Key Developments in the United States

Key developments in the United States

In the United States, the Department of Justice (DOJ) and Federal Trade Commission (FTC) have been active in enforcing antitrust laws on technology companies and digital services.[2] In particular, the agencies have largely responded to a rapidly rising new strain of antitrust thought known as ‘antitrust populism’. At the heart of this perspective is the view that traditional antitrust laws are inadequate to address modern challenges, in particular the high level of concentration in many digital markets.[3]

This new approach to antitrust enforcement has driven a strategic vision that aims to bring and win big cases against major technology companies. The agencies are and want to continue challenging the biggest names among technology platforms, social media and digital advertising. As FTC Commissioner Slaughter explained, ‘It’s incumbent on [the agencies] to bring hard cases [against tech companies].’[4] In response to this vision, on 15 September 2021, the FTC published its report on past acquisitions of large technology companies that were non-HSR reportable.[5] FTC Chair Lina Khan remarked that the report ‘captures the extent to which these firms have devoted tremendous resources to acquiring start-ups, patent portfolios, and entire teams of technologists’ and ‘underscores the need for [the FTC] to closely examine . . . loopholes that are unjustifiably enabling deals to fly under the radar.’[6] On 22 September 2021, in a memorandum to FTC staff, Chair Khan emphasised the need for the FTC to be ‘forward-looking’ and to anticipate problems in ‘next generation technologies, innovations, and nascent industries across sectors.’[7] The report and Chair Khan’s Memorandum to FTC staff signal the FTC’s forthcoming focus and suggests that the FTC will continue to find creative ways to seek enforcement actions against technology companies.

Despite this renewed focus and attention on digital enforcement, serious questions remain about the capacity for the agencies to fulfil their vision. A key issue is the lack of resources for the agencies to bring and win large and complex cases.[8] In response to this concern, a group of Senators has introduced the Merger Filing Fee Modernization Act of 2021. Some of the bill’s provisions propose an increase in the fees charged to merging parties with the proceeds going to fund more aggressive enforcement, especially in the digital space.[9] While this bill has support from Democrats and Republicans, as of September 2021, it remains in committee and has not been passed. As such, the FTC and DOJ remain critically understaffed and under-resourced. As but one example of this situation, the FTC has recently issued warning letters to parties that have seen their statutory 30-day waiting period under the Hart-Scott-Rodino Act expire. These letters warn parties that FTC may still be investigating the merger after the waiting period ends and that parties close at their peril.[10]

In sum, while the agencies have adopted a more aggressive vision for antitrust enforcement, especially in the digital realm, it remains to be seen whether the agencies have the resources to achieve their policy vision.

Policy, legislative and advocacy developments and initiatives

The Biden Administration has ushered increased attention to competition policy, with efforts to strengthen and coordinate antitrust enforcement across the federal government. The Administration’s efforts also mirror increased legislative developments in the US Congress.

On 9 July 2021, the White House issued an ‘Executive Order on Promoting Competition in the American Economy’.[11] The Order directs a number of government agencies – beyond the DOJ and the FTC – to adopt rules and regulations to accomplish the competition-enhancing goals set forth in the Order.[12] The Order aims to address the Administration’s concerns about purported increased consolidation and abuse of market power.[13] Among other initiatives, the Order encourages the DOJ and the FTC to challenge consummated mergers – including technology and digital platform mergers – that prior administrations did not challenge. It also encourages agencies to focus enforcement on lack of competition in labour markets, agricultural markets, healthcare markets and tech.[14] The Order establishes the White House Competition Council, tasked with implementing the Order across the federal government and with coordinating the White House’s response to anticompetitive behaviour.[15] While the Order is ambitious, practitioners are starting to see its impact namely at the FTC. It will be important to monitor how implementation evolves across other federal agencies and whether other agencies follow suit to implement the actions directed in the Order.

