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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United States | Publication | juli 2021
The Executive Order sets forth the Biden Administration's vision of a whole-of-government antitrust policy and commits the federal government to aggressive enforcement of the antitrust laws. In particular, the Executive Order:
In addition to the above, the Executive Order seeks to introduce new rules and/or guidelines for specific economic sectors. We include below takeaways for various industry-specific mandates.
To date, there are several proposals pending from Federal and State legislatures, US agencies, and the Executive Branch. Some of the more prominent proposals are listed below:
In October 2020, the US House Subcommittee on Antitrust issued a Report and Recommendation titled, "Investigation of Competition in Digital Markets," which resulted from a bipartisan investigation into the state of on-line competition. In brief, the 449-page report recommended three areas for further action: (1) restoring competition in the digital economy, (2) strengthening the antitrust laws, and (3) reviving antitrust enforcement.1 This Report and Recommendation, co-written by now FTC Chair Lina Kahn, has fueled a spate of legislative and administrative proposals.
There presently are six bills introduced in the House that, in sum, would change US monopoly laws to make it more difficult for major tech companies to buy nascent competitors, prohibit them from giving preference to their own services on their platforms, and ban them from using their dominance on one business to gain leverage in another business.2 These bills also propose a broader definition of consumer welfare that goes beyond lower prices. At present time, the bills still need to pass the full House of Representatives and then get introduced into the Senate. We do not expect these bills to be enacted without some political compromise.
There currently are also three proposed antitrust bills in the Senate.3 Although they differ somewhat in approach, all three bills seek to amend the Clayton Act to (1) relax the standards to determine whether an acquisition is anticompetitive; (2) restrict mergers by "extremely large" companies; and (3) enhance the antitrust enforcement powers of both private plaintiffs and the federal government. While all three bills seek to increase the enforcement powers of the DOJ, the Klobuchar and Hawley bills also increase the FTC's enforcement powers—the TEAM Act seeks to consolidate all federal antitrust authority at the DOJ. All three bills would have a chilling effect on Big Tech companies by restricting acquisitions, even unrelated to the core technology business, of companies with large market capitalization. While the target of the three bills may be Big Tech, the proposed modifications would also negatively impact the business activities of other types of large companies considering potential acquisitions.
Recent court decisions applying traditional antitrust laws in favor of dominant companies have fueled bipartisan support for the need to "modernize our antitrust laws to address anticompetitive mergers and abusive conduct in the digital economy."4
Subsequent to her appointment as FTC Chair on June 15, 2021, Lina Khan has announced almost daily administrative changes designed to strengthen and broaden the FTC's enforcement powers. Most of these changes have been approved based on party line voting. Among those changes are:
As we await President Biden's appointment of an Assistant Attorney General to lead the Antitrust Division, the DOJ has taken some modest steps recently toward more vigorous antitrust enforcement. These include:
New York State is presently the only state to propose legislative antitrust reform measures. On June 7, 2021, the New York State Senate passed the "Twenty-First Century Antitrust Act," which seeks to expand New York's antitrust laws by establishing first-of-its-kind US state premerger notification requirements for mergers with as low as a $9.2 million threshold in New York, prohibiting "abuse of dominance" by companies with market shares as low as 30%, authorizing private class actions, and raising criminal penalties. We expect other states to follow this trend.
The Executive Order and the legislative proposals are not binding law—however they presage a change in the scope of antitrust law that is certainly underway. How far these proposals go remains to be seen. But right now, one thing is certain: merger reviews in all industries—but especially in technology, pharmaceuticals/healthcare and banking/finance—will take longer and be more in-depth. Moreover, it is certain that complaints from competitors and customers involving transactions will be taken very seriously by the agencies and will be carefully considered as part of the merger review. In connection with potential anticompetitive conduct, this provides new opportunities for companies that wish to bring complaints to the agencies about conduct undertaken by competitors to have their complaint heard and taken seriously. And it should serve as a wake-up call to those dominant companies to reconsider aggressive positions that impact competition and result in harm to social welfare—no longer will a focus on price and output suffice to determine anticompetitive impact.
Although the Order contains specific references to several industries, we believe that transactions in virtually all industries will be affected by this more aggressive antitrust enforcement regime. Where previously routine merger investigations may have taken between 2-6 months, with more in-depth investigations taking 6-12 months, most investigations going forward can be expected to take longer. Moreover, we expect both agencies to raise a wide range of theoretical economic issues that go beyond traditional investigations as they test the boundaries of a more aggressive and holistic approach to antitrust enforcement. We further expect the agencies to more aggressively solicit information from non-party market participants. In addition, parties may be required to offer broader divestiture packages than comparable transactions have in the past. Parties should plan accordingly.
For the past several years, the FTC and DOJ have focused on restrictions that employers impose on their workforce and rooting out anti-poaching and anti-solicitation agreements among employers that prevent worker mobility. Picking up on this theme, the Order encourages the FTC to ban or limit non-compete agreements and to ban unnecessary occupational licensing restrictions that impede economic mobility. The Order further encourages the FTC and DOJ to strengthen antitrust guidance to prevent employers from collaborating to suppress wages or reduce benefits by sharing wage and benefit information with one another.
In light of current antitrust trends, counsel should consider the following takeaways from the Executive Order:
1. Be prepared to face a rigorous merger review process.
All indications point to a more rigorous merger review process in the banking and finance sectors. In the Executive Order, DOJ and the agencies responsible for banking (the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency) are encouraged to update guidelines on banking mergers to provide more robust scrutiny of mergers. Parties contemplating an HSR-reportable transaction should be prepared for a longer wait before obtaining antitrust clearance.
2. Make sure you're up to speed on data rights and consent.
Counsel in the finance and banking sectors no doubt are aware of the significance of consumer data and consent obligations as they relate to privacy law. However, these issues also carry significance in antitrust law, and the intersection of antitrust and data privacy has substantial implications for financial institutions going forward.
Traditionally, courts do not take into account data or privacy rights when evaluating competitive harm. However, with these issues featuring prominently in antitrust challenges to Big Tech, it is only a matter of time before the Administration or Congress take action to resolve the issue. For instance, in the Executive Order, the Consumer Financial Protection Bureau (CFPB) is encouraged to issue rules allowing customers to download their banking data and take it with them.
The Norton Rose Fulbright US Antitrust and Competition group is following all these developments as they happen. We can assist you with your strategic plans and counsel you through these important times. Please contact us if you have any questions or need further information.
The House bills are:
The Senate bills are:
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