Antitrust

The European Commission’s draft guidelines on exclusionary abusive conduct by dominant firms under Article 102 TFEU (the “Draft Guidelines”) were published on 1 August 2024. They show a marked change from the 2009 Article 82 [now Article 102] Enforcement Priorities Guidance (the “Priorities Guidance”): economic concept has largely been replaced with the Commission’s interpretation of the European Courts’ caselaw.

The consultation on the Draft Guidelines is open until 31 October 2024. Practical suggestions rooted in and developing the caselaw appear more likely to influence the Commission’s final version of the Draft Guidelines than statements of economics.

Like the Priorities Guidance before it, the Draft Guidelines cover exclusionary conduct that the Commission views as concerning – conduct that benefits the dominant firm by excluding competitors from the market – and not exploitative conduct which benefits the dominant firm by exploiting its market power such as excessive pricing or the use of unfair trading conditions. Though in a departure from the Priorities Guidance, the Draft Guidelines do note overlaps between exclusionary and exploitative analysis: “the principles relevant to the assessment of dominance (section 2) and the justifications based on objective necessity and efficiencies (section 5) are also relevant for the assessment of other forms of abusive conduct, such as exploitative abuses” (paragraph 11 of the Draft Guidelines) and “the same conduct by a dominant undertaking may have both exclusionary and exploitative effects” (footnote 17 of the Draft Guidelines).

The Draft Guidelines also now cover collective dominance and not only single dominance, of which more below.

The Draft Guidelines are important because they signal not only how the Commission intends to apply Article 102 to dominant companies – arguably it is already doing so – but also how the Commission interprets the European Courts’ caselaw since the Priorities Guidance was adopted, and how the Commission wishes to influence the development of the caselaw in the future. In the period since the publication of the Priorities Guidance in 2009, the concepts set out in the Priorities Guidance have had mixed success in front of the European Courts. Some examples:

  • The Court of Justice in the Telia Sonera preliminary ruling said that there can be a margin squeeze even absent an obligation to deal (paragraph. 59), in implicit contradiction of the Priorities Guidance;
  • The General Court in Qualcomm, overturning the Commission’s decision, seemingly extends the relevance of the as efficient competitor test beyond the area of pricing abuses in the Priorities Guidance to exclusivity arrangements;
  • The Court of Justice in the Unilever Italia preliminary ruling and the Intel appeal affirming the use of the as efficient competitor test; and
  • The Court of Justice in the Post Danmark II preliminary ruling noting that less efficient competitors can sometimes constrain dominant companies (paragraph. 60).

Continue Reading From Concept to Precedent: The 2024 Draft Guidelines on Article 102

On August 5, 2024, Judge Amit Mehta of the U.S. District Court for the District of Columbia concluded that Google has monopolized markets for online searches and search text advertising and unlawfully engaged in exclusionary conduct in those markets. Specifically, the court found that Google used revenue sharing agreements with…

Continue Reading D.C. District Court Finds Google Monopolized Online Search Text Ads Markets

On 18 July 2024, the current President of the European Commission (“Commission”), Ursula von der Leyen, was reconfirmed by the European Parliament for a second 5-year term. As part of her reconfirmation, President von der Leyen delivered a speech before the European Parliament, complemented by a 30-page program, which lays down the Commission’s political program for the next five years.

A key pillar of the program – “A new plan for Europe’s sustainable prosperity and competitiveness” – has the objective of combining competitiveness and prosperity with the achievement of the European Green Deal goals.

Specifically on competition policy, according to President von der Leyen, a new approach is needed to achieve this objective. This blog post projects where competition policy is likely headed in the 2024-2029 period by commenting on the most relevant paragraphs of the program.

Von der Leyen: “I believe we need a new approach to competition policy, better geared to our common goals and more supportive of companies scaling up in global markets – while always ensuring a level playing field. This should be reflected in the way we assess mergers so that innovation and resilience are fully taken into account. We will ensure competition policy keeps pace with evolving global markets and prevents market concentration from raising prices or lowering the quality of goods or services for consumers. We will look at all of our policies through a security lens.”

  • This statement reaffirms the classic principles underlying competition law, i.e., the focus on ensuring a level playing field, preventing market concentration, and ultimately avoiding a negative impact on prices/quality of goods or services.
  • However, the President’s comments recognize the impact of global dynamics and the need for EU companies to be able to respond to global pressures. In the context of Siemens/Alstom and Lufthansa/ITA, there is growing pressure from EU Member States to allow European champions and this program could signal an openness to that effect.
  • The President also calls for an increased focus on innovation and resilience in the substantive assessment of mergers. This could mean (i) that the Commission will expand its assessment of the impact of ESG (Environmental, Social, and Governance) standards and security, (ii) that the Commission would be open to a greater role of wider efficiency justifications/public interest considerations in merger control and competition law assessments, and/or (iii) that the impact on the overall economic competitiveness of the EU, and the aim of geopolitical de-risking for critical supply chains and technologies, may play an increasingly important role in the assessment of mergers.

Continue Reading The 2024-2029 Commission Political Guidelines: Where Is Competition Policy Likely Headed?

On July 9, 2024, the Federal Trade Commission (“FTC”) voted 4-1 (with Commissioner Melissa Holyoak dissenting) to release an Interim Staff Report (the “Interim Report”) entitled: Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies. The Interim Report describes what FTC staff has uncovered…

Continue Reading Federal Trade Commission asserts significant anticompetitive harms in Interim Staff Report on the pharmacy benefit manager industry

In line with its previous decision-making practice (see our previous sustainability blog posts here and here), on 8 May 2024, the German Federal Cartel Office (“FCO”) declared the implementation of a new European industry standard for reusable pot plant trays compatible with competition law.

