United States

The U.S. Agencies Issue New Merger Guidelines

As 2023 came to a close, the Federal Trade Commission (“FTC”) and the Antitrust Division of the Department of Justice (“DOJ”) issued their new Merger Guidelines, which reflect a dramatic shift in the agencies’ prior guidance regarding how they evaluate transactions and identify those that they view to be problematic. As discussed in more detail here and here, the new Guidelines reflect an expansive approach to merger enforcement that is consistent with the agencies’ public statements calling for more enforcement during this Administration.

Does the Agencies’ Aggressive Rhetoric Match Enforcement Levels?

While the agencies have challenged individual transactions based on novel and/or aggressive theories of harm and report high levels of enforcement activity for FY 2022, recently published data suggests that there were fewer merger enforcement actions in 2023 than in any of the previous twenty years.

That said, the agencies’ record has been mixed, particularly with the more novel theories. For example, courts rejected the agencies’ vertical theories of harm in Microsoft/Activision and UnitedHealth/Change Healthcare and the FTC’s potential competition theory in Meta/Within. But the agencies prevailed in three recent decisions: (1) the Fifth Circuit affirmed the FTC’s prohibition of Illumina’s consummated acquisition of Grail; (2) a judge in the Southern District of New York granted the FTC’s motion to enjoin IQVIA’s proposed acquisition of Propel Media (and the merging parties subsequently abandoned the transaction), and (3) a judge in the District of Massachusetts granted DOJ’s motion to permanently enjoin JetBlue from acquiring Spirit Airlines (the parties appealed to the First Circuit but then terminated the transaction).

Since November 2023, the federal government has filed litigation complaints seeking to challenge four transactions. The companies involved in two of those challenges abandoned their deals—John Muir/San Ramon Medical (hospitals) and Sanofi/Maze Therapeutics (pharmaceuticals). The other two deals are in active litigation—Novant/CHS (hospitals) and Kroger/Albertsons (grocery stores).

Read more about trends in merger enforcement levels in recent years here, here, and here.

Increased Procedural Burdens with Extended Investigations and Proposed New HSR Filing Requirements

More generally, the policies and procedures pursued by the agencies have had the effect of increasing the time and expense of merger investigations. This trend will continue with the agencies’ proposed changes to the HSR rules, which would drastically increase the cost, time, and burden of making merger filings. The practical effect of the new rules would be broad—they would impact every company that is a party to a reportable transaction, irrespective of whether it raised any plausible antitrust issues. Read more about the proposed HSR rule changes here.

The number of Second Requests issued by the agencies hit a record high in FY 2021 but returned to a level close to historical averages in FY 2022, despite the number of filings remaining elevated (complete FY 2023 data is not yet available). Regardless, the investigations have become more onerous, searching, and time-intensive than in the past and, in some instances, have resulted in enforcement actions involving non-merger issues, such as for violating the prohibition on interlocking directorates in Section 8 of the Clayton Act. Read more about that Section 8 enforcement action here.

FTC Focus on the Robinson Patman Act

Multiple FTC commissioners called for the reinvigoration of the Robinson Patman Act (“RPA”), which prohibits anticompetitive price discrimination, among other things. Although it has been decades since an agency has brought an enforcement action under the RPA, the FTC has made multiple announcements renewing its interest. And, in 2023, the FTC reportedly opened RPA-related investigations into three companies: Coca-Cola, Pepsi, and Southern Glazer’s (which is an alcoholic beverage distribution company).

FTC’s Rule Banning Most Employment-Related Non-Competes

The FTC issued a final rule banning most non-compete clauses in employment agreements on April 23, 2024. The rule makes it illegal for an employer in most circumstances to (1) enter—or attempt to enter—a non-compete with a worker; (2) enforce—or attempt to enforce—a non-compete with a worker; or (3) represent to a worker that the worker is subject to a non-compete. The rule does not apply (a) to non-competes entered by a person pursuant to a bona fide sale of a business entity, (b) where a cause of action related to a non-compete accrued prior to the effective date of the rule, or (c) to existing non-competes with “senior executives” (although it bans all future non-competes even for “senior executives”). The final rule has already been challenged, and additional lawsuits seeking to block the rule are expected. Read more about the non-compete rule here and here.

FTC’s Constitutionality Under Scrutiny

In April 2023, the Supreme Court—in a unanimous decision authored by Justice Kagan in Axon Enterprise, Inc. v. FTC—held that companies under investigation by the FTC can challenge the agency’s constitutionality (on at least some grounds) immediately in federal district court rather than waiting until after the administrative process had concluded. Although Axon voluntarily dismissed its constitutional challenge after the FTC abandoned its challenge to Axon’s acquisition of VieVu, it is becoming commonplace for companies to challenge the FTC’s constitutionality in counterclaims or affirmative defenses. So far, courts have not issued a decision on the merits of such claims, but we expect companies to continue to challenge the agency’s authority in 2024 (and beyond). Read more about the Supreme Court’s holding in Axon here.

The DOJ Antitrust Division Suffers Multiple Losses in No-Poach Trials

The Antitrust Division continued to prioritize the prosecution of claims of employee wage-fixing and “no-poach” agreements this year. However, in November 2023, the Division voluntarily dismissed all charges in its last pending criminal no-poach case, United States v. Surgical Care Affiliates. The dismissal followed a string of losses for the Division, which has failed to secure a trial conviction in a labor-market criminal prosecution. Most notably, in the United States v. Patel no-poach prosecution, the court issued a judgment of acquittal for the charged individuals before the case went to the jury. Despite these setbacks, the Division’s 2016 Guidance for HR Professionals, announcing its intent to prosecute criminal no-poach cases, remains in place. Read more here.

