Potential Impacts on Financial Services Providers of New Biden “Promoting Competition” Order

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On July 9, 2021, President Joe Biden signed a sweeping document titled “Executive Order on Promoting Competition in the American Economy.” The President’s stated intentions are to implement a “whole-of-government effort” involving numerous federal agencies, plus a new cross-agency coordinating body called the White House Competition Council, “to promote competition in the American economy, which will lower prices for families, increase wages for workers, and promote innovation and even faster economic growth.” Please click on the following links to read the complete order, the White House’s accompanying fact sheet, and the President’s remarks at the signing ceremony.

Among the numerous matters addressed in the order (which in many cases are directed at specific “non-financial” sectors including, but not limited to, health care, agriculture, technology, telecommunications, and manufacturing), the following are of particular interest to financial services providers operating in the banking, consumer finance, and related spaces:

Increased Scrutiny of Mergers/Acquisitions and Enforcement of Antitrust Laws to Combat Concentration

The order’s sharp focus on heightened scrutiny of M&A activity and “full and aggressive” (though also “fair”) enforcement of antitrust laws could result in increased litigation and/or a slowdown of concentration, not just in the financial sector but in other industries as well. The President left little doubt about the new administration’s position in his remarks at the signing: “No more tolerance for abusive actions by monopolies. No more bad mergers that lead to mass layoffs, higher prices, fewer options for workers and consumers alike.” The order also includes a potentially ominous reminder for large businesses that the federal government “retains the authority to challenge transactions whose previous consummation was in violation of the [antitrust laws].”

Specifically addressing the financial sector, and noting that the federal government has not formally denied a bank merger application in over 15 years, the order “encourages” (see the “Conclusions” section below for more about this and similar “suggestive” language in the order) the Department of Justice to work with the Federal Reserve, the FDIC, and the OCC to revisit the current merger guidelines and to develop, within the next 180 days, a new plan “for the revitalization of merger oversight.”

CFPB Directives

In the order, the Consumer Financial Protection Bureau is “encouraged to consider” adopting new rules to make it easier for consumers to switch financial institutions. The primary impediment to that goal which the order urges the CFPB to fix is consumers’ inability or difficulty in downloading or otherwise achieving portability of their transaction history and other financial data.

The CFPB also is “encouraged to consider” upping its enforcement efforts against bad actors who may be violating the Dodd-Frank Act’s prohibition on unfair, deceptive, or abusive acts or practices in consumer financial products and services.

Non-Banks’ Involvement in Consumer Finance Markets

The order directs the Secretary of the Treasury to submit a report to the new White House Competition Council within 270 days, “assessing the effects on competition of large technology firms’ and other non bank companies’ entry into consumer finance markets.”

Non-Compete Employment Agreements/Clauses

These provisions of the order likely will be of interest to employers in many industries, not just financial services.

To address employment agreements and clauses which, in the administration’s view, may unfairly limit workers’ job mobility, the FTC is “encouraged to consider” exercising its FTC Act rulemaking authority to ban or limit employers’ ability to require employees to sign such agreements and clauses. Making it easier to change jobs, the administration reasons, will foster increased competition in labor markets, higher wages, and “greater dignity and respect in the workplace.”

Conclusions

It is very important to note that, while the President’s order represents a policy statement which may be viewed as breathtaking in its scope and its potential future effects on broad aspects of the American economy, this document alone does not immediately enact any changes in federal rules, regulations, enforcement activities, or the like. Rather, at this point, President Biden essentially has only announced his administration’s objectives and issued some initial marching orders (or “marching suggestions”) to the various agencies to begin work in pursuit of those goals.

Also in this regard, the President undoubtedly understands that not all federal agencies and regulators are structured in the same way, and that some are more independent and less subject to political influence than others. Thus, while the order does include a good bit of “mandate” language (e.g., a particular agency or director “shall” do this or that), it also uses words like “encouraged,” “encouraged to consider,” and similar permissive terms in various places, which effectively indicate substantial deference to the leaders of the applicable agencies to use their judgment and experience in their fields to determine the best path forward.

One thing is virtually certain, and that is that we can expect a wave of new regulatory actions and proposals beginning in the coming months, and likely continuing at least through the end of the Biden administration. Typically, most federal agencies publish (and may be required by law or regulation to publish) any significant proposals well in advance of finalization, and all interested parties are invited to submit comments. So upon the publication of each proposed action, the financial services and other industries (along, of course, with individual consumers, consumer groups, and others) will definitely have their chance to voice any objections they may have and to attempt to persuade the agencies to make appropriate changes.

The result of all of this, as the President surely knows, is that he will not be able to implement everything on his vast wish list, and that the degree to which he ultimately can achieve his goals is yet to be determined.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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