Be Prepared: Aggressive Antitrust Enforcement Is Back

Firm Publication

This summer has seen a flurry of bold antitrust announcements from the Biden administration. By issuing a sweeping executive order calling for numerous changes to antitrust enforcement and by naming progressive favorites and prominent Big Tech critics to head the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ), President Biden has signaled that federal antitrust policy is entering a new era.

The FTC has already begun carrying out its mandate to reshape antitrust policy. Under the leadership of new Chairwoman Lina Khan, the FTC has moved quickly to eliminate checks on its antitrust enforcement powers. A majority of the FTC’s commissioners have expressly disavowed the agency’s longstanding approaches to policing antitrust violations and have given the new chair unprecedented authority over investigations and rulemakings.

Collectively, the Biden administration and the FTC have sent a clear message to the business community: aggressive antitrust enforcement is back. Companies should expect to see an increase in antitrust investigations, stiffer penalties for violations, more burdensome merger reviews, and new rules targeting a range of industry practices. In this environment, effective antitrust counseling and compliance programs are more important than ever.

Executive Order Signals Sea Change in Antitrust Enforcement

On July 9, President Biden signed a sweeping executive order aimed at changing numerous aspects of federal antitrust policy. The ambitious Order directs more than a dozen federal agencies to undertake 72 initiatives. In some respects the Order is quite specific—for instance, it calls for new rules on the narrow topic of over-the-counter hearing aids. Other parts of the Order, however, are short on policy specifics, but suggest broad changes to federal antitrust policy. Four of the most significant aspects are:

  • Mergers. DOJ and the FTC currently use joint, agency-issued guidelines to evaluate proposed mergers under the antitrust laws. The Order encourages DOJ and the FTC to revisit these guidelines and consider revamping them to reduce consolidation across industries. In response, the heads of DOJ and the FTC promptly announced they would indeed review whether the current merger guidelines are “overly permissive,” and whether they should be updated to incorporate a more “rigorous analytical approach.”The Order also specifically “reaffirms” that the government may challenge the legality of past mergers, even if they have already been completed.
  • Non-Compete Agreements. The Order calls for the FTC to enact new rules—long advocated by progressives—limiting the use of non-compete agreements to restrict worker mobility.
  • Healthcare in Focus. The Order specifically highlights the healthcare industry for increased antitrust attention. In particular, the Order commits the Biden administration to a policy of combatting consolidation in healthcare markets, including insurance, hospitals, and prescription drugs.
  • White House Competition Council. The Order establishes a new White House Competition Council, within the Executive Office of the President, to coordinate the federal government’s competition policy.

These and other policies in the Order are significant in their own right. But perhaps more than any concrete policy, the Order demands attention because it suggests the Biden administration envisions an antitrust sea change and is willing to rethink long-settled principles of U.S. competition law.

Aggressive New Leadership at DOJ

To implement these bold new policies, President Biden on July 20 nominated Jonathan Kanter to lead DOJ’s Antitrust Division. The White House touts Kanter as a “leading advocate” in the effort to promote “strong and meaningful antitrust enforcement.” If confirmed by the Senate, he is widely expected to be active and progressive at the helm of DOJ’s Antitrust Division.

Kanter is known as a particularly vocal critic of Big Tech. A former co-chair of the antitrust practice at Paul Weiss, Kanter left to found his own “antitrust advocacy boutique” after some of his clients—which include many rivals and critics of the big technology companies—created conflicts at his old firm.

Kanter’s past statements suggest a generally aggressive and creative enforcement approach. He is on record stating that antitrust enforcement “serves an important deterrent value, and the more it’s enforced and the more companies are understanding of where the boundaries lie, that deterrent has meaning.” He has also argued for rethinking merger enforcement policy in light of the realities of modern markets.

