On March 20, 2020, the Colorado legislature passed a bill amending the Colorado Antitrust Act to allow the Colorado Attorney General (AG) to challenge transactions that harm competition, even where federal antitrust agencies have declined to bring an enforcement action. The amendment, expected to take effect in August 2020, expands the AG’s independent authority to pursue mergers and acquisitions it deems anticompetitive. The new law is the latest illustration of a broader trend of aggressive, independent antitrust enforcement at the state level, particularly in the technology sector. Against this backdrop, parties contemplating transactions should consider the potential competitive effects of those transactions across geographies, and evaluate antitrust enforcement risk from both a federal and state perspective. Assessing these issues early in the transaction process can reduce the risk of divergent or unexpected outcomes that may threaten deal certainty.

The Colorado Antitrust Act

Like its federal counterpart (Section 7 of the Clayton Act), the Colorado Antitrust Act of 1992 (Act) prohibits transactions that “may substantially lessen competition or may tend to create a monopoly.”[1] The Act bars Colorado’s AG from challenging any transaction under the Act that the U.S. antitrust authorities—the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division (DOJ) — investigate and decline to challenge. On March 20, 2020, the Colorado General Assembly passed Senate Bill 64 (Amendment), which eliminates this prohibition, allowing Colorado’s AG to challenge transactions irrespective of any federal enforcement action (or lack thereof).[2] The Amendment is expected to take effect on August 5, 2020 (the 90th day following adjournment of the General Assembly, currently anticipated to be May 6, 2020). 

Recent Trends in State Antitrust Enforcement

At the federal level, the U.S. antitrust laws—including the Sherman Act and the Clayton Act, which governs mergers and acquisitions—are enforced by the FTC and DOJ. States also have antitrust laws, which are enforced by state AGs and are often patterned after their federal analogs, but can contain important differences. States frequently collaborate with the federal antitrust agencies and/or other states on merger investigations. However, the Supreme Court has recognized that states are not required to do so, and have the right to make enforcement decisions that differ from other federal and state authorities.[3] States have sometimes exercised this authority in order to “fill the gap” of perceived under-enforcement at the federal level.

For example, in June 2017, the California AG sued to block Valero Energy Partners LP’s acquisition of two petroleum terminals in Northern California, despite the FTC’s decision not to challenge the deal. Several months later, the parties abandoned the transaction. More broadly, in recent years, there has been a growing trend of robust and autonomous state antitrust enforcement, as illustrated by major investigations and enforcement actions by state coalitions in the healthcare, pharmaceutical, telecom, and technology sectors, among others.

Consistent with this trend, Colorado AG Phil Weiser—who previously served as Deputy Assistant Attorney General in the DOJ Antitrust Division under the Obama administration—has affirmed his commitment to “protecting all Coloradans from anticompetitive consolidation and practices…whether or not the federal government acts to protect Coloradans.” In keeping with this mandate, the Amendment will bring Colorado increasingly in line with states such as California and New York that have demonstrated an appetite for aggressive, independent antitrust enforcement, even where it may depart (or conflict) with federal action.

Key Takeaways & Practical Guidance

• In keeping with the broader trend of robust state enforcement and greater autonomy exercised by state AGs, the Amendment will expand the Colorado AG’s antitrust enforcement toolkit, potentially increasing the number of actions brought by the Colorado AG’s office challenging deals on competition grounds.
• The Amendment will allow the Colorado AG to challenge transactions even where the federal antitrust authorities have decided not to take action. Thus, the passage of the Amendment will increase the risk of divergent enforcement outcomes at the federal and state level, potentially introducing additional deal risk to transactions with a Colorado nexus.
• The Amendment underscores the importance of adopting a holistic and proactive approach in evaluating antitrust risk in the M&A context. Companies contemplating transactions should (1) consider the potential competitive effects of those transactions across geographies; (2) evaluate antitrust enforcement risk from both a federal and a state/local perspective; and (3) engage with state enforcers as appropriate. Addressing these issues early in the transaction process can reduce the risk of divergent or unexpected outcomes that may threaten deal certainty.

Eric Pacifici and Eric Olson contributed to the writing of this alert.

[1] See Colo. Rev. Stat. § 6-4-107(3).

[2] See 2020 Colo. Legis. Serv. Ch. 31 (S.B. 20-064).

[3] California v. Am. Stores Co., 495 U.S. 271 (1990).

[View source.]