April Antitrust Bulletin: Top-of-Mind Global Antitrust Issues

Our Take on Top-of-Mind Global Antitrust Issues

U.S. Supreme Court clears the way for federal courts to consider the constitutionality of the FTC’s administrative litigation process: On April 14, 2023, the Supreme Court decided Axon Enterprise, Inc. v. FTC, clearing a jurisdictional hurdle in consolidated lawsuits challenging the constitutionality of the administrative hearing processes that both the FTC and Securities and Exchange Commission (SEC) require parties to undergo. Federal courts had declined to hear the merits of the cases on jurisdictional grounds, ruling that the parties must first bring their claims challenging the constitutionality of the agencies’ processes to the agencies themselves. In a 9-0 vote, the Supreme Court clarified that parties may bring claims challenging the constitutionality of these agencies’ administrative hearing processes to federal courts first if they wish.

Why it matters: The Supreme Court’s decision clears the way for parties to take their arguments to federal court and challenge the constitutionality of some of the foundational administrative litigation processes that parties have faced before the FTC and SEC for decades. Should the parties succeed with their claims on the merits, federal courts would drastically alter the structure and power of the FTC and SEC and, as a result, their respective enforcement mandates. As Justice Elena Kagan wrote, “The [parties’] challenges are fundamental, even existential. They maintain in essence that the agencies, as currently structured, are unconstitutional in much of their work.” The decision provides fodder for litigants who may wish to bring similar claims against other federal agencies with similar enforcement power and processes.

DOJ touts its renewed focus on Section 8 interlocking directorates enforcement: In public comments at the 2023 ABA Antitrust Spring Meeting, DOJ AAG Kanter emphasized the DOJ’s continued interest in enforcing Section 8 of the Clayton Act, which prohibits individuals from simultaneously serving on the boards of competing firms. AAG Kanter stated that the DOJ now has “vibrant Section 8 enforcement,” sharing that the agency has nearly 20 open investigations and noting that nearly 15 directors have stepped off the boards of their companies due to Section 8 enforcement efforts. AAG Kanter stated that in many respects Section 8 enforcement is “probably the most effective way of deconcentrating the United States economy today.”

Why it matters: As well as scrutinizing board governance agreements when negotiating mergers and acquisitions, the DOJ’s renewed focus on Section 8 enforcement also means that companies need to examine current board governance arrangements to ensure no red flags are raised. AAG Kanter’s comments suggest that Section 8 enforcement is here to stay, and companies will need to plan and act accordingly.  

Top EU court finds that nonreportable transactions could be caught by abuse of dominance rules: On March 16, 2023, the CJEU in its Towercast judgment confirmed that national competition authorities (NCAs) in EU member states can assess deals that are not subject to national or EU-level merger control under the general rules regarding abuses of dominant positions (the EU’s equivalent of Sherman Act, Section 2, in the U.S.). 

Why it matters: The Towercast judgment introduces additional uncertainty to merger-and-acquisition (M&A) transactions with a European nexus by exposing companies with a dominant position in the EU to the possibility of completed M&A deals being investigated, sanctioned, and even unwound post closing. It also provides further indications of the willingness of European competition authorities to investigate transactions falling below merger control thresholds. Although the full implications of the judgment remain to be seen, NCAs are ready to avail of the ability to review deals under abuse of dominance rules: The Belgian Competition Authority — relying on the Towercast ruling — has already opened abuse of dominance proceedings in relation to an ongoing M&A transaction. To find out more about the possible implications and what practical steps can be taken to mitigate the risks relating to abuse of dominance probes, see our client alert here. 

European Commission announces Article 102 TFEU Package: On March 27, 2023, the European Commission announced plans to update its policy related to the application of abuse of dominance rules under Article 102 Treaty on the Functioning of the European Union (TFEU). The package includes publishing amendments to the Commission’s 2008 guidance on its enforcement priorities in exclusionary conduct and launching a Call for Evidence (open until April 24, 2023) on a proposal to adopt guidelines on the application of Article 102 TFEU to exclusionary conduct.

Why it matters: This is the first major EU policy initiative in the area of abuse of dominance rules since 2008. The Commission explained that since 2008, when its prior guidance on enforcement priorities was adopted, there have been 32 judgments by the EU’s courts and 27 decisions by the Commission based on Article 102 TFEU relating to exclusionary conduct. The proposed guidelines will reflect this case law, and, once adopted (which is expected in 2025), the 2008 guidance will be withdrawn.

Google sanctioned for failing to preserve internal chat data: In a complex antitrust multidistrict litigation, a federal judge in California imposed sanctions on Google for failing to take reasonable steps to preserve relevant Google Chat communications. The court found that Google did not suspend its internal chat system’s 24-hour autodelete setting even after litigation began. Instead, Google instructed its employees to turn off the default setting if discussing topics related to the litigation but did not otherwise monitor employees’ chat preservation. The court likened this to a “don’t ask, don’t tell” policy for preservation and, based on further “troubling” conduct, found Google’s preservation failures to be intentional.

Why it matters: The order has far-reaching preservation and e-discovery implications for actual and potential antitrust litigants. First, it places a premium on performing due diligence to preserve relevant information when litigation is reasonably foreseeable. This includes ensuring that defensible preservation efforts are well documented. Second, it underscores the “obvious danger” of putting preservation decisions in the hands of custodians who may not understand the relevant litigation issues without adequate monitoring by the company; every litigant has an “unqualified obligation” to take affirmative steps to safeguard relevant information. Third, it reminds litigants that when a party intentionally fails to preserve unrecoverable electronically stored information, significant discovery-related sanctions are permitted under Rule 37(e) of the Federal Rules of Civil Procedure. The judge may instruct the jury that it must presume the evidence was unfavorable to the party or may even dismiss the case altogether.

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