Khan’s FTC Eliminates Longstanding Checks on Its Authority to Investigate and Regulate

Transitions in leadership at the FTC are usually uneventful, but not this time. New Chairwoman Khan has already spearheaded many changes to the agency’s longstanding policies and procedures since assuming office on June 15. Khan, a 32-year-old Columbia Law School professor, has (like her potential counterpart at DOJ) been a vocal critic of Big Tech. Her elevation to chair of the FTC came as a surprise to many; she had been confirmed as a commissioner just hours before President Biden named her chairwoman.

Along with the two other Democrat-appointed commissioners, Rohit Chopra and Rebecca Slaughter, Khan has pushed through several resolutions, rule amendments, and policy changes to abolish key limitations on the FTC’s investigative and rulemaking powers.

  • Unilateral Subpoena Power. The FTC passed seven resolutions authorizing staff to issue subpoenas and civil investigative demands (CIDs) to investigate several broad “enforcement priorities,” including healthcare markets, technology platforms, and mergers and acquisitions that have already been consummated. The FTC’s rules have long required a majority vote of the commissioners before the issuance of subpoenas and CIDs, but the new resolutions effectively bypass that requirement and give Khan unilateral power to order the use of compulsory process.
  • Section 5 Policy Rescinded. The FTC rescinded its 2015 policy statement that outlined its authority to combat unfair methods of competition under Section 5 of the FTC Act. The 2015 statement, passed on a bipartisan vote during the Obama administration, established guiding principles on the use of Section 5 that were in line with prevailing antitrust law. By repealing the policy, the FTC has signaled that it will seek to use Section 5 more expansively to target conduct outside the boundaries of the antitrust laws.
  • Expedited Rulemaking Procedures. The FTC amended its procedures to expedite future rulemakings and give Khan greater control over the process. The amendments allow the chair or her designee to preside over rulemaking hearings instead of the Chief Administrative Law Judge and eliminate the requirement that rule recommendations be accompanied by a staff report. These amendments may presage a wave of regulations from the FTC targeting a variety of practices deemed harmful.
  • Prior Approval Provisions Return. The FTC rescinded its 1995 policy statement that limited the use of prior approval and prior notice provisions in consent orders in merger cases. Before 1995, consent orders typically required parties to obtain FTC approval for future acquisitions in the same market, even those valued well below the Hart-Scott-Rodino (HSR) threshold. Prior approval and prior notice provisions, which give the FTC broad discretion to block parties’ future transactions, may once again become the norm in consent orders.
  • Warnings to Merging Parties. To confront an increase in merger filings, the FTC announced that it has started issuing warning letters to some merging parties in instances when the FTC cannot conclude its review before the 30-day waiting period under the HSR Act expires. The letters state that the FTC is continuing to investigate the transaction and that it may challenge the transaction at a later date, even post-consummation. For some merging parties, the expiration of the HSR waiting period will no longer provide certainty that any antitrust issues have been cleared.

Those are far from the only changes at the FTC. Within a week of being sworn in, Khan imposed a moratorium on all public appearances by FTC staff and instructed all staff to cancel any upcoming appearances. And in July, the FTC issued an unusually harsh statement when Berkshire Hathaway Energy called off a proposed acquisition after an FTC investigation, asserting that “this is representative of the type of transaction that should not make it out of the boardroom.” Companies should make plans for an antagonistic FTC.

Looking Ahead

Although the Biden administration and the FTC are making enormous changes to antitrust enforcement, it remains to be seen whether the judiciary will go along. Already there are signs that the agencies could face stiff resistance in court. Earlier this year, the U.S. Supreme Court unanimously stripped the FTC of its power to seek monetary disgorgement from defendants, which the FTC had previously used to obtain billions of dollars in enforcement actions. More recently, a judge dismissed the FTC’s complaint against Facebook, which sought to unwind Facebook’s acquisition of Instagram.

While we wait to see how far the DOJ and FTC can push the limits of antitrust law, the business community should prepare for burdensome investigations and more contentious interactions with the agencies. Strong antitrust compliance programs, effective counseling, and sophisticated advocacy will help companies withstand the antitrust agencies’ newfound aggression.

If you have any questions about the federal government’s new approach to antitrust enforcement, please do not hesitate to contact the authors.

