10 key themes
Antitrust in a changed world
The role of antitrust in driving sustainable economic growth
Diminishing faith in competition law – time for a reset?
Are antitrust and competition laws failing to deliver beneficial outcomes to consumers and should governments be intervening more to correct market failures and reverse growing inequalities in society? A growing academic consensus seems to think so. If politicians and authorities agree, businesses should prepare for a tougher enforcement environment in 2021.
The key complaint is that competition enforcers have failed to prevent a trend of increasing consolidation and concentration in markets, to check the power of leading firms or to protect consumers and citizens adequately from anti-competitive practices. In addition, the crisis hitting many sectors as a result of the pandemic has bolstered calls for closer alignment of antitrust laws with wider industrial and public policy concerns, such as national resilience, consumer protection, unfair trade practices and data privacy, with more politicians and authorities demanding a reset or reorientation of competition policy to help drive sustainable economic growth and recovery.
Debate on these matters has sparked a proliferation of investigations, inquiries and reports which consider a variety of broad questions, including:
- whether current laws are capable of reaching, or can be adapted to reach, the perceived concerns; or
- whether broader reform is required, for example through expanding antitrust law to cover a more egalitarian set of objectives or through the adoption of new mechanisms, such as ex ante regulation or market investigation tools.
Although these debates are still being had, it seems clear that change – and in some jurisdictions dramatic change – is being demanded and may soon be on the horizon.
Many governments around the world were already considering reviews of aspects of their competition regimes, whether due to concerns about concentration in certain sectors or due to events like Brexit in the UK. These reviews have now taken on a different character as a result of the pandemic, as governments seize the opportunity to implement broader policies under the cover of fostering sustainable growth post-COVID-19.
Implementing a more ambitious enforcement agenda – the steps so far
Competition agencies around the world are being urged to act more decisively and forcefully to safeguard the competitive process and to ensure that their policies and enforcement priorities not only protect consumers, but also address sustainability goals and inequalities in society (including those arising from regional imbalance, race and gender). Many are already taking the articulated concerns seriously and are, for example:
- scrutinising the impact of mergers much more closely, including acquisitions of start-ups, sometimes referred to as ‘killer acquisitions’, and past mergers (see theme 2). Both the US Federal Trade Commission (FTC) and Conselho Administrativo de Defesa Econômica (CADE) in Brazil, for example, are conducting wide-ranging studies into past acquisitions by technology companies;
- carrying out investigations into the conduct of technology companies, including data collection or other practices which may be seen as favouring their own businesses over rivals (see theme 5);
- placing greater emphasis on the importance of firms behaving fairly and focusing resources on anti-competitive conduct that harms individual citizens, especially the more vulnerable (eg through challenging price increases by pharmaceutical firms); or
- considering whether, and if so how, broader public policy matters can be folded into competition analyses:
- several authorities, for example, are actively considering how competition and sustainability policies can work together to achieve improved standards and outcomes for the environment and consumers, with the EC’s Executive Vice-President, Margrethe Vestager, indicating that she will welcome initiatives by companies to work quickly, in line with competition law, to go green and that the EC might be prepared to give comfort about the compatibility of such agreements with EU competition law in order to provide greater clarity and guidance (see theme 6); and
- in the US, a broad debate continues as to whether root-and-branch antitrust reform is required. Some politicians and scholars contend that antitrust law should pursue a broader citizen-welfare standard, allowing issues such as employment security, wage levels, economic freedom of consumers, the well-being of small and medium-sized enterprises (SMEs), the diffusion of concentrated private and political power and the preservation of democracy to be addressed.
Consistent with the increasing public and political attention on antitrust issues and the recent election of Joe Biden, we are expecting further enforcement focus and profile from the US antitrust agencies. We anticipate that the federal antitrust agencies will come under continued political pressure to pursue enhanced enforcement, litigation and in-depth analysis of both merger control and single-firm conduct. Calls for legislative reforms to expand the scope of the antitrust laws are likely to continue, as well as the focus on large consumer-facing sectors such as tech and life sciences – with further focus on potentially extended theories of harm involving nascent competition, innovation and big data.
Safeguarding of national businesses operating in sensitive and strategic sectors
Fewer countries are now willing to accept unreservedly the benefits of free trade, open markets and foreign investment. The pandemic has focused attention on the importance of national resilience and autonomy of supply, accelerating a trend for new and tougher mechanisms to control foreign direct investment and other policies to protect national interests. These are principally being designed to protect businesses operating in sensitive and strategic sectors, including critical national infrastructure or advanced technologies and companies providing essential supplies to governments and emergency services, including military and dual-use sectors (see theme 4).
Although these regimes frequently operate in parallel to antitrust regimes, the concerns being addressed are often intertwined, particularly when authorities are influenced by political agendas and governments may be required to decide on remedies where national interests outweigh competition concerns.
Invigorated enforcement and new rules are imminent
A variety of measures are being contemplated across the globe to ensure that competition law and policy addresses perceived weaknesses and facilitates economic recovery. These include more active steps to tackle consumer harm, to foster competition in digital markets, to break down barriers to entry and to promote dynamic, innovation-driven competition which delivers benefits to consumers and businesses across the board. In 2021, we can expect to see:
- strengthened enforcement and better resourced competition agencies. This is a core priority, for example in the UK, following its final departure from the EU on 31 December 2020, and for some policy-makers in the US; and
- changes to antitrust laws and the adoption of new tools to address market failures, including sector-specific regulation and market investigation tools:
- the EC has released its proposed DMA reforms, which seek to supplement competition enforcement in digital markets and introduce a regulatory regime for large online platforms which act as ‘gatekeepers’ (see theme 5); and
- the election of Joe Biden as President of the United States, together with the digital markets report issued by the Democratic Majority Staff of the US House Subcommittee on Antitrust, Commercial and Administrative Law (US House Report), signals that pursuit of some antitrust reform – or at minimum expanded enforcement – is likely to be forthcoming in the US.
Next steps in both the US and the EU are keenly awaited, while new tools due to commence in other countries will be watched with interest. In Japan, a new monitoring review mechanism, overseen by the Ministry of Economy, Trade and Industry (METI) rather than the Japan Fair Trade Commission (JFTC), will commence for certain large platforms, which will include some mandatory disclosure requirements across a range of practices (see theme 5).
Although the European Commission has acted forcefully against a number of leading firms in recent years, it remains concerned about gaps in its current toolkit which it believes preclude timely and effective intervention against broader structural concerns. New tools and regulations to plug these perceived gaps are expected imminently.
Looking ahead in 2021:
Businesses must remain vigilant for reforms and new rules in a fast-changing regulatory environment and prepare for a more aggressive enforcement environment and greater scrutiny of:
- markets and mergers, particularly those involving innovation-led, data-heavy or consumer-facing businesses;
- the commercial practices of firms with market power, especially unfair pricing and selling practices;
- the conduct of firms in digital markets where many competition agencies have expressed their intention to prioritise fairness for consumers and open access for all stakeholders;
- anti-competