Last month, we held a webinar to discuss the modernisation of the EU’s distribution block exemption (the ‘VBER’) and of the UK’s own approach to this: the ‘VBEO’).   Economic principles increasingly need to be woven into the commercial application of the competition rules by businesses and we were pleased to have with us Dr Claudio Calcagno, Director at GMT Economics.  For those who were not able to participate in the webinar, here is a link to the recording.  We compared the EU approach with the expected UK approach and discussed a number of key developments.  Highlights from the webinar include:

Continue Reading Webinar Recap – Vertical Agreements in the EU and UK: How to Navigate the New Competition Law Landscape

The Biden administration has made promoting competition a top priority, as reflected in President Biden’s July executive order on competition. (For a complete description of the executive order and developments in its implementation, please visit Steptoe’s Executive Order on Competition Tracker). This priority is reflected in appointments that President Biden has made to the Federal Trade Commission (FTC) and the Department of Justice (DOJ), as well as in policies announced by those appointees.


Although the FTC has been announcing a plethora of changes (some described below), the DOJ Antitrust Division has been significantly quieter, perhaps due to not yet having a permanent head confirmed. President Biden’s nominee, Jonathan Kanter, had his Senate Judiciary Committee confirmation hearing on October 6, although it may be weeks before the Committee and the full Senate vote on his nomination. He appeared to have more support than FTC Chair Lina Khan received during her hearing, with lawmakers from both parties indicating support for his nomination. He answered questions ranging from his views on the consumer welfare standard and whether environmental, social, and labor factors should be considered in the context of an antitrust review. Throughout, while his views may contrast to an extent with the principles announced by Chair Khan in her memo described below, Kanter emphasized his commitment to strong antitrust enforcement.

President Biden has also nominated Alvaro Bedoya to the FTC Commissioner position left vacant by Commissioner Rohit Chopra’s confirmation to lead the Consumer Financial Protection Bureau. Bedoya is a privacy expert who has focused his research on the harms of artificial intelligence, such as the potentially discriminatory aspects of facial recognition. He has also worked in the Senate, serving as chief counsel to the Senate Judiciary Subcommittee on Privacy, Technology, and the Law. Before their nominations to the FTC, both Khan and Bedoya had established themselves as critics of Big Tech and, in light of their backgrounds, it is likely that the FTC will continue its focus on Big Tech and privacy issues.

Consistent with that prediction, Chair Khan appointed Olivier Sylvain as an advisor on rulemaking and emerging technology. Sylvain, a professor of communications and administrative law at Fordham Law, is an expert on Section 230, artificial intelligence, and content moderation issues. His writings opining that content moderation can lead to systemic racial and gender inequalities, among other issues, may indicate that the FTC intends to tackle these issues, perhaps asserting jurisdiction pursuant to their unfair and deceptive practices responsibility. This may lead to inter-agency conflict, as the Federal Communications Commission staked its claim to Section 230 in a blog post last year.

Merger Review Developments

Parties considering Hart-Scott-Rodino-reportable transactions find themselves in the midst of considerable change, with less transparency in some areas. In particular due to several policy shifts by the FTC, previously well-established practices and guidance are no longer being followed, leaving merging parties to contend with less direction and greater agency involvement.

Vision and Priorities for the FTC. A September 22 memo from FTC Chair Khan to the FTC’s staff directed staff to take “a holistic approach” to identifying antitrust and consumer protection harms, to orient its enforcement efforts around targeting root causes rather than looking at one-off effects, to invest in a more rigorous and empiricism-driven interdisciplinary approach to understanding market conduct, to be forward-looking in anticipating problems and taking swift action, and, finally, to further democratize the FTC. She identified as enforcement priorities merger enforcement, dominant intermediaries, and restrictive contract terms.

