Antitrust developments stemming from federal agency actions, state actions and private litigation have continued on several fronts in the United States, including:
- the Department of Justice (DOJ) and Federal Trade Commission (FTC) actively investigating the technology sector, including Big Tech;
- the DOJ being active in intervening in other litigations, including in the FTC litigation against Qualcomm;
- an increased focus on labour issues;
- the DOJ has brought a merger challenge that may be resolved via binding arbitration; and
- a coalition of states suing to block the merger of Sprint and T-Mobile, even though the parties have settled with the DOJ and the sector regulator (the Federal Communications Commission (FCC)).
Big Tech investigations
Broad concerns have been expressed regarding increasing concentration, margins and lack of entry across a range of technology-related industries, and whether antitrust enforcement to date has played a sufficient role in these industries. Particular criticism has focused on Big Tech. At least partly in response to these expressed concerns, the FTC and DOJ have become markedly more proactive in this sector.
The DOJ announced in July 2019 that it was conducting a review of ‘whether and how market-leading online platforms have achieved market power’ and whether they have ‘reduced competition, stifled innovation, or otherwise harmed consumers’. The FTC announced in February 2019 the establishment of a task force ‘dedicated to monitoring competition in US technology markets’, including investigating potential anticompetitive behaviour and taking enforcement action. The agencies reportedly have divided up responsibilities for the four firms receiving the most scrutiny, with the DOJ taking Google and Apple, and the FTC taking Facebook and Amazon. Furthermore, states’ Attorneys General are conducting their own investigations into the competitive implications of Big Tech business practices.
The FTC recently completed a slate of 14 Hearings on Competition and Consumer Protection in the 21st Century, including several topics related to technology markets and online platforms, such as ‘Privacy, Big Data, and Competition’, ‘Algorithms, Artificial Intelligence, and Predictive Analytics’ and ‘Data Security’. The impact of these hearings will depend to a large extent on how the information accumulated is evaluated and internalised at the FTC. In its investigations, the FTC can consider the use of FTC Act Section 5’s prohibition of unfair methods of competition, which provides a more flexible legal framework for addressing potential concerns than the Sherman Act’s proscriptions against monopolisation and attempted monopolisation. Also, the FTC potentially could seek the unwinding of previous mergers, such as Facebook’s acquisitions of Instagram and WhatsApp.
Relatedly, the FTC levied a US$5 billion fine against Facebook in July 2019 for violating consumer privacy – in particular, for violating a prior FTC order from 2012 by ‘deceiving users about their ability to control the privacy of their personal information’.
Department of Justice amicus programme
The DOJ has placed renewed emphasis on its amicus programme, which involves exercising its discretion to make filings in antitrust cases in which the DOJ is not a party. The DOJ’s intervention in such cases has expanded substantially in the past two years and it is now common for private litigants to make submissions to the DOJ regarding such litigation. The programme is designed to promote the proper application and development of antitrust law, and it may temper litigant claims for fear of seeing an opposition brief filed by the United States.
The DOJ and FTC have concurrent authority in many areas and it is very unusual for one to oppose the other. An unusual example where this did happen is in the FTC’s litigation against Qualcomm. The FTC brought a case against Qualcomm in January 2017. Qualcomm is a seller of baseband chips used to connect cellular phones to networks and a leading developer of wireless communications technology. The FTC challenged Qualcomm’s practice of selling modem chips for cellular phones or tablets only to buyers that also have a licence to Qualcomm’s portfolio of standard-essential patents, a practice the FTC alleged to be a means of maintaining Qualcomm’s monopoly over baseband processors.
The FTC’s case has been controversial. One of the three FTC commissioners at the time the case was authorised issued a dissent to the filing of the lawsuit claiming, among other things, it would undermine intellectual property rights and harm innovation. The DOJ had sought to intervene with regard to remedies, but its request was denied. The FTC won at trial, the court imposed remedies and Qualcomm has appealed.
