May 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 team and why they may matter to you. On May 24, the UK’s Digital Markets, Competition, and Consumer Act received royal assent, meaning that substantial changes to the current competition law will come into force likely later this year. In the United States, the federal district court in Nevada granted a motion to dismiss a class action that alleged algorithmic price-fixing. On May 9, the Antitrust Division of the U.S. Department of Justice (DOJ) announced the formation of the Task Force on Health Care Monopolies and Collusion, and on May 13, the DOJ secured a guilty plea in connection with criminal bid-rigging charges. The European Commission (EC) recently published a policy brief on EU antitrust law in labor markets. Interested? Keep reading …

Our Take on Top-of-Mind Global Antitrust Issues

UK government passes landmark competition reform: On May 24, following almost 13 months of parliamentary scrutiny, the UK’s Digital Markets, Competition, and Consumer Act received royal assent, entailing the most significant changes to the UK competition law regime in a decade. It will likely become effective this fall (see our Sidley Update here for additional details).

Why it matters: The Competition and Markets Authority (CMA) will have numerous new powers under the new Act.  These include a significant expansion of the CMA’s geographical remit — in certain cases, the CMA will have the authority to investigate anticompetitive agreements implemented outside the UK and to provide investigative assistance to overseas regulators. The CMA will have powers to require the production and preservation of any documents relevant to its antitrust and merger investigations regardless of the location of such documents. The UK’s merger thresholds have been revised, providing the CMA with the authority to review transactions where acquirers have a large UK presence but the target has limited UK nexus and there is no overlap between the parties. With respect to digital markets, once a digital company is designated by the CMA’s Digital Markets Unit as having “strategic market status,” it will be subject to tailored behavioral codes of conduct, requirements to report mergers and acquisitions (including minority investments where a target has UK activities) and, potentially, more specific pro-competition interventions to remedy or prevent perceived adverse effects on competition. Other significant changes include tougher consumer protection laws.

Algorithmic price-fixing case dismissed by Nevada district court judge: On May 8, Chief U.S. District Judge Miranda Du dismissed a class-action complaint alleging that hotel operators in Las Vegas conspired to fix the price of hotel rooms by using algorithmic pricing software (Gibson v. Cendyn Group LLC, No. 2:23-CV-00140-MMD-DJA (D. Nev. May 8, 2024). According to the complaint, the software in question collected pricing and occupancy information from the hotels and offered pricing recommendations based on that feedback. Plaintiffs alleged that the defendant hotels were able to charge artificially high room rates because they knew their competitors were also using the software and following the rates the software recommended. The hotels, software, and underlying agreements among them were alleged to constitute a “hub-and-spoke” conspiracy in violation of the Sherman Act. Ultimately, the court found the complaint contained numerous pleading deficiencies, including failing to clearly allege that the pricing information defendants obtained from the algorithm was indeed nonpublic, and that the hotels were required to accept the prices recommended by the pricing software.

Why it matters: Although private plaintiffs have primarily challenged algorithmic pricing as anticompetitive to date, the U.S. Federal Trade Commission (FTC) and DOJ have also expressed an interest in antitrust enforcement as it relates to the use of pricing algorithms (see, e.g., the September issue of the Sidley Antitrust Bulletin here). The judge’s dismissal offers a roadmap for ways to potentially reduce antitrust risk for parties that use algorithmic pricing software to inform business decisions. First, pricing algorithms that rely on public information as inputs are inherently less risky than those that rely on confidential information collected from competitors. Second, maintaining independent pricing authority is critical. According to the Gibson court, the “fatal” deficiency in the complaint was that plaintiffs did not allege that defendants agreed or were required to be bound by the pricing software’s recommendations. As similar cases make their way through the courts, expect the themes underlying the courts’ order in Gibson to lead defendants’ arguments at the motion-to-dismiss stage. 

The U.S. antitrust agencies’ heightened focus on competition concerns in healthcare markets continues with a newly announced DOJ task force: On May 9, the DOJ reiterated its prioritization of healthcare markets by announcing a task force on healthcare monopolies and collusion. This new task force will “guide the Division’s enforcement strategy and policy approach in health care,” including by “identify[ing] and root[ing] out monopolies and collusive practices that increase costs, decrease quality and create single points of failure in the health care industry.” The DOJ says the task force will focus on issues such as payer-provider consolidation and serial acquisitions.

Why it matters: Dedication of a specific task force serves as a clear signal to all firms involved in the healthcare industry — not just private equity firms or pharmaceutical companies — that the antitrust agencies are committed to aggressively investigating and pursuing potential antitrust violations in the healthcare markets. Healthcare companies may want to consider reviewing (and potentially updating) their antitrust compliance programs accordingly.

DOJ secures guilty plea in criminal bid-rigging case: An individual pleaded guilty to conspiring to rig bids related to the procurement of sports equipment by public schools in Mississippi and elsewhere. Jonathan Kanter, the Assistant Attorney General of the DOJ’s Antitrust Division, said, “The Antitrust Division and its partners will continue to protect taxpayers and students across the country by stopping bid rigging and fraud that targets government procurements wherever we find it, including at the state and local levels.”

Why it matters: This action demonstrates DOJ’s commitment to pursuing criminal antitrust violations, even on a very localized level. Moreover, this case is a reminder that the Procurement Collusion Strike Force, which comprises DOJ officials in partnership with officials from the FBI, multiple U.S. Attorneys’ offices, and Inspectors General from multiple federal agencies, is focused on rooting out, investigating, and prosecuting antitrust crimes like bid rigging, price fixing, and market allocation. Just last month, the DOJ announced the addition three new U.S. Attorneys’ offices and the Department of Commerce Office of Inspector General as partners to the task force. 

Antitrust scrutiny in labor markets continues: On May 3, the EC published a Competition Policy Brief on antitrust in labor markets, which highlights the application of EU competition law to agreements related to labor markets, in particular to no-poach and wage-fixing agreements. In essence, the EC generally considers no-poach and wage-fixing agreements to be forms of market allocation and price fixing agreements, which are anticompetitive “by object,” akin to “per se” violations in the U.S. This implies that such agreements inherently restrict competition, so the EC will not need to demonstrate negative effects. 

Why it matters: Following the contentious new rule passed by the FTC prohibiting almost all noncompete clauses between employers and workers in the United States (as discussed here and here), the EC’s policy brief further demonstrates increased global antitrust scrutiny of labor markets. While antitrust enforcement related to European labor markets has, so far, predominantly been conducted by national competition authorities, the EC’s policy brief shows readiness by the EC to enforce at the Unionwide level too. 

Read more Antitrust and Competition Bulletins here.