On July 9, 2021, President Joe Biden announced a broad executive order (the “Order”) intended to boost what it characterizes as stagnant competition across the U.S. economy. The Order, among other things, encourages the federal antitrust agencies to “fairly and vigorously” enforce the antitrust laws, encourages the antitrust and other agencies to focus on perceived competition problems in key industries, and “reaffirms” the authority of the U.S. antitrust agencies to challenge previously consummated transactions. This sweeping Order is likely to launch a series of policy reevaluations and new rulemakings across a multitude of federal agencies.

Revisions to The Merger Review Guidelines. Following the Order, Federal Trade Commission (“FTC”) Chair Lina Khan and the Department of Justice (“DOJ”) Antitrust Division Acting Assistant Attorney General Richard A. Powers issued a joint statement announcing a review of the merger review guidelines in order to determine whether they are “overly permissive.”

Shift Towards Heightened Scrutiny for Mergers and Acquisitions, Even Retroactively. The Order is the most recent statement indicating a clear intention to increase scrutiny of mergers and acquisitions. Notably, the Order’s “reaffirmation” of the authority of the FTC and DOJ to challenge previously consummated transactions that are now deemed to violate the antitrust laws, if implemented in practice, would signal a major shift in U.S. antitrust merger enforcement priorities.

FTC Rulemaking Authority. The Order encourages the FTC to use its rulemaking authority to address a number of consumer protection and competition issues including, for example, patent settlements in the pharmaceutical industry. However, for more than five decades, the FTC has addressed anticompetitive conduct solely through its investigative and enforcement powers to challenge such conduct in court. The executive order follows the perspective of Commissioners Khan and Chopra that the FTC has authority to issue regulations that would clarify what constitutes an “unfair method of competition” under Section 5 of the FTC Act, even where such conduct is already subject to scrutiny under existing antitrust law, (i.e., the Sherman and Clayton Acts). Whether the FTC has such authority is contested and will very likely be the subject of federal court litigation.

A New Competition Council. A White House Competition Council, led by the Director of the National Economic Council, will be established to monitor progress on the initiatives in the Order and to coordinate among federal agencies.

Policy Initiatives Across Multiple Federal Agencies. The Order includes 72 initiatives by federal agencies to tackle the most pressing competition issues across the U.S. economy. The initiatives are focused in particular on labor markets, agricultural markets, healthcare markets (which includes prescription drugs, hospital consolidation, and insurance), the tech sector, transportation, and banking and consumer finance.

EXAMPLES OF KEY INITIATIVES:

• Healthcare and Pharma:
  • The Order affirms that it is the administration’s policy to “combat [ ]excessive consolidation” in healthcare markets (e.g., hospitals, insurance, prescription drugs);
  • The Order encourages the FTC to consider issuing rules addressing “unfair conduct or agreements” that delay the entry of generic drugs or biosimilars;
  • For further details on the initiatives directed to the healthcare industry, please visit our colleagues’ client alert here.
• Technology:
  • The Order announces an administration policy of greater scrutiny of acquisitions by large tech companies, including of nascent competitors;
  • The Order encourages the FTC to establish rules barring unfair methods of competition in internet marketplaces, as well as practices relating to data collection, surveillance, and restrictions on third-party or self-repair of products.
• Labor Markets:
  • The Order encourages the FTC to ban or limit non-compete agreements.
  • Licensing requirements and the exchange of wage and benefit information are highlighted for additional scrutiny.

KEY IMPLICATIONS:

• Revised horizontal and vertical merger guidelines are expected, which will likely implement a much more aggressive approach to deals. Note, however, that agency merger guidelines are not binding on courts and merger challenges under more aggressive theories may be met with skeptical courts;
• Anticipate delays in HSR review especially for deals in industries singled out by the Order (e.g., tech, pharma, healthcare, among others), even if competitive overlaps are minimal;
• Deals not subject to HSR filing requirements, even when purchase prices are relatively low, should be reviewed by antitrust specialists to assess risk, especially in the sectors identified in the Order;
• Past deals that are now viewed as potentially raising antitrust concerns may be subject to review and scrutiny;
• The agencies’ shift to more rigorous guidelines means it will be even more essential to negotiate antitrust risk provisions in agreements with a complete grasp of the substantive antitrust risk under this new landscape; and
• This novel proposal for the FTC to exercise rulemaking authority may impose new requirement on affected industries, but will also likely face litigation challenges.