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

Welcome to this month’s 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 European Court of Justice (CJEU) overturned the policy of the European Commission (EC) to accept referrals of below-threshold deals for merger review. Generative artificial intelligence (AI) continues to be a focus of governments, with eight U.S. senators urging an antitrust investigation into the use of generative AI on digital platforms, and the EC publishing a competition policy brief on generative AI and virtual worlds. The U.S. Federal Trade Commission (FTC) wrote to the Indiana legislature opposing a hospital merger requiring approval by the state, continuing its quest against Certificate of Public Advantage (COPA) laws. After years of speculation, the Antitrust Division of the U.S. Department of Justice (DOJ) withdrew the 1995 Bank Merger Guidelines.
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Our Take on Top-of-Mind Global Antitrust Issues

CJEU overturns below-threshold merger review policy: On September 3, the CJEU delivered its eagerly awaited Illumina/GRAIL judgment and rejected the EC’s assertion of jurisdiction to review transactions falling below the merger review thresholds at the EU and member state levels. The CJEU found that the EC’s expansive interpretation of Article 22 EU Merger Regulation (EUMR) (which allows referrals of merger cases between the EC and national competition authorities of EU member states) went beyond the provision’s intended scope and imposed undue uncertainty on businesses operating in the EU. Going forward, unless a transaction is reviewable under its national merger control regime, a member state will no longer be able to refer it to the EC.

Why it matters: For companies involved in mergers and acquisitions, the judgment restores much-needed legal certainty and predictability in European merger control. However, the practical impact may be partly offset by the growing range of member state powers to review below-threshold deals at a national level. The EC may turn to member states to ensure that these types of transactions continue to be referred to it, which could undermine the “guarantee of foreseeability” that the judgment promotes. For a more detailed update, see our Sidley Update here.

U.S. Democratic Senators urge antitrust investigation of generative AI use on digital platforms: In a letter, eight Democratic senators, led by Sen. Amy Klobuchar, urged the antitrust agencies to investigate whether the use of generative AI tools on digital platforms is an unfair method of competition or exclusionary conduct in violation of the antitrust laws. Various websites and digital applications have introduced generative AI tools that will summarize a response to user queries from other online sources, obviating the need for the user to navigate to the site of the online source. The Senators argue the drop in referral traffic keeps users on the initial platform where only the platform can benefit. The antitrust agencies are already focused on the issue of digital platforms using AI to cannibalize publishers and content creators. Assistant Attorney General Jonathan Kanter stated in May that “[a]bsent competition to compensate creators for their works, AI companies could exploit monopsony power on levels we have never seen before.” 

Why it matters: The letter comes as the DOJ and Google are still working out remedies in the wake of the finding that Google has a monopoly in search. DOJ requested additional discovery on Google’s AI search strategy prior to proposing remedies, and the Senators’ letter highlights the opportunity afforded by the remedies phase of the search monopolization case. The outcome of the remedies phase will likely outline the playbook the DOJ may take in other cases involving generative AI.

EC publishes a policy brief on competition in generative AI: On September 19, the EC published a Competition Policy Brief on competition in generative AI and virtual worlds. The policy brief provides an overview of the market dynamics and potential barriers to entry and expansion in generative-AI-related markets, and it sets out a reference framework for competition enforcement in this area. The EC points to five theories of harm that it will closely, though not exclusively, monitor:

1. exclusive access to key inputs by large digital players
2. large players using their market power to limit choice or distort competition in downstream markets when commercializing AI applications
3. horizontal collusion or unlawful exchange of competitively sensitive information
4. vertically integrated players engaging in margin squeezes
5. acquisitions aimed at eliminating nascent competition in the relevant markets (so-called killer or reverse killer acquisitions)

The document provides a similar overview of market dynamics and emerging tendencies in the virtual worlds industry.

Why it matters: The policy brief underscores the EC’s commitment to actively scrutinize any potential concern in the generative AI and virtual worlds sectors. Following the joint statement issued by the EC, the UK Competition and Markets Authority, and the DOJ, the policy brief notes the EC’s commitment to strengthening coordination in relation to enforcement in these markets at the European Competition Network, the International Competition Network, and the Organization for Economic Co-operation and Development.

FTC opposes Indiana hospital merger under COPA application: On September 5, FTC staff submitted a 107-page comment to the Indiana Department of Health asking the agency to oppose the merger of Union Hospital and Terre Haute Regional Hospital. The hospitals are proposing to merge under Indiana’s COPA regime, which allows states to approve hospital mergers that prove they will benefit the public, even if the deals might significantly reduce competition or lead to increased consolidation. Once granted, COPAs purport to shield approved mergers from federal antitrust enforcement under the state action doctrine, leaving state departments of health and state attorneys general responsible for evaluating, approving, and supervising COPAs. If approved, the transaction would represent the first hospital merger approved under Indiana’s 2021 COPA law.

Why it matters: The FTC has a long history of opposing both COPA legislation and the underlying transactions, including with its August 2022 policy paper disputing hospital claims regarding the benefits of COPAs, which found that COPAs often lead to higher prices for patients, reduced quality of care, and lower wages for healthcare workers and serve as an inadequate substitute for market competition. Nineteen states have COPA laws, and this challenge is a signal that the FTC will continue its fight against them. 

The DOJ changes course on the framework for reviewing bank mergers: On September 17, the DOJ announced it has withdrawn the 1995 Bank Merger Guidelines, which provided an analytical framework for investigating antitrust considerations related to bank mergers. Going forward, DOJ will review bank mergers under the 2023 Merger Guidelines, which the DOJ claims provide a “comprehensive and flexible framework to assess antitrust and competition considerations” for every industry, including banking. The DOJ elaborated in a Banking Addendum that the 2023 Merger Guidelines are informed by modern market realities and take a broader view of the ways in which banks may compete. In addition to the move by the DOJ, the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency each took actions to update their respective bank merger review policies and procedures (see here and here).

Why it matters: The antitrust agencies during the current administration have consistently taken an expansive view in defining and investigating potential markets in which merging parties may compete. The Banking Addendum notes that the DOJ will continue to coordinate with other banking regulators, though it “may, at its discretion, challenge the legality of a merger transaction pursuant to relevant enforcement authorities following approval by the relevant banking agency.” Given the evolving enforcement landscape for bank mergers, industry participants contemplating potential transactions may want to seek legal counsel earlier in the evaluation process.

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