The DOJ has intervened to support Qualcomm’s appeal, seeking a stay of some of the remedies imposed. The DOJ also told the Appellate Court that Qualcomm’s appeal ‘has a likelihood of success’ with regard to liability, criticising the analysis of the Trial Court with regard to both liability and remedies. Its filing included affidavits from senior officials at the Departments of Defense and Energy attesting to harm to innovation and to these Departments arising from the Trial Court’s remedies. In staying the remedies during the appeal process, the Appellate Court cited to the opposing views of the DOJ and FTC as a reason for its decision – demonstrating the impact a DOJ intervention can have.
The focus on labour-related issues has grown in recent years. The DOJ, FTC and states have investigated and settled ‘no-poach’ cases whereby entities agree not to solicit each other’s employees and there has been private no-poach litigation as well. Cases have involved a wide variety of occupations, including doctors working in academic medical centres, railway workers, fast food restaurant staff and movie studio animators, directors, software engineers and visual effects artists. The DOJ recently submitted amicus briefs indicating its view that no-poach agreements among horizontal competitors are per se illegal unless they are ancillary to a separate legitimate transaction or collaboration.
Another recent DOJ amicus filing in a different litigation explained that the per se rule would not apply in the case of a franchise agreement. A requirement that prevents one franchise location from poaching the employees of another location of the same franchise could be ancillary to the establishment of the franchise’s business and enable the overall organisation to compete with other organisations. In this example, the DOJ stated that a no-poach agreement should be considered under a rule of reason analysis. In addition, non-compete agreements are undergoing closer scrutiny at the state level, as several states have imposed restrictions on the enforcement of such agreements.
DOJ Merger Challenge Arbitration
In early September 2019, the DOJ challenged the proposed acquisition of Aleris by Novelis. In its complaint filed in US District Court, the DOJ alleged this transaction would harm competition in the North American market for aluminium autobody sheet, which is rolled aluminium sheet used in automotive applications. In conjunction with its complaint, the DOJ issued a press release stating that the parties had agreed to use binding arbitration if certain conditions are met. The arbitration would address the issue of product market definition, which was described by DOJ as being ‘dispositive’ and would represent the first time the DOJ has used arbitration to resolve an antitrust matter.
Merger litigations and appeals can take more than a year to resolve. For example, the DOJ’s challenge to the AT&T/Time Warner merger occurred in November 2017, but the final appellate ruling was not until February 2019. In addition, litigation is costly for both the merging parties and the government. The use of binding arbitration is a procedural innovation that is expected to reduce litigation costs and to resolve the case more rapidly. Instead of fully litigating all the issues implicated by a merger analysis, the use of arbitration to resolve one ‘dispositive’ issue narrows the focus of the dispute, which lowers the cost of litigation and allows for more rapid adjudication. In addition, the use of binding arbitration limits appeal opportunities, which tends to result in quicker resolution.
State action to Block Sprint/T-Mobile
T-Mobile (majority owned by Deutsche Telekom) agreed in April 2018 to acquire Sprint (majority owned by Softbank) in a transaction valued at over US$26 billion. T-Mobile and Sprint are the third and fourth largest cellular carriers in the country. They had attempted to merge in 2014, but that transaction was called off due to opposition from the DOJ and other regulators. The DOJ, FCC and many states investigated the current merger proposal and the parties were able to reach agreements on divestitures and other remedies with the DOJ, FCC and five states to resolve their concerns.
Fifteen other states and the District of Columbia, however, have sued to block the transaction in federal court and also view the remedies as insufficient. The merits of the transaction will be litigated in federal court and the transaction could be blocked, even though it is national in scope and was approved by national authorities. States often analyse transactions, but this is the first time a collection of states has tried to block a national transaction approved by the DOJ or FTC, as opposed to seeking remedies to resolve competitive effects specific to particular states (eg, in local markets).