US regulators unveil antitrust action plan with Big Tech in the crosshairs

Diane Bartz and Anirban Sen

WASHINGTON (Reuters): U.S. antitrust regulators released guidance on Wednesday on the types of mergers and acquisitions they oppose, confirming the skepticism with which President Joe Biden’s administration has approached many deals, especially in the technology sector.

Since Biden took office in 2021, the U.S. Department of Justice and the Federal Trade Commission (FTC) have mounted an unprecedented number of merger legal challenges.

Their success in court has been mixed, with two defeats last week in their attempts to thwart Microsoft Corp’s $69 billion deal to buy video game maker Activision Blizzard Inc and to thwart a merger in the sugar industry.

Under the Biden administration, the FTC also lost an attempt to stop Meta from buying a virtual reality content maker and another cancer detection software maker. The Department of Justice lost an insurance merger but won an attempt to stop a book publisher merger.

The justices will face several challenges over the next few months, including the Justice Department’s fight against JetBlue Airways Corp.’s purchase of Spirit Airlines Inc.

The 51-page guidance from the Department of Justice and the Federal Trade Commission described, without naming, transactions such as Amazon.com’s 2018 purchase of the Ring video intercom system and said antitrust agencies should scrutinize them closely.

The problem is that Ring’s competitors are sold on Amazon.com, which gives Amazon an incentive to favor Ring over its competitors.

The guidelines also state that the transaction should not eliminate a potential participant in a concentrated market or result in a situation in which the company purchases a company that supplies raw materials to the buyer’s competitors.

Deal advisers said companies have already prepared for a tough antitrust regime under Biden, with some emboldened by recent court losses to regulators.

“Courts make final decisions and are guided by precedent and case law,” said Kenneth Schwartz, antitrust partner at Skadden, Arps, Slate, Meagher & Flom LLP.

Several other antitrust lawyers, including Daniel Culley of Cleary Gottlieb Steen & Hamilton LLP, said the new guidance is unlikely to significantly disrupt deals and the impact of enforcement may be limited in the near term.

“The new guidance may not have that much of an impact until we see what the courts are willing to agree to,” said Megan Browdie, an antitrust partner at Cooley LLP.

According to data from LSEG Deals Intelligence, global deal volume in the technology sector has fallen by more than half this year.

According to Fiona Schaeffer, an antitrust partner at law firm Milbank LLP, tightening antitrust regulations in the industry have contributed to a decline in appetite.

She argued that if the guidelines are adopted in their proposed form, they will not necessarily be accepted by judges hearing merger complaints because they do not reflect recent court decisions on the disputed mergers.

“(Regulatory) guidance does provide greater transparency, but that transparency also reveals some concerns that they are quite hostile to consolidation. Big is bad,” she said.

Sen. Elizabeth Warren, a Democrat who has strongly pushed for tougher antitrust enforcement, called the guidelines a turnaround “after more than 40 years of lax antitrust enforcement.”

She and others defended the guidelines, with Warren saying they are “rooted in the laws Congress has passed, consistent with court precedent, and represent a much-needed update to counter the real harms caused by corporate monopolies.”

The new antitrust guidance also reflects the White House’s focus on labor issues. “If a merger of employers is likely to significantly reduce competition for workers, a reduction in competition in the labor market may lower wages or slow their growth, and worsen benefits or working conditions,” the guidelines read.

The guidance replaces those last issued in 2010 on companies purchasing competitors and 2020 guidance on business mergers with suppliers. The new guidelines will be open for comment for 60 days before they are finalized.

(Reporting by Diane Bartz; Editing by Richard Chang, Chizu Nomiyama, Daniel Wallis and Diane Craft)