Both houses of Congress have proposed a raft of potential new bills to address competition in the digital arena. Most notably, the desire for reform has come from both Republicans and Democrats, despite the fractious nature of the US Congress. US Senator Klobuchar and US Senator Hawley have each introduced legislation that aims to amend the antitrust laws to address digital competition. For example, Senator Hawley’s bill proposes, among other provisions, that acquisitions by ‘dominant digital firms’ (i.e., those with a ‘dominant market power’) be made presumptively illegal – short-circuiting the established presumption under the antitrust laws.[16] Senator Klobuchar likewise targets the digital arena with her bill, in particular by proposing to remove the requirement that the FTC or DOJ need define a relevant market.[17] This is particularly relevant to digital platforms, as it could make it easier for the agencies to bring and win lawsuits.[18]

In addition to the raft of proposed legislative changes, the FTC in particular has adopted a series of changes in its policies aimed at making it easier for the FTC to bring cases against digital companies. One example is the recent rescinding of the 1995 FTC policy statement that removed the requirement for prior approval as a matter of course.[19] This policy meant that the FTC would only issue prior approval notice for cause. Now, however, the FTC is aiming to use this tool to target more conduct, especially in digital markets, as the rescinding of this policy could require a lengthy prior approval process even for transactions that would not be HSR-reportable.

On 15 September 2021, the FTC voted 3-2 to withdraw the 2020 Vertical Merger Guidelines issued jointly by the FTC and the DOJ in 2020.[20] On the same day, the DOJ issued a statement that the Vertical Merger Guidelines will ‘remain in place’ at the DOJ, but that it is ‘conducting a careful review . . . to ensure they are appropriately skeptical of harmful mergers’.[21] The FTC Commissioners who voted in favour of withdrawal – Chair Khan, Commissioner, Chopra, and Commissioner Slaughter – criticised the Guidelines’ focus on pro-competitive effects and efficiencies as a defence to vertical mergers, and in particular criticised their favouring of the elimination of double marginalisation in analysing vertical mergers.[22] The White House’s 9 July 2021 Order on competition encouraged review of the horizontal and vertical merger guidelines, and the FTC’s announcement is likely a response to the Order.

Trends in decisional practice, including key investigations against tech companies

As part of the agencies’ broader push to increase their enforcement in the digital arena, the DOJ and the FTC have developed a much more sceptical and aggressive approach to digital enforcement. This trend is exemplified in three key lawsuits. The first is United States v. Google, which was brought by the DOJ against Google on 20 October 2020. The DOJ alleges that Google has engaged in anticompetitive behaviour in search and search advertising.[23] In particular, the DOJ has focused on the use of self-preferencing in advertising on Google’s search results, as well as an alleged web of exclusivity agreements that tied users’ mobile searches to Google.[24] As at September 2021, the lawsuit is ongoing.

The FTC also has sued Facebook alleging that Facebook holds monopoly power in an alleged market for ‘personal social networking services’.[25] On 19 August 2021, a US district court dismissed the FTC’s complaint as vague and lacking facts sufficient to support its allegations. On 8 September 2021, the FTC filed an amended complaint alleging the same product market.[26] It is unclear how the district court will assess the FTC’s amended complaint and, in particular, whether the court again will find that the allegations are insufficient to support the FTC’s proposed relevant product market, which excludes a number of social networking services, such as LinkedIn and Strava.

The FTC has also challenged mergers in the technology space, most notably the Illumina/Grail merger. In March 2021, the FTC sued to block the acquisition of Grail by Illumina alleging that this transaction would reduce competition for certain key cancer therapies.[27] The parties maintained that this transaction would actually bring more innovation to the cancer market, and would increase patient access to advance cancer therapies and tests.[28] The parties decided not to wait for clearance from the FTC before closing, and closed the deal on 18 August 2021.[29]

Merger cases with a digital aspect and trends emerging from those

Between 2019 and 2021, the FTC and DOJ have issued Second Requests and challenged several mergers and acquisitions involving digital services and technology companies. In addition to the cases referenced above, the following select cases show key trends in these emerging sectors.

