Download full Board Memo 2021
Antitrust continues to be in the global spotlight and is a key risk to consider when evaluating M&A and strategic plans. We anticipate companies and dealmakers in 2021 will face even greater antitrust scrutiny as policymakers and enforcers around the world continue to question whether current enforcement levels are sufficient to achieve the aims of competition policy. The global pandemic and resulting economic downturn have only heightened these concerns, as life sciences and big tech companies have benefited from the global disruption while companies in other sectors – and their employees – have struggled.
The Biden administration is expected to support tougher antitrust enforcement. We will see new leadership at the Federal Trade Commission (FTC) and Department of Justice (DOJ), who will steer enforcement priorities for the next four years and may back legislative reforms to increase government oversight. Even absent legislative change, Congressional support for increased enforcement likely will result in added FTC and DOJ scrutiny of deals and commercial conduct by large companies.
These three areas deserve board attention in the coming year.
1. Expanded theories of harm in horizontal mergers
Direct horizontal overlaps will continue to be front and center in merger review, but other theories of harm are gaining traction. Around the world, enforcers are increasingly focused on so-called “killer acquisitions” of nascent competitors. They also are looking more closely at minority acquisitions and cross-shareholdings that could mute incentives to compete and facilitate information-sharing. In addition, regulators outside the US have required remedies in deals raising conglomerate or broad innovation-related concerns. It is therefore increasingly important to assess deals with respect to these less-common theories of harm.
2. Greater scrutiny of vertical transactions
There are signs that the FTC and DOJ may scrutinize deals that combine firms in different parts of a supply chain more closely following publication of new Vertical Merger Guidelines in 2020. Companies should not presume that such transactions will be viewed as procompetitive and should pay particularly close attention to antitrust risk when one of the two parties to a vertical transaction operates in relatively more concentrated industry.
3. Increased focus on digital markets
Lawmakers on both sides of the aisle have called for increased antitrust enforcement in digital markets and for greater scrutiny of large tech companies. In October, the US House Judiciary Committee issued a highly anticipated digital markets report recommending several antitrust reforms in the tech sector. Enforcers around the world also have remained active, acknowledging several ongoing tech investigations. The increased focus on digital markets on both sides of the Atlantic also may be a harbinger of broader antitrust alignment and coordination between US and European regulators going forward.