Summary Of Key Recent U.S. Antitrust Developments – Antitrust, EU Competition

March 20, 2024 –  Over the past 12
months, the Biden administration continued its aggressive
enforcement of the federal antitrust laws, although the rate at
which the enforcement agencies have filed cases has slowed down
compared to the first two years of President Biden’s term.
The FTC and DOJ’s focus on the technology sector has
continued, even though both agencies have also filed substantial
cases across a range of other industries. The two enforcement
agencies closed out 2023 with several significant wins. Their
successes, however, have been tempered by a federal judiciary that
is generally skeptical of the Biden administration’s
expansive views of antitrust enforcement. 2023 also saw an
emboldened plaintiffs’ bar targeting a range of industries,
including the real estate sector, technology, and healthcare
industries.

We expect these antitrust enforcement trends to continue through
the end of President Biden’s current term, with the longer
term outlook depending in part on the results of the upcoming
presidential election and any changes in agency leadership early
next year. Below is a summary of some of the most significant
recent developments.

Agency Developments

• At the close of 2023, the FTC and DOJ Antitrust
  Division published their long anticipated updated Merger
  Guidelines.  The Guidelines reflect the heightened
  antitrust scrutiny the Biden administration believes is necessary
  to combat increasing consolidation that it claims has reduced
  competition in the U.S. economy over the past several decades. The
  Guidelines adopt a revised structure compared to the guidelines
  promulgated in 1982 during the Reagan administration and revised in
  1992 and 2010 during the Clinton and Obama administrations.
  Importantly, for the first time since 1992, the two agencies will
  now have a single set of Merger Guidelines that, in different
  sections, address both horizontal and vertical mergers and
  acquisitions, as well as mergers with or of potential
  competitors.




• The FTC published a proposed rulemaking in June
  overhauling pre-merger notification requirements under the
  Hart-Scott-Rodino (HSR) Act. FTC Chair Lina Khan
  described the proposal as the culmination of the first
  “top-to-bottom review” since the HSR Act was passed in
  1976. The changes are generally expected to make the preparation of
  HSR filings a lengthier and more burdensome process. Among the
  proposed changes, the new rule would require filing parties to make
  additional disclosures, including information about a
  transaction’s “strategic rationale,”
  “information about existing or potential vertical, or supply,
  relationships between the filing persons,” information on how
  the transaction may impact the relevant labor markets, and details
  regarding previous acquisitions by the merging parties. The comment
  period for the proposed rulemaking has closed, but the FTC has yet
  to announce when it will issue its final rule.




• In January of 2023, the FTC proposed a rule that would
  ban post-employment non-compete clauses in agreements between
  employers and workers.  The rule would make an
  exception in limited cases in connection with the sale of a
  business. In public comments, many business groups expressed strong
  objections to classifying such non-competes as “unfair methods
  of competition.” The FTC is expected to take a final vote on
  the proposed rule in April 2024. If the FTC issues the rule in its
  current form, these groups are expected to bring court challenges
  to the commission’s authority to impose the
  restrictions.

Merger Litigation

• FTC data show increased scrutiny of pharmaceutical and
  healthcare mergers.  Data released by the FTC in
  December indicates that since 2020, DOJ and the FTC have been much
  more likely to issue second requests in pharmaceutical and
  healthcare mergers than in previous years. Enforcement actions in
  other industries appear not to have spiked to the same extent,
  perhaps because the Biden administration’s pledges to
  strengthen enforcement have deterred potentially anticompetitive
  mergers across the board. The FTC data show that HSR filings
  involving producers of products and services within the same
  industry classification code has declined by 50% since a recent
  peak in 2019.




• The DOJ secured two notable wins in the District of
  Massachusetts in the airline industry. In May, Judge
  Sorokin ordered JetBlue and American Airlines to terminate their
  joint venture, the Northeast Alliance, following a September 2022
  trial in which DOJ and several state attorneys general challenged
  the alliance as a de facto merger. The court rejected the
  airlines’ contention that the alliance would increase
  competition with market leaders Delta and United. It found instead
  that the alliance violated Section 1 of the Sherman Act because it
  increased fares and reduced choices for flights between Boston and
  New York. In January 2024, Judge Young blocked JetBlue’s
  proposed acquisition of Spirit Airlines, finding at trial that the
  deal would harm cost-conscious flyers and reduce competition in
  multiple markets nationwide.




