Companies planning deals in 2021 should anticipate higher levels of regulatory intervention from the U.S. antitrust enforcement agencies and global competition authorities. In the United States, the Biden administration is expected to scrutinize transactions more closely and increase coordination with authorities globally.
As a result of this increased scrutiny, some transactions which might not have otherwise been reviewed (or reviewed only in a light-touch way) will be more likely to be subject to an in-depth investigation by U.S. agency authorities. This increased scrutiny does not necessarily mean more deals will be blocked, as the FTC and DOJ have been quite successful in stopping transactions in the last several years under the prior administration. What it does signal is that clearance may take longer, so parties should factor this timeline into their plans and their merger agreements.
Additionally, these longer timelines should consider coordination among global competition authorities. Authorities worldwide are also expected to apply more detailed-and-probably more skeptical-scrutiny to transactions, particularly those involving industries that affect consumers and involve data and innovation such as healthcare, pharmaceuticals, social media, e-commerce and tech. These changes reinforce the need for deal planning to feature a coordinated global merger control strategy for all businesses.
Casting a Wider Net
The Biden administration is widely expected to usher in a re-energized era of merger enforcement, against the backdrop of criticism by some of under-enforcement over the last decade under the prior two administrations. This criticism resulted in the announcement of dramatic legislative proposals over the course of the 2020 presidential campaign and through the Fall of 2020.
Such proposals include imposing structural presumptions that would presumptively prohibit transactions resulting in high market shares or increased concentration, introducing a presumption against acquisitions of start-ups by dominant firms, and/or prohibiting acquisitions of potential rivals and nascent competitors. Though headline-grabbing, a narrow Democratic majority in both houses of Congress means such proposals are unlikely to pass. And even congressional supporters have acknowledged that such proposals are just the start of the legislative process.
One area of bipartisan agreement, however, is the need for increased funding for the antitrust agencies. Even without substantive legislative changes, greater funding will enable the agencies to expand their ability to investigate transactions through hiring and to use new tools or reinvigorate existing tools to catch acquisitions of nascent competitors, vertical transactions or minority acquisitions, which are among the areas we expect the most focus on.
These tools include use of the FTC Act’s Section 6(b) powers to conduct industry studies, breaking up past acquisitions deemed to have anti-competitive effects, rulemaking authority to regulate conduct happening before the event, and bringing (and potentially losing) more cases challenging deals.
What Does This Mean?
Against this backdrop, parties should prepare for longer timelines—even for deals that do not raise traditional antitrust concerns. Only a few months into 2021, the FTC has already announced at least temporary changes to its practices that extend timelines; the Premerger Notification Office has suspended its Early Termination procedure, meaning parties now must wait the full 30-day waiting period for transactions raising no antitrust risk. While this change adds only two weeks, it signals what may be coming from the agencies: longer timelines and more thorough reviews.