2023 M&A Annual Review 7 The HSR form is expanding. The proposed changes6 would require parties to include, among other things: ▪ An expanded universe of documents, including some created earlier in a party’s deal consideration; ▪ New narrative responses regarding competition; and ▪ Disclosure of debtholders, indirect owners, and others who might influence the parties. New Merger Guidelines reveal an attempted paradigm shift. Key changes in the new Merger Guidelines, released in December 2023,7 include: ▪ Abandonment of the consumer welfare standard; ▪ New tests for market definition and lower thresholds to presume mergers are illegal; and ▪ Sections targeting particular industries, markets, or strategies, including a renewed focus on labor impacts, use of data (including pricing algorithms), multi-sided platforms, potential market entrants, and serial acquisitions and roll-up strategies. The new Merger Guidelines softened initially proposed language and cited to more recent cases, compared to the draft Merger Guidelines released in July. Courts have typically followed prior Merger Guidelines, but that may change as the new Guidelines appear to reject aspects of the prior Merger Guidelines and depart from recent court precedent. Enforcement abroad is increasing. Global developments have paralleled the aggressive approach of U.S. enforcers but have not moved entirely in lockstep. The European Commission (EC) this year adopted a package of reforms to simplify its merger control regime, creating a new “tickthe-box” notification for low-risk cases. International agencies remain active in merger enforcement, with, for example, the UK’s Competition and Markets Authority conducting an aggressive review of Microsoft’s acquisition of Activision before clearing the deal after the parties made additional licensing commitments, and Adobe and Figma terminating their merger agreement following challenges from the EC and UK. Chinese regulators have been looking aggressively at transactions involving U.S. technology firms, leading to delays. For example, Intel terminated its acquisition of Israeli chipmaker Tower Semiconductor after the State Administration for Market Regulation (SAMR) did not approve of the deal. What’s Next? 2024 presents a potential paradigm shift for merger enforcement. Careful planning, including proactive consideration of divestitures and other “fixes” where appropriate, and customization of acquisition agreements to provide appropriate efforts covenants (including with respect to control over the approach to the regulatory review process and any litigation with regulators), pre-closing target company operations covenants (that contemplate the possibility of extended review periods), termination provisions, and remedies and related terms, will be key, as businesses and the antitrust agencies adjust to the new rules and courts respond to these dramatic changes. 5 6 7 5th Cir. Dec. 15, 2023. The Fifth Circuit remanded the case on the basis that the FTC did not properly evaluate the remedy. The Fifth Circuit also rejected Illumina’s claims that the FTC structure was unconstitutional. Illumina shortly thereafter announced a decision to divest Grail. For additional discussion of the proposed revised HSR rules, see our July 7, 2023 client alert, FTC Proposes Significant Expansion and Changes to HSR Merger Notification Form. For additional discussion of the new Merger Guidelines, see our December 21, 2023 client alert, DOJ and FTC Finalize New Merger Guidelines – What You Need to Know, and our July 27, 2023 client alert, DOJ and FTC Release Draft of New Merger Guidelines. “Global developments have paralleled the aggressive approach of U.S. enforcers but have not moved entirely in lockstep.” For additional discussion of the new Merger Guidelines, see our December 21, 2023 client alert, DOJ and FTC Finalize New Merger Guidelines – What You Need to Know, and our July 27, 2023 client alert, DOJ and FTC Release Draft of New Merger Guidelines. For additional discussion of the proposed revised HSR rules, see our July 7, 2023 client alert, “FTC Proposes Significant Expansion and Changes to HSR Merger Notification Form.”
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