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Firm Publication

This summer has seen a flurry of bold antitrust announcements from the Biden administration. By issuing a sweeping executive order calling for numerous changes to antitrust enforcement and by naming progressive favorites and prominent Big Tech critics to head the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ), President Biden has signaled that federal antitrust policy is entering a new era.

The FTC has already begun carrying out its mandate to reshape antitrust policy. Under the leadership of new Chairwoman Lina Khan, the FTC has moved quickly to eliminate checks on its antitrust enforcement powers. A majority of the FTC’s commissioners have expressly disavowed the agency’s longstanding approaches to policing antitrust violations and have given the new chair unprecedented authority over investigations and rulemakings.

Collectively, the Biden administration and the FTC have sent a clear message to the business community: aggressive antitrust enforcement is back. Companies should expect to see an increase in antitrust investigations, stiffer penalties for violations, more burdensome merger reviews, and new rules targeting a range of industry practices. In this environment, effective antitrust counseling and compliance programs are more important than ever.

Executive Order Signals Sea Change in Antitrust Enforcement

On July 9, President Biden signed a sweeping executive order aimed at changing numerous aspects of federal antitrust policy. The ambitious Order directs more than a dozen federal agencies to undertake 72 initiatives. In some respects the Order is quite specific—for instance, it calls for new rules on the narrow topic of over-the-counter hearing aids. Other parts of the Order, however, are short on policy specifics, but suggest broad changes to federal antitrust policy. Four of the most significant aspects are:

  • Mergers. DOJ and the FTC currently use joint, agency-issued guidelines to evaluate proposed mergers under the antitrust laws. The Order encourages DOJ and the FTC to revisit these guidelines and consider revamping them to reduce consolidation across industries. In response, the heads of DOJ and the FTC promptly announced they would indeed review whether the current merger guidelines are “overly permissive,” and whether they should be updated to incorporate a more “rigorous analytical approach.”The Order also specifically “reaffirms” that the government may challenge the legality of past mergers, even if they have already been completed.
  • Non-Compete Agreements. The Order calls for the FTC to enact new rules—long advocated by progressives—limiting the use of non-compete agreements to restrict worker mobility.
  • Healthcare in Focus. The Order specifically highlights the healthcare industry for increased antitrust attention. In particular, the Order commits the Biden administration to a policy of combatting consolidation in healthcare markets, including insurance, hospitals, and prescription drugs.
  • White House Competition Council. The Order establishes a new White House Competition Council, within the Executive Office of the President, to coordinate the federal government’s competition policy.

These and other policies in the Order are significant in their own right. But perhaps more than any concrete policy, the Order demands attention because it suggests the Biden administration envisions an antitrust sea change and is willing to rethink long-settled principles of U.S. competition law.

Aggressive New Leadership at DOJ

To implement these bold new policies, President Biden on July 20 nominated Jonathan Kanter to lead DOJ’s Antitrust Division. The White House touts Kanter as a “leading advocate” in the effort to promote “strong and meaningful antitrust enforcement.” If confirmed by the Senate, he is widely expected to be active and progressive at the helm of DOJ’s Antitrust Division.

Kanter is known as a particularly vocal critic of Big Tech. A former co-chair of the antitrust practice at Paul Weiss, Kanter left to found his own “antitrust advocacy boutique” after some of his clients—which include many rivals and critics of the big technology companies—created conflicts at his old firm.

Kanter’s past statements suggest a generally aggressive and creative enforcement approach. He is on record stating that antitrust enforcement “serves an important deterrent value, and the more it’s enforced and the more companies are understanding of where the boundaries lie, that deterrent has meaning.” He has also argued for rethinking merger enforcement policy in light of the realities of modern markets.

