On October 1, 2020, the U.S. Department of Justice’s (DOJ) Antitrust Division announced that it had completed its review of ISDA’s proposed amendments to its standard documentation to deal with IBOR discontinuation (by way of a Protocol and Supplement). The DOJ concluded that ISDA’s proposals do not harm competition, and so announced that they will not challenge them. A copy of the letter can be found here.
Assistant Attorney General Makan Delrahim cited a number of factors that the DOJ took into account when issuing this positive response, including ISDA’s cooperation with government regulators, its consultation-driven process and the safeguards it has put in place to protect competition (including the voluntary selection of fallback rates). In their letter, the DOJ also concluded that the use of a pre-cessation trigger in the Protocol and Supplement was not anti-competitive, as parties were free to substitute the default pre-cessation trigger for an alternative, or not use one at all.
Indeed, the DOJ concluded that the pro-competitive aspects of ISDA’s proposal outweighed the potential anti-competitive effects. In arriving at this decision, they noted the increased efficiency and certainty in calculating the value of fallback rates, and that the increased predictability and certainty of rate calculations will substantially reduce the number of disputes arising from the calculation of fallback rates upon the discontinuation of LIBOR.
As discussed in our earlier blog post, the launch of ISDA’s IBOR Protocol and Supplement is still dependent on ISDA disclosing the DoJ’s letter to competition authorities in other jurisdictions (including the EU, Australia and Canada), and receiving positive feedback from their counsel in those jurisdictions. Following this, two weeks’ notice will be given of the official launch date (in which parties can adhere to the Protocol and Supplement ‘in escrow’). The effective date is expected to occur around three months’ after the launch date, and no earlier than late-January 2021.