Criminal Antitrust Enforcement Under New Scrutiny in the Fourth Circuit

In a separate case, in December 2023, the Antitrust Division experienced another setback in its criminal enforcement program when the Fourth Circuit reversed a guilty verdict in United States v. Brewbaker, a case involving alleged bid-rigging for road construction projects. In reversing the conviction, the court held that the conduct did not amount to a per se violation because the alleged anticompetitive restraint occurred between two companies in a vertical, supplier-customer relationship. The Division sought rehearing and rehearing en banc, but the Fourth Circuit recently denied the Division’s petition.

New Remedies in Resolving Criminal Antitrust Investigations

The Division broke new ground by entering into deferred prosecution agreements with Teva Pharmaceuticals USA, Inc., and Glenmark Pharmaceuticals Inc., USA. The DPAs, which resolved criminal price-fixing charges, required the companies to divest the product line at issue in the charged conspiracy. This novel remedy indicates the Division’s willingness to seek alternative resolutions beyond monetary penalties, especially in cases where fines alone may not adequately compensate for the harm to competition or deter future offenses. Read more here. 

The U.S. Agencies Withdraw Information Exchange Guidance

The Antitrust Division signaled increased scrutiny of information exchanges by withdrawing three well-established policy statements that had provided guidance and safe harbors for such exchanges, announcing that they would take a case-by-case enforcement approach. This decision reflects the Division’s view that the existing guidance is outdated and misaligned with current market realities: “In some industries, high-speed, complex algorithms can ingest massive quantities of ‘stale,’ ‘aggregated’ data from buyers and sellers to glean insights about the strategies of a competitor. Where that happens the distinctions between past and current or aggregated versus disaggregated data may be eroded.”[1] A few months later, the FTC joined the Antitrust Division in its withdrawal of the healthcare enforcement policy guidelines, citing significant shifts in those markets over the past three decades.[2]

The DOJ’s Civil Litigation Activity Regarding Information Exchanges

In a notable enforcement action, the Division filed a civil antitrust lawsuit against Agri Stats, alleging that the company organized and managed anticompetitive information exchanges among meat processors. The complaint alleges that Agri Stats violated Section 1 of the Sherman Act by “collecting, integrating, and distributing” competitively sensitive pricing and output information among competing meat processors.

Additionally, the Division submitted a Statement of Interest in the In re RealPage multidistrict litigation, which involves allegations by tenants of multifamily and student housing that RealPage, along with property owners and managers, conspired to fix and inflate rental housing prices. The Division’s statement argued that the per se rule (rather than the rule of reason) should apply to this case, asserting that competitors sharing nonpublic confidential pricing data through the use of an algorithm “meets the legal criteria for per se unlawful price fixing.” Although the court dismissed the per se allegations, it did not directly address the Division’s arguments. The D.C. and Arizona Attorneys General filed a similar lawsuit against RealPage and other large landlords.

The Division reiterated its position in a separate Statement of Interest filed in the Duffy v. Yardi Systems, Inc. et al. case, involving similar allegations. The Division cited back to its RealPage submission and emphasized that competitors’ “adherence to the agreed-upon prices” is not condition of per se illegality. Notably, the FTC also joined the Statement.

The U.S. Agencies File Monopolization Suits Against Technology Companies

Over the last couple of years, the DOJ Antitrust Division and the FTC have pursued Sherman Act Section 2 monopolization cases against technology companies. The agencies have pending litigations against Meta, Amazon, Apple, and Google; Google is subject to two separate monopolization cases filed by the DOJ both of which are on track for a decision and/or trial this coming year.

One of those cases – United States et al. v. Google – went to trial in 2023. The Division alleged that Google maintained its monopoly over search and search advertising markets through exclusionary practices, including exclusivity and tying arrangements that effectively made Google the default search service. The arrangements also involved using its profits to secure preferential treatment for its search engine. The Division completed the evidentiary phase of the litigation during a 10-week bench trial. Closing arguments are scheduled for May 1-3, 2024, with a decision expected later this year, though both parties are expected to appeal if they receive an unfavorable decision. The Division’s second monopolization case against Google for allegedly monopolizing digital advertising technologies is set to go to trial later this year.

Epic Games Antitrust Suits Against Apple and Google

Three years after Epic Games sued Google, claiming that Google’s Play Store constituted an unlawful monopoly, a jury delivered a verdict in favor of Epic. The jury found that Google has monopoly power in Android app distribution and in-app billing markets. The jury also found that Google unlawfully required developers to use both its Play Store and billing service, effectively tying the two services together. Google has announced that it will challenge the verdict and seek a new trial. Meanwhile, a settlement has been reached in a separate but similar, lawsuit filed by 52 state attorneys general, with Google agreeing to pay $700 million to resolve similar antitrust allegations.

Separately, the U.S. Supreme Court declined to review the antitrust case between Epic Games and Apple in which Epic raised monopolization allegations against Apple, most of which were rejected in the lower court proceedings. The decision leaves in place a lower court’s injunction based on California’s Unfair Competition law “prohibiting Apple from enforcing the anti-steering provision against any developer.”[1]