In the few short months since the inauguration, the Biden administration has demonstrated a desire to chart an aggressive course of industry regulation and enforcement, suggesting a potentially dramatic shift from the prior administration in how the federal government enforces our nation’s business laws and regulations. Earlier this year, some of our U.S. regulatory and enforcement lawyers hosted a webinar to address the changes we expect will impact companies across a wide range of industries. In this report, we summarize the key points from our presentation and offer helpful tips for businesses to stay ahead of the regulatory enforcement curve. In antitrust enforcement, for example, we expect the administration to nominate and appoint more individuals who believe antitrust law needs to be significantly overhauled, and enforcement recharged, to address what they see as over-consolidation in a number of industries, widespread abuses of market power, and dominant digital platforms that need to be reined in, if not broken up. We also foresee a significant increase in white collar criminal enforcement, with the U.S. Justice Department led by Attorney General Merrick Garland focusing on prosecutions related to the misuse of COVID-19-related assistance programs, violations of the Foreign Corrupt Practices Act and the False Claims Act, and investigations and prosecutions of banks for Bank Secrecy Act violations and money laundering lapses. Similarly, we anticipate vigorous enforcement by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). We may see the SEC use its regulatory and enforcement authority to promote the administration’s policies in the areas of climate change and ecological diversity, while we expect the CFTC will continue to bring high-profile enforcement actions, as it expands its reach to promote administration policies such as climate change. The substantial policy differences between the Trump and Biden administrations in the areas of foreign affairs and international relations are also certain to result in a change in policies in the areas of export controls, sanctions, national security, and foreign investment. New sanctions have already been applied against Russia and Saudi Arabia since the inauguration, and the United States under President Biden may change the way it deals with both Cuba and Iran, including with respect to the application of sanctions. The administration may also use new export controls to pressure countries deemed to be out of step with U.S. policies, including possibly, against China. We are also certain to see changes in trade policy, including customs and tariffs. Those changes are likely to include efforts intended to strengthen the nation’s COVID-19 response, including by boosting the domestic production of essential medical equipment and supplies; using trade policy to promote the administration’s goals of supporting labor; and promoting climate policy through bilateral and multilateral agreements. We hope you find this report helpful, and we are happy to discuss with you how these and other expected changes in federal regulation and enforcement can affect your business. Introduction 04 Reed Smith What to expect from a Biden administration Takeaways • Biden’s nomination of Lina Khan to fill one of the two empty seats at the Federal Trade Commission confirms that, as expected, the administration will be putting in place new leadership at the FTC and Department of Justice (DOJ) Antitrust Division who subscribe to the views of the former antitrust enforcers and others who authored the report quoted above. (Indeed, one of the authors, Tim Wu, is himself at work in the White House as a special assistant to the President for technology and competition matters.) Expect them to seek to substantially boost antitrust enforcement, and to shift antitrust law and enforcement policies to promote new theories of harm to competition (for example, “hipster antitrust”), and lower bars to successful enforcement actions. • Both the FTC and the DOJ Antitrust Division are very likely to increase enforcement efforts in merger, civil non-merger, and criminal enforcement. We also expect them to attempt to push the current boundaries of antitrust law while they pursue emerging and largely dormant theories of antitrust law. • Efforts to amend the antitrust laws to strengthen enforcement could gain traction. Senate Antitrust Subcommittee Chair Amy Klobuchar has already introduced legislation that would lower the standard of proof in merger cases (to “an appreciable risk of materially lessening competition”); lower the standard of proof of exclusionary conduct in Section 2 cases; and implement other reforms. Antitrust Ed Schwartz Several factors are likely to fuel a significant increase in antitrust enforcement under the Biden administration, including: (1) a desire to reverse the decline in enforcement under the Trump administration, particularly by the Department of Justice; (2) growing concern by Congress, policymakers, and the public about increased