Overview and Key Issues from 2021

Despite the ongoing economic impact from the coronavirus pandemic, deal activity in 2021 continued to set new records with global mergers and acquisitions topping $5.5 trillion dollars—far exceeding prior peaks in 2007 and 2015.1 At the same time, 2021 ushered in new leadership—and an aggressive antitrust enforcement agenda—with Jonathan Kanter becoming Assistant Attorney General, Department of Justice Antitrust Division and Lina Khan becoming Chair of the Federal Trade Commission.

Consistent with its 2020 campaign statements, the Biden Administration has moved to aggressively enforce US antitrust laws. And, the new leadership brought a number of high-profile merger challenges, with three deals being challenged or abandoned in the face of a challenge in the last couple of months of 2021, including US Sugar/Imperial Sugar (DOJ challenge), Nvidia/Arm (FTC challenge), and Great Outdoors/Sportsman's Warehouse (abandoned due to FTC concerns).

Although the practical consequences of the Biden Administration's antitrust policy are not yet fully known, 2021 provides a number of insights for parties to contemplate as they consider transactions in 2022 and beyond.

  1. The Biden Administration's Executive Order and Antitrust Agenda. On July 9, 2021, President Joe Biden issued a wide-ranging Executive Order (EO) establishing a government-wide policy to bolster economic competition and laying out 72 specific initiatives seeking "to promote the interests of American workers, businesses, and consumers" across the economy.2 As discussed in Arnold & Porter's Advisory here, the EO singled out "Big Tech" and "dominant Internet platforms," and identified several areas warranting closer scrutiny: acquisitions of nascent competitors, aggregation of data, surveillance of users, and network effects. The EO also urged FTC to exercise its rulemaking authority to address unfair competition in major Internet marketplaces. In addition, the EO established a new White House Competition Council within the executive branch, which will coordinate competitionrelated initiatives across agencies.

  2. New Leadership. With the new presidential administration, 2021 also saw changes to the antitrust leadership. At FTC, former professor Lina Khan was appointed FTC Chair and former professor Alvaro Bedoya was nominated as an FTC Commissioner (to replace Commissioner Rohit Chopra).3 Subsequently, Chair Kahn named Holly Vedova (former advisor to Commissioner Rohit Chopra) as Director of the Bureau of Competition.4 At DOJ, antitrust lawyer Jonathan Kanter was confirmed to head the Antitrust Division,5 following the interim stewardship of Deputy AAG for Criminal Enforcement Richard Powers. At the White House, Tim Wu, former professor and former senior advisor to FTC, serves as the new Special Assistant for Technology & Competition Policy.

  3. FTC Omnibus Investigation. On July 1, 2021 and September 14, 2021, the Commission authorized FTC staff, for the next 10 years, to use compulsory process (such as civil investigative demands and subpoenas) to investigate a number of antitrust enforcement priorities, including, notably:
    • "repeat offenders";
    • technology companies and digital platforms;
    • healthcare businesses including pharmaceutical companies, pharmacy benefits managers, and hospitals;
    • harms against workers and small businesses;
    • proposed mergers;
    • consummated mergers; and
    • any simultaneous service as an officer or director of, or a contemporaneous financial stake in, two or more competing entities.

These priorities are no surprise as they have long been a focus of FTC enforcement. However, this Commission action is notable because it both marks a departure from prior FTC practice and expands the scope of conduct typically covered by FTC compulsory process resolutions. In the past, FTC staff typically conducted an initial investigation into identifiable conduct by a company or group of companies. If FTC staff determined that there was enough evidence or concern to launch an in-depth investigation, staff would typically recommend to the full Commission that it authorize the use of compulsory process pursuant to FTC's Rules of Practice. A majority of the Commission was then required to vote to approve the use of compulsory process and a majority of the Commission was required to vote to close any investigation in which compulsory process authority was granted to staff. As a result of FTC's July 1 action (discussed in Arnold & Porter's Advisory here), FTC staff now need approval from only one Commissioner before issuing a subpoena or civil investigative demand to a particular company as long as it concerns one of the broad enforcement areas. These authorizations remove full bi-partisan Commission oversight of the launch of in-depth investigations into particular companies or specific conduct. Since the Chair has more direct influence over FTC staff compared to other Commissioners through her appointment of senior staff (such as the Director of the Bureau of Competition and the Director of the Bureau of Economics), this decision gives the Chair even more control over individual investigations than she otherwise would have.