Since 2021, companies and associations…

Continue Reading FCO gives green light for ‘greener’ plant trays

The Northern District of Illinois recently denied certification to several proposed classes of purchasers of a seizure drug called Acthar in City of Rockford v. Mallinckrodt ARD, Inc., No. 3:17-cv-50107, 2024 WL 1363544 (Mar. 29, 2024).  Class plaintiffs had alleged that defendant Express Scripts, a drug distributor, conspired with…

Continue Reading Court Denies Class Certification in Antitrust Case Based on Expert’s Reliance on Unsupported Assumptions in Damages Model

Last summer, the antitrust agencies proposed sweeping changes to the Hart-Scott-Rodino (“HSR”) Act premerger notification form and associated rules. Covered in detail here, the proposed changes would significantly increase the time, burden, and costs on merging parties to prepare an HSR filing. The public comment period ended on September…

Continue Reading New HSR Rules Will be Finalized Within Weeks, According to DOJ Official

On October 17, 2023, the U.S. Government Accountability Office (“GAO”) published a report on mergers and acquisitions (“M&A”) in the defense industrial base. The report details the current M&A review process of the Department of Defense (“DOD”) and provides recommendations to proactively assess M&A competition risks.

Currently, DOD’s Industrial Base…

Continue Reading GAO Recommends Increased Guidance for DOD Mergers & Acquisitions Review

October 17, 2023, Covington Alert

What You Need to Know

  • On October 4, 2023, Deputy Attorney General Lisa Monaco provided new and expanded policy guidance on corporate criminal enforcement, announcing a new Mergers and Acquisitions Safe Harbor Policy (“Safe Harbor Policy”).
  • The Safe Harbor Policy provides acquiring companies an opportunity to avoid criminal charges if they voluntarily self-disclose misconduct at acquired companies within six months of a merger or acquisition (“M&A”), fully cooperate in any DOJ investigation, engage in timely and appropriate remediation within one year of the transaction closing date, and pay restitution or disgorgement, as appropriate.
  • The Safe Harbor Policy—which we expect will be formalized in writing and incorporated into the Justice Manual—appears to draw heavily on policies and guidance from the Criminal Division dating back to 2008, but that will now be formalized, clarified, and applied across the Department, with different parts of the Department “tailor[ing] its application . . . to fit their specific enforcement regime.”
  • As with all of the Department’s recent policy announcements concerning the benefits of voluntary disclosure, significant questions remain. We discuss some of those below, and we will be watching to see how DOJ applies the Safe Harbor Policy in practice. At a minimum, however, companies should ensure that their pre- and post-closing diligence and integration processes are designed to quickly identify legacy or ongoing misconduct at acquired companies so that they may have an opportunity to consider the expected benefits and burdens associated with a voluntary disclosure under the Safe Harbor Policy.
  • In addition to announcing the Safe Harbor Policy, Deputy Attorney General Monaco noted a “dramatic” expansion in national security enforcement, new enforcement tools that the Department is deploying, continued focus on incentivizing companies to seek compensation clawbacks from individual wrongdoers, and even more policy changes to come. Deputy Attorney General Monaco’s announcement follows recent shifts in enforcement remedies sought by the Department, such as divestiture in certain criminal antitrust cases—an unprecedented remedial measure.

Continue Reading DOJ Provides Further Voluntary Disclosure Incentives, This Time Linked to M&A Transactions, and Signals Other Areas of Focus

In recent years, there has been increasing antitrust scrutiny around the world of large technology companies. The increased attention on competition in the digital economy started outside of the United States. Since 2019, however, the U.S. antitrust enforcers—the U.S. Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) as well as numerous state attorneys general—have closely scrutinized and brought enforcement actions against some of the largest tech companies. This client alert provides an overview of the recent competition enforcement trends, specifically: (1) key topics at issue in many tech investigations; (2) the increased focus on competition in labor markets; and (3) the U.S. FTC’s new, expansive interpretation of Section 5 of the FTC Act. In view of this uncertain landscape, tech companies should stay on top of these enforcement trends and potential risks they face.

Key Topics at Issue in Investigations of Tech Companies

Investigations of technology companies follow similar principles to investigations in other industries, but there are some concepts that the antitrust authorities have been considering more closely in the context of the tech industry. First is the concept of “gatekeepers,” which the government agencies have used to describe any entity that sits between users and suppliers/merchants. The agencies have shown a particular interest in large intermediaries and have expressed concern that certain intermediaries may be able use their position to increase fees, obtain restrictive terms, and extend their position in the marketplace. At the same time, intermediaries in the tech industry have generated significant benefits, including by lowering transaction costs, helping sellers and customers to more easily find each other, and enabling new business models and innovations.

Another concept that sometimes arises in tech investigations related to intermediaries is “zero-price” products, where a company makes its products or services free to certain users and makes money either through different products, different consumers (like advertisers), or at a different point in time. The notion of “free” products is not unique to the tech industry. Ad-supported media – including radio, broadcast television, and newspapers – existed long before the rise of the digital economy. Nevertheless, the agencies are currently grappling with how to define relevant markets and measure competitive harm in the absence of price competition. For example, the traditional test applied by enforces to define relevant markets that looks at a small but significant and non-transitory increase in price (or “SSNIP”) does not directly translate to zero-priced goods. Similarly, alleged non-price harms to consumers are often harder to prove than an increase in price.Continue Reading Antitrust Enforcement Trends in the Digital Economy