concentration and what is perceived as market power in a number of industries, particularly digital markets; and (3) a growing belief by antitrust enforcers and policy makers that the historic antitrust doctrines are insufficient to protect competition in today’s economy and markets. • Regardless of the fate of efforts to legislate substantive changes to the antitrust laws, Congress is expected to significantly increase funding for the antitrust agencies, enabling them to increase staffing to support their enhanced enforcement efforts. • Expect both the FTC and the DOJ Antitrust Division to make great efforts to boost merger enforcement, including by investigating more transactions including through Second Requests, and suing more often to stop deals including with respect to: • Mergers of firms in the healthcare, digital platform, and agriculture industries; • Mergers involving close competitors; • Mergers of firms in highly concentrated industries; • Acquisitions of “nascent” competitors thought to potentially reduce innovation (for example e.g., the FTC’s and state AG’s complaints against Facebook); and • The acquisition of “maverick” firms (firms that disrupt markets and larger, entrenched firms through low pricing and other competition). Tips Stay informed. Changes are coming that could affect your business. Stay on top of those changes so your business can adapt if needed. Risk assessment. Assess your company’s risk in light of the expected changes. Consider an antitrust audit. Compliance. Review and if needed, enhance your antitrust compliance program, and ensure it is effective and conforms to the agencies’ latest guidance. M&A. If your company is planning significant acquisitions this year, make sure you realistically assess antitrust risk and develop an effective merger clearance strategy early in the process. What to expect from a Biden administration Reed Smith 05 • The agencies will likely aggressively pursue vertical theories of potential harm (foreclosing competition/ refusals to deal and raising rivals costs), and look for opportunities to challenge vertical mergers such as a merger of a supplier and its customer or distributor (as took place in the 2010 merger of concert promoter LiveNation and Ticketmaster) • The agencies are also likely to insist on stronger remedies as a condition of approving mergers. • We expect antitrust enforcers to significantly increase enforcement of the antitrust laws against companies they believe are using their market or monopoly power to harm competition, and against parties to anticompetitive agreements. Expect them to: • Aggressively investigate and challenge no-poach agreements (including criminally) and other agreements affecting labor markets; • Aggressively investigate both potentially anticompetitive agreements and unilateral conduct in health care, digital platforms and agriculture industries, as well as in other industries perceived to be heavily concentrated; • Seek out potential Section 2 (monopolization) cases, and look for opportunities to shift the case law in its favor; • Attempt to reinvigorate largely dormant doctrines such as predatory pricing and refusals to deal; and • Closely scrutinize standard-setting and agreements involving SEPs (reversing policy of current DOJ). • The DOJ will do what it can to boost lagging criminal antitrust enforcement trends. Expect the DOJ Antitrust Division to aggressively investigate potential cartel activity, potentially in coordination with non-U.S. enforcement agencies. The division may also work with the U.S. Congress to strengthen the antitrust leniency program under the Antitrust Criminal Penalty Enhancement and Reform Act. 06 Reed Smith What to expect from a Biden administration DOJ priorities - FCPA and fraud Eric Sussman After record-low levels of white collar investigations and prosecutions by the Trump DOJ, the Biden administration early on signaled its intent to take a more aggressive role in fraud and corruption prosecutions. The Biden administration has made a sharp break from the prior administration by emphasizing: 1) its intent to focus on foreign corruption; 2) prosecutions related to the misuse of COVID19-related assistance programs – totaling $5.3 trillion; and 3) collaboration with the Special Inspector General for Pandemic Recovery, which has opened up whistleblower programs and received and vetted new matters to refer to law enforcement. Takeaways • Criminal fraud and antitrust prosecutions declined to an all-time low during the Trump administration – down roughly 26%-30%; while only 45% of “key positions” in the DOJ were filled as of November 2020. • The Biden DOJ’s top priority will be prosecutions related to the misuse of COVID-19-related assistance programs (over $5.3 trillion of relief funds to date). Specifically, DOJ will be investigating: 1) unemployment aid fraud; 2) CARES Act-related fraud; 3) price gouging and fraudulent PPE; 4) fraud in Paycheck Protection Program which funneled over $525 billion through thousands of financial institutions; and 5) fraud