• In October, a federal court in San Francisco denied the
  FTC’s request for a preliminary injunction to block
  Microsoft’s acquisition of videogame developer Activision
  Blizzard. The FTC argued that the vertical
  combination of Microsoft’s Xbox gaming system and
  Activision’s Call of Duty game within one firm would harm
  competition by allowing and incentivizing Microsoft to withhold the
  game from rival consoles. The defendants attempted to address the
  FTC’s concerns with a “fix,” the specific terms of
  which were not publicly disclosed but reportedly included a
  commitment to make Call of Duty available on Sony PlayStation and
  Nintendo Switch consoles. The court considered the proposed fix at
  the liability stage of the litigation over objections from the FTC,
  arguing that it should wait until the remedy stage of litigation.
  The court declined to issue a preliminary injunction, ultimately
  finding that Microsoft lacked sufficient incentive to make access
  to Call of Duty exclusive. The parties closed the transaction in
  October 2023.




• In late December, the Fifth Circuit affirmed the
  viability of the FTC’s theory of vertical harm in one of its
  merger challenges and set out standards for litigating proposed
  deal fixes.  The case, Illumina v. FTC, centered on
  the FTC’s challenge to Illumina’s vertical acquisition
  of Grail, the producer of early detection cancer tests that use
  gene sequencers made by Illumina. The FTC alleged that the
  transaction would harm Grail’s competitors by foreclosing
  their access to Illumina’s next-generation gene sequencing
  platform. The appeals court upheld the FTC’s decision to
  block the transaction, finding, among other things, that Illumina
  bore the burden to show the remedy rebutted the government’s
  prima facie case. Illumina has announced plans to unwind the
  transaction, making it the first time in decades that either the
  FTC or DOJ successfully challenged a vertical merger in court.




• In February 2024, the FTC filed an enforcement action
  to block Kroger’s proposed acquisition of Albertsons, the
  largest supermarket merger in U.S. history. In its
  complaint filed in the District of Oregon, the FTC alleged that the
  deal would eliminate competition between the grocery chains in
  multiple local markets nationwide, leading to higher prices for
  groceries and other household goods and, in a novel claim, that the
  combination would threaten employees’ ability to secure
  higher pay and better working conditions. This is the first time
  the FTC has challenged a merger in court due to its impact on labor
  markets. As in other recent merger challenges, the FTC alleged that
  the parties’ proposed fixes to address the agency’s
  antitrust concerns were inadequate. The court has scheduled a
  hearing on the FTC’s request for a preliminary injunction for
  the end of August.

Criminal Antitrust Cases

• In April, a Connecticut federal judge entered a
  judgment of acquittal at the trial of several aerospace executives
  in a no-poach case.  The court tossed out allegations
  by DOJ that the defendants had orchestrated an employee
  “no-poach” agreement that would unlawfully restrict
  recruitment and hiring among subcontractors to Pratt & Whitney.
  The court, in United States v. Patel, found that “no
  reasonable juror could conclude that there was a ‘cessation of
  meaningful competition in the allocated market.'” The
  decision was a further blow to DOJ’s efforts to bring
  “no-poach” claims, having failed to win a single jury
  conviction to date.




• The Fourth Circuit Court of Appeals overturned an
  antitrust conviction of an engineering firm executive in
  December.  In United States v. Brewbaker, the court
  found that the DOJ’s allegation of a “hybrid”
  restraint involving two firms with both vertical and horizontal
  relationships did not constitute a per se antitrust violation. The
  case involved allegations that two firms—Contech
  Engineered Solutions (Contech)
  and Pomona Pipe
  Products (Pomona)—coordinated their bids for
  work with the North Carolina Department of Transportation. DOJ
  alleged that Contech and one of its executives, Brent Brewbaker,
  asked Pomona for its anticipated bid prices so that it could
  deliberately submit a higher bid, ensuring that Pomona secured the
  contract and enabling Contech to profit from the scheme by
  supplying Pomona with aluminum parts. The court held that because
  the alleged restraint had both vertical and horizontal components,
  the alleged conduct was subject to the rule of reason and that only
  purely horizontal restraints are subject to the per se standard.
  The Fourth Circuit denied the DOJ’s petition for rehearing en
  banc.

Civil Antitrust Cases

• Google is facing a flurry of civil lawsuits alleging
  anticompetitive conduct involving a range of
  products.  In November, the evidentiary phase of a
  bench trial concluded in a case brought by DOJ and 49 state
  attorneys general in the District of D.C., alleging that Google has
  maintained monopolies in the internet search market, including in
  general search services, search advertising, and general search
  text advertising. Closing arguments are scheduled for May 2024,
  with the decision likely to come later this year. Google faces
  another upcoming trial in a Virginia federal court on allegations
  by DOJ and several states that the company maintained a monopoly in
  digital advertising technologies. The complaint, filed in January
  of 2023, alleges that Google violated Sections 1 and 2 of the
  Sherman Act by eliminating ad-tech competitors through
  acquisitions, wielding its market dominance to force more firms to
  use its products and to thwart their ability to use competing
  tools. Google has also faced multiple private lawsuits alleging
  that its control over its Play app store on Android devices was
  anticompetitive. In December, a San Francisco jury found in favor
  Epic Games, developer of the game Fortnite, finding that the fees
  Google charges on in-app transactions violated U.S. antitrust laws.
  Google has asked the court to either overturn the jury verdict or
  grant a new trial. In September, Google settled similar claims
  regarding its app store that were brought by 30 state attorneys
  general. Google also faces claims by multiple newspaper publishers,
  including Gannett, that it maintains a monopoly in the digital
  advertising marketplace.