Sabre/Farelogix (2019–2020)

On 20 August 2019, DOJ challenged in US district court Sabre’s US$360 million proposed acquisition of Farelogix, alleging that Sabre, a dominant provider of airline booking services, was attempting to eliminate a ‘disruptive’ competitor.[30] The US district court disagreed, reasoning that DOJ failed to define adequately a relevant market and that, therefore, Sabre did not compete with Farelogix because Sabre is a two-sided platform that interacts with airlines and travel agencies, whereas Farelogix interacts with airlines and is not a two-sided platform.[31] After the UK CMA challenged the transaction, the parties agreed to terminate their merger agreement in April 2020. The US district court’s decision shows that after Ohio v. American Express, US antitrust regulators will face difficulties in challenging mergers of digital platforms where the proposed relevant product market does not include both the buy side and sell sides of the platform.

Intuit/Credit Karma (2020)

On 25 November 2020, DOJ challenged the proposed US$7.1 billion merger of Intuit and Credit Karma. Credit Karma operates a personal finance platform that offers free services such as credit monitoring, financial management, and digital do-it-yourself (DDIY) tax preparation services. Intuit offers tax preparation, accounting, payroll and finance solutions to individuals and small businesses. The complaint alleged that Intuit and Credit Karma are direct competitors in the relevant product market of the development, provision, operation, and support of DDIY tax preparation products. Under the terms of settlement, filed simultaneously with the complaint on 25 November 2020, the parties agreed to divest Credit Karma’s tax business to Square, Inc. for US$50 million. With the divestiture, the transaction between Intuit and Credit Karma closed on 3 December 2020. The DOJ’s challenge and subsequent settlement with the parties highlights how US antitrust enforcers will allow divestitures to other, growing, digital platforms, such as Square, to support some of their nascent product offerings, such as CashApp, which was starting to develop a tax preparation offering.

CoStar Group Inc./RentPath Holdings (2020)

On 30 November 2020, the FTC filed a suit to block CoStar Group’s (CoStar) US$587.5 million acquisition of RentPath Holdings (RentPath). CoStar operates listing sites such as Apartments.com and Apartmentfinder.com, whereas RentPath operates listing sites such as Rent.com and Apartment Guide. The FTC alleged that the acquisition would significantly increase concentration in the already highly concentrated markets for internet listing services advertising for large apartment complexes, which the FTC defined as the relevant product market.[32] The FTC argued that CoStar and RentPath were head-to-head competitors and that the five-to-four merger would bring together the top two internet listing services for large apartment complexes. [33] A month after the FTC filed its complaint, on 29 December 2020, CoStar and RentPath terminated their merger agreement. The FTC’s suit in this transaction could suggest two trends: (1) US antitrust agencies may turn their attention to acquisitions of ‘proptech companies’ (digital companies emerging in the property industry) and (2) the agencies will not be not shy in reviewing technology mergers valued at less than US$1 billion.

Google/Fitbit (2020/2021)

In 2020, the European Commission and the DOJ investigated Google’s US$2.1 billion proposed acquisition of Fitbit. Though the EC cleared the transaction in December 2020, the DOJ continued to scrutinise the proposed merger. On 14 January 2021, Google announced that it closed the transaction after the investigation period had ended. There is limited information about the DOJ’s investigation into the Google/Fitbit transaction, but it is possible that the merger investigation is tied to the DOJ’s lawsuit against Google alleging anticompetitive conduct. That the DOJ has not made any announcements about this transaction could also portend that DOJ may have had difficulty defining a relevant product market or articulating theories of harm in a non-horizontal merger. The ongoing scrutiny could also raise the possibility that the DOJ could sue to unwind the consummated merger at a later date.[34]

Visa/Plaid (2020)

On 5 November 2020, DOJ challenged Visa’s proposed US$5.3 billion acquisition of Plaid, alleging that Visa is a monopolist in online debit transactions, and that the acquisition represented Visa’s attempt to acquire a nascent, innovative competitor.[35] In its complaint, DOJ described the two-sided nature of online debit platforms – that they facilitate online transaction between merchants on one side and consumers on the other. Though DOJ recognised that Plaid was not a direct competitor, it argued that the relevant market for online debit transactions included both online debit services (such as those that Visa traditionally offers) and pay-by-bank debit services, such as those Plaid offers. On 12 January 2021, the parties terminated the agreement. The DOJ’s challenge showed increased focus on acquisitions of nascent competitors, a trend that will likely continue throughout the Biden Administration.

