US regulators unveil antitrust roadmap with Big Tech in the crosshairs By Reuters

© Reuters. FILE PHOTO: Amazon logo is seen at the Viva Technology conference dedicated to innovation and startups at the Porte de Versailles exhibition center in Paris, France, June 15, 2023. REUTERS/Gonzalo Fuentes/

By Diane Bartz and Anirban Sen

WASHINGTON (Reuters) – US antitrust regulators published guidance on Wednesday on the types of mergers and acquisitions they object to, reaffirming the skepticism with which President Joe Biden’s administration has approached many deals, especially in the technology sector.

The US Department of Justice and the Federal Trade Commission (FTC) have filed unprecedented legal challenges to the merger since Biden took office in 2021.

Their success in court has been mixed, with two losses recorded last week in their bid to undo a $69 billion deal from Microsoft Corp (NASDAQ:) to buy video game maker Activision Blizzard Inc (NASDAQ:) and to undo a merger in the sugar industry.

During the Biden administration, the FTC also lost in attempts to stop Meta from buying virtual reality content creators and others in cancer detection. The Department of Justice lost a merger in the insurance industry but won a bid to stop book publishers’ mergers.

Several challenges are scheduled to be brought before a judge in the coming months, including the Justice Department’s fight against JetBlue Airways (NASDAQ:) Corp’s purchase of Spirit Airlines (NYSE:) Inc.

A 51-page guideline by the Justice Department and Federal Trade Commission describes, without specifying, deals such as Amazon.com’s (NASDAQ:) purchase of a video doorbell in 2018, and says antitrust agencies should scrutinize them.

The concern is that Ring’s competitors are selling on Amazon.com, giving Amazon an incentive to prefer Ring over competitors.

The guidelines also say that transactions must not eliminate potential entrants in a concentrated market or create a situation where a company buys a company that provides inputs to a competing acquirer.

Deal advisers say the company has braced for a tough antitrust regime under Biden and some have been bolstered by the regulator’s recent court defeat.

“Courts are the final arbiter, and courts 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 guidelines were unlikely to significantly interfere with deal-making activity and the impact of enforcement could be limited in the near future.

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

Global deal volume in the technology sector has fallen by more than half so far this year, according to data from LSEG Deals Intelligence.

Tougher antitrust enforcement in the sector has been a contributing factor to reduced interest, according to Fiona Schaeffer, antitrust partner with law firm Milbank LLP.

He argued that if the guidelines were adopted as proposed, they would not necessarily be accepted by judges hearing merger suits because they did not reflect recent court decisions on contested mergers.

“The (regulator’s guidelines) do provide more transparency but that transparency also expresses some concerns that they are quite hostile to consolidation. Big is bad,” he said.

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

He and others defended the guidelines, with Warren saying they were “rooted in laws passed by Congress, aligned with court precedent, and provided much-needed updates to counter the real harm inflicted by corporate monopolies.”

The new antitrust guidelines also reflect the White House’s focus on employment issues. “Where mergers between employers can substantially reduce competition for workers, reduced labor market competition can lower wages or slow wage growth, worsen benefits or working conditions,” the guidelines say.

The guidelines replace the last published in 2010 on companies buying competitors and the 2020 guidelines on companies merging with suppliers. New guidelines will be open for comment for 60 days before finalizing.