Biden formed an antitrust "dream team", and the industry giant's 2022 will not be better

Entering 2022, US President Biden may not be soft on his antitrust agenda.

With U.S. inflation at a 40-year high, In recent weeks, Biden has urged the U.S. Department of Agriculture to investigate large meat packers, accusing them of raising prices and paying farmers less; he has publicly encouraged the Federal Trade Commission (FTC) to investigate large oil companies as gasoline prices soar; biden has also urged the Federal Maritime Commission to investigate the price monopoly practices of large shipping companies at the heart of the supply chain.

In other words, the Biden administration blamed the soaring prices in part on a lack of corporate competition in the market, further fueling the administration's emphasis on antitrust work in 2022.

Robert Ashworth, co-director of global mergers and acquisitions at Fuerde Law Firm, said in an interview with First Financial Reporter that the Biden administration is encouraging U.S. regulators to take a firmer stance when it comes to antitrust or review of practices that hinder competition. "It could be a business itself that is hindering competition, or it could be a business that wants to make an M&A, it could be for a tech company, or it could be a consumer-facing company." All in all, the Biden administration is indeed encouraging regulators to take tougher measures. In 2022, the antitrust theme will be further strengthened in the United States. He said.

Biden's Antitrust "Dream Team"

In 2021, Biden assembled the strongest antitrust team in the United States in recent decades.

Biden has appointed Lina Khan as chairman of the Federal Trade Commission, Tim Wu as white house special assistant for technology and competition policy, and Nominated Jonathan Kanter to head the Justice Department's antitrust division. All three have long been critical of tech giants.

This may mark a shift in the biden administration's antitrust philosophy. For the past 40 years, the U.S. federal antitrust agency has seen its goal as "promoting consumer welfare." But Lena Khan and others have advocated that antitrust policies should be used as a more general tool for achieving social policy objectives in order to reduce unemployment, raise wages, reduce the gap between rich and poor, or otherwise promote equity. According to US media reports, the Federal Trade Commission and the Department of Justice each received $500 million in new funding to recruit more law enforcement antitrust staff.

Against this backdrop, the U.S. Federal Trade Commission is expanding its powers. For example, the commission revoked a 2015 antitrust policy statement that limited its ability to prevent unfair competition. The agency is also considering a rule for digital platforms that curbs algorithmic discrimination and "business surveillance."

The Biden administration says it is increasingly concerned that the concentration of power in tech and industries such as pharmaceuticals, agriculture, health care and finance will hurt consumers and workers and hinder economic growth. To that end, early last year, Biden issued an executive order containing 72 initiatives aimed at promoting competition across industries. Biden, for example, instructed federal regulators to consider taking a tougher stance on mergers and acquisitions in hospitals, health insurance, meat processing and technology, which could include revisiting past approved mergers.

Propelled by the Federal Trade Commission led by Lena Khan, a series of antitrust agendas quickly unfolded. As envisioned by the Biden administration, the committee sought to overturn some mergers and acquisitions approved during the Obama administration. Facebook acquired photowall (Instagram) and chat app WhatsApp in 2012 and 2014, and in mid-2021 Lena Khan made two antitrust allegations.

The "tentacles" of Biden's antitrust team have reached out to all walks of life. In late November 2021, the commission also ordered nine large retailers, including Walmart, Amazon and Kroger, to hand over detailed information to help identify the root causes of supply chain bottlenecks that "hurt U.S. economic competition." The U.S. Department of Agriculture has invested $500 million to help small and medium-sized businesses or new entrants in the meat packaging industry challenge industry giants. The Federal Maritime Commission also investigated a handful of corporate shipping unions. According to freight tracking company Freightos, these alliances have effectively controlled the flow of goods across the world's oceans and raised prices by as much as 9 times during the pandemic.

An Weibin told the first financial reporter: "Perhaps some areas that were originally considered to be more sensitive or that were not originally noticed by everyone will now be concerned by relevant anti-monopoly agencies." For example, whether a transaction will affect the entire job market, whether it will affect the security of personal data, these things will be more concerned by regulators. Therefore, the focus of regulators may no longer be just a matter of competition, their focus will be more extensive. ”

According to White House officials, they are satisfied with the antitrust cause in 2021. So far, they say, Biden's antitrust team has successfully blocked the merger of Kansas City South, a major U.S. rail company, with The Canadian National Railroad, and halted mergers and acquisitions by two large insurers, Aon and Willis Towers Watson, avoiding rising consumer costs.

Antitrust enforcement will not be lax in 2022

Still, the behavior of Biden's antitrust team has caused resentment in the business community.

When Biden signed an executive order directing the FTC to tighten monopoly regulation of some industries, the U.S. Chamber of Commerce accused Biden of interfering with the commission's impartiality. In November 2021, the U.S. Chamber of Commerce threatened to sue the commission for the move as the FTC wrote to hundreds of business owners warning them against false advertising and misleading endorsements. Last December, Sean Heather, the U.S. Chamber of Commerce's senior vice president for international regulatory affairs and antitrust, revealed that the U.S. Federal Trade Commission was working with regulators in Europe to overturn possible merger deals. Regulators in the United States, the European Union and the United Kingdom are using a "divide and rule" strategy to prosecute cases outside their jurisdiction, he said.

Earlier this year, U.S. Chamber of Commerce CEO Suzanne Clark said in a speech: "The FTC has taken too aggressive a stance on mergers and acquisitions, leading SMEs to worry that if they choose to sell, they have no exit strategy." ”

But the Biden administration's antitrust resolve may not back down. Valarie Williams, a U.S. antitrust lawyer, argued: "Whether there is formal new legislation or not, this will not affect the antitrust enforcement of the Justice Department and the Federal Trade Commission based on existing laws." After years of inaction and easy approval of M&A deals, the pendulum must have swung (meaning that the situation is about to change). ”

Nabiha Syed, president of the investigative firm The Markup, said more and more executives and investors are turning to antitrust law firms to assess the legislative and political environment and its impact on big tech companies' aggressive M&A strategies.

The M&A Market Perspectives on the Fourth Quarter of 2021, just released by Fourerd & Company, notes that boards and dealers should anticipate that antitrust agencies are more likely to initiate in-depth investigations that will take longer to complete given the scope of the issues reviewed. The risk of extending the review period is even greater as the number of merger applications received by U.S. antitrust agencies hit a new high and faces internal staff and other resource constraints. Companies should take into account the longer antitrust review period when calculating the entire transaction timeline and be prepared to quickly resolve issues that do not fall under the traditional antitrust harm theory.

An Weibin reminded: "For participants in M&A transactions, they must make more comprehensive and forward-looking forecasts to understand what kind of impact the transaction will have on the market. First of all, the review time will be longer than before, the materials submitted will be more complex than before, and more institutions will be involved. In the process, parties need to know how to use this period of time, such as how to raise funds, and how to predict the possibility of M&A transactions in a forward-looking manner without affecting the operation of the business. Once the regulator has a surprise inspection, you want to ensure that the material you submit is very honest and transparent. This is the main trend and risk of antitrust involved in future mergers and acquisitions. ”