Salesforce/Slack (2021)

On 16 February 2021, the DOJ issued Second Requests to Salesforce and Slack in connection with their US$27.7 billion merger. The merger would make the Slack collaboration tool the interface for Salesforce Customer 360 to compete with Microsoft’s similar product. After a five-month investigation, DOJ announced that it completed its review and that it would not challenge the acquisition. The DOJ likely had concerns about Salesforce competitors’ future ability to use Slack’s messaging service or Salesforce illegally obtaining competitor information through Slack. It may have also had concerns that Salesforce could cross-sell Slack by requiring that any user of its software also use Slack’s messaging service, which could have stymied entry for new workplace messaging competitors. The parties closed the transaction on 21 July 2021. DOJ’s challenge to this transaction could further suggest that the agencies will be interested in non-horizontal mergers in the tech space, and that it could use Second Requests to better understand the nature of competition in these sectors.

The DOJ and the FTC have focused increasingly on acquisitions of nascent competitors. As seen in the government’s complaints in Visa/Plaid, Intuit/Credit Karma and Sabre/Farelogix, the agencies have raised these concerns in digital industries because, they argue, these markets are more likely to gain increased market share by being a favoured platform through enhanced network effects and economies of scale.[36] In addition, the DOJ and the FTC have identified creative ways to challenge mergers, such as in Visa/Plaid, by bringing allegations under Section 2 of the Sherman Act, which prohibits the wilful acquisition or maintenance of monopoly power monopolisation or attempted monopolisation.[37] Practitioners will be monitoring how US federal courts will react to this use of Section 2 in mergers.


Notes

1 George L Paul is a partner, D Daniel Sokol is a senior adviser and Gabriela Baca is an associate at White & Case LLP. Any views expressed in this publication are strictly those of the authors and should not be attributed in any way to White & Case LLP. The authors gratefully acknowledge the contributions of Michael Kucharski and Alexander Andresian.

2 Rebecca Farrington, Anna Kertesz, and Heather Greenfield, White & Case LLP, Key Developments – United States, 21 May 2021, available at https://www.whitecase.com/publications/insight/global-merger-control/united-states.

3 Joshua D Wright & Aurelien Portuese, Antitrust Populism: Towards a Taxonomy, 21 Stanford J. of Law and Business 1 (2020).

4 Nylen, Lean, ‘“I Wish” FTC had sued Google in 2013, Biden’s acting chair says’, Politico, 13 March 2021.

6 Remarks of Chair Lina M. Khan Regarding Non-HSR Reported Acquisitions by Select Technology Platforms Commission File No. P201201, 15 September 2021, at 1, available at 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.

7 Vision and Priorities for the FTC, Memorandum to FTC Staff, Chair Lina M Khan, 22 September 2021, available at https://www.ftc.gov/system/files/documents/public_statements/1596664/agency_priorities_memo_from_chair_lina_m_khan_9-22-21.pdf.

8 See, e.g., Chairman Nadler Statement for Markup of H:R. 3843, the Merger Filing Fee Modernization Act of 2021, 23 June 2021.

9 S.228 § 2(D).

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

12 See, e.g., White & Case LLP, Sweeping US Order on Promoting Competition, 12 July 2021, available at https://www.whitecase.com/publications/insight/sweeping-us-order-promoting-competition.

13 White House, Fact Sheet: Executive Order on Promoting Competition in the American Economy, 9 July 2021, available at https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/.

14 White House, Fact Sheet: Executive Order on Promoting Competition in the American Economy, 9 July 2021, available at https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/.

15 White House, Fact Sheet: Executive Order on Promoting Competition in the American Economy, 9 July 2021, available at https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/.

16 S. 1074 § 4.

17 S. 225 §9(a).

18 Kristen O’Shaughnessy, Jaclyn Philips, Michael Kucharski, Senator Josh Hawley Joins a Growing Number in Congress Proposing Sweeping Antitrust Reform Legislation, 19 April 2021, available at https://www.whitecase.com/publications/alert/senator-josh-hawley-joins-growing-number-congress-proposing-sweeping-antitrust.

19 FTC Rescinds 1995 Policy Statement that Limited the Agency’s Ability to Deter Problematic Mergers, FTC, 21 July 2021, available at https://www.ftc.gov/news-events/press-releases/2021/07/ftc-rescinds-1995-policy-statement-limited-agencys-ability-deter.