Khan’s FTC Eliminates Longstanding Checks on Its Authority to Investigate and Regulate

Transitions in leadership at the FTC are usually uneventful, but not this time. New Chairwoman Khan has already spearheaded many changes to the agency’s longstanding policies and procedures since assuming office on June 15. Khan, a 32-year-old Columbia Law School professor, has (like her potential counterpart at DOJ) been a vocal critic of Big Tech. Her elevation to chair of the FTC came as a surprise to many; she had been confirmed as a commissioner just hours before President Biden named her chairwoman.

Along with the two other Democrat-appointed commissioners, Rohit Chopra and Rebecca Slaughter, Khan has pushed through several resolutions, rule amendments, and policy changes to abolish key limitations on the FTC’s investigative and rulemaking powers.

  • Unilateral Subpoena Power. The FTC passed seven resolutions authorizing staff to issue subpoenas and civil investigative demands (CIDs) to investigate several broad “enforcement priorities,” including healthcare markets, technology platforms, and mergers and acquisitions that have already been consummated. The FTC’s rules have long required a majority vote of the commissioners before the issuance of subpoenas and CIDs, but the new resolutions effectively bypass that requirement and give Khan unilateral power to order the use of compulsory process.
  • Section 5 Policy Rescinded. The FTC rescinded its 2015 policy statement that outlined its authority to combat unfair methods of competition under Section 5 of the FTC Act. The 2015 statement, passed on a bipartisan vote during the Obama administration, established guiding principles on the use of Section 5 that were in line with prevailing antitrust law. By repealing the policy, the FTC has signaled that it will seek to use Section 5 more expansively to target conduct outside the boundaries of the antitrust laws.
  • Expedited Rulemaking Procedures. The FTC amended its procedures to expedite future rulemakings and give Khan greater control over the process. The amendments allow the chair or her designee to preside over rulemaking hearings instead of the Chief Administrative Law Judge and eliminate the requirement that rule recommendations be accompanied by a staff report. These amendments may presage a wave of regulations from the FTC targeting a variety of practices deemed harmful.
  • Prior Approval Provisions Return. The FTC rescinded its 1995 policy statement that limited the use of prior approval and prior notice provisions in consent orders in merger cases. Before 1995, consent orders typically required parties to obtain FTC approval for future acquisitions in the same market, even those valued well below the Hart-Scott-Rodino (HSR) threshold. Prior approval and prior notice provisions, which give the FTC broad discretion to block parties’ future transactions, may once again become the norm in consent orders.
  • Warnings to Merging Parties. To confront an increase in merger filings, the FTC announced that it has started issuing warning letters to some merging parties in instances when the FTC cannot conclude its review before the 30-day waiting period under the HSR Act expires. The letters state that the FTC is continuing to investigate the transaction and that it may challenge the transaction at a later date, even post-consummation. For some merging parties, the expiration of the HSR waiting period will no longer provide certainty that any antitrust issues have been cleared.

Those are far from the only changes at the FTC. Within a week of being sworn in, Khan imposed a moratorium on all public appearances by FTC staff and instructed all staff to cancel any upcoming appearances. And in July, the FTC issued an unusually harsh statement when Berkshire Hathaway Energy called off a proposed acquisition after an FTC investigation, asserting that “this is representative of the type of transaction that should not make it out of the boardroom.” Companies should make plans for an antagonistic FTC.

Looking Ahead

Although the Biden administration and the FTC are making enormous changes to antitrust enforcement, it remains to be seen whether the judiciary will go along. Already there are signs that the agencies could face stiff resistance in court. Earlier this year, the U.S. Supreme Court unanimously stripped the FTC of its power to seek monetary disgorgement from defendants, which the FTC had previously used to obtain billions of dollars in enforcement actions. More recently, a judge dismissed the FTC’s complaint against Facebook, which sought to unwind Facebook’s acquisition of Instagram.

While we wait to see how far the DOJ and FTC can push the limits of antitrust law, the business community should prepare for burdensome investigations and more contentious interactions with the agencies. Strong antitrust compliance programs, effective counseling, and sophisticated advocacy will help companies withstand the antitrust agencies’ newfound aggression.

If you have any questions about the federal government’s new approach to antitrust enforcement, please do not hesitate to contact the authors.

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