Last week, President Biden issued an Executive Order, "Promoting Competition in the American Economy," that seeks to remedy perceived excessive market concentration and reduced competition across wide swaths of the U.S. economy.1 The accompanying Fact Sheet states that lack of competition increases consumer prices and reduces worker wages and that the Order is intended to "lower prices for families, increase wages for workers, and promote innovation."2 The Fact Sheet frames the Order as firmly rooted in historical precedent, citing to Teddy Roosevelt's trust busting in the early 1900s and FDR's "supercharged antitrust enforcement" in the late 1930s.3 The Order, along with other recent changes at the DOJ and FTC, including the appointment of Lina Khan as FTC Chair, demonstrates the Biden Administration's commitment to significantly increasing antitrust enforcement in the U.S., including greater scrutiny of M&A transactions and "taking decisive action to reduce the trend of corporate consolidation."4
The Order establishes a "whole-of-government" effort to promote competition, including 72 initiatives by more than a dozen federal agencies. The initiatives focus on the labor market, the agricultural industry, the information technology sector (with special attention paid to "dominant Internet platforms"), healthcare, the telecommunications sector, the financial services sector, and the shipping industry. In addition, the Order encourages the DOJ and FTC to "vigorously" enforce the antitrust laws, promises that the Administration will "support aggressive legislative reforms," and establishes a White House Competition Council.
Merger Review Considerations
In the recent months leading up to the Order, significant changes have already been underway with respect to U.S. antitrust review of M&A transactions. Only weeks after the inauguration of President Biden, the FTC announced a "temporary" suspension of early termination of the 30-day Hart-Scott-Rodino waiting period for transactions presenting no competitive concerns, which remains in effect more than five months later.5 In addition, the regulatory agencies have shown a greater desire to investigate a broader range of issues when considering proposed transactions, all of which likely equate with longer review periods. The Order provides further confirmation that certain mergers will be subject to longer review periods, greater scrutiny, and more exotic theories of harm. Most notably, the Order:
- Specifically encourages the DOJ and FTC to review and consider whether to revise the Horizontal and Vertical Merger Guidelines that set forth the framework under which transactions are analyzed. Chair Kahn and Acting Assistant Attorney General Powers responded that they will take a "hard look" at the guidelines to determine whether they are "overly permissive" and with the goal of updating them.6 The Order's Fact Sheet details the Administration's policy of "greater scrutiny of mergers," especially where dominant Internet platforms are involved, or in instances of serial mergers, the accumulation of data, competition by "free" products, effects on user privacy, and where there is an acquisition of a nascent competitor.7
The FTC also recently announced plans to review whether to withdraw a 1995 policy that limits the use of prior approval provisions in merger settlements, which require the buyer to seek FTC approval for future transactions.8 This comes just after the FTC withdrew its guidance restricting its pursuit of "unfair methods of competition" to conduct that violates the Sherman and Clayton Acts.
- Reaffirms that the antitrust agencies have the authority to challenge previously consummated transactions that were not pursued by prior administrations.
- Encourages a review of current practices for the "revitalization" of merger oversight under the Bank Merger Act and the Bank Holding Company Act of 1956.
- Encourages FTC rulemaking to curtail perceived unfair non-competition agreements. The agencies are already making clear their focus on non-competition agreements in recent mergers, such as Huntington Bancshares/TCF, where the DOJ included an unusual provision prohibiting Huntington from implementing new non-compete agreements with branch managers and loan officers located in divestiture areas.9
- Requires the Secretary of Defense to review the state of competition within the defense industrial base, including areas where lack of competition may be a concern.
- Directs the Secretary of the Treasury to assess the effects on competition of large technology firms' and other non-bank companies' entry into consumer finance markets.
The Executive Order, as well as recent actions by the DOJ and FTC, signal a significant, rapid shift to increased enforcement of the antitrust laws and broader theories of harm. While the Executive Order and agency action will continue to face constraints from the courts, the Administration's efforts highlight the importance for merging parties to consider antitrust risk thoughtfully and conduct careful pre-signing planning to navigate the new enforcement environment.