• In an antitrust class action in the Western District of
  Missouri, a jury found that the National Association of Realtors
  (NAR) and certain other residential real estate brokerages
  conspired to maintain artificially high commissions on residential
  real estate transactions. The jury awarded the class
  of affected homeowners in three states nearly $1.8 billion in
  damages. The allegations centered on certain provisions of
  NAR’s listing rules for regional Multiple Listing Services
  (MLS), where most homes are listed for sale. The rules required
  that listing brokers make offers of compensation for buyers’
  broker commissions, which plaintiffs alleged were essentially
  nonnegotiable and artificially raised the commissions that sellers
  had to pay to buyers’ brokers. The jury found that the
  provisions had the effect of raising buyer brokers’
  commission rates, resulting in higher costs for the sellers, and
  therefore constituting an unreasonable restraint on trade. Since
  the decision in Missouri, numerous class actions making similar
  allegations against NAR and regional real-estate associations and
  brokers have been filed in other courts across the country.
  Forsaking its right to appeal the jury verdict, NAR reached a
  settlement with the home seller plaintiffs, which, if approved by
  the court, would release NAR and most of its members from liability
  in the Missouri action and related nationwide class actions in
  exchange for NAR’s payment of $418 million to aggrieved home
  sellers and for changing its listing rules. Relatedly, the DOJ
  sought to reopen an antitrust investigation into NAR last year,
  asking the DC Circuit to overturn a decision that a settlement
  between DOJ and NAR was still in force, after DOJ pulled out of the
  settlement in 2021. At a hearing in December, a panel of circuit
  judges appeared skeptical that the settlement prevented DOJ from
  reopening its probe.




• Last spring, dozens of class action lawsuits were filed
  alleging that software vendor RealPage and certain large property
  management companies conspired to raise the price of rental
  apartments.  The complaints, consolidated in the
  Middle District of Tennessee, allege that the defendants colluded
  to raise prices through use of RealPage’s AI Revenue
  Management software, which allegedly increased rental prices by
  increasing vacancies. The DOJ filed a statement of interest in
  support of the plaintiffs’ claims late last year. Attorneys
  General for the District of Columbia, Arizona and Washington have
  since filed separate cases against RealPage and various property
  managers, making similar price fixing allegations on behalf of
  state residents.




• Ten out of 17 elite universities recently settled
  claims that they conspired to fix the level of the financial aid
  packages.  The plaintiffs, a proposed class of
  students, allege that the schools engaged in price fixing and
  unfairly limited student aid through use of a shared methodology to
  calculate admitted students’ financial needs. The plaintiffs
  also allege that during the admissions process the defendants
  agreed to consider some applicants’ ability to pay, when
  considering students on the waitlist or through legacy admissions,
  thereby disqualifying the schools from an antitrust exemption under
  federal law.

Additional developments to watch for later this year:

• The FTC’s case alleging
  that Facebook parent Meta maintained
  a monopoly through its acquisitions
  of WhatsApp and Instagram may
  go to trial later this year, in another test of the Biden
  administration’s efforts to crack down on large technology
  companies.




• Continuing its focus on large technology companies, the FTC
  opened an investigation in January 2024 into five specific
  companies’ investments in artificial intelligence. The FTC
  ordered the companies to provide information “regarding recent
  investments and partnerships involving generative AI companies and
  major cloud service providers.” FTC Chair Lina Khan expects
  that the study “will shed light on whether investments and
  partnerships pursued by dominant companies risk distorting
  innovation and undermining fair competition.”




• The DOJ reportedly opened an antitrust investigation
  into UnitedHealth, the healthcare
  conglomerate that owns the largest U.S. health insurer, a leading
  manager of drug benefits, and Optum Health,
  an extensive network of a providers. The investigation reportedly
  centers on the relationships and potential favoritism between the
  health insurance unit and Optum
  Health and is examining the effects of the
  company’s acquisition of physician groups. The investigation
  exemplifies the Biden administration’s continued attention to
  increasing competition and reducing prices in the healthcare
  sector, and 2024 may see the investigation evolve into
  litigation.

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