  1. Suspension of Early Termination and "Close at Own Risk" Letters. In February 2021, citing the change in administration and high volume of filings, FTC, with DOJ's support, announced a temporary suspension of granting early terminations of the HSR waiting period while FTC reviewed its procedures for granting early termination.6 This move generated criticism from the Republican Commissioners and from members of Congress. While FTC indicated that this "temporary" suspension of early terminations would be brief, it remains in place. FTC subsequently announced that for transactions where it had not been able to fully investigate during the HSR waiting period, FTC would issue letters warning the parties that FTC had an ongoing investigation and that the parties may close "at their own risk."7 We are aware of at least one instance in which DOJ has sent a similar letter. The expiration of the HSR waiting period has never conferred "approval" or any legal immunity, but these letters serve to underscore that antitrust scrutiny of transactions may continue even after the HSR waiting period has expired.

  2. Prior Notice & Approval. FTC reinstated a historical policy to include language in merger settlements that require prior notice and approval of further transactions in the relevant market, even if they would not otherwise be reportable under the HSR Act.8 Importantly, the prior approval requirement gives the parties no opportunity to litigate if they feel FTC inappropriately withholds approval, except perhaps to challenge the action as arbitrary and capricious under the Administrative Procedures Act. FTC, for instance, implemented this policy in its settlement resolving concerns associated with DaVita Inc.'s proposed acquisition of certain dialysis clinics owned by the University of Utah.9 Notably, while Commissioners Wilson and Phillips dissented from the general policy change,10 Commissioner Wilson concurred in the DaVita matter that the prior approval requirement was appropriate in that circumstance.11

  3. Asserting Greater Control Over Divestiture Buyers. As part of FTC's policy announcement discussed above regarding prior approvals, FTC stated it would require buyers of assets divested as part of a merger consent decree to become a party to the consent agreement for purposes of requiring buyers to seek prior approval of any future sale of those assets for a minimum number of years. For instance, in the Global Partners/Wheels transaction, the divestiture buyer was ordered not to re-sell the divested assets without prior approval of FTC for a period of three years, and an additional seven years if the proposed buyer already owns a fuel outlet within two miles.12

  4. Merger Analysis & Consumer Welfare Effects. Chair Khan has made no secret of her view that the "consumer welfare" standard that measures the effects of competition primarily by prices paid is inadequate to tackle what she sees as antitrust issues in the current economy. Rather than focus on consumer harms (such as higher prices), she has advocated that the Commission focus on a broader set of conduct that may harm individual competitors and its effects that may create an uneven playing field without an immediate impact on consumers.

    Accordingly, FTC will now examine conduct it views as "exploitative," "collusive," "coercive," and "predatory"—even if such conduct has not been traditionally viewed as unlawful under the antitrust laws.13 FTC also has made clear its intention to investigate transactions that "threaten to reduce competition and harm consumers, workers, and honest businesses."14 Although it remains to be seen whether courts will agree with FTC's new approach, the scope of FTC merger investigations seem to have broadened.15 Practitioners have reported FTC staff have requested information not historically evaluated as part of a merger investigation, such as unionization, Environmental, Social & Governance (ESG) policies, or franchising.16

  5. FTC 6(b) Order Related to Non-Reportable Technology Transactions. In February 2020, FTC issued a 6(b) order to Alphabet/Google, Amazon, Apple, Facebook, and Microsoft seeking information about non-HSR reportable transactions over the past decade. After receiving information on over 800 such transactions, on September 15, 2021, FTC staff presented a report that focused on over 600 non-HSR reportable acquisitions valued at over $1 million.17 Chair Khan named several "critical policy areas" based on her review of the study—(1) reform of HSR reportability thresholds, some of which require legislative intervention, (2) collaboration with other jurisdictions on international transactions, and (3) increasing scrutiny of non-competes for key individuals in acquired entities.18