Vertical Merger Guidelines. Also in September, the FTC withdrew the vertical merger guidelines that it issued in 2020 (which was the first major revision since 1984) due to “unsound economic theories that are unsupported by the law or market realities.” In particular, the FTC critiqued “the 2020 VMG’s flawed discussion of the purported procompetitive benefits (i.e., efficiencies) of vertical mergers, especially its treatment of the elimination of double marginalization.” The FTC’s statement has been criticized by leading antitrust scholars, including Carl Shapiro and Herbert Hovenkamp.

These Vertical Merger Guidelines remain in effect at the DOJ, although Acting Assistant Attorney General Richard Powers of the Antitrust Division issued a statement announcing that the DOJ believes that there are “several aspects of the guidelines that deserve close scrutiny,” and that it is working with the FTC to update the guidelines, which will be subject to a public comment period.

The withdrawal of these guidelines creates at least two problems. First, it creates an apparent asymmetry between review at the FTC compared to the review at the DOJ, which could result in different standards being applied by the FTC and the DOJ. Second, parties with transactions pending before the FTC may have decreased transparency into how the Commission will evaluate a vertical merger.

Suspension of Early Terminations. On February 4, 2021, the FTC and DOJ halted the practice of granting early termination requests. Ever since August 1982, when the FTC dropped the requirement that parties provide “special business reasons” for requesting early termination, parties to transactions that were identified as not posing a risk to competition had been granted early termination before the expiration of the applicable HSR waiting period. The agencies cited an unprecedented number of mergers and acquisitions that have been filed in the past year, which has put tremendous strain on the agencies. Although the agencies announced that the temporary suspension would be brief, they have yet to lift the suspension, more than eight months later.

Assumption of debt. In August, the FTC announced that it would treat the assumption of liabilities as part of the acquisition price for purposes of the HSR Act thresholds. Prior to this announcement, informal interpretations from the staff at the FTC’s Premerger Notification Office (PNO) had advised that the retirement of debt should never be included in the consideration calculation. The FTC has now reversed that informal interpretation, resulting in the likelihood that additional HSR filings will be required.

Moreover, the blog post publicizing the change portends further changes to existing informal interpretations. The blog post said that “some of these informal interpretations may not reflect modern market realities or the policy position of the Commission,” and that the agencies “are currently in the process of reviewing the voluminous log of informal interpretations to determine the best path forward.” Although PNO informal interpretations do not have legal force, they have created a body of precedent on which merging parties have relied for decades. Again, the FTC action creates additional uncertainty in the merger review process.

Prior Notice. In July, the FTC voted to rescind a 1995 policy statement on prior approval. Until the 1995 policy statement, the FTC had required companies entering consent decrees to resolve merger investigations to agree to provide prior notice and/or obtain prior approval for subsequent acquisitions in the relevant product and geographic markets that were the subject of the consent.  In 1995, the FTC voted to remove that requirement, essentially because the HSR process had rendered it superfluous. Although the ultimate effect of the withdrawal of this policy remains uncertain, it is likely another obstacle to parties proposing deals that raise antitrust issues and it will create another issue for negotiation between merging companies.

Close at your own peril letters. In August, the FTC announced another policy shift that is also likely intended to deter merger activity. The HSR Act generally sets forth a 30-day waiting period to enable premerger review by the FTC or the DOJ, which can be extended by the issuance of a Second Request or if the parties decide to “pull-and-refile” their notifications.  After the expiration of the waiting period, the parties are free to close their deal. Although the FTC technically retains the authority to continue to investigate – or even to seek to unwind the deal – after a transaction has been consummated, it has rarely sought to use that power. Accordingly, the recent FTC announcement that it will issue form letters to parties informing them that the FTC’s investigation is continuing and that any consummation of the transaction would be at the parties’ own risk represents a distinct departure from prior procedure. While parties previously could have a high level of confidence that their transaction could be consummated without consequence if the FTC did not issue a Second Request, this confidence may now be subject to question. As with the FTC’s policy shift on prior notice provisions in consent decrees, this change represents another hurdle for merging parties to overcome.

