January Antitrust and Competition Bulletin: Top-of-Mind Global Antitrust Issues

Welcome to 2025’s first edition of the Sidley Antitrust and Competition Bulletin — thoughts on topics that are top of mind for Sidley’s global Antitrust and Competition team and why they may matter to you.

• The U.S. Federal Trade Commission (FTC) imposed a record penalty of $5.6 million on two parties in the oil sector that implemented their transaction before expiration of the Hart-Scott-Rodino (HSR) Act waiting period.

• The U.S. Chamber of Commerce, among others, raised a complaint in the U.S. District Court for the Eastern District of Texas for declaratory and injunctive relief against the FTC for recent changes to the notification requirements under the HSR Act.

• In response to concerns expressed by the U.S. Department of Justice (DOJ) regarding a potential violation of Section 8 of the Clayton Act for simultaneously holding board positions at a competitor (and minority investor), two Epic Games (Epic) directors resigned their board positions.

• The UK Competition Appeal Tribunal (CAT) provided a judgment on the application of excessive pricing in relation to a class action in the telecoms sector.

• The new year marked the entry into force of key changes to competition law in the UK under the Digital Markets, Competition, and Consumers Act 2024 (DMCCA). A longer overview of these changes is provided below, focusing particularly on the pro-competition regulatory regime for digital markets in the UK and the first investigations launched by the Competition and Markets Authority (CMA) under these powers.

Read more on how this news can affect your business below ….

Record FTC fine for “gun jumping”: On January 7, the FTC announced a record-breaking fine for “gun jumping” — assuming beneficial ownership of a target before the HSR waiting period expired — against XCL Resources, Verdun Oil Company (the Buyers), and EP Energy LLC (the Target). The enforcement action and record fine were a consequence of the buyers’ taking control of the target’s production and capital expenditure decisions immediately after signing the agreement, requiring Target to obtain Buyer approval for all actions over $250,000 and for hiring field-level employees and contractors, and Buyer coordinating directly with Target’s customers and holding itself out as acting on behalf of Target — among other exercises of “control.”

Why it matters: The FTC used this action to flag overly aggressive restrictive covenants and other preclosing conduct that could raise gun-jumping concerns. The suit serves as a reminder to seek antitrust counsel advice when negotiating executory covenants. A few of the key points made by the FTC:

• Restrictive covenant caps on expenditures should be tailored to the industry and the target, and caps must be high enough to allow the target to operate its business in the ordinary course (and/or include a carveout for ordinary course expenses).

• Hiring approvals should not affect parties’ ability to hire personnel for ordinary course operations, especially low- or mid-level employees.

• Where the parties compete, diligence exchanges — particularly involving competitively sensitive information — should be limited to formal or informal clean teams.

• Buyers may not coordinate directly with a target’s customers until after closing.

The U.S. Chamber of Commerce challenges new FTC rule amending HSR Act: In a new complaint against the government, the U.S. Chamber of Commerce challenges new regulations enacted by the FTC, greatly expanding the burden on premerger notifications under the HSR Act, contending that the new regulations demand excessive information inessential for an initial antitrust assessment. The new requirements, the Chamber argues, impose undue burdens on businesses, quadrupling the average time and expenses of preparing an HSR filing. They continue that the FTC did not conduct a reasonable cost-benefit analysis and failed to provide a “reasoned explanation” for the extensive changes or demonstration of how the new information will meaningfully improve antitrust enforcement. The Chamber also argues that the FTC failed to consider less burdensome alternatives, such as civil investigative demands, voluntary requests for information, and Second Requests.

Why it matters: If a judge accepts the Chamber’s arguments and enjoins the new rules from coming into effect (temporarily or permanently), businesses could be relieved of the heightened compliance burdens. In the near term, it is unclear whether the rules will enter force under the new regime. Relatedly, and as further set out in our recent Sidley Update, the FTC announced its annual update to the premerger notification thresholds and filing fees, which are expected to come into effect on or after February 12, 2025. These are the new thresholds and filings fees that would apply under the new HSR regime if they go into force following the moratorium.

Board directors agree to resign board seat due to competition with company subsidiary: On December 18, 2024, the DOJ announced that two directors from U.S.-based video game developer Epic had resigned their board seats after DOJ raised concerns that the directors’ simultaneously holding positions on the Epic board and the board of a subsidiary of one of Epic’s minority investors (Tencent) may create an illegal interlocking in violation of Section 8 of the Clayton Act (which prohibits a person from serving on the board of two competing corporations). Tencent holds a minority stake (approximately 40%) in Epic and can nominate two directors to its board. But Tencent is also the parent company to Riot Games Inc., a U.S.-based video game developer that, according to DOJ, competes with Epic. A finding of a Section 8 violation requires that the interlock be dissolved, that is, the person in question must resign one of the interlocking board positions: in this case, Epic.

Why it matters: In the statement announcing the Epic action, DOJ did not suggest that Epic and Tencent were competitors but rather that Epic and Tencent’s subsidiary (Riot) were competitors, thus creating the potential interlock. Tencent’s minority interest in Epic was apparently not sufficient to absolve the company of scrutiny. As is annual practice and reported here, the FTC recently updated the materiality thresholds for Section 8, but what remains to be seen is whether the new Trump administration will continue to make Section 8 an enforcement priority.