20 See Federal Trade Commission Withdraws Vertical Merger Guidelines and Commentary, 15 September 2021, available at https://www.ftc.gov/news-events/press-releases/2021/09/federal-trade-commission-withdraws-vertical-merger-guidelines; Statement of Chair Lina M. Khan, Commissioner Rohit Chopra, and Commissioner Rebecca Kelly Slaughter on the Withdrawal of the Vertical Merger Guidelines, Commission File No. P810034, 15 September 2021 available at https://www.ftc.gov/system/files/documents/public_statements/1596396/statement_of_chair_lina_m_khan_commissioner_rohit_chopra_and_commissioner_rebecca_kelly_slaughter_on.pdf.

21 Justice Department Issues Statement on the Vertical Merger Guidelines, 15 September 2021, available at https://www.justice.gov/opa/pr/justice-department-issues-statement-vertical-merger-guidelines.

22 See Statement of Chair Lina M. Khan, Commissioner Rohit Chopra, and Commissioner Rebecca Kelly Slaughter on the Withdrawal of the Vertical Merger Guidelines, Commission File No. P810034, 15 September 2021 available at https://www.ftc.gov/system/files/documents/public_statements/1596396/statement_of_chair_lina_m_khan_commissioner_rohit_chopra_and_commissioner_rebecca_kelly_slaughter_on.pdf.

23 United States v. Google, No. 1:20-cv-03010, Complaint, (D.D.C. 20 October 2020), available at https://www.justice.gov/opa/press-release/file/1328941/download.

24 United States v. Google, No. 1:20-cv-03010, Complaint, (D.D.C. 20 October 2020), available at https://www.justice.gov/opa/press-release/file/1328941/download.

25 Complaint, Federal Trade Commission v. Facebook, Inc., 1:20-cv-93590 (13 January 2021) at 1, 51-52.

26 Substitute Amended Complaint, Federal Trade Commission v. Facebook, Inc., 1:20-cv-93590 (8 September 2021).

27 In the Matter of Illumina, Inc. and Grail, Inc., Docket No. 9401, FTC, 30 March 2021.

28 See ‘Illumina Acquires GRAIL to Accelerate Patient Access to Life-Saving Multi-Cancer Early-Detection Tests’, Illumina, 18 August 2021.

29 See ‘Illumina Acquires GRAIL to Accelerate Patient Access to Life-Saving Multi-Cancer Early-Detection Tests’, Illumina, 18 August 2021.

30 Complaint, United States v. Sabre Corporation, et al., 1:19-cv-01548 (Aug. 20, 2019) at 1.

31 United States v. Sabre Corp., 452 F. Supp. 3d 97, 136-137 (D. Del. 2020) (relying on Ohio v. American Express Co., 138 S. Ct. 2274, 2285-87 (2018) (‘Only other two-sided platforms can compete with a two-sided platform for transactions.’)).

32 See Complaint, In the Matter of CoStar Group, Inc. and RentPath Holdings, Inc., No. 201-0061, available at https://www.ftc.gov/system/files/documents/cases/d09398complaintpublic.pdf.

33 See Complaint, In the Matter of CoStar Group, Inc. and RentPath Holdings, Inc., No. 201-0061, available at https://www.ftc.gov/system/files/documents/cases/d09398complaintpublic.pdf.

34 ‘Google Closes Fitbit Deal Amid Ongoing U.S. DOJ Review,’ 14 January 2021, available at https://www.bloomberglaw.com/bloomberglawnews/antitrust/X7LIL7GG000000?bna_news_filter=antitrust#jcite.

35 See Complaint, United States v. Visa Inc. and Plaid Inc., 3:20-cv-07810, available at https://www.justice.gov/opa/press-release/file/1334726/download.

36 Rebecca Farrington, Anna Kertesz, and Heather Greenfield, White & Case LLP, Key Developments – United States, 21 May 2021, available at https://www.whitecase.com/publications/insight/global-merger-control/united-states.

37 United States v. Grinnell Corp., 384 U.S. 563, 570­71 (1966).

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