Second Requests – “More Streamlined” and “More Rigorous”. On September 28, the FTC announced new processes for Second Requests that it claims will make the process both more streamlined and more rigorous – although it appears that the process likely will make the process more streamlined for the FTC and more rigorous for parties facing Second Requests. The changes include: efforts to better identify facets of market competition that may be affected by the merger (likely through broader inquiries into issues such as competition for labor), postponing requests for modification of the requests until after a company provides initial foundational information, requiring companies to provide information at the outset of the investigation on how it will use e-discovery, aligning privilege log practices with the practices of DOJ, and allowing secure internal access to second requests information to all Commissioners and relevant offices at the FTC.

In a blog post released on August 3, 2021, FTC Bureau of Competition Acting Director, Holly Vedova, announced that, in response to “a tidal wave of merger filings,” the FTC had begun to send standard form letters “alerting companies that the FTC’s investigation remains open and reminding companies that the agency may subsequently determine that the deal was unlawful.” Merging parties receiving such letters were warned by the blog post that although they may “choose to proceed with transactions that have not been fully investigated, they are “doing so at their own risk.”

Technically, the blog post reiterates what the law already provides. The Hart-Scott-Rodino Act already states that “any failure of [the FTC or the DOJ] to take any action … shall not bar any proceeding or any action with respect to such acquisition at any time,” and that nothing in the HSR Act limits the authority of the FTC or DOJ to obtain documents, testimony, or information under the Antitrust Civil Process Act, the FTC Act, or otherwise. 18 U.S.C. § 18a(i).

But, notwithstanding the recent FTC challenge to Facebook’s acquisition of Instagram and WhatsApp (albeit under §2 of the Sherman Act rather than §7 of the Clayton Act), such post-consummation challenges (or even investigations) of transactions that have previously been subject to HSR review are exceedingly rare.

Accordingly, we have four take-aways from Holly Vedova’s blogpost:

  • The blogpost is another indication that the FTC under Chairwoman Lina Khan may be more serious about challenging mergers — including consummated mergers.
  • Parties need carefully to consider this new policy in negotiating merger agreements, because closing conditions predicated on the expiration of relevant waiting periods are likely unaffected by the receipt of such a warning letter. Parties may wish to consider whether closing conditions predicated on the absence of a pending or threatened investigation are satisfied where the FTC has issued such a warning letter stating that the “investigation remains open and ongoing.”  And parties may wish explicitly to address in their merger agreements the effect of the receipt of such a warning letter.
  • Unless the Antitrust Division of the DOJ adopts a similar policy, this creates another meaningful distinction between the federal antitrust enforcement agencies in terms of merger review practice.
  • Because prior challenges to consummated HSR-reviewable transactions have been so rare, institutionalizing the issuance of this type of warning letter – and the potential for the perpetuation of investigations with no statutory or other limit on their duration – introduces an element of uncertainty into deal planning that runs counter to the almost 50-year course of practice under the HSR Act.

Parties should pay close attention to how aggressively the FTC proceeds under this new policy over the next few months. The policy injects another dose of uncertainty at a time when merger review practice is already being changed.

President Biden’s unprecedented July 9, 2021, Executive Order 14036 represents a potential watershed moment in U.S. competition policy. The wide-ranging Executive Order (EO) includes 72 initiatives that aim to enforce existing antitrust laws and other consumer protection regulations, to be undertaken by at least 15 federal departments, offices, and agencies. The Biden Administration’s stated hope is that these efforts will drive down prices for consumers, increase wages for workers, and facilitate innovation.

Continue Reading Biden Administration Calls for Whole-of-Government Approach to More Vigorous Antitrust Enforcement

No-poach and wage-fixing agreements – arrangements between companies seeking to prevent or limit the hiring of each other’s employees, or to suppress the wages and/or benefits of their respective current employees are not only currently under the spotlight in the US, but have also been subject to scrutiny by antitrust authorities in the European Union (EU), albeit to a more limited degree. These antitrust infringement decisions have mostly been taken by EU Member State national competition authorities (NCAs), rather than by the European Commission (EC) (the foremost enforcer of EU competition law). The US antitrust regime will be relevant to companies from third countries that have US subsidiaries or that participate in joint ventures or private equity investments in the US, but this alert focuses on the emerging body of EU and Member State law relating to anti-competitive labour practices and highlights the need for those companies with European operations or investments to take note of them. Potential liability for EU antitrust failings may extend to a number of circumstances, including where the parent holds only a minority stake, potentially coupled with nominee directors sitting on subsidiary company boards, and even where a buyout or private equity firm has no involvement in, or awareness of, the alleged wrongdoing. As with labor-related restrictions in the US, the growing use of fines by EU Member States for violations of competition law through no-poach, no-hire, wage-fixing and staff data sharing calls for increased coordination between sales managers, human resource departments, and antitrust legal and compliance officers.

Click here to read the full analysis.

Despite the UK’s withdrawal from the EU, the EU Vertical Agreement Block Exemption Regulation (retained VABER) continues to offer a safe harbor with respect to potentially anti-competitive vertical or supply agreements with an effect on trade within the UK. In this Alert, Steptoe’s EU Competition Team analyses the UK Competition and Market Authority’s recently issued consultation on its proposals for a UK Vertical Agreements Block Exemption Order that will replace the retained VABER.

Any interested party can respond to the consultation by July 22, 2021.

Our Alert highlights some of the intricacies concerning the proposed changes to UK competition law surrounding vertical agreements, and how businesses can best operate in this new environment.

To read our full analysis click here.

Steptoe’s Antitrust practice hosted a complimentary webinar on antitrust enforcement in the Biden administration. Click here to access the recording. 

During the webinar, the team compared and contrasted enforcement priorities and actions from the Trump administration with the positions the Biden administration might take that are informed by campaign proposals and actions so far. The discussion included potential legislation coming out of Congress that will focus on antitrust and competition as well as changes in leadership at the Antitrust Division at the Department of Justice (DOJ) and the Federal Trade Commission (FTC).

Topics for Discussion Include:
  • Criminal enforcement
  • Civil enforcement of both unilateral and concerted conduct
  • Potential industries of focus
  • Potential legislative changes
Steptoe Speakers:

As we predicted in Steptoe’s client webinar last week on “Antitrust Enforcement in the Biden Administration – What We Know from The First 100 Days,” on April 22, 2021 the US Supreme Court put an end to the Federal Trade Commission’s (FTC) longstanding practice under § 13(b) of the FTC Act of seeking disgorgement or restitution orders in cases brought by the agency in federal courts.

Continue Reading Supreme Court: FTC May Not Seek Restitution Directly in Federal Court

A ‘killer acquisition’ is an acquisition of a potential rival whilst they are still in the early stages of their development, whose turnover is small or zero, in order to eliminate them as a possible source of future competition. Such acquisitions often fly under the radar of EU and national merger regimes which are usually only engaged when the turn-over of a target exceeds a certain threshold. They tend to be a particular problem in digital services where companies try to expand their market share whilst charging nothing or very little to begin with and pharmaceutical companies whose new techniques or medicines may take years to develop and not yield revenue for a significant period of time.

Continue Reading Attack of the Killer Acquisitions

On March 2, 2021, the UK signed a trade partnership agreement with Ghana.  Recently, Cadbury, which is wholly owned by Mondelez, has announced that it is moving some production of its iconic Dairy Milk chocolate bars from Germany to the UK. This note, which is in two parts, considers the connection between the trade partnership agreement between the UK and Ghana and the relocation of Cadbury’s Dairy Milk chocolate production to the UK from the EU and the implications this will have in terms of supply chain management.

Continue Reading Home-Coming of Cadbury Dairy Milk Chocolate Bars (Part 1)