UK CAT clarifies the distinction between “excessive” pricing and “unfair” pricing in rejection of £1.3 billion class action: On December 19, 2024, the UK CAT dismissed a £1.3 billion class action brought against BT (Justin Le Patourel v BT Group PLC [2024] CAT 76) determining that BT did not abuse its dominant position in violation of UK competition law by imposing unfair prices on customers. While the CAT found BT’s prices to be excessive, they were not deemed to be unfair.

Why it matters: The judgment provides helpful guidance on how to approach excessive pricing cases in the UK and underlines the high bar to finding an abuse. To be abusive, prices must be not only excessive but also unfair. An assessment of unfairness can depend on various factors: the CAT weighs the extent to which BT’s prices were excessive against BT’s distinctive value to customers, and performs an assessment of whether the dispersion of price and cost efficiencies was within the scope of normal competition. Separately, as this is the first substantive judgment delivered by the CAT in an opt-out class action, companies may be heartened to see the CAT enforcing robust standards for bringing a successful claim.

New UK Competition Regime and Guidance: On January 1, the first parts of the UK’s DMCCA officially came into force. The new pro-competition regime for digital markets now applies alongside various other changes to the wider competition regime (including to the CMA’s market investigation and enforcement powers). In December 2024 and early January 2025, the CMA published a number of new and updated guidance documents setting out how it will use its powers under the DMCCA.

Why it matters:

1. Pro-competition regime for digital markets: The new digital markets regulatory regime marks a major departure from the previous competition law enforcement landscape in the UK. The DMCCA provides the CMA with a significant range of additional investigative, supervisory, and enforcement powers in relation to tech companies. Under the new regime, the CMA Digital Markets Unit (DMU) will designate certain tech companies with “strategic market status” (SMS). Companies designated with SMS will be subject to (among others) (i) bespoke enforceable codes of conduct, (ii) the prospect of “pro-competitive interventions” (PCIs), and (iii) a strict merger reporting regime that captures minority investments as low as 15%. The CMA can also issue fines of up to 10% of a company’s global turnover for failure to comply with PCIs and conduct requirements and enforce criminal offenses against executives who (i) destroy or conceal information, (ii) provide false or misleading information, or (iii) obstruct investigations.

On January 7, the CMA announced its initial plans for the regime. The CMA will be “moving at pace whilst ensuring a fair process” and expects to launch two SMS investigations in January with a third to follow within the first six months of 2025.

Hot on the heels of that announcement, the CMA announced on January 14 its first probe into whether Google has SMS in relation to search and search advertising. Third parties are invited to comment by February 3, 2025, on the scope of the CMA’s investigation and SMS assessment as well as potential issues and interventions in that investigation. The CMA has until October 2025 to decide whether to designate Google as having SMS in the UK search and search advertising sectors and, in parallel, will consider whether conduct requirements should be imposed in the event of a designation.

On January 23, the CMA launched two investigations into whether there was SMS in relation to specific mobile ecosystems. The invitation to comment on those investigations closes on February 12, 2025.

It is widely expected that another SMS investigation will be launched in the first half of 2025, which will follow on from the CMA’s previous market investigations work in the digital area, though the specific entities and activities remain to be seen.

In its consultation of its annual plan, the Chair and CEO of the CMA described in the foreword that the CMA will with the new regime “protect choice and promote effective competition in digital markets, removing barriers to innovation and investment in a targeted, proportionate, and more effective way for the many businesses and consumers who rely on digital services”.

2. Updated Merger Control Thresholds: The DMCCA amends the thresholds permitting the CMA to review mergers and acquisitions. The new UK thresholds (below) apply to all deals completing on or after January 1, 2025 (unless they were already under formal review in 2024):

• The Target has UK turnover of £100 million (up from £70 million); or

• the parties to the transaction have a combined share of supply in the UK (or a part thereof) of 25% or more (provided that at least one of the parties has UK turnover exceeding £10 million); or

• the transaction meets the brand new “hybrid” / “acquirer” threshold, which applies where one party has a share of supply of 33% or more in the UK (or a substantial part of it) and its UK turnover exceeds £350 million, and another party (likely the Target) has a UK nexus.

While the UK merger control regime remains voluntary, this new threshold drastically widens the CMA’s jurisdiction and expands the scope of unnotified transactions the CMA could “call in” for merger review. As a result, it is highly likely that some companies will face an increased number of deals triggering the thresholds for notification despite only a loose nexus to the UK and no overlap between the parties in the UK. For more information, please see our recent Sidley Update.

3. Wider competition law changes: Outside of digital markets and mergers, further changes in relation to the CMA’s competition enforcement powers are now in effect. This includes strengthened powers to preserve and request documents (including those held outside the UK) in an investigation, investigative assistance to overseas public authorities, and stronger enforcement powers, including to impose larger administrative penalties. The CMA is also now bound by a general duty of expedition across its portfolio of work.

4. This is just the beginning …: The DMCCA also brings significant changes to consumer protection, consumer rights, and unfair commercial practices (for more information, please see our Sidley Update). These sections of the DMCCA are slated to come into effect over the next year.

There may be certain matters that Sidley cannot comment on herein based on our work for clients.

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