We recently gathered a group of regulatory attorneys from across Reed Smith to provide a rundown of the key trends to watch for in Q3 2024 – if you missed the webinar, you can access the recording on demand.
Please see a short summary of our top takeaways below and look out for an invite to the next installment of this quarterly series – we hope you can join us!
FCA enforcement hot topics and emerging trends
- DOJ and relators' counsel are focused on cybersecurity compliance by government contractors and grant recipients, as well as potential FCA liability. Obligations include safeguarding protected information, accurately representing cybersecurity practices and protocols, and maintaining ongoing monitoring and reporting of incidents. Best practices start with a thorough assessment of statutory, regulatory, and contractual obligations.
- DOJ has emphasized its commitment to holding private equity firms accountable, including encouraging disclosure of misconduct discovered during M&A due diligence.
- Buyers and sellers should be aware of the risk of waiving privilege over diligence memos by sharing them during the pre-acquisition phase.
EEOC enforcement guidance on harassment in the workplace
- Employers should roll out training focused on the areas highlighted in the new EEOC guidance.
- Among other takeaways from the EEOC guidance, communications on private phones, computers, and social media may constitute harassment if they impact the workplace.
- Once on notice of potential harassment, employers should initiate a "prompt and adequate" investigation, mindful of potential conflicts and the possibility that credibility determinations will have to be made.
DOJ Antitrust Division's enforcement priorities and developments
- We are in a new era of aggressive antitrust enforcement by both the DOJ and FTC, with both agencies working to bolster enforcement by expanding the scope of conduct and transactions that they consider to be illegal, and by abandoning enforcement policies and doctrines that have guided them for decades.
- These changes have had their broadest and most significant impact on merger enforcement, but we have also seen sweeping changes in the agencies' focus on labor markets, private equity, AI and pricing algorithms, health care, tech, and others, and in a reinvigoration of dormant enforcement tools, such as the Robinson-Patman Act (price discrimination) and criminal enforcement of section 2 of the Sherman Act (monopolization).
- The results of the presidential election could usher in yet another significant swing in antitrust enforcement. If so, those changes might be most felt in merger enforcement and in the agencies' vigorous efforts to apply antitrust laws to the potential impacts of mergers and conduct on labor markets. One area in which we may see continued vigorous enforcement, regardless of which party captures the White House, is the agencies' actions against the major tech companies.
Developments in national security enforcement
- The diversion of items and technology subject to U.S. export controls without authorization to sanctioned destinations constitutes a violation of law and is an enforcement priority for the U.S. government. Parties engaged in international trade must conduct appropriate due diligence to confirm their products are not being diverted. "Know your customer" procedures, including requiring end-use certificates and enhanced screening, as well as public domain information research, are recommended steps to minimize the risk of non-compliance.
- Companies under CFIUS mitigation agreements (CMAs) must take steps to verify their compliance with the CMAs' conditions to minimize the risk of potential CFIUS enforcement action and penalties. Periodic internal assessments should be conducted as part of the CMA implementation plan. Further, all companies engaged in merger and acquisition activity must ensure that CFIUS review is included in the transaction due diligence and that required disclosures are made on a timely basis.
- Export compliance programs must include commodity jurisdiction and classification (J/C) procedures that address how to determine the J/C of both company and third-party products and technology. J/C determinations should be documented, and records maintained for future reference. When classifying parts, components, and accessories subject to the "specially designed" test, the rationale used to conclude that an item is released from ITAR controls should be clearly documented. Contemporaneous records will be key to defeat any potential allegation of willful conduct in the event of a violation.
Highlights of DOJ's environmental enforcement strategy
- Companies should plan for an expeditious timeline for ongoing negotiations involving environmental justice (EJ) concerns.
- Companies should increase investigative efforts if operating in EJ communities.
- Companies should be prepared to engage with their communities on EJ issues, respond to inquiries from DOJ/EPA related to these issues, and track actions that may involve their state and local permitting agencies.
Loper Bright and FTC's non-compete rule
- The Supreme Court's June 2023 decision in Loper Bright puts an end to nearly 40 years of Chevron deference. Under Loper Bright, courts may not defer to agency interpretation of the statute, or the rules and regulations promulgated to give it effect, simply because a statute could be considered ambiguous.
- In recent years, the FTC has relied on its interpretation of the FTC Act to expand its authority into the competition space. But Loper Bright seriously calls into question whether the FTC has any competition rulemaking authority, since the FTC's own statutory interpretations won't receive judicial deference anymore. We've recently seen this tension play out in legal battles regarding the FTC's final rule banning non-competes.
- The FTC's final rule that banned and rendered unenforceable virtually all preexisting and future U.S. non-compete agreements has been permanently blocked by a U.S. district judge in the Northern District of Texas. The court found that the FTC lacked statutory authority under the APA to promulgate the non-compete rule and that the rule was arbitrary and capricious. As of now, the FTC has not formally lodged an appeal, though it has stated that it intends to continue addressing non-competes through case-by-case enforcement actions.
This article is presented for informational purposes only and is not intended to constitute legal advice.