and counterfeiting related to the COVID vaccine. • A Special Inspector General for Pandemic Recovery (SIGPR) has actively engaged in numerous proactive investigations with a goal of referring these matters for prosecution by DOJ. • Expect an increase in Foreign Corrupt Practices Act (FCPA) investigations. The economic downturn (due to COVID-19) created multiple incentives for fraud. Historically, Other FCPA case spikes occurred in 2001 and 2007-2009, correlating with recent recessions. • Expect an increase in False Claims Act (FCA) enforcement relating to COVID-19 relief funds. Provider relief funds – $175 billion from the Centers for Medicare & Medicaid Services to hospitals and health care providers during the height of the pandemic – provided a source of potential FCA cases in that providers must certify that they used the relief funds for COVID-19 related expenses. • The Biden DOJ is also expected to increase investigations and prosecutions of banks for Bank Secrecy Act violations and money laundering lapses, particularly those involving China and Chinese entities, which have emerged as areas of anti-money laundering concern. Tips Businesses should: • Tighten corporate compliance and training relating to third-party vendors in high-risk locations – especially China. • Audit and review any COVID-19 related assistance your business receives. Ensure that there is a robust audit trail for all COVID-related government funds. • Create and monitor whistleblower hotlines to ensure that your business is aware of potential fraud and misconduct before any government involvement. • Proactively examine claims relating to whether hospital admissions were improperly upcoded to take advantage of the higher reimbursement associated with the treatment of COVID-19 cases. • Immediately escalate SIGPR inquiries to your legal department because they could be a precursor to DOJ intervention. • Create a response program for government subpoenas and search warrants. Educate executives and employees about their rights and responsibilities during a government investigation. What to expect from a Biden administration Reed Smith 07 Export controls and sanctions Lizbeth Rodriguez Johnson & Michael J. Lowell The U.S. government has enacted U.S. export controls and trade sanctions laws and regulations for reasons of U.S. national security and foreign policy. We expect these controls to continue to be an important part of U.S. policy. The Biden administration will likely expand multilateral cooperation and coordination with U.S. allies. President Biden has appointed experienced professionals, many of whom are veterans of the Obama administration, to positions of leadership in the U.S. Departments of Commerce, State, and Treasury. Industry should expect a recalibration of foreign policy under the Biden administration that includes the roll back of certain Trump administration policies, and an increased reliance on sanctions and exports controls to address new foreign policy and national security challenges. 08 Reed Smith What to expect from a Biden administration What to expect from a Biden administration Reed Smith 09 Takeaways • To lead the U.S. State Department, Biden nominated Anthony Blinken, a Deputy Secretary of State during the Obama administration. To lead the U.S. Department of Treasury, President Biden nominated Janet Yellen, former chair of the Federal Reserve Board. Yellen and Blinken were confirmed by the U.S. Senate on Jan. 25 and Jan. 26. For Secretary of Commerce, President Biden nominated Rhode Island Governor Gina Raimondo, who was confirmed by the U.S. Senate on March 2. Under their leadership, it is expected that the Departments of Commerce, State, and Treasury will use trade sanctions and export controls to advance the Biden administration’s foreign policy priorities, such as national security issues related to China, Russia, and Iran. • The Export Control Reform (ECR), initiated during the Obama administration, resulted in the transition of items and technology from the jurisdiction of the U.S. State Department to the jurisdiction of the U.S. Commerce Department, Bureau of Industry and Security (BIS). As a result, items and technology previously controlled for export by the International Traffic in Arms Regulations (ITAR) are now subject to the Export Administration Regulations (EAR). During ECR, certain items and technology transitioned from the U.S. Munitions List (USML) to the Commerce Control List (CCL). While most USML Categories transitioned during the Obama administration, the rule effectuating the transition of USML Categories I (Firearms), II (Artillery), and III (Ammunition) was effective on March 9, 2020 with a transition end date still to be determined. Under revised USML Categories I, II, and III, certain firearms transitioned from the ITAR to the EAR. Before his election, Biden opposed the transition of firearms to the EAR (see https://joebiden.com/gunsafety/). Therefore, there is a possibility that further revisions will take place to export controls of firearms.