Dealmakers and business leaders should not expect Donald Trump during his second presidential administration to retreat from aggressive antitrust enforcement, but they may see relief from some of the Biden administration enforcement tactics they found especially aggravating.
While Trump’s rhetoric about excessive regulation and government waste might seem to foreshadow a more hands-off approach to business competition, the Department of Justice and the Federal Trade Commission’s antitrust record during his first four years in the White House suggests otherwise, legal observers said.
“The administration would not be soft on antitrust, based on Trump’s first term,” said Jon Dubrow, a McDermott Will & Emery partner who serves as co-head of its antitrust mergers focus group.
While antitrust enforcement has been a much more headline-grabbing issue during the Biden administration, “at least some of the data may indicate a less radical change in antitrust enforcement under Biden as compared to Trump than the conventional wisdom suggests,” the law firm Sheppard Mullin said in a September analysis.
Still, attorneys expect Trump to check off one item on the wish list of many business leaders: Parting ways with Democratic FTC Chair Lina Khan and replacing her with a more centrist Republican.
Khan, a 35-year-old Yale law grad, has unapologetically embraced neo-Brandeisianism, a school of academic thought that evaluates proposed mergers on a wide range of social and economic factors.
That big-picture approach had fallen out of favor decades ago, replaced by a philosophy that generally allowed a deal to go forward unless regulators believed it would raise prices for consumers.
Khan’s philosophy has been on full display in the FTC’s efforts to block Kroger’s $25 billion acquisition of grocery rival Albertsons. The FTC in February sued to block the deal, arguing that it would raise prices but also that it would restrict job options for workers of the two chains and reduce their unions’ clout negotiate higher wages.
Legal observers expect the new FTC chair to strike a moderate course, narrowing the criteria considered in merger reviews and showing more willingness to settle disagreements through compromise.
Many business leaders were deeply frustrated with Khan’s “sue, don’t settle” philosophy. Rather than negotiate consent decrees that might require merger partners to divest certain businesses or make other concessions to blunt potentially anticompetitive aspects of deals, Khan has favored taking disputes to court, a go-for-broke strategy aimed at racking up legal wins that support a more expansive view of what constitutes anticompetitive behavior.
“I expect that consent orders and divestitures, essentially abandoned in the Biden administration, will likely reemerge as a favored merger remedy,” Dubrow said.
Under its new Hart-Scott-Rodino premerger notification rules, companies will have to provide a mountain of additional information, some time-consuming to collect, creating a larger data trove for regulators to draw from to support steering deals out of the fast lane and into full, antitrust investigations.
The FTC estimates that under the new rules, the average Hart-Scott-Rodino filing will take an average of 105 hours to complete, compared with 37 hours currently.
Dubrow called the new process “very hostile to M&A” and likely to be rescinded.
Legal observers say the next chair also will be less likely to push the bounds of the FTC’s legal authority, something Khan and her Democratic FTC majority were regularly accused of doing, especially through settlements with companies that were unlikely to test the FTC’s theory in court.
For example, in May the FTC conditioned its approval of Exxon Mobil’s $65 billion purchase of Pioneer Natural Resources on the companies agreeing to ban Pioneer founder Mark Sheffield from Exxon’s board, and in October it conditioned Chevron’s $53 billion purchase of Hess on the companies agreeing to ban Hess CEO John Hess from the Chevron’s board. The FTC said both men had made statements about OPEC, or had conversations with OPEC, that suggested on openness to price-fixing.
In both instances, the two Republican commissioners, Melissa Holyoak and Andrew Ferguson, issued sharp dissents. Of the Exxon and Hess settlements, Ferguson wrote, “They pay the toll because the commission has threatened to make their lives difficult if they do not, and they have concluded that it is easier to pay than to resist.”
He characterized what the Democratic majority had pulled off as “a pay-for-peace racket” and said it “inflicts serious injury on the rule of law—and the commission’s credibility.”
Charles Elson, at attorney who served as founding director of the John L. Weinberg Center for Corporate Governance at the University of Delaware, told Law.com Wednesday that the action was extraordinary given that “Mr. Hess had never been accused of an antitrust issue.”
With the next iteration of the FTC, “I would expect there’ll be less aggressiveness. This administration has been hyper-aggressive. Even if you dial it back to a normal level, that’ll be a change,” he said.