Our Take on Top-of-Mind Global Antitrust Issues
EC issues revised notice for companies to seek informal guidance on the application of European Union (EU) antitrust rules: On October 3, 2022, the EC published a revised Informal Guidance Notice (Notice) on the application of EU antitrust rules to novel or unresolved questions. The Notice sets out how companies can request guidance and the revised criteria based on which the EC may issue a written “guidance letter” to companies. For the EC to consider a request for written guidance, there has to be both a novel question or one where there is currently “no sufficient clarity” and an added value in terms of legal certainty in the EC’s providing a guidance letter. On the same day, the EC withdrew its Antitrust COVID Temporary Framework under which companies could obtain ad hoc “comfort letters” from the EC for specific and well-defined cooperation projects aimed at mitigating the effects of the pandemic.
Why it matters: The initial 2004 informal guidance notice limited the circumstances in which the EC could provide informal guidance to companies and was rarely used. The revised Notice should give the EC greater flexibility and broaden the issues that can be addressed in guidance letters. Seeking guidance may be helpful not just for companies dealing with a crisis but also for those wishing to cooperate on new technologies or on projects with environmental benefits. The Notice is part of the EC’s broader ongoing evaluation of antitrust procedural rules.
The DOJ issues warning letters targeting companies with interlocking directorates: The DOJ recently issued a series of warning letters to companies and individuals with purported “interlocking directorates,” alleging violations of Section 8 of the Clayton Antitrust Act, then issued a press release announcing several director resignations in response. As fully addressed in the September issue of Sidley Perspectives, under Section 8 an individual or entity is prohibited from serving as a director or board-appointed officer of two or more competing companies. The letters coincide with a broader enforcement push from the DOJ and delivers on a statement made by Assistant Attorney General Jonathan Kantor in an April 2022 speech in which he vowed to use the “whole legislative toolbox” afforded to the DOJ — including Section 8 enforcement.
Why it matters: Section 8 has traditionally been enforced as part of the Hart-Scott-Rodino (HSR) merger review process, whereby merging parties submit mandatory information about their businesses and competitive overlaps. With these letters, DOJ signaled that it is willing to dedicate both time and resources to identify interlocking directorates in publicly available information (e.g., Form 10-Ks), outside of the HSR process. The letters serve as a reminder to private equity funds and other companies that routinely acquire board seats as part of a minority acquisition process to consult antitrust counsel early in the diligence process and as part of annual compliance to understand potential Section 8 implications.
Director disqualifications are a renewed CMA focus: In addition to imposing fines on companies, the CMA can seek the disqualification of individual directors of companies involved in anticompetitive practices. Although this power has been available since 2003, the CMA first secured a director disqualification in 2016 and is increasingly seeking disqualifications. Most recently, in September 2022, the CMA sought disqualifications from the English High Court of several directors of various pharmaceutical companies. In January 2022, the CMA successfully secured the disqualification of a director for four years.
Why it matters: Disqualification orders and disqualification undertakings can have significant consequences for individuals because they can lead to directors being prevented from being (directly or indirectly) involved in the management of a company for up to 15 years. This is a reminder that breaches of competition law not only can lead to fines for the company involved but can also have significant consequences for individuals.
FTC Commissioner Alvaro Bedoya signaled possible reinvigoration of the Robinson-Patman Act after decades of inactivity: In his first public address as an FTC Commissioner, Commissioner Bedoya called on the agency to renew enforcement of the Robinson-Patman Act. The Act, passed in 1936, targets price discrimination, barring sellers from providing competing customers different prices and terms of sale in certain circumstances. The revival of Robinson-Patman relates to Commissioner Bedoya’s call for a return to the concept of fairness in antitrust, in which he joins Chairwoman Lina Khan. According to Commissioner Bedoya, modern antitrust enforcement is disproportionately concerned with efficiency and needs to do more to promote “fairness” in the economy, particularly for rural America and small businesses.
Why it matters: Heightened scrutiny of potential Robinson-Patman violations is imminent. As highlighted in the address, the FTC has already focused on violations of the Act in its investigation of prescription drug middlemen. Commissioner Bedoya’s remarks singled out the practices of those pharmacy benefit managers, grocery wholesalers, and agricultural middlemen. Although these industries are particularly likely to be under the microscope of sharpened FTC scrutiny, sellers in other industries should likewise be on notice. Sellers should evaluate internal Robinson-Patman compliance polices in the context of the statute’s original textual and legislative purpose as well as FTC’s new focus on fairness.
The DOJ lost three litigated cases in under a month: In September, UnitedHealth Group Inc. won district court approval for its $7.8 billion proposed acquisition of Change Healthcare Inc., overcoming a DOJ lawsuit that aimed to block the deal. Only a few days later, a district court judge rejected the DOJ’s attempt to block U.S. Sugar Corp.’s proposed acquisition of its competitor Imperial Sugar. And on October 11, a judge denied DOJ a preliminary injunction related to another acquisition.
Why it matters: While the antitrust enforcers are increasingly willing to litigate to block transactions, the agencies still need to obtain an injunction from a district court bound by precedent. As the past month has shown, the antitrust agencies do not always win; parties may still succeed on the merits provided the parties are willing to invest the time and resources into litigation.
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