  6. HSR Enforcement. FTC and DOJ continued to enforce the statutory filing requirements. At the request of FTC, DOJ brought a number of cases resulting in civil penalties against parties who failed to comply with HSR reporting requirements, including, for example, Biglari Holdings19 and Werner Enterprises.20

  7. Revising the Merger Guidelines. Chair Khan and Acting Assistant Attorney General Powers promised in July 2021 to "jointly launch a review of our merger guidelines with the goal of updating them to reflect a rigorous analytical approach consistent with applicable law."21 Subsequently, on September 15, 2021, FTC withdrew the Vertical Merger Guidelines and Commentary published in 2020.22 FTC noted that it intended to update the guidelines, in particular with a focus on "ineffective remedies" and "expan[sion] on the harms" associated with vertical transactions. The Democratic Commissioners also critiqued the guidelines for focusing on potential efficiencies and pro-competitive effects associated with vertical transactions. DOJ explained on the same day that the 2020 Vertical Merger Guidelines "remain in place at the Department of Justice" but that the Department is "conducting a careful review" of the both the Horizontal and Vertical Guidelines.23 In January 2022, FTC and DOJ announced an effort to modernize merger guidelines and strengthen merger enforcement, and solicited public comment on the same.24 The agencies intend to inquire whether, or how, merger guidelines should address a number of issues including incipiency, the distinction between horizontal and vertical mergers, presumptions of harm, market definition, nonprice competition, potential and nascent competition, monopsony power, labor market competition, and digital markets.25

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Footnotes

1. DealBook Newsletter: The Deals of the Year, New York Times (Dec. 18, 2021), https://www.nytimes.com/2021/12/18/business/dealbook/deals-of-the-year.html.

2. Executive Order on Promoting Competition in the American Economy, White House (July 9, 2021), https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/. 

3. Press Release, Fed. Trade Comm'n, Lina M. Khan Sword in as Chair of the FTC (Jun 15, 2021), https://www.ftc.gov/news-events/press-releases/2021/06/lina-m-khan-sworn-chair-ftc; Press Release, Fed. Trade Comm'n, Statement of FTC Chair Lina M. Khan on the Nomination of Alvaro Bedoya to Serve as a Commissioner (Sept. 13, 2021), https://www.ftc.gov/news-events/press-releases/2021/09/statement-ftc-chair-lina-m-khan-nomination-alvaro-bedoya-serve.

4. Press Release, Fed. Trade Comm'n, FTC Chair Lina M. Khan Appoints Directors of Bureau of Competition and Bureau of Consumer Protection (Sept. 28, 2021), https://www.ftc.gov/news-events/press-releases/2021/09/ftc-chair-lina-m-khan-appoints-bureau-directors.

5. "On the Nomination (Confirmation: Jonathan Kanter, of Maryland, to be an Assistant Attorney General): Roll Vote No. 470." 167 Cong. Rec. S8232–33 (daily ed. Nov. 16, 2021), https://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=117&session=1&vote=00470; see also Press Release, Fed. Trade Comm'n, Statement of FTC Chair Lina M. Khan on Senate Confirmation of Jonathan Kanter to Serve as Assistant Attorney General of the Department of Justice's Antitrust Division (Nov. 16, 2021), https://www.ftc.gov/news-events/press-releases/2021/11/statement-ftc-chair-lina-m-khan-senate-confirmation-jonathan.

6. FTC, DOJ Temporarily Suspend Discretionary Practice of Early Termination (Feb. 4, 2021), https://www.ftc.gov/news-events/press-releases/2021/02/ftc-doj-temporarily-suspend-discretionary-practice-early.

7. Holly Vedova, Adjusting merger review to deal with the surge in merger filings, FTC; Competition Matters Blog (Aug. 3, 2021; 12:28 PM) https://www.ftc.gov/news-events/blogs/competition-matters/2021/08/adjusting-merger-review-deal-surge-merger-filings; Fed. Trade Comm'n, Sample Pre-Consummation Warning Letter (Aug. 3, 2021), https://www.ftc.gov/system/files/attachments/blog_posts/Adjusting%20merger%20review%20to%20deal%20with%20the
%20surge%20in%20merger%20filings/sample_pre-consummation_warning_letter.pdf.

8. Press Release, Fed. Trade Comm'n, FTC Rescinds 1995 Policy Statement that Limited the Agency's Ability to Deter Problematic Mergers (July 21, 2021), https://www.ftc.gov/news-events/press-releases/2021/07/ftc-rescinds-1995-policy-statement-limited-agencys-ability-deter; Press Release, Fed. Trade Comm'n, Statement of the Commission on Use of Prior Approval Provisions in Merger Orders (Oct. 25, 2021), https://www.ftc.gov/system/files/documents/public_statements/1597894/p859900priorapprovalstatement.pdf; see also Dissenting Statement of Commissioners Christine S. Wilson and Noah Joshua Phillips Regarding the Commission's Withdrawal of the 1995 Policy Statement Concerning Prior Approval and Prior Notice Provisions in Merger Cases (July 21, 2021), https://www.ftc.gov/public-statements/2021/10/dissenting-statement-commissioners-christine-s-wilson-noah-joshua-phillips. 

9. Press Release, Fed. Trade Comm'n, FTC Imposes Strict Limits on DaVita, Inc.'s Future Mergers Following Proposed Acquisition of Utah Dialysis Clinics (Oct. 25, 2021), https://www.ftc.gov/news-events/press-releases/2021/10/ftc-imposes-strict-limits-davita-incs-future-mergers-following. 

10. Dissenting Statement of Commissioners Christine S. Wilson and Noah Joshua Phillips Regarding the Commission's Withdrawal of the 1995 Policy Statement Concerning Prior Approval and Prior Notice Provisions in Merger Cases (July 21, 2021), https://www.ftc.gov/public-statements/2021/10/dissenting-statement-commissioners-christine-s-wilson-noah-joshua-phillips.

11. Concurring Statement of Commissioner Christine S. Wilson In the Matter of DaVita Inc., and Total Renal Care, Inc., No. 211-0013 (Oct. 25, 2021), https://www.ftc.gov/system/files/documents/public_statements/1597906/concurring_statement_of_commissioner
_christine_s_wilson_in_the_matter_of_davita_inc_and_total_renal.pdf.

12. Decision and Order, In the Matter of Global Partners LP and Richard Wiehl, No. 211-0050 (FTC), https://www.ftc.gov/system/files/documents/cases/final_global_wiehl_order.pdf.

13. Dissenting Statement of Commissioner Christine S. Wilson Open Commission Meeting on July 1, 2021, https://www.ftc.gov/system/files/documents/public_statements/1591554/p210100wilsoncommnmeetingdissent.pdf.

14. Fed. Trade Comm'n, Sample Pre-Consummation Warning Letter (Aug. 3, 2021), https://www.ftc.gov/system/files/attachments/blog_posts/Adjusting%20merger%20review%20to%20deal%20with%20the%20
surge%20in%20merger%20filings/sample_pre-consummation_warning_letter.pdf.

15. Debbie Feinstein, C. Scott Lent, Matthew Tabas, and Samantha Shulman, Advisory: FTC Open Meeting Announces Expansion of FTC's Antitrust Enforcement Focus, Arnold & Porter (July 8, 2021), https://www.arnoldporter.com/en/perspectives/publications/2021/07/ftc-open-meeting-announces-expansion; Transcript from Open Commission Meeting (September 15, 2021), https://www.ftc.gov/system/files/documents/public_events/1596052/transcript_open_commission_meeting_9-15-21.pdf. 

16. Fed. Trade Comm'n, Transcript from Open Commission Meeting, 26 (September 15, 2021), https://www.ftc.gov/system/files/documents/public_events/1596052/transcript_open_commission_meeting_9-15-21.pdf.

17. Press Release, Fed. Trade Comm'n, FTC Staff Presents Report on Nearly a Decade of Unreported Acquisitions by the Biggest Technology Companies (Sep. 15, 2021) https://www.ftc.gov/news-events/press-releases/2021/09/ftc-report-on-unreported-acquisitions-by-biggest-tech-companies?utm_source=govdelivery; Fed. Trade Comm'n, Non-HSR Reported Acquisitions by Select Technology Platforms, 2010–2019: An FTC Study 10, 13 & n.48 (September 2021), https://www.ftc.gov/system/files/documents/reports/non-hsr-reported-acquisitions-select-technology-platforms-2010-2019-ftc-study/p201201technologyplatformstudy2021.pdf. 

18. Remarks of Chair Lina M. Khan, Regarding Non-HSR Reported Acquisitions by Select Technology Platforms (September 15, 2021), https://www.ftc.gov/system/files/documents/public_statements/1596332/remarks_of_chair_lina_m_khan_regarding_non-hsr_reported_acquisitions_by_select_technology_platforms.pdf.

19. Press Release, Dep't of Justice, Biglari Holdings Inc. to Pay Civil Penalty for Repeat Violation of Antitrust PreTransaction Notification Requirements (Dec. 22, 2021), https://www.justice.gov/opa/pr/biglari-holdings-inc-pay-civil-penalty-repeat-violation-antitrust-pre-transaction.

20. Press Release, Dep't of Justice, Founder of Werner Enterprises to Pay Civil Penalty for Violating Antitrust PreTransaction Notification Requirements (Dec. 22, 2021), https://www.justice.gov/opa/pr/founder-werner-enterprises-pay-civil-penalty-violating-antitrust-pre-transaction-notification .

21. Press Release, Dep't of Justice, Statement of Acting Assistant Attorney General Richard A. Powers of the Antitrust Division and FTC Chair Lina Khan on Competition Executive Order's Call to Consider Revisions to Merger Guidelines (July 9, 2021), https://www.justice.gov/opa/pr/statement-acting-assistant-attorney-general-richard-powers-antitrust-division-and-ftc-chair.

22. Press Release, Fed. Trade Comm'n, Federal Trade Commission Withdraws Vertical Merger Guidelines and Commentary (Sept. 15, 2021), https://www.ftc.gov/news-events/press-releases/2021/09/federal-trade-commission-withdraws-vertical-merger-guidelines.

23. Press Release, Dep't of Justice, Justice Department Issues Statement on the Vertical Merger Guidelines (Sep. 15, 2021), https://www.justice.gov/opa/pr/justice-department-issues-statement-vertical-merger-guidelines.

24. Press Release, Fed. Trade Comm'n, Federal Trade Commission and Justice Department Seek to Strengthen Enforcement Against Illegal Mergers (Jan. 18, 2022), https://www.ftc.gov/news-events/press-releases/2022/01/ftc-and-justice-department-seek-to-strengthen-enforcement-against-illegal-mergers?utm_source=govdelivery; Press Release, Dep't of Justice, Justice Department and Federal Trade Commission Seek to Strengthen Enforcement Against Illegal Mergers (Jan. 18, 2022), https://www.justice.gov/opa/pr/justice-department-and-federal-trade-commission-seek-strengthen-enforcement-against-illegal.

25. Press Release, Fed. Trade Comm'n, Federal Trade Commission and Justice Department Seek to Strengthen Enforcement Against Illegal Mergers (Jan. 18, 2022), https://www.ftc.gov/news-events/press-releases/2022/01/ftc-and-justice-department-seek-to-strengthen-enforcement-against-illegal-mergers?utm_source=govdelivery; Press Release, Dep't of Justice, Justice Department and Federal Trade Commission Seek to Strengthen Enforcement Against Illegal Mergers (Jan. 18, 2022), https://www.justice.gov/opa/pr/justice-department-and-federal-trade-commission-seek-strengthen-enforcement-against-illegal.

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