Government Enforcement

“Modernized” HSR Filing Fees and Increased Filing Thresholds

Jennifer Clarke-Smith, Danielle Mangogna and Kristin PetersenPosted on January 27, 2023

Takeaways

For the first time in more than two decades, HSR filing fees and fee tiers will be adjusted. The filing fees will range from $30,000 to $2.25 million and apply to HSR notifications filed on or after February 27, 2023.
The minimum HSR “Size of Transaction” filing threshold will increase to $111.4 million (from $101 million) and applies to transactions closing on or after February 27, 2023.
The maximum daily civil penalty for an HSR Act violation (including failure to file) has increased to $50,120.
Talk to HSR counsel early in the deal process to assess potential filing requirements.

On January 23, 2023, the U.S. Federal Trade Commission (“FTC”) announced revised filing thresholds, as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), based on an increase in the U.S. gross national product. The FTC also announced that the recently passed amendments to the HSR Act, which adjust the HSR filing fee tiers and amounts, will take effect at the same time as the new filing thresholds. Going forward, the filing thresholds, as well as the filing fee tiers and amounts, will adjust annually.

The HSR Act and related regulations (“HSR Rules”) require that parties to certain transactions submit an HSR filing and, generally, wait 30 days (or more, if additional information is formally requested) before closing, giving the agency time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

New Filing Fee Structure and Amounts

After more than two decades, a new HSR filing fee scale will become effective on February 27, 2023. The new fee scale – a result of amendments to the HSR Act included in the 2023 Consolidated Appropriations Act (H.R. 2617) signed into law in late December 2022 – significantly increases the filing fee required for many transactions. The increase for larger transactions is notable, with a fee increase of nearly $2 million for transactions valued at $5 billion or more. The fee scale changes increase the filing fee for some, yet not all, transactions valued at less than $500 million.

The buyer is obligated to pay the filing fee for a reportable acquisition (although parties may agree to share the fee or shift responsibility to the seller). The specific fee due depends on the transaction value, which is based on the aggregate total value of voting securities, assets, and/or non-corporate interests that will be held as a result of the transaction, as calculated under the HSR Rules (the “Size of Transaction”).

The new fee scale is set forth below. The fee tiers and filing fee amounts will be adjusted annually.

New HSR Filing Fees
Size of Transaction	Filing Fee
Less than $161.5 million	$ 30,000
$161.5 million or more but less than $500 million	$ 100,000
$500 million or more but less than $1 billion	$ 250,000
$1 billion or more but less than $2 billion	$ 400,000
$2 billion or more but less than $5 billion	$ 800,000
$5 billion or more	$ 2,250,000

The filing fee changes are expected to contribute to a meaningful increase in collected fees, supporting increased budgets for the federal antitrust agencies’ active enforcement efforts.

Increased HSR Filing Thresholds

A higher minimum HSR “Size of Transaction” threshold will apply to transactions closing on or after February 27, 2023. As a result of this adjustment, a transaction will be potentially reportable under the HSR Act only if it is valued in excess of $111.4 million (approximately $10 million higher than the 2022 threshold of $101 million).

Determining HSR reportability: Does the transaction meet the Size of Transaction test?

An HSR filing may be required when, as a result of the transaction, the acquiring person will hold an aggregate amount of voting securities, assets, and/or non-corporate interests valued in excess of the minimum HSR Size of Transaction threshold in place at the time of closing. Because the HSR value considers what is held as a result of the transaction, the total Size of Transaction will include not only the value of what will be acquired in the present transaction but also the value of certain voting securities, non-corporate interests, and assets previously acquired.

Contingent payments, earnouts, liabilities, debt paid off or assumed, and other forms of consideration also can impact the Size of Transaction.

Size of Transaction Test

2022 Threshold

Closing before February 27, 2023

2023 Threshold

Closing on or after February 27, 2023

>$101 million

>$111.4 million

Determining HSR reportability: Do the parties to the transaction meet the Size of Person test?

Certain transactions that satisfy the Size of Transaction threshold must also satisfy the “Size of Person” test to be HSR reportable. The relevant Size of Person thresholds also will increase for transactions closing on or after February 27, 2023 and are reflected in the general Size of Person test set out below. The Size of Person test applies differently in certain situations—for example, the formation of joint ventures and where an Acquired Person is not engaged in manufacturing.

Size of Person Test
Size of Transaction >$111.4 million, but ≤$445.5 million	One party (or its Ultimate Parent Entity) has ≥$222.7 million in total assets or annual net sales, and
	The other party (or its Ultimate Parent Entity) has ≥$22.3 million in total assets or annual net sales
Size of Transaction >$445.5 million	Reportable regardless of the Size of Person test

Determining HSR reportability: Does an exemption apply?

The HSR Act and Rules set out a number of exemptions. Even where a transaction satisfies the Size of Transaction and Size of Person thresholds, the application of an exemption may render the transaction non-reportable or impact the Size of Transaction calculation.

Failure to File Penalty

Where required, the failure to file can carry a significant financial penalty for each day of non-compliance. The maximum civil penalty for HSR violations also adjusts annually. The adjusted maximum civil penalty as of January 11, 2023 is set out below.

Failure to File Penalty

Up to $50,120 per day in violation

Consult HSR counsel early in the deal process to determine whether your transaction is HSR-reportable, especially before concluding that a filing is not required.

If you have questions regarding HSR Act reporting requirements or the new filing fees or thresholds, please contact the authors listed above or your usual Orrick contact.

The Digital Markets Act (DMA): Entry Into Force Starts the Clock on the Application of Game-Changing Rules for Big Tech

Saira Henry, Douglas Lahnborg and Boris MarschallPosted on November 2, 2022

The EU’s Digital Markets Act (DMA) enters into force on 1 November 2022. It promises to be one of the most significant developments in the history of EU regulation, ushering in a new era for technology companies operating in the EU. In this communication we set out the background to the DMA, the companies whose services will be affected, the obligations that they will have, the consequences of non-compliance and the next steps in the DMA’s application.

Illumina vs European Commission: the EU General Court endorses the Commission’s new approach to Article 22 EUMR allowing the capture of mergers below the thresholds

Marie-Laure Combet and Maxence JonvelPosted on July 21, 2022

In a judgment dated 13 July 2022 (T-227/21), the General Court of the European Union (the “General Court” or the “Court”) upheld the decision of the European Commission (the “Commission”) whereby the latter accepted to assert its (merger control) jurisdiction over the “below-the-thresholds” acquisition of Grail by Illumina (the “Transaction”), following referrals from EU and EFTA member states based on Article 22 of the EU Merger Regulation (“EUMR”)[1].

In addition to its direct and almost immediate implications for Illumina and Grail (see below), this judgment paves the way for new cases that capture concentrations below the thresholds (i.e., not triggering merger control requirements based on the numerical thresholds) while leaving a few questions open.

It was indeed the first time, since the announcement by Margrethe Vestager of the Commission’s willingness to use Article 22 EUMR to tackle potentially problematic “below the thresholds” mergers, that the General Court was given the opportunity to have its say on this new approach.

Background

Pursuant to Article 22 EUMR, national competition authorities (“NCAs”) may refer to the Commission any concentration that does not have a European dimension, but (i) which affects trade between Member States and (ii) threatens to significantly affect competition in the territory of the Member State concerned (see our previous Blog post on the Commission’s guidance published on 26 March 2021).

This provision was long conceived as a tool designed for EU Member States lacking national merger control regimes. Over recent years, however, there had been increasingly clear messages that the Commission wanted to use it for other purposes, namely to extend its jurisdiction to catch the so-called killer acquisitions, or more generally potentially problematic concentrations below the thresholds. But, before the issuance of the Commission’s guidance regarding the application of Article 22 EUMR on 26 March 2021, the rules of the game were not clear at all.

Made public in September 2020, before the release of the aforementioned guidance, the Illumina/Grail Transaction was not notified to any NCAs within the EU or to the Commission, as it did not cross any relevant thresholds. However, a complainant, as well as the Commission, has considered it a textbook case of a “killer acquisition.”

In this case, Grail is a start-up, not yet generating any turnover, developing innovative blood-based cancer tests based on genomic sequencing and data science tools. Reportedly, the alleged concern would be that the purchaser, Illumina, a U.S. major biotechnology company supplying sequencing and array-based solutions for genetic and genomic analysis, could post-transaction restrict access to or increase prices of next generation sequencers and reagents to the detriment of Grail’s rivals active in genomic cancer tests.

Likely informed of the Transaction by the complaint, the Commission reached the preliminary conclusion that the Transaction satisfied the necessary conditions for a referral. In accordance with Article 22(5) EUMR, the Commission informed the EU and EFTA Member States of the Transaction and invited them to request a referral (through a so-called “Invitation Letter”), and on 9 March 2021, the French competition authority sent a request (joined by the Dutch, Belgian, Norwegian, and Icelandic competition authorities). By decisions of 19 April 2021, the Commission accepted the referral request and associated requests to join (the “Decisions”).

Subsequently, Illumina, supported by Grail, initiated an action for annulment against both the Invitation Letter and the Decisions before the General Court of the EU, competent to rule on such annulments for acts of the institutions of the European Union that are contrary to European Union law.

The judgment at hand was much awaited as, by contrast with traditional guidelines which build upon a long decisional practice, the Commission’s guidance develops a new untested approach to Article 22 EUMR and has generated much debate amongst academics and practitioners about its legality.

Findings of the General Court

First ruling on the admissibility of the case, the General Court confirmed that the Commission’s Decisions constituted challengeable acts within the meaning of Article 263 of the Treaty on the Functioning of the European Union (“TFEU”), notably as each were considered to produce binding legal effects vis-à-vis Illumina and were thus capable of affecting its interests by bringing about a distinct change in its legal situation.

The Court thus rejected the European Commission’s position that its Decisions were merely preparatory acts, the illegalities of which could be raised in an action brought against the final decision on the concentration at issue. On the contrary, the Invitation Letter was considered to constitute only an intermediate step in the context of the referral procedure so that the Court held Illumina’s action against such letter to be inadmissible.

On the substance of the case, Illumina challenged the Commission’s Decisions on three points, essentially alleging: 1) a lack of competence on the part of the Commission, 2) that the referral request of France was late and 3) that the Decisions violated the principle of protection of legitimate expectations.

1° Article 22 EUMR is an adequate legal basis for the Commission to exercise its jurisdiction over the Transaction

Illumina argued that the Commission did not have a valid legal basis to review the transaction at issue, since the referral request was made by a competition authority which was not itself competent, under its own national legislation, to review the transaction. For Illumina, the residual purpose of Article 22 EUMR only enables a Member State that does not have a merger control legislation to submit a referral request in order to prevent a concentration affecting its territory from not being subject to any scrutiny.

Following a holistic review, through a literal, contextual, teleological and historical interpretation of the provision at issue, the Court concluded that the Commission was right to accept the referral request and the requests to join under Article 22 EUMR, thus confirming with a particular strength, the validity of this recent and major change in the Commission’s merger control policy.

Relying on the wording of Article 22(1) EUMR, and in particular the use of the expression “any concentration,” the Court took the view that a concentration could be the subject of a referral, regardless of the existence or scope of national merger control rule. Interpreting Article 22(1) EUMR otherwise, as Illumina and Grail advocated, would in fact add a condition for a referral that is not apparent from its wording, the Court added.

It also considered that although the referral mechanism was originally conceived, under the previous merger regulation 4064/89, primarily for Member States which did not have their own merger control system (in practice, the Kingdom of the Netherlands), it did not, however, preclude other Member States from also having recourse to that mechanism. For the Court, nothing in that regulation indicates that the EU legislature intended at the time to reserve that mechanism for those aforementioned States.

For the Court, while the scope of the EUMR depends primarily on the exceeding of the turnover thresholds defining the European dimension, it also depends, alternatively, on the referral mechanisms provided for in Article 4(5) and Article 22 of that regulation, which supplement those thresholds by authorising the examination, by the Commission, of certain concentrations that do not have such a European dimension. It further emphasized the distinction that was operated between the referral mechanism set forth under Article 4(5) EUMR, the “one-stop shop” threshold, which specifically requires 3 Member States having competence to review a transaction for it to be referred to the Commission, and the referral mechanism of Article 22, which does not provide such a condition.

Eventually, the Court found that referral mechanisms are an instrument necessary to remedy the control gaps inherent to a rigid system solely based on turnover thresholds. It considered that the use of the expression “effective corrective mechanism” in recital 11 of the EUMR, to describe referrals, shows that such mechanisms create a subsidiary power of the Commission which confers on it the flexibility necessary to achieve the objective of the regulation, namely, to allow for the control of concentrations that are likely to significantly impede effective competition in the internal market.

Accordingly, the General Court concluded that the Commission was right to accept the referral request at issue and that neither a legislative amendment nor a revision of the EU thresholds were necessary, contrary to what Illumina claimed.

2° The Transaction was lawfully referred to the Commission as the referral request was not late

Beyond the much-anticipated conclusion on the overall lawfulness of the referral request made by a non-competent NCA, the General Court’s judgment also provides clarifications as regards the deadline to be complied with by Member States to submit such a referral request, which, if helpful, still leaves open a number of questions.

As a reminder, the second subparagraph of Article 22(1) EUMR provides that a referral request “shall be made at most within 15 working days of the date on which the concentration was notified, or if no notification is required, otherwise made known to the Member State concerned.”

Illumina, supported by Grail, argued that the referral request was submitted after the expiry of the time limit, since the Transaction was announced publicly through a press release and the CMA and the FTC had already started investigating the deal, which therefore was necessarily known to the French NCA.

The General Court rejected the argument and held that the concept of a concentration being “made known” within the meaning of the second subparagraph of Article 22(1) EUMR must, as regards its form, consist of the active transmission of relevant information to the Member State concerned and, as regards its content, contain sufficient information to enable that Member State to carry out a preliminary assessment.

According to that interpretation, the Court followed, the period of 15 working days laid down in that provision starts to run from the time when that information was transmitted, and in the present case, the information was transmitted through the Invitation Letter sent by the Commission, which eventually enabled the NCAs concerned to carry out a preliminary assessment of the required conditions. In consequence, the Court found that the referral request at issue was made on time since it was rightly made within 15 working days from receipt of the Invitation Letter.

The Court did note, however, that the Invitation Letter itself was sent within an unreasonable period of time as a period of 47 working days elapsed between receipt of the original complaint by the Commission and the sending of the Invitation Letter to the NCAs, a delay which the Court found to be unjustified. Nevertheless, the Court ruled that such an infringement of the reasonable time principle could not in the present situation justify the annulment of the Commission’s Decisions as it did not adversely affect the ability of Illumina or Grail to defend themselves effectively, such adverse effect being the legal standard to call into question the validity of an administrative procedure.

3° The recent shift in the Commission’s approach towards Article 22 EUMR does not violate the principle of protection of legitimate expectation

Finally, Illumina argued that the recent shift in the commission’s guidance on Article 22 violated its legitimate expectations since, at the time it agreed on the concentration with Grail, the Commission did not accept referral requests for concentrations that did not fall within the scope of national merger control rules. To that end, it pointed out to a specific speech made by Margrethe Vestager in September 2020 in which she confirmed that, at the time, the Commission was discouraging Member States to make use of such referral requests and that a change of approach would take place in the future. Illumina and Grail emphasized the clear and unconditional nature of that speech, as regards the process and timing of the implementation of the new referral policy. They also reminded that the Commission’s guidance on the application of the referral mechanism of Article 22 was adopted after the Invitation Letter was sent, without public consultation.

However, the Court dismissed such argumentation, reminding that a party’s right to rely on the principle of the protection of legitimate expectations presupposes the fulfilment of certain conditions set by the case law, notably that “precise, unconditional and consistent assurances originating from authorised, reliable sources have been given to the person concerned by the competent authorities of the European Union” and “has led him or her to entertain well-founded expectations.” In the present case, the Court held that Illumina failed to demonstrate the existence of such assurances. In particular, with regard to Margrethe Vestager’s speech that Illumina relied upon, the Court found that the Vice-President of the Commission simply stated in her general policy speech that it was time to change that past practice but did not make any commentary on the transaction. And since the speech occurred months before the transaction was even publicly announced, that speech could not contain precise, unconditional and consistent assurances in relation to the treatment of that specific concentration.

Furthermore, the Court noted that the fact that the Commission has a practice of discouraging NCAs from referring cases to it that they do not have the power to review themselves does not, in itself, precluded such referrals.

The Court added that because the contested Decisions were based on a correct interpretation of the scope of Article 22 EUMR (as developed supra in section 1°), Illumina could not rely on the reorientation of the Commission’s decision-making practice to claim any violation of the principle of legitimate expectation.

The General Court thus concluded by dismissing Illumina’s action in its entirety.

Conclusion

Given the novelty of the Article 22 doctrine and the absence of guidance thereof at the time of the contemplated Transaction, this is arguably a particularly harsh ruling against Illumina, with serious consequences. The Commission, which had temporarily halted its in-depth probe into the Transaction last February while waiting for the General Court’s ruling, may now resume its work. As for now, Illumina and Grail remain subject to the interim measures imposed by the Commission in October 2021 requiring, in particular, that Grail be kept separate, be run by independent managers and that the parties implement Chinese walls in order to avoid sharing confidential and strategic information. In parallel of the in-depth review and the interim measures, the Commission, just six days after the judgment, sent a statement of objections to Illumina alleging unlawful gun-jumping (i.e., violation of the standstill obligation). The latter had indeed publicly announced that it had completed its acquisition of Grail while the Commission’s in-depth investigation was still ongoing. What’s next? Illumina made public its intention to appeal the judgment almost immediately after its issuance. It may hence not be the end of the story.

About the impact of the ruling beyond the Illumina/Grail transaction, it vigorously reinforces the Commission’s expansion of jurisdiction over mergers below the thresholds and confirms the need, for companies, whatever the activities concerned, to adapt to this new legal framework and take into account the clear uncertainty that derives from a potential Article 22 referral.

This is even truer as Margrethe Vestager, commenting upon the judgment, declared “We have a few acquisitions within our sights that might be relevant candidates.” So, there are clearly more cases to come.

In this context, our recommendations made a few months back (see here) remain all the more relevant after this confirmation’s judgment.

Finally, one can only hope that in the future the Commission and the NCAs will use this new Article 22 approach sparingly, focusing on the highest risks’ cases.

[1] Article 22 EUMR provides that « one or more Member States may request the Commission to examine any concentration as defined in Article 3 that does not have a Community dimension within the meaning of Article 1 but affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request. »

Largest Ever Annual Adjustment to the HSR Premerger Notification Thresholds Announced

Jennifer Clarke-Smith, Kristin Petersen and Danielle MangognaPosted on January 24, 2022

Takeaways

The new minimum HSR “Size of Transaction” threshold is increasing from $92 million to $101 million.
New thresholds apply to transactions closing on or after February 23, 2022.
This $9 million increase is the largest ever annual adjustment to the minimum HSR “Size of Transaction” threshold.
Failure to file may result in a fine of up to $46,517 per day of non-compliance.
The HSR Act casts a wide net, catching mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

The Federal Trade Commission announced revised Hart-Scott-Rodino (“HSR”) filing thresholds on January 24, 2022, as required by the HSR Act, based on the change in the US gross national product. The new minimum HSR “Size of Transaction” threshold is increasing to $101 million from the prior threshold of $92 million. The increase of $9 million, or 9.8%, is the largest annual adjustment to the minimum HSR filing threshold since the adjustments began in 2005. The new threshold will apply to transactions closing on or after February 23, 2022. The HSR Act and Rules require that parties to certain transactions submit an HSR filing and wait up to 30 days (or more, if additional information is formally requested) before closing, which gives the government time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

Determining HSR reportability: Does the transaction meet the Size of Transaction test?

An HSR filing may be required when, as a result of the transaction, the acquiring person will hold an aggregate amount of voting securities, non-corporate interests, and/or assets valued in excess of the HSR “Size of Transaction” threshold in place at the time of closing. Calculating the Size of Transaction may require aggregating voting securities, non-corporate interests, and assets previously acquired, with what will be acquired in the contemplated transaction. The Size of Transaction may also include contingent payments, earnouts, liabilities, and certain debt retired as consideration for the transaction. Talk to HSR counsel to determine your Size of Transaction.

Size of Transaction Test

2021 Threshold

Closing before February 23, 2022

2022 Threshold

Closing on or after February 23, 2022

>$92 million

>$101 million

If the transaction will close before February 23, 2022, the $92 million threshold still applies; closings on or after February 23, 2022 will be subject to the higher $101 million threshold.

Determining HSR reportability: Do the parties to the transaction meet the Size of Person test?

Certain transactions that satisfy the Size of Transaction threshold must also satisfy the “Size of Person” thresholds to be HSR-reportable. These adjusted thresholds are also effective for all closings on or after February 23, 2022. While the general Size of Person test is set out below, an alternative test may apply to transactions where the Acquired Person is not engaged in manufacturing. Talk to HSR counsel to determine which entity’s sales and assets must be evaluated and which test applies.

Size of Person Test
Size of Transaction >$101 million, but ≤$403.9 million	One party (or its Ultimate Parent Entity) has ≥$202 million in total assets or annual net sales, and
	The other party (or its Ultimate Parent Entity) has ≥$20.2 million in total assets or annual net sales
Size of Transaction >$403.9 million	Reportable regardless of the Size of Person test

Filing Fee

For all HSR filings, one filing fee is required per acquisition. The amount of the filing fee is based on the Size of Transaction. Below are the adjusted fee ranges for 2022.

Size of Transaction	Filing Fee
More than $101 million, but less than $202 million	$45,000
$202 million or greater, but less than $1.0098 billion	$125,000
$1.0098 billion or greater	$280,000

Failure to File Penalty

Failing to submit an HSR filing can carry a significant financial penalty for each day of non-compliance. The maximum civil penalty for HSR violations also adjusts annually and the adjusted maximum civil penalty as of January 10, 2022 is set out below.

Failure to File Penalty

Up to $46,517 per day in violation

Always consult HSR counsel to determine whether your transaction is HSR-reportable, especially before concluding that a filing is not required. Even if the Size of Transaction and Size of Person tests are met, the transaction may be exempt from the filing requirements. If you have any questions regarding HSR Act reporting requirements or the new thresholds, please contact the authors listed above or your usual Orrick contact.

2021 Antitrust Writing Awards Nominations

Editorial BoardPosted on June 11, 2021

An article authored by Orrick attorneys has been nominated for a 2021 Antitrust Writing Award as a “Best Business Article” in the intellectual property category. The Awards Jury will select one winning article per category and the piece is also eligible for the “Reader Award” distinction, which is decided by popular vote.

You can view the article and cast your vote here:

“SEP Licensing in Supply Chains: ECJ Gets Opportunity for a Major Trend-Setting Decision,” by Lars Mesenbrink, Julius Schradin, and Jay Jurata

Voting closes on June 28, 2021.

No more ‘flying under the radar’: capturing transactions below the jurisdictional thresholds of national and EU merger control regimes

Marie-Laure Combet, Saira Henry, Douglas Lahnborg and Matthew G. RosePosted on March 31, 2021

The European Commission (“Commission”) is expanding its jurisdiction over transactions by encouraging national competition authorities (“NCAs”) of the EU Member States to ‘refer’ certain transactions to it that fall below the thresholds for mandatory notification at the EU and the national level. On 26 March 2021, the Commission published guidance (“Guidance”) setting out referrals that are ‘encouraged’ and how and when it will accept such referrals. This development has not required legislative changes (which would have taken some time and also required unanimity among EU Member States) but rather the Commission is resuscitating an existing provision, the so-called “Dutch clause”, namely Article 22 of the EU Merger Regulation (“EUMR”).

The Commission hopes to remedy what it perceives as an enforcement gap under the turnover-based thresholds for notification. In particular, this change in policy aims to catch transactions that would otherwise fall outside its jurisdiction as the turnover thresholds would not be met, but the parties otherwise have an important competitive position that is not reflected in their turnover, including so-called “killer acquisitions”. The Commission considers this to be a particular issue in the digital economy, pharmaceutical sector and other ‘innovation-driven’ sectors.

Only a couple of Member States (Austria and Germany) have implemented transaction value-based thresholds to catch acquisitions of companies with low turnover and high valuation. The Guidance allows the Commission to enable a more systematic EU-wide response.

The substantive test remains unchanged: the Commission will continue to assess whether there is a risk of significant impediment to effective competition (the “SIEC test”).

Transactions falling within the new policy

According to the Guidance, Article 22 referrals will be encouraged for transactions where the turnover of at least one party does not reflect its actual or future “competitive potential.” A non-exhaustive list of examples includes acquisitions of: (i) promising start-ups, (ii) “important innovators,” (iii) an “actual or potential important competitive force,” (iv) companies having access to key raw materials, infrastructure, data or IP rights, and (v) companies providing key inputs for other industries.

Whether a transaction is eligible for an Article 22 referral depends on two legal requirements: the transaction must (i) affect trade between Member States, and (ii) threaten to significantly affect competition within the territory of the Member State(s) making the request. The Commission provides examples of the relevant factors for the assessment of these criteria:

Trade between Member States could be considered affected, for example, based on the location of potential customers, data collection, or likely future commercialisation of IP rights.
The requirement of a threat to “significantly affect competition” within the relevant territory will be met if a preliminary assessment reveals a real risk that the transaction could result in the creation or strengthening of a dominant position, the elimination of an important competitive force (in particular, a new important innovator), the foreclosure from a market or supplies, and leveraging a strong market position from one market to another through exclusionary practices. The preliminary assessment conducted to verify this second criterion is without prejudice to the subsequent formal assessment of the transaction if the Commission accepts the referral.

Procedure/timing

The Commission intends to play an active role in the enforcement of the new policy. It is willing to “cooperate closely” with NCAs to identify transactions that would fall within the scope of this new policy, or even invite NCAs to invoke Article 22 in certain cases. Third parties are encouraged to contact the Commission or NCAs, if they consider a transaction appropriate for referral, provided they have sufficient evidence to enable a preliminary assessment.

The timing for referral is as follows:

In cases where there is no mandatory filing at a national level, NCAs have 15 working days to request referral, starting from the date on which the transaction is made known to them (according to the Guidance, this is when sufficient information is available to make a preliminary assessment);
The Commission will inform the other NCAs of the referral request “without delay”;
Other NCAs then have 15 working days to join the initial request (direct communication between NCAs is also encouraged by the Commission); and
After 10 additional working days, the Commission will be deemed to have adopted a decision to examine the transaction, if it has not already done so.

While the referral is subject to the deadlines set out above, the Commission is willing to accept Article 22 referrals up to six months after completion of the transaction or the transaction having become known in the EU (whichever is the later), or even later in “exceptional situations”.

Implications for parties to corporate transactions

Standstill effect and risk of gun jumping: The obligation not to close a transaction applies to transactions that have not completed at the date on which the Commission informs the parties that an Article 22 referral request has been made, after which the parties risk substantial gun jumping fines if they decide to close. The standstill obligation ceases if the Commission subsequently decides not to examine the concentration. The standstill obligation does not apply to transactions that have already completed before the Article 22 referral process is initiated such that no gun jumping fines can be incurred. The Commission will inform the parties as soon as possible if a referral is being considered to allow the parties to refrain from completing the transaction.

Duty to notify: Once the Commission has accepted Article 22 jurisdiction, the acquirer will be under a duty to notify the transaction under the standard notification procedure under the EUMR.

Potential effects on the transaction and risk of sanctions: Once the Commission has accepted jurisdiction, the transaction will be reviewed based on the standard substantive and procedural EUMR rules, which for transactions that raise concerns include the risk of remedies and in the worst-case scenario, a prohibition decision. If the transaction has not yet completed, there will be no real difference with the standard rules for notifiable transactions, although a decision to apply Article 22 adds to the timetable and may delay closing. However, effective remedies could prove difficult to implement for transactions that have already closed depending on the degree to which the acquired business has been integrated, particularly remedies requiring structural changes (e.g. full or partial divestment) to restore the situation pre-transaction.

The end of the “one stop shop” within the EU?: While under Article 22, the territorial jurisdiction is in theory limited to the EU Member States that have either referred the concentration to the Commission or joined the initial referral(s), the Commission takes into account the effects of a transaction in the rest of the EU whenever a relevant market has a geographic dimension larger than the referring Member State(s). This is likely to be the case in many digital and innovation markets potentially covered by the new policy and tech companies with global ambitions should assume that the Commission will investigate the effect of the transaction on an EU-wide basis.

The Guidance states that if a transaction has already been notified in one or more EU Member States that did not request a referral or join such referral request, this could be a factor against accepting a referral. However, for the purposes of legal certainty and considering potential for inconsistencies, in particular in relation to any remedies, we encourage the NCAs and the Commission to maintain a high level of cooperation to avoid overlapping investigations.

Our recommendations in light of the new policy

This is a major change to the Commission’s merger control policy. With this new policy, which is not limited to “Big Tech” or the digital economy (which has driven recent policy shifts or discourse relating to such shifts), EU merger control no longer provides for the legal certainty resulting from turnover-based notification thresholds. Several months of delay could be added between signing and closing, remedies could be imposed after the implementation of a transaction, and completed acquisitions might have to be unwound, all for transactions which prior to this policy change would not have faced any merger control review in the EU.

In light of this, transaction parties should consider:

Assessing the risk of falling within the scope of the new policy: Transaction parties should consider if a transaction falls within the categories of potential Article 22 referrals set out above. They should also consider if the transaction is likely to raise competition concerns – including through the strengthening of dominance/market power, access to advanced/innovative technology, R&D or data, or if the transaction involves a highly concentrated market, a target with a substantial user base or high projected growth, or meets merger control thresholds outside the EU. The rationale of the transaction and projected market developments will also be relevant factors in assessing if an Article 22 referral is likely.

Allocating risk and adapting transaction documents: Transaction agreements should be revised to take into account the risk of an Article 22 referral. In particular, agreements should allocate the risk of an Article 22 referral between buyers and sellers and include, or not include, as a condition precedent the absence of an Article 22 referral in the time period between signing and closing. If a transaction is likely to be referred, the acquirer may insist on having received from the Commission or NCAs confirmation that the transaction will not get referred under Article 22.

Strategically informing NCAs: At a national level, it might be beneficial to provide NCAs with enough information to allow a preliminary assessment of whether Article 22 referral is appropriate. Providing a sufficient level of detail should trigger the 15 working day deadline vis-à-vis the NCAs that have been provided with such information. It remains to be seen what level of cooperation will be achieved among NCAs; at this stage, it is not certain that informing one NCA would be regarded as informing all NCAs.

Reaching out to the Commission: While it is not yet clear what type of “comfort letter” the Commission is willing to provide, early communication with the Commission should help clarify whether a transaction is outside the scope of Article 22 referral, provided that sufficient information is made available to the Commission to make such assessment. This option should be particularly attractive in a competing bid scenario, or where competitors or other third parties otherwise may use the new Article 22 policy to scupper or delay a transaction.

DECREASING HSR Premerger Notification Thresholds in 2021

Diana GillisPosted on February 2, 2021

Takeaways

The new minimum HSR threshold is DECREASING from $94 million to $92 million.
New thresholds apply to any transaction closing on or after March 4, 2021.
Failure to file may result in a fine of up to $43,792 per day of non-compliance.
The HSR Act casts a wide net, catching mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

The Federal Trade Commission has announced new HSR thresholds for 2021, which are lower than the existing thresholds. The thresholds typically increase year-over-year, but are decreasing in 2021 from $94 million to $92 million, potentially requiring HSR premerger notification filings to the U.S. antitrust agencies for smaller transactions. The new threshold will begin to apply to transactions closing on March 4, 2021. The HSR Act and Rules require that parties to certain transactions submit an HSR filing and wait up to 30 days (or more, if additional information is formally requested) before closing, which gives the government time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

Determining reportability: Does the transaction meet the Size of Transaction test?

The potential need for an HSR filing requires determining whether the acquiring person will hold an aggregate amount of voting securities, non-corporate interests, and/or assets valued in excess of the HSR “Size of Transaction” threshold that is in place at the time of closing. Calculating the Size of Transaction may require aggregating voting securities, non-corporate interests, and assets previously acquired, with what will be acquired in the contemplated transaction. It may also include more than the purchase price, such as earnouts and liabilities. Talk to your HSR counsel to determine what must be included in determining your Size of Transaction.

If the transaction will close before March 4, 2021, the $94 million threshold still applies; closings as of March 4, 2021 will be subject to the lower $92 million threshold.

Determining reportability: Do the parties to the transaction have to meet the Size of Person test?

Transactions that satisfy the Size of Transaction threshold may also have to satisfy the “Size of Person” thresholds to be HSR-reportable. These new thresholds are also effective for all closings on or after March 4, 2021. Talk to your HSR counsel to determine which entity’s sales and assets must be evaluated.

Filing Fee

For all HSR filings, one filing fee is required per transaction. The amount of the filing fee is based on the Size of Transaction.

Failure to File Penalty

Failing to submit an HSR filing can carry a significant financial penalty for each day of non-compliance.

Always consult with HSR counsel to determine if your transaction is HSR-reportable, especially before concluding that a filing is not required. Even if the Size of Transaction and Size of Person tests are met, the transaction may be exempt from the filing requirements.

Good News for Clients From Germany: Increased German Merger Control Thresholds in Force

Lars Mesenbrink and Julius SchradinPosted on January 22, 2021

In a Nutshell

What’s new?
- Significantly increased turnover thresholds for German merger control.
The good
- Many transactions will no longer be subject to German merger control.
- This will lead to a much smoother process for lots of transactions, specifically for our clients in the tech sector and start-up companies that have not generated more than 17.5 mn in Germany.
The ugly
- Transactions can still be subject to German merger control even if the increased thresholds are not triggered.
- The Federal Cartel Office can require filings from a company after having conducted a market inquiry.
- The review period for so-called phase 2 proceedings was extended from four to five months.
- In 2017, consideration of the transaction threshold with the requirement of the rather vague criterion “substantial domestic operations” was introduced and is still in effect.
Action items for our clients
- Check transactions that are currently being negotiated or that have already been signed – they might benefit from the increased thresholds of not requiring merger clearance in Germany anymore.
- Going forward: Have a look at the Federal Cartel Office’s approach on the “vague thresholds” and sector inquiries – we will keep you posted.

In Detail

The 10^th amendment of the German Act against Restraints of Competition (ARC) does not only introduce a new enforcement tool concerning the control of abusive practices. The amendment also brings a significant increase of the turnover thresholds in merger control. This will lead to a significant reduction of merger control filing requirements – good news for transactions!

New Thresholds

Most transactions in Germany are only subject to a notification if the companies involved achieve certain minimum turnover worldwide and in Germany. With respect to the turnover threshold, from now on, transactions will only be subject to merger control if, among other things, one of the companies involved has annual sales of at least 50 million euros in Germany (instead of 25 million previously) and, in addition, another company involved has annual sales in Germany of at least 17.5 million euros (instead of five million previously). Officially, this increase is intended to ease the bureaucratic burden on companies. However, the fact that the Federal Cartel Office received around 1,200 merger notifications in 2020 and opened in-depth investigations (phase II) in only 7 cases indicates that the Federal Cartel Office intends to focus its resources more efficiently on problematic cases. This is accompanied by the extension from four to five months of the review period for in-depth investigations.

For our business clients dealing with unproblematic transactions from an antitrust perspective, this is certainly good news as there will be no delay due to a merger control filing. However, besides these mere turnover thresholds, there is another threshold that takes into account the value of the transaction and competitive potential that has been in force since 2017 and is particularly important to our tech clients. We will keep you posted if the Federal Cartel Office focuses on this threshold in the future.

Further, the Federal Cartel Office is now able to require companies in certain sectors of the economy to notify mergers even if the companies involved in the transaction do not meet turnover thresholds mentioned above. According to the newly introduced section 39a ARC, the Federal Cartel Office can request notifications from a company if the following conditions are met:

The acquirer must generate a worldwide turnover of more than 500 million euros;
There must be objectively verifiable indications demonstrating that future acquisitions by the acquirer may significantly impede effective competition in Germany in the specified sectors;
The acquirer holds at least a 15% market share in Germany in the specified sector; and
The Federal Cartel Office must have carried out a sector inquiry of the industry in question.

Once a company is subject to such a notification obligation, it is obliged to notify the Federal Cartel Office about any acquisition in the specified sector(s), provided that

the target’s global turnover exceeded 2 million euros in its last fiscal year, and
more than two-thirds of the target’s turnover were generated in Germany.

Sector inquiries are investigations by the Federal Cartel Office of a specific sector of the economy if certain circumstances give rise to the assumption that competition of such a specific sector may be restricted or distorted. In the course of a sector inquiry, the supply and demand structures as well as aspects of market activity which have an impact on competition are analyzed by the Federal Cartel Office. A sector inquiry is not a procedure against specific companies. However, proceedings by the Federal Cartel Office are often a follow-up to a sector inquiry if the sector inquiry raises sufficient initial suspicion of a violation of competition regulations.

Andreas Mundt, President of the Federal Cartel Office, indicated the ambivalence of the new thresholds from an enforcement point of view:

“So far, we have controlled around 1,200 mergers year after year; including many cases that are not really relevant from a competition point of view. That is a considerable number, and one that is accompanied by a very heavy workload. In principle, we therefore welcome an increase in the thresholds. However, at the level now selected, one or two questionable cases are likely to disappear. With the resources freed up, we will be able to focus even better on the really critical cases.“

This shows the shift in the way the Federal Cartel Office obtains information on critical cases and markets. The previous approach relied heavily on a large number of “unproblematic” merger notifications, which provided the Federal Cartel Office with the parties’ view on markets and competition.

In the future, the Federal Cartel Office will put an emphasis on gaining information through sector inquiries. This shift also results in the elimination of the obligation to inform the Federal Cartel Office about the successful closing of a transaction. Previously, such a notification had to be submitted to the Federal Cartel Office for statistical purposes.

Takeaways

From a company’s point of view, the significant increase of the thresholds is welcomed as it will relieve companies from “pro forma” notifications. This applies, in particular, to PE funds. The new thresholds refer to the last completed business year prior to closing. Thus, transactions that are currently being negotiated or have already been signed but not yet closed could benefit from these new thresholds as well.

The increased thresholds will also free resources at the Federal Cartel Office, which will likely be used to conduct more sector inquiries and, subsequently, to prepare decisions under the new sections 39a and 19a GWB. Companies that are affected by such a sector inquiry and interested third parties will have the opportunity to provide the Federal Cartel Office with their views and arguments on the competitive environment in their market(s) and may highlight potentially controversial market conduct of (rival) market participants. This might be seen as a good opportunity to shine the spotlight in the right direction.

Background

The 10^th amendment became necessary due to the implementation of the ECNplus Directive. The implementation of the so-called ECNplus Directive will strengthen the effectiveness of antitrust prosecution. In conjunction with the system in place at the EU level, companies and their employees are now obliged to cooperate by clarifying these facts.

The amendment also contains various innovations in the area of fine regulations. For example, “reasonable and effective precautions taken in advance to avoid and detect infringements” (i.e., compliance measures) can be considered mitigating circumstances in the future assessment of fines. In addition, the leniency program has now been codified into law. The Federal Cartel Office will adapt its announcements in this regard. Leniency applications can of course still be submitted at any time.

New obligations and sanctions for digital ‘gatekeepers’: European Commission proposes Digital Markets Act

Marie-Laure Combet and Boris MarschallPosted on December 23, 2020

The debate about competition issues and unfair practices specific to online platforms and the appropriate tools to tackle them was taken a step further by the European Commission (‘Commission’), which presented two legislative proposals on 15 December 2020: The Digital Services Act (‘DSA’) and the Digital Markets Act (‘DMA’). While the former is intended to regulate online content and increase transparency and accountability, the latter is intended to ensure contestable and fair markets in the digital sector by imposing limits (and potentially sanctions) on so-called ‘gatekeepers’. This post focuses on the latter. The DMA is the confirmation that, from the Commission’s point of view, the competition law toolbox does not perfectly address the new challenges encountered in the digital sector. Designed more specifically at tackling unfair practices and closing (what is perceived by the Commission as) an enforcement gap, the DMA complements the competition law toolbox with new obligations for market players and new control and enforcement tools for the Commission.

Identifying the gatekeepers

The first potentially contentious issue concerns the determination of the subject-matter of the DMA.

Digital platforms will have to assess whether the DMA applies to them. During the press presentation, the two commissioners in charge, Margrethe Vestager, Executive Vice-President for a Europe fit for the Digital Age (and continued head of DG Competition), and Thierry Breton, Commissioner for Internal Market, refrained from naming any specific platform.

The DMA establishes a concept of ‘gatekeeper’, which refers to providers of ‘core platform services’. These services include online intermediation, search engines, social networks, video-sharing platforms, online-communication, operating systems, cloud computing, as well as related advertising.

More specifically, the proposal sets out three cumulative criteria for defining ‘gatekeepers’: the provider must (i) have a significant impact, (ii) act as an ‘important gateway for business users to reach end users’ and (iii) enjoy an ‘entrenched and durable position’ or will foreseeably do so in the near future.

The Commission will presume that these criteria are fulfilled above the following quantitative thresholds:

a) for criterion (i) above, where the provider has an annual turnover in the EEA of at least EUR 6.5 billion in the last three financial years or market capitalization or market value of at least EUR 65 billion in the last financial year and it provides a core platform service in at least three Member States; or

b) for criterion (ii) above, where, in the last financial year, the core platform service had more than 45 million monthly active EU end users and 10,000 yearly active EU business users; or

c) for criterion (iii) above, where the provider meets the two thresholds mentioned in b) for each of the last three financial years.

The gatekeeper status will result from a Commission assessment and subsequent decision, but providers will have an obligation to self-assess and report themselves to the Commission when they meet the thresholds for the presumption to apply.

The presumption is rebuttable: a provider meeting the thresholds can argue that it does not fulfil the gatekeeper criteria. The Commission can also identify a gatekeeper even when not all the thresholds are met. A list of gatekeepers will be published and maintained to take into account market developments.

Specific duties and prohibitions

Regarding behavior, the DMA contains a list of Do’s and Don’ts for gatekeepers.

A first set listed in Article 5 of the DMA applies per se and needs no further details for the gatekeepers to fully comply with and be held responsible if they do not. For the second set listed in Article 6 of the DMA, the Commission may impose specific, more precise measures on a gatekeeper.

Do’s	Don’ts
Obligations for gatekeepers (art. 5 DMA)
Allow business users to offer the same products or services to end users at different prices or conditions via other platforms; Allow business users to do business with end users acquired on a platform also outside that platform, and allow end users to access content via the platform even if it was acquired outside the platform; Upon request by a client of advertising services, provide it with pricing and remuneration information in relation to a specific ad and for each relevant advertising service.	Refrain from combining personal data sourced from these core platform services with other personal data; Refrain from preventing or restricting business users from raising issues with any relevant public authority relating to any practice of gatekeepers; Refrain from imposing its own identification service on end users that want to access business users’ services on the gatekeeper’s platform; Refrain from tying core platform services.
Obligations for gatekeepers susceptible of being further specified (art. 6 DMA)
Allow end users to uninstall any preinstalled software applications (unless it is essential for the functioning of the operating system or of the device and cannot technically be offered on a standalone basis by third parties); Allow use of or interaction with third party software applications or software application stores on the gatekeeper’s operating systems, and allow access to these outside the gatekeeper’s core platform services (but the gatekeeper can take proportionate measures to ensure that the integrity of its hardware or operating system is not endangered); Allow business users providing ancillary services access to and interoperability with the same operating system, hardware or software features used for the gatekeeper’s ancillary services; Provide advertisers and publishers, upon their request and free of charge, with access to the performance measuring tools of the gatekeeper and the information necessary for advertisers and publishers to carry out their own independent verification of the ad inventory; Provide effective portability of data generated through the activity of a business user or end user; Provide business users (or third parties authorised by them), with free, effective, high-quality, continuous and real-time access and use of data provided for or generated in the context of end users engaging with the products or services provided by those business users; however, for personal data, the end user must have opted in for such access, and the access must be limited to the data directly connected with the use of the relevant platform in respect of the products or services offered by the relevant business user; If the gatekeeper offers an online search engine, provide any third-party providers of online search engines (upon their request) with access on FRAND terms to ranking, query, click and view data generated by end users, subject to anonymisation of personal data; Apply fair and nondiscriminatory general conditions of access for business users to the gatekeeper’s software application store.	When the gatekeeper competes with business users, refrain from using relevant data not publicly available and generated or provided in relation to the use of the core platform services by these business users or their end users; Refrain from ranking more favourably its own products and services compared to those of third parties (fair and nondiscriminatory conditions should apply); Refrain from technically restricting the ability of end users to switch between and subscribe to different software applications and services to be accessed using the operating system of the gatekeeper, including as regards the choice of Internet access provider for end users.

Regarding acquisitions, the DMA introduces an obligation for gatekeepers to inform the Commission of any intended concentrations in the digital sector, even for transactions falling outside the scope of EU or national merger control regimes.

Enforcement powers for the Commission (EU level intervention)

The Commission will have several tools to monitor gatekeepers and sanction lack of compliance: market investigations, investigative proceedings (including requests for information, interviews, on-site inspections), interim measures in case of emergency, noncompliance decisions, and ultimately fines up to 10% of the gatekeeper’s worldwide annual turnover and periodic penalty payments up to 5% of the average daily turnover. A provider will be able to make commitments to avoid a noncompliance decision and sanctions.

Limited intervention at national level

For the sake of a uniform and coherent response to unfair practices implemented by gatekeepers within the EU, the proposed legislation takes the form of a Regulation, directly enforceable within the EU, meaning that it will apply without the need for Member States to adopt national rules. The DMA lays down harmonized rules and Member States must not impose further obligations specific to gatekeepers, be it by way of national legislation, administrative action or else. The only way for Member States to intervene is when at least three of them jointly request the Commission to open an investigation. Regarding public enforcement, no specific role is foreseen for national competition authorities.

However, private damages are still handled at national level. The DMA leaves room for business users and end-users of core platform services provided by gatekeepers to claim damages for the unfair behaviour of gatekeepers before national courts.

Not yet a reality – the legislative process ahead

The current version of the DMA is still likely to change as it will undergo the normal EU legislative process involving the European Parliament and national governments via the European Council. According to the Commission, the search for a broad political consensus was already part of the preparatory phase, so that the final legislative act is anticipated to be adopted rather rapidly, in about one and a half years. Add the proposed six-month delay between entry into force and application, and the DMA could apply beginning of 2023. Yet, the real pressure against the proposal will probably come from providers likely to be identified as gatekeepers and that had already made their objections known during the public consultation launched by the European Commission prior to the drafting of the DMA.

The European Antitrust Enforcers’ response to the Covid-19 outbreak: Antitrust rules will bend, but will not break

Marie-Laure Combet and Boris MarschallPosted on March 26, 2020

In a welcomed attempt to align their approaches, the antitrust enforcers of the European Competition Network (ECN)¹ have published a brief joint statement on the application of competition law during the Covid-19 crisis.

If one may regret that its content remains too high-level, it is an important step, which comes just shortly after the European Commission adopted a specific temporary State Aid framework in order to offer Member States the flexibility required in this exceptional context to support businesses impacted by the critical disruptions caused by the Covid-19 outbreak (commented here).

In addition to flexible public support measures, businesses need more clarity as to whether they can similarly benefit from a flexible enforcement of antitrust rules. At a time where businesses are put under considerable pressure, no one seems to question the fact that increased cooperation between them may be necessary, not to say indispensable for some economic sectors to continue to address basic consumers’ needs; likewise, there are reasons to believe that the traditional special responsibility of dominant firms may be harder to assume in the current circumstances.

Here and there, voices have rapidly been raised about the need to explicitly relax competition laws or their enforcement to allow companies to continue to meet European consumers’ vital needs while not dreading subsequent antitrust investigations (see for instance: the public statement issued by EuroCommerce, a trade association of European retail and wholesale companies, advocating for a waiver of normal competition rules to allow retailers to “share information on supplies and arrang[e] deliveries to the homes of people who cannot get out”).

At the same time, faced with the risk of a generalization of inflated prices for products or services in high demand due to the pandemic, antitrust enforcers naturally feel the need to be extra-vigilant and ensure that adequate safeguards remain in place, despite their own challenges of having (at least for some of them) their personnel working from home. It explains why some enforcers (such as the German Federal Cartel Office) have been vocal about the fact that existing competition law rules already provided sufficient flexibility and that they would continue to crack down on those who would unduly take advantage of the crisis to adopt anticompetitive conducts.

The guidance offered in the ECN’s joint statement strikes a balance between encouraging good-faith solutions and preventing abuses. It combines different approaches that have previously been supported by some European antitrust enforcers. But let’s make no mistake: the underlying message is clear: antitrust rules may bend but will not break, meaning that companies shall not lower their guard and ensure that they take adequate steps to mitigate the antitrust risks.

Flexible antitrust to ensure continued supply

In its joint statement, after acknowledging that “this extraordinary situation may trigger the need for companies to cooperate in order to ensure the supply and fair distribution of scarce products to all consumers”, the ECN assures that it “will not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply”.

The ECN statement yet continues by stressing that “such measures” are likely to already comply with existing competition law, since they would either not be caught by the antitrust prohibitions or would fall under the existing exemptions. In other words, the message is that businesses will benefit from flexibility where this is justified by the Covid-19 pandemic, mostly because this flexibility is already an inherent part of the existing antitrust regime.

While nothing is said about what would be accepted as “necessary measures” or what is meant by “temporary” measures, some illustrations may already be found in decisions concerning topical sectors taken by some national enforcers. For instance, the Norwegian antitrust enforcer recently approved a three-month cooperation between Norwegian airlines in order to allow them to continue to ensure critical activities for citizens. Likewise, the German Cartel Office seems to have taken a softened approach to cooperation in the retail sector to the extent it is necessary to ensure continuous supply.

If useful, these precedents, however, leave numerous questions unaddressed.

To help companies navigate these issues, the members of the ECN seem willing to provide “informal guidance” to companies, which is a good thing in theory but clearly does not provide the same level of comfort as proper formal decisions. One may also have some doubts as to the enforcers’ ability to respond adequately in a timely manner to consultations considering that many of them have already made it clear that stakeholders needed to be prepared to face significant delays in the handling of pending investigations and merger control reviews.

It is hence to be hoped for that the members of the ECN will take inspiration from the UK CMA and will shortly, individually or jointly, follow-up with more detailed guidance.

Flexible antitrust to avoid excessive price increases

To tackle the other main issue, the risk of exaggerated inflation, the ECN joint statement contains a warning to companies that prices of “products considered essential to protect the health of consumers in the current situation (e.g., face masks and sanitising gel)” should “remain available at competitive prices” and that antitrust enforcement will continue to fight against antitrust infringements such as cartels or abuses of dominance. To the same end, the ECN joint statement also explicitly recalls that manufacturers can continue to use their right to set maximum prices.

This position is in line with the messages sent previously by several European antitrust enforcers. For instance, the Latvian Competition Council warned against price cartels resulting in overpayment for consumers. The Greek Competition Authority has communicated that it would indulge vertical agreements tending to maintain prices at a low level (maximum or recommended prices), which otherwise could be deemed anticompetitive in certain circumstances; conversely, resale price management (minimum prices) would still be examined and prosecuted.

However, one may wonder whether antitrust (flexible or not) is the appropriate tool to tackle excessive pricing problems in the current context. Why? Because, it may not offer a timely remedy (as a prior investigation will still be needed); because, the concept of exploitative abuse to address excessive prices traditionally raises several complex legal questions, and even more if we are to speak about temporary dominance resulting from the current context.

One may therefore not exclude that, in the most critical situations, European Governments will prefer ex-ante regulation over ex-post regulation, like in France where the price of hydroalcoholic gel was eventually fixed by decree.

¹ECN is the network for coordination between the national competition authorities (NCAs) within the EU/EEA, the European Commission (DG Comp) and the EFTA Surveillance Authority.

M&A HSR Premerger Notification Thresholds Increase in 2020

Diana GillisPosted on January 28, 2020

Chinese: 美国提高2020年HSR法案并购前申报门槛

Takeaways

The new minimum HSR threshold is $94 million and applies to transactions closing on or after February 27, 2020.
The current threshold of $90 million is in effect for all transactions that will close through February 26, 2020.
Failure to file may result in a fine of up to $43,280 per day of non-compliance.
The HSR Act casts a wide net, catching mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

The Federal Trade Commission has announced new HSR thresholds for 2020. Transactions closing on or after February 27, 2020 that are valued in excess of $94 million potentially require an HSR premerger notification filing to the U.S. antitrust agencies. The HSR Act and Rules require that parties to certain transactions submit an HSR filing and wait up to 30 days (or more, if additional information is formally requested) before closing, which gives the government time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

Determining reportability: Does the transaction meet the Size of Transaction test?

If the transaction will close before February 27, 2020, the $90 million threshold still applies; closings as of February 27, 2020 will be subject to the new $94 million threshold.

Determining reportability: Do the parties to the transaction have to meet the Size of Person test?

Transactions that satisfy the Size of Transaction threshold may also have to satisfy the “Size of Person” thresholds to be HSR-reportable. These new thresholds are also effective for all closings on or after February 27, 2020. Talk to your HSR counsel to determine which entity’s sales and assets must be evaluated.

Filing Fee

For all HSR filings, one filing fee is required per transaction. The amount of the filing fee is based on the Size of Transaction.

Failure to File Penalty

Failing to submit an HSR filing can carry a significant financial penalty for each day of non-compliance.

U.S. v. Sabre: Putting the Innovation Theory of Harm to the Test?

James J. Tierney and Emily LukenPosted on November 11, 2019

In its recent complaint challenging the $360 million acquisition of Farelogix by Sabre, the Department of Justice (“DOJ”) appears to have left the door open to offering proof that harm to innovation in the market for airline bookings is a separate and independent basis to block the merger. When the case goes to trial in January 2020, watch to see if DOJ uses this case to provide a roadmap for the evidence and analytical tools to analyze innovation effects in a technology merger.

The Sabre/Farelogix Lawsuit

The DOJ complaint alleges that Sabre’s acquisition of Farelogix is a “dominant firm’s attempt to eliminate a disruptive competitor after years of trying to stamp it out.” Sabre operates the largest global distribution system (“GDS”) in the United States. A GDS is a computerized system that allows brick-and-mortar and online travel agents to search for fares and schedules and book flights across multiple airlines. The complaint alleges Farelogix is a disruptive competitor that has eroded Sabre’s dominance in airline bookings. Farelogix offers an innovative booking service that allows airlines to bypass GDSs and connect directly to travel agencies. Farelogix has also pioneered the next-generation technology standard, called “New Distribution Capability” (“NDC”). NDC offers more advanced communications between airlines and travel agents and gives airlines greater flexibility to offer travelers ancillary products and services, such as priority boarding and Wi-Fi.

The complaint alleges that over the years Sabre has used its dominant position to engage in a broad range of anticompetitive conduct to delay adoption of NDC and to impede Farelogix’s ability to compete . Despite Sabre’s efforts, Farelogix has loosened Sabre’s grip on the market for airline bookings which has given the airlines leverage to negotiate lower fees from the GDSs. In addition, competition from Farelogix has pushed Sabre to update its own outdated airline booking technology. In spite of Sabre’s efforts to hobble Farelogix, demand for NDC has steadily grown and Sabre has recognized Farelogix as an existential threat to its business model. According to DOJ, “[i]nstead of innovating to compete with Farelogix, Sabre has resorted to eliminating the competitive threat by acquiring Farelogix” and the “acquisition would wipe out this competition and innovation, harming airlines and American travelers.”

In a press statement released the same day the complaint was filed, Sabre wrote that the “DOJ’s claims lack a basis in reality and reflect a fundamental misunderstanding” of the airline booking market. In its answer, Sabre argues the transaction is procompetitive because it will accelerate the delivery of new technology to the airline booking market by combining Farelogix’s NDC technology and retailing capabilities with Sabre’s travel agent network and global footprint. Sabre challenges DOJ’s conclusion that Farelogix is a particularly disruptive and innovative competitor. Sabre contends Farelogix is “not disruptive today and will not become so in the future.” Farelogix’s booking service earned only $7 million in revenues in 2018 and has close to a zero percent share of the airline booking markets alleged in the complaint. Sabre further contends Farelogix is not poised to disrupt the market because there is nothing unique about Farelogix’s technology. NDC is an open standard that is freely available and at least 39 other firms are certified to provide NDC solutions.

Harm to Innovation

Traditional merger analysis has focused on price competition—the merged firm’s ability to raise price or reduce output. In recent decades, nonprice competition—the merged firm’s ability to reduce quality and innovation—has become an important dimension of merger analysis. The emphasis on innovation is nothing new. Section 6.4 of the DOJ/FTC 2010 Horizontal Merger Guidelines makes clear that competition may be harmed if a merger reduces the merged firm’s incentives to innovate:

The Agencies may consider whether a merger is likely to diminish innovation competition by encouraging the merged firm to curtail its innovative efforts below the level that would prevail in the absence of the merger.

Alleging harm to innovation is a well-accepted theory and many DOJ and the Federal Trade Commission (“FTC”) complaints have alleged technology mergers will reduce incentives to innovate. For example, in U.S. v. Bazaarvoice, a litigated case involving the consummated merger of the two leading ratings and review platforms, the DOJ introduced substantial evidence that competition between the parties was the primary driver of innovation in the market. In another recent DOJ case, the proposed acquisition of Tokyo Electron by Applied Materials, the parties abandoned the merger when they were unable to address the DOJ’s innovation concerns. Similarly, the FTC has challenged mergers to protect innovation in high-tech markets. For example, in Nielsen/Arbitron, the FTC required divestitures to protect future competition in the market for cross-platform audience-measurement services and in NXP/Freescale the FTC required divestitures to protect future competition in the semiconductor industry. FTC Chairman Maureen Ohlhausen explained the importance of innovation in the review of high-tech mergers:

Higher prices are obviously a fundamental concern in reviewing mergers of close competitors. The loss of competition to innovate and to develop better, faster, more efficient products, however can be just as concerning – particularly in the technology area, where essential competition often is not on price, but rather on product features.

Assessing Harm to Innovation

Most of these enforcement actions were resolved by consent where the agencies did not go into detail regarding the evidence considered and the analytic tools used to assess harm to innovation. In Bazaarvoice, the one litigated case, DOJ alleged harm to innovation along with effects on price and quality. DOJ did not ask, and the court did not find, that harm to innovation was a separate and independent basis to find the merger substantially reduced competition in the ratings and review market.

The Sabre complaint alleges two separate and distinct theories of competitive harm: (i) higher prices due to the elimination of head-to-head competition between Sabre and Farelogix, and (ii) reduced incentives to invest and innovate next-generation technology. The structure of the Sabre complaint and the extensive references to innovation competition suggests that DOJ may ask the court to make a separate finding that the merger should be blocked based on an innovation theory of harm.

The DOJ’s focus on innovation effects is likely a response to criticism that the agencies have placed excessive focus on price effects and failed to intervene when dominant firms acquire smaller, disruptive competitors. DOJ may seek to use the Sabre case to put harm to innovation on equal footing with price effects. Discovering whether DOJ intends to allege harm to innovation as a separate and independent basis to block the merger will have to wait until DOJ files its pretrial brief and presents expert and other testimony at trial. But if this is DOJ’s intention, the trial may very well answer some open questions about how the agencies approach the elimination of small, innovative competitors. For example, will DOJ articulate a clear standard for blocking a dominant firm’s acquisition of a smaller, innovative competitor? Even if Farelogix has been an aggressive and innovative competitor, will DOJ be able to prove Farelogix is uniquely positioned to push the airline booking industry forward? Expect Sabre to offer evidence that the GDSs have been a source of innovation and that there are many other similarly situated competitors that can match Farelogix’s NDC technology. Will DOJ be able to prove how Farelogix would have developed without the merger? Expect Sabre to argue that Farelogix is a weak competitor that does not have the resources to implement NDC technology at scale. What weight will DOJ give to any integration efficiencies of combining Sabre’s and Farelogix’s respective technologies? Expect Sabre to argue that the merger will lead to better products that will enhance, rather than stifle, innovation. Finally, what, if any, economic tools will DOJ use to measure any potential reduction in innovation in the airline booking market?

No Signs of Slowing Down — Global Antitrust Agencies Focus on Big Tech

Amy RayPosted on August 1, 2019

Earlier this year, we covered the widespread interest in tech giants among international competition authorities, as well as the potential for divergence in intensity and type of enforcement across jurisdictions. We observed that while the U.S. enforcement agencies did not appear to support a regulatory approach to platforms and the digital economy, others like the Australian Competition and Consumer Commission (ACCC) and the UK Parliament’s Digital Culture, Media and Sport Committee may have a stronger appetite for proactive regulation.

Since that post, competition authorities, both U.S. and other, have intensified their focus, with activities ranging from sector-wide studies to investigations into individual tech companies.

For example, the U.S. Department of Justice Antitrust Division (DOJ) recently announced a broad review of whether online tech companies have harmed consumers or otherwise reduced competition. The probe will cover leading online platforms in “search, social media, and some retail services” and will focus on “practices that create or maintain structural impediments to greater competition and user benefits.”

That DOJ announcement is part of a broader effort by the U.S. antitrust enforcement agencies to address competition in the tech sector. Days later, the Attorney General met with eight State AGs who reportedly are considering opening their own investigations. The FTC launched a tech task force back in February (in addition to its recently concluded hearings on competition and consumer protection) and last month opened a formal antitrust investigation into Facebook (according to a recent press release accompanying Facebook’s Q2 earnings report). Reports also have emerged of FTC information requests to third-party resellers on Amazon. Even the Antitrust subcommittee of the U.S. House Committee on the Judiciary has held a hearing on online platforms and market power as part of its separate investigation.

The U.S. agencies’ overseas counterparts have remained just as active. In Australia, the ACCC just published the Final Report from its Digital Platforms inquiry. The inquiry focused on online search engines, social media platforms and other digital content aggregation platforms with an emphasis on Facebook and Google, and looked into the impact of digital platforms on competition in the advertising and media markets, and on advertisers, media content creators and consumers.

The final report found that Google has “substantial market power” in the supply of general search services and search advertising services in Australia, and that Facebook has “substantial market power” in the supply of social media services and display advertising services in Australia. Both companies were found to have “substantial bargaining power” in their dealings with news media businesses in Australia. The report cautioned that this market power could be used to damage the competitive process, though it did not look at whether these digital players have in fact misused their market power.

The report offered 23 recommendations “aimed at addressing some of the actual and potential negative impacts of digital platforms in the media and advertising markets, and also more broadly on consumers.” The recommendations most directly implicating competition include changing merger law to incorporate additional factors – such as the likelihood that the acquisition would result in the removal of a potential competitor from the market, and the nature and significance of assets, including data and technology, being acquired – and to require advance notice of acquisitions; and creating a new, specialist digital platforms branch within the ACCC to monitor and investigate proactively instances of potentially anticompetitive conduct by digital platforms and take action to enforce competition and consumer laws.

The report also recommended changes to Australia’s Privacy Act, including expanding the definition of “personal information” to include technical data, strengthening notification and consent requirements and pro-consumer defaults, enabling the erasure of personal information, and introducing direct rights of action and higher penalties for breach, as well as establishing an ombudsman scheme to resolve complaints and disputes with digital platform providers. Additional recommendations focused specifically on news media (e.g. creating a code of conduct to promote fair and transparent treatment of news media by digital platforms, improving digital media literacy in schools and the communities, and offering greater funding for public broadcasters and local journalism).

Similar undertakings are in the works around the globe. The ACCC report comes just as the UK Competition and Markets Authority (CMA) announced the start of a formal market study into online platforms and the UK market for digital advertising. The study will examine three potential sources of harm in digital advertising: (1) The market power of online platforms in consumer-facing markets – to what extent online platforms have market power and what impact this has on consumers; (2) Consumer control over data collection practices – whether consumers are able and willing to control how data about them is used and collected by online platforms; and (3) Competition in the supply of digital advertising in the UK – whether competition in digital advertising may be distorted by any market power held by platforms. Platforms not funded by digital advertising are expressly outside the scope of the study.

In keeping with what appears to be a greater openness toward proactive regulation than the U.S. agencies (at least historically), the discussion of potential remedies in the CMA’s Statement of Scope explains that the “current expectation is that any remedies are likely to focus on recommendations to Government for the development of an ex ante regulatory regime … and are likely to require legislative change.” The CMA does not believe that a “one-off” market investigation and intervention is “sufficient to provide a sustainable long-term framework for the sector.” The five main areas in which remedies may be required include: (1) increasing competition through data mobility, open standards, and open data; (2) giving consumers greater protection over data; (3) limiting platforms’ ability to exercise market power; (4) improving transparency and oversight for digital advertisers and content providers; and (5) institutional reform. The CMA plans to publish an interim report with initial findings in January 2020, with a final report to follow no later than July of next year.

Not to be outdone, the EU – which recently has been fairly active in the tech sector, including last year’s highly publicized Google Android decision – recently announced a formal investigation into Amazon. The investigation focuses on Amazon’s role as both a platform provider (through Amazon marketplace) and a participant on that platform (through its first-party retail offerings), asking whether Amazon’s use of sensitive data from independent retailers is in breach of EU competition rules. Specifically, the Commission will look into (1) the standard agreements between Amazon and marketplace sellers, which allow Amazon’s retail business to analyze and use third-party seller data; and (2) the role of data (including competitively sensitive marketplace seller data) in selecting the winners of the “Buy Box,” which allows customers to add items directly to their shopping carts and accounts for the majority of Amazon transactions.

As we cautioned previously, with so many competition authorities weighing in on how to assess tech competition, this confluence of inquiries and investigations can pose a challenge for global enterprises operating under an international patchwork of approaches. Technology-focused, data-intensive businesses should consider seeking antitrust counsel to monitor developing competition trends and implications across jurisdictions.

Toward Uncharted Waters – The CVS-Aetna Merger

James J. Tierney and Emily LukenPosted on June 11, 2019

On June 4 – 5, 2019, Judge Richard J. Leon of the U.S. District Court for the District of Columbia held an extraordinary and unprecedented evidentiary hearing to decide whether to enter the proposed Final Judgment in U.S. v. CVS/Aetna requiring the divestiture of Aetna’s Medicare Part D business. Judge Leon has been highly critical of DOJ’s proposed remedy and has disrupted long-established DOJ practices to resolve competitive concerns in merger cases. A decision to reject the Division’s proposed remedy would upend established law, interfere with DOJ’s ability to negotiate merger settlements, and create uncertainty in DOJ’s merger enforcement program.

Procedural History

Following an 11-month investigation, the Antitrust Division on October 10, 2018 filed a lawsuit seeking to enjoin CVS Health Corporation’s $69 billion acquisition of Aetna, Inc. The complaint alleged the transaction would substantially lessen competition for the sale of individual prescription drug plans (“individual PDPs”) in 16 regions in the U.S. Individual PDPs provide Medicare beneficiaries with insurance coverage for their prescription drugs (Medicare Part D). To address the harm alleged in the Complaint, the Division filed a proposed Final Judgment that required CVS to divest Aetna’s nationwide individual PDP business to WellCare Health Plans, Inc.

When settling an antitrust case, DOJ must comply with the Tunney Act, which establishes various procedures the parties must follow, after which the settlement can be submitted to the court to determine whether entry of the proposed Final Judgment “is in the public interest.”^[1] Consistent with standard Tunney Act practice, Judge Leon entered an order permitting the parties to close their transaction and requiring CVS to hold separate Aetna’s individual PDP business until the assets are divested to WellCare. Pursuant to Judge Leon’s order, the parties closed their transaction on November 28, 2018, and two days later completed the divestiture to WellCare.

Despite having authorized the parties to close the transaction, Judge Leon became concerned the status quo would not be preserved in the event he subsequently concluded the proposed Final Judgment would not be in the public interest. Judge Leon was very critical of the proposed remedy, which he said involved “about one-tenth of one percent” of the value of the transaction. He also expressed concern that the proposed Final Judgement failed to address potential harm in the market for pharmacy benefit management (“PBM”) services. PBM providers manage pharmacy benefits for health plans and negotiate their drug prices with pharmaceutical companies and retail pharmacies. Specifically, Judge Leon wanted to preserve the option to reject the proposed Final Judgment if he found that DOJ, in failing to allege harm in the PBM market, had drafted the Complaint so narrowly as “to make a mockery of judicial power.”^[2]

Judge Leon ordered the parties to explain why CVS should not be required to hold Aetna separate and insulate the management of the two companies during the pendency of the Tunney Act process. DOJ vigorously objected that the court did not have the power to consider possible harm in the PBM market because the complaint did not allege harm in the PBM market and the record before the court did not implicate the judicial mockery standard. Ultimately, CVS diffused the issue when it voluntarily agreed to stop further integration efforts and to preserve the status quo by operating Aetna’s health insurance business as a separate unit from CVS’s businesses.

The Tunney Act requires the publication of the proposed Final Judgment followed by a 60-day public comment period. DOJ received 173 comments about the proposed settlement, many criticizing the remedy. DOJ filed its response to the public comments on February 13, 2019. It concluded that the proposed Final Judgment provides an effective and appropriate remedy for the antitrust violation alleged in the Complaint and is therefore in the public interest. Thereafter, the Division filed a motion requesting that Judge Leon enter the proposed Final Judgment.

Tunney Act Hearing

In most Tunney Act proceedings, courts make their public interest determination based on the Complaint, the terms of the proposed Final Judgment, public comments, and DOJ’s response to the public comments. In rare cases, the court will consider argument from the parties and on very rare occasions will hear from other interested parties. Here, Judge Leon accepted briefs opposing the remedy filed by amici curiae the American Medical Association, AIDS Healthcare Foundation, and Consumer Action and U.S. PIRG. In an unprecedented move, Judge Leon ordered a hearing to take live testimony from witnesses presented by the amici and the parties. In connection with the ordered hearing, Judge Leon directed the parties and amici to submit lists of witnesses and a summary of their testimony and issued the following rulings concerning the conduct of the hearing:

From the list submitted by the amici, Judge Leon selected three witnesses: an economic expert, the President of the American Antitrust Institute and the Chief Medical Officer from the AIDS Healthcare Foundation.
From the CVS list, Judge Leon selected CVS’s economic expert, Aetna’s Vice President of its Medicare Part D business and CVS’s Chief Transformation Officer.
Judge Leon refused to hear testimony from DOJ’s economic expert and WellCare’s Executive Vice President of Clinical Operations and Business Development.
Judge Leon ordered that witnesses will not be subject to cross-examination and there would be no opening and closing arguments.
Judge Leon overruled DOJ’s objection that the proposed hearing procedures gave the amici the ability to frame the issues and denied the DOJ from meaningful participation in the proceedings.

Over the two-day hearing, Judge Leon heard testimony from the amici’s expert witnesses that WellCare is not a suitable divestiture buyer because: (i) WellCare does not have Aetna’s brand recognition, (ii) WellCare will be dependent on CVS to provide PBM services and (iii) the divestiture itself raises concentration levels in several regions. Judge Leon also heard testimony from two amici witnesses that the merger raises vertical competitive concerns. By combining CVS’s thousands of pharmacies and 92 million PBM members with Aetna’s 22 million insurance customers, the merged firm will have a greater ability and incentive to deny its PBM services to rival health plans or raise the prices for its PBM services to rival plans. After the two-day hearing, Judge Leon indicated that he would accept final briefs and hear closing arguments next month.

What’s Next

The CVS/Aetna merger entered murky waters some months ago and is now headed toward uncharted waters. Pressuring merging parties to hold the two companies separate while the Tunney Act process plays out is unnecessary and unwarranted. Nothing in the Tunney Act bars the parties from consummating their merger, and consumers may be harmed by delaying integration activities that may generate efficiencies. Nor does closing prevent DOJ from obtaining additional relief if necessary. Parties that close before the settlement receives final approval by the court bear the risk the proposed remedy is not in the public interest and therefore may have to make additional concessions to obtain court approval. The Tunney Act evidentiary hearing was also highly unusual and did not give DOJ a fair opportunity to defend its settlement. In particular, DOJ had no cross-examination rights and no opportunity to offer expert testimony to rebut the testimony from the amici’s expert. Also unusual was Judge Leon’s decision to reject testimony from WellCare, even though the amici challenged WellCare’s suitability as a divestiture buyer.

The CVS/Aetna proceeding highlights a tension in the Tunney Act. Judge Leon’s public interest determination is limited by binding D.C. Circuit precedent U.S. v. Microsoft. Under Microsoft, DOJ has considerable discretion to settle antitrust cases and the court’s review is limited to reviewing the proposed remedy in relationship to the allegations in the complaint. A Tunney Act court does not have the authority to inquire into matters outside the scope of the complaint. Judge Leon clearly bristles at playing such a limited role. At a November 29, 2018 status hearing, Judge Leon said that he would not take a “rubber stamp” approach to approving the proposed Final Judgment. Judge Leon’s May 13, 2019 order regarding the Tunney Act hearing noted that Microsoft authorized a Tunney Act court to reject a settlement that makes a “mockery of judicial power.” The court’s actions clearly suggest that DOJ’s failure to allege and remedy harm in the PBM market may satisfy the “judicial mockery” standard.

It remains to be seen if Judge Leon, based on a two-day hearing, will second-guess DOJ’s decision that the merger will not harm competition in the PBM market. Given controlling authority in the D.C. Circuit and the irregularities in the Tunney Act proceeding, Judge Leon may conclude his only option is to enter the proposed Final Judgement. If, on the other hand, he rejects the proposed Final Judgment for failing to address concerns outside the scope of the Complaint, he will likely be overruled by the D.C. Circuit.

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[1] The Antitrust Procedures and Penalties Act, 15 U.S.C. §§16(b)-(h).

[2] U.S. v. Microsoft Corp., 56 F.3d 1448, 1462 (D.C. Cir. 1995).

M&A HSR Premerger Notification Thresholds Increase in 2019

Diana GillisPosted on March 4, 2019

Takeaways

The new minimum HSR threshold is $90 million and applies to transactions closing on or after April 3, 2019.

The current threshold of $84.4 million is in effect for all transactions that will close through April 2, 2019.

Failure to file may result in a fine of up to $42,530 per day of non-compliance.

The HSR Act casts a wide net, catching mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

The Federal Trade Commission has announced new HSR thresholds for 2019. The thresholds are adjusted annually, and were delayed this year by the government shutdown. Transactions closing on or after April 3, 2019 that are valued in excess of $90 million potentially require an HSR premerger notification filing to the U.S. antitrust agencies. The HSR Act and Rules require that parties to certain transactions submit an HSR filing and wait up to 30 days (or more, if additional information is formally requested) before closing, which gives the government time to review the transaction for potential antitrust concerns. The HSR Act applies to a wide variety of transactions, including those outside the usual M&A context. Potentially reportable transactions include mergers and acquisitions, minority stock positions (including compensation equity and financing rounds), asset acquisitions, joint venture formations, and grants of exclusive licenses, among others.

Determining reportability: Does the transaction meet the Size of Transaction test?

If the transaction will close before April 3, 2019, the $84.4 million threshold still applies; closings as of April 3, 2019 will be subject to the new $90 million threshold.

Determining reportability: Do the parties to the transaction have to meet the Size of Person test?

Transactions that satisfy the Size of Transaction threshold may also have to satisfy the “Size of Person” thresholds to be HSR-reportable. These new thresholds are also effective for all closings on or after April 3, 2019. Talk to your HSR counsel to determine which entity’s sales and assets must be evaluated.

Filing Fee

For all HSR filings, one filing fee is required per transaction. The amount of the filing fee is based on the Size of Transaction.

Failure to File Penalty

Failing to submit an HSR filing can carry a significant financial penalty for each day of non-compliance.

Always consult with HSR counsel to determine if your transaction is HSR-reportable. Even if the Size of Transaction and Size of Person tests are met, the transaction may be exempt from the filing requirements.

Agree to Disagree: Competition Authorities Differ on Approach to Digital Platforms

Amy RayPosted on February 22, 2019

Tech giants have captured the attention of competition agencies around the world. As we have previously shared, the FTC is in the midst of a series of hearings on Competition and Consumer Protection in the 21^st Century, including sessions on Big Data, Privacy, and Competition and the Antitrust Framework for Evaluating Acquisitions of Potential or Nascent Competitors in Digital Marketplaces. Multiple European regulators (the EU, Germany and now Austria) recently launched investigations into Amazon. Technology platforms are a priority for many other enforcers as well, from China to Australia to the UK.

With different competition authorities weighing in on how to assess tech competition, there is the potential for divergence in intensity of enforcement as well as whether existing competition doctrine suffices. Disparities are borne out by recent statements emanating from U.S., Australian, and UK competition agencies and officials.

Fresh remarks from the U.S. DOJ Antitrust Division indicate the agency does not support a regulatory approach to platforms and the digital economy. In a speech last week, agency head Makan Delrahim addressed Antitrust Enforcement in the Zero-Price Economy, noting that while zero-price strategies have “exploded” with the rise of digital platforms, “the strategy of selling a product or service at zero price is not new, nor is it unique to the digital economy.” Mr. Delrahim acknowledged the divergent views of how antitrust enforcement should treat such products and services, which range from exemption from antitrust scrutiny entirely to the creation of new, specially crafted rules and standards. Rejecting both of these “extreme views” as “misplaced,” he emphasized the ability of current antitrust doctrine – including the consumer welfare standard – to tackle the issue, stating: “[W]e do not need a wholesale revision of the antitrust laws to address competitive concerns in these contexts. . . . [O]ur antitrust laws and principles are flexible enough to adapt to the challenges of the digital economy.” Mr. Delrahim called for “careful case-by-case analysis” in enforcement. He touted the innovation and benefits that zero-price strategies have brought to consumers, crediting the country’s “pro-market economic and legal structures” and cautioning against “distortions of our antitrust standards” to address issues like privacy and data protection if they do not impede the functioning of the free market.

His speech echoes a view Mr. Delrahim and others at the Antitrust Division have expressed previously regarding the need (or lack thereof) for new rules to address the antitrust implications of “big data.” In an October 2018 speech regarding startups, innovation, and antitrust policy, Mr. Delrahim remarked that “accumulation of data drives innovation and benefits consumers” in many ways (including by enabling zero-price offerings), and that forced sharing risks undermining innovation by reducing incentives for both incumbents and new entrants. Invoking Trinko,^[1] he stated that “free and competitive markets” – not antitrust agencies or courts – are best equipped to determine “how much data should be shared, with whom, and at what price.” Deputy Assistant Attorney General Bernard Nigro, Jr. has taken a similar position, stating that “forced sharing of critical assets reduces the incentive to invest in innovation” and that “where benefits to sharing exist, they can be best captured by the parties negotiating in a free and competitive market, not by government regulation.”

By contrast, other jurisdictions and industry observers considering the competitive implications of digital platforms have questioned the status quo. In their view, control of valuable data provides a competitive advantage and raises entry barriers that may entrench a platform’s dominant position and lead to competitive or consumer harm. At a higher level, France and Germany just announced an effort to overhaul competition rules to enable European companies to better develop technologies that compete on the global stage.

For example, last week the Australian Productivity Commission and the New Zealand Productivity Commission released a joint report that reviews how most effectively to address the challenges and harness the opportunities the digital economy creates (particularly for small- to medium-sized enterprises). In a section titled “Existing competition regulation may not be adequate for digital markets,” the report addressed the challenges of applying existing laws to the digital economy, including (among others) that zero-price goods and services complicate the analysis of market definition and market power, and that data “is an increasingly important business input and may be a source of market power” but is not adequately captured in traditional competition policy. Although the report acknowledged that in some cases technological developments might obviate the need for regulation (and in others the mere threat of regulation may be enough), it posited that new regulation might be necessary to maintain competitive markets: “[I]f ‘winner-take-most’ markets do end up prevailing, competition regulators may need to consider extending tools such as essential service access regimes to digital services.” An essential service (or “essential facilities”) regime would treat a digital platform’s data as an input essential to competition and require the platform to provide its competitors with reasonable access to it. In contrast to the Productivity Commissions’ suggestion, U.S. competition enforcers to date have been loath to treat digital platforms as essential facilities.

The Productivity Commissions’ report comes on the heels of the Australian Competition and Consumer Commission’s (ACCC) Digital Platforms Inquiry preliminary findings released in December. The ACCC expressed similar concerns about the rise of digital platforms and the threat they pose to consumers and the competitive process. Addressing what it found to be Google’s and Facebook’s market power in a number of markets,^[2] the report encouraged governments to be “responsive, and indeed proactive, in reacting to and anticipating challenges and problems” posed by digital platforms. It offered eleven preliminary recommendations to address these concerns, including: amending merger law to expressly consider potential competition and the data at issue in the transaction, requiring advance notice of any acquisition by a large digital platform of a business with activities in Australia, and tasking a regulatory authority with monitoring the conduct of vertically integrated digital platforms. The report also proposed areas for further analysis, such as: a digital platforms ombudsman, the monitoring of intermediary pricing and opt-in targeted advertising. As such, indications from Australia suggest calls for more competition intervention have some teeth.

The UK may have a similar appetite, as indicated by a new Parliament publication addressing “Disinformation and ‘fake news.’” The statement calls for increased oversight and greater transparency into “how the big tech companies work and what happens to our data,” highlighting Facebook’s treatment and monetization of user data as an example of why intervention is needed. In addition to recommending a compulsory Code of Ethics overseen by an independent regulator with “statutory powers to monitor relevant tech companies,” the publication advocated for greater competition law scrutiny of and enforcement against digital platforms, including an investigation of Facebook and a “comprehensive audit” of the social media advertising market. Invoking existing “legislative tools” such as privacy laws, data protection legislation, and antitrust and competition law, the report cautioned: “The big tech companies must not be allowed to expand exponentially, without constraint or proper regulatory oversight.”

Operating under an international patchwork of competition approaches can present a challenge to global enterprises. Technology-focused, data-intensive businesses should consider seeking antitrust counsel to monitor developing competition trends and implications across jurisdictions.

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[1] Verizon Communic’ns, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407-08 (2004).

[2] The preliminary report finds that Google has market power in online search, online search advertising and news media referral services, and that Facebook has market power in social media services, display advertising and news media referral services.

The New Madison Approach Goes to Court

James J. Tierney and Emily LukenPosted on January 23, 2019

On January 11, 2019, the U.S. DOJ Antitrust Division (Division) filed a Notice of Intent to File a Statement of Interest in a lawsuit filed by u-blox against Interdigital in the U.S. District Court for the Southern District of California to obtain a license consistent with Interdigital’s voluntary commitment to license its 2G, 3G and 4G telephony Standard Essential Patents (SEPs) on fair, reasonable, and nondiscriminatory (FRAND) terms. Simultaneous with the filing of its Complaint, u-blox filed a Motion for a Temporary Restraining Order and Preliminary Injunction to prevent Interdigital from further interfering with u-blox’s customer relationships. The Division argued that the Court would benefit from hearing its views on granting a TRO based on u-blox’s claim that Interdigital monopolized the 2G, 3G and 4G cellular technology markets. Intervening in a District Court case is highly unusual and is yet another clear signal that the Division has reversed the Obama Antitrust Division’s antitrust treatment of FRAND violations, despite the disparity between the Division’s current position and numerous well-reasoned U.S. court decisions that have carefully considered these issues and come to precisely the opposite conclusions.

Retro-Jefferson Approach^[1]

By way of background, standard setting involves competitors and potential competitors, operating under the auspices of Standard Setting Organizations (SSOs), agreeing on a common standard and incorporating patented technology. Patents that are incorporated into a standard become much more valuable once a standard becomes established and commercially deployed on a widespread level, and it becomes impossible for companies manufacturing devices that incorporate standardized technology to switch to alternative technologies. In these circumstances, patent holders may gain market power and the ability to extract higher royalties than would have been possible before the standard was set. This type of opportunistic conduct is referred to as “patent hold-up.” To address the risk of patent hold-up, many SSOs require patent holders to commit to license their SEPs on FRAND terms. FRAND commitments reduce the risk that SEP holders will exercise market power by extracting exorbitant licensing fees or imposing other more onerous licensing terms. One way to address patent hold-up is through breach of contract and antitrust suits against holders of FRAND-encumbered SEPs.

The Obama Antitrust Division advocated the position that, under appropriate circumstances, the antitrust laws may reach violations of FRAND commitments. This position was, and remains, consistent with applicable legal precedent. For example, in 2007 the Third Circuit recognized in Broadcom v. Qualcomm, 501 F.3d 297, that a SEP-holder’s breach of a FRAND commitment can constitute a violation of Section 2 of the Sherman Act where the SEP-holder makes a false FRAND promise to induce an SSO to include its patents in the standard and later, after companies making devices that incorporate the standard are locked in, demands exorbitant royalties in violation of the FRAND commitment. Numerous other cases similarly stand for the proposition that it is appropriate to apply competition law to the realm of FRAND-encumbered SEPs. See, e.g., Research in Motion v. Motorola, 644 F. Supp. 2d 788 (N.D. Tex. 2008); Microsoft Mobile v. Interdigital, 2016 WL 1464545 (D. Del. Apr. 13, 2016).

The Obama Antitrust Division also took the position that in most cases it is inappropriate to seek injunctive relief in a judicial proceeding or an exclusion order in the U.S. International Trade Commission (ITC) as a remedy for the alleged infringement of a FRAND-encumbered SEP. Injunctions and exclusion orders (or the threat of one) are generally incompatible with a FRAND commitment and unfairly shift bargaining power to the patent holders. In the Obama Antitrust Division’s view, money damages, rather than injunctive or exclusionary relief, are generally the more appropriate remedy. Again, the Obama Antitrust Division’s policy reflected case law recognizing the same principles. See, e.g., Apple v. Motorola, 757 F.3d 1286 (Fed. Cir. 2014).

The Obama Antitrust Division articulated its views on the use of exclusion orders against the infringing use of SEPs in a joint statement issued by the Department of Justice and the U.S. Patent & Trademark Office on January 8, 2013 entitled “Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments” (Joint Policy Statement). The Joint Policy Statement urged the ITC to consider that “the public interest may preclude issuance of an exclusion order in cases where the infringer is acting within the scope of the patent holder’s F/RAND commitment and is able, and has not refused, to license on F/RAND terms.”

New Madison Approach

The Division is now of the view that the Obama Antitrust Division’s focus on patent implementers and its concerns with hold-up were misplaced, even though many courts and other regulatory bodies around the world have noted the significance of the hold-up problem. The Division currently does not believe that hold-up is an antitrust problem. According to the Division, the more serious risk to competition and innovation is the “hold-out” problem. The hold-out problem arises when companies making products that innovate upon and incorporate the standard threaten to under-invest in the implementation of a standard, or threaten not to take a license at all, until their royalty demands are met. The Division further has questioned the role of antitrust law in regulating the FRAND commitment, even though the Federal Trade Commission (FTC) – and numerous other competition agencies around the world – has engaged in enforcement efforts to curb allegedly anticompetitive SEP licensing practices, many of which are directed at Qualcomm (which is the subject of an ongoing trial between the FTC and Qualcomm in Federal District Court in California).

Assistant Attorney General Makan Delrahim coined the term the “New Madison Approach” to describe his approach to the application of antitrust law to patent rights.^[2] The four premises of the New Madison Approach are:

The antitrust laws should not be used as a tool to police FRAND commitments that patent holders make to SSOs.
To ensure maximum incentives to innovate, SSOs should focus on implementer hold-out, rather than focus on patent hold-up.
SSOs and courts should not restrict the right of a patent holder to seek or obtain an injunction or exclusion order.
A unilateral and unconditional refusal to license a patent should be considered per se legal.

The Division has taken at least three concrete steps to implement the New Madison Approach. First, it has opened several investigations of potential anticompetitive conduct in SSOs by implementers, for example to exclude alternative technologies. Second, in a December 7, 2018 speech in Palo Alto, California, AAG Delrahim announced that DOJ was withdrawing its support of the Joint Policy Statement. According to AAG Delrahim, the Joint Policy Statement created confusion to the extent it suggests a FRAND commitment creates a compulsory licensing scheme and suggests exclusion orders may not be appropriate in cases of FRAND-encumbered patents. AAG Delrahim noted he would engage with the U.S. Patent & Trademark Office to draft a new statement. Finally, the Division intervened in the u-blox case.

u-blox v. Interdigital

u-blox presents a fact pattern that commonly arises in FRAND cases. Since 2011, u-blox has licensed Interdigital patents that had been declared essential to the 2G, 3G and 4G standards. U-blox relied on Interdigital’s FRAND commitments, and its devices are now allegedly locked into 2G, 3G and 4G cellular technology. u-blox alleges that in its most recent round of negotiations, Interdigital is demanding supra-competitive royalty rates. Among its various claims, u-blox alleges Interdigital breached its contractual obligation to offer its SEPs on FRAND terms and has monopolized the 2G, 3G and 4G technology markets in violation of Section 2 of the Sherman Act. u-blox also alleges that Interdigital threatened its customers to force u-blox to pay excessive, non-FRAND royalties. u-box has asked the court to set a FRAND rate and filed a TRO to prevent Interdigital from interfering with its contractual relationships.

On January 11, 2019, the Division filed its Notice of Intent to explain its views concerning u-blox’s monopolization cause of action. The Division further explained that due to the partial government shutdown, it was unable to submit a brief before the TRO hearing scheduled for January 31, 2019, and asked that the TRO hearing be delayed until after DOJ appropriations have been restored, or in the alternative, to order DOJ to respond. Although not stated in the Notice of Intent, the Division can be expected to argue that it would be improper to grant a TRO based on a claim of monopolization because the antitrust laws should play no role in policing Interdigital’s FRAND commitment where contract or common law remedies are adequate. On January 14, 2019, u-blox responded that it would withdraw reliance on its monopolization claim to support its request for a TRO and instead rely on its breach of contract and other claims.

Implications of the Division’s Intervention in the u-blox Case

The Division’s filing of a Notice of Interest in the u-blox case is highly unusual. The Division rarely intervenes in district court cases, and it may be unprecedented for the Division to intervene at the TRO stage. It is also difficult to explain why the Division chose to intervene on this motion. While u-blox was relying on its antitrust claim, among several other claims, to support its TRO request, u-blox was only seeking an order to prevent Interdigital from interfering with its customer relationships while the court adjudicated its request for a FRAND rate. It is also notable that the Division put its thumb on the scale in the aid of Interdigital, a company that often finds itself in FRAND litigation.

The Division appears to be attempting to aggressively implement the New Madison Approach that the antitrust laws should protect innovators. The Division’s decision to withdraw its assent to the Joint Policy Statement appears to have been a clear signal to the ITC that it is free to grant an exclusion order in SEP cases. The Division’s intervention in the u-blox case is a clear signal that it is willing to intervene at the district court level to advance its view that the antitrust laws are not an appropriate vehicle to enforce FRAND commitments where there are adequate remedies sounding in contract or other common law theories.

To date, the Division has used speeches to make policy arguments that the antitrust laws should not be used to enforce FRAND commitments. If the Division ever gets the opportunity to present its views to a district court, watch to see what legal arguments it can marshal to support its policy position. Also watch to see whether the Division attempts to participate in other FRAND cases.

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[1] Assistant Attorney General Makan Delrahim coined the phrase in his March 16, 2018 speech at the University of Pennsylvania entitled “The ‘New Madison’ Approach to Antitrust and Intellectual Property Law” based on the initial understanding of patent rights held by Thomas Jefferson, the first patent examiner of the U.S. (and a former president and principal author of the Declaration of Independence). AAG Delrahim describes the retro-Jefferson view of patents as conferring too much power on patent holders at the expense of patent implementers and that such power should be constrained by the antitrust laws or Standard Setting Organizations.

[2] The term “New Madison Approach” is based on the understanding of intellectual property rights held by James Madison, the principal drafter of the U.S. Constitution. Madison believed strong IP protections were necessary to encourage innovation and technological progress.

Know Your Investors – Their Holdings and Board Seats Can Create Antitrust Risk for Your Company

Diana GillisPosted on October 22, 2018

A recent divesture ordered by the Federal Trade Commission should serve as a reminder that private equity- and venture capital-backed companies need to evaluate the other holdings of their investors and directors to avoid potential antitrust problems.

Background

Red Ventures and Bankrate are marketing companies that connect consumers with providers in various industries. In 2017, Red Ventures entered into an agreement to acquire Bankrate for $1.4 billion. Among other interests, Bankrate operated “Caring.com,” a website used to generate customer leads for providers of senior living facilities. Red Ventures did not offer a competing product in this space, but the FTC nonetheless required the divestiture of Caring.com, citing competitive concerns generated by operations of Red Ventures’ investors and directors.

Specifically, two of the largest shareholders in Red Ventures are private equity firms General Atlantic and Silver Lake Partners, with a combined 34 percent stake, two of seven board seats, and other substantial rights over operations. General Atlantic and Silver Lake separately owned “A Place for Mom” which, like Caring.com, provides an online referral service for providers of senior living facilities. According to the FTC’s complaint, “A Place for Mom” and “Caring.com” were each other’s closest competitors, with the number one and number two positions in the market. Here, the FTC looked behind the actual parties to the transaction to identify potential competitive concerns.

Takeaways

Private equity- and venture capital-backed companies must be aware of the competitive, or potentially competitive, holdings of their investors and directors.

As in the Red Ventures/Bankrate acquisition, the separate holdings of significant investors may become a focus of the government’s antitrust review of a transaction.
An investor simultaneously holding seats on the boards of two competing companies may violate the statute prohibiting interlocking directorates.^[1]
Finally, companies should ensure that protections are in place to prevent any scenario – real or implied – where the investor or director could serve as a conduit for the sharing of competitively sensitive information between competing companies.^[2]

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^[1] See 15 USC § 19.

^[2] See 15 USC § 1.

FTC Kicks Off Hearings on Competition and Consumer Protection in the 21st Century

Amy RayPosted on September 21, 2018

Antitrust policy, once relegated to wonk status, has taken center stage in recent years: it seems as if each day there is a new debate over the need – or lack thereof – for more robust competition enforcement in today’s economy. In the past few weeks alone, competition law and big tech have been in the spotlight in both a call to reopen a Federal Trade Commission (“FTC” or “Commission”) investigation into Google and a forthcoming meeting among Attorney General Jeff Sessions, state Attorneys General investigating social media companies and a representative from the Department of Justice’s Antitrust Division (“DOJ”).

The FTC jumped into the fray on September 13, 2018 when it kicked off its hearings on Competition and Consumer Protection in the 21^st Century, which had been announced earlier this year. The purpose of the hearings is to utilize the agency’s Section 6 authority “to consider whether broad-based changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection law, enforcement priorities, and policy.” Among the announced topics are issues that have dominated the news lately, including: competition in technology markets, particularly those featuring two-sided “platform” businesses (ones that cannot make a sale to one side of the market without simultaneously making a sale to the other); the intersection of privacy, data and competition; evaluating the competitive effects of vertical mergers (those that join firms at different levels of the supply chain, e.g., the AT&T-Time Warner deal challenged unsuccessfully by DOJ); and the consumer welfare standard, which has served as the economic principle guiding antitrust enforcement since the 1980s. The FTC has accepted more than 500 public comments on 20 announced topics and continues to invite public comment in advance of specific hearing sessions.

Commission Chairman Joe Simons set the stage for the opening session by highlighting the combination of increased economic concentration and decreased antitrust enforcement that has generated calls to reassess the very nature of antitrust policy, noting that he is approaching the discussions “with a very open mind.”

The panel discussions that followed the opening session focused on the current landscape of competition and consumer protection law and policy, concentration and competitiveness in the U.S. economy, and the regulation of consumer data. Key takeaways so far include:

The Commission is eager to set competition enforcement priorities. Tech companies appear to be in the crosshairs.
Although there is growing concern about increased concentration in the economy, there is no consensus that big equates to bad. While some panelists cited data linking concentration to income inequality and reduced innovation, others cautioned that protecting less efficient businesses in the name of competition is misguided.
Effective privacy and data breach enforcement likely require new, modern tools both for detection and regulation. The FTC’s consumer protection mission likely will need to account for changes in federal legislation and/or voluntary rules established by the tech industry.

Videos of past hearing sessions are available online, along with public comments and additional information.

The FTC’s end goal is to produce one or more policy papers, patterned after the fruits of the 1995 hearings hosted by then-FTC Chairman Robert Pitofsky. Those hearings, which focused on global competition and innovation, led to two staff reports on competition and consumer protection policy “in the new high-tech, global marketplace” and helped pave the way for U.S. agency actions blocking mergers primarily based on harms to innovation. The Commission once again is revisiting its approach.

In the interim, stay tuned for additional updates as the hearings continue.

UK’s Proposed Investment Scrutiny Powers Are Far-Reaching

Douglas Lahnborg and Matthew G. RosePosted on September 13, 2018

Douglas Lahnborg and Matthew Rose present a comparative discussion on the recently issued National Security and Investment White Paper, which proposes a significant expansion of the UK government’s powers to scrutinize foreign investment beyond those available in other leading economies. The white paper introduces powers to intervene in a broad range of transactions in any sector, regardless of deal value, the transaction parties’ market shares, or their revenues. If the proposals are brought into force in their current form, the UK regime would be one of the most stringent in the world, with wide-ranging implications for foreign and domestic companies and projects in sensitive sectors, including technology, energy, infrastructure, telecommunications, real estate and financial services. Read more here.

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Know Your Investors – Their Holdings and Board Seats Can Create Antitrust Risk for Your Company

FTC Kicks Off Hearings on Competition and Consumer Protection in the 21st Century

UK’s Proposed Investment Scrutiny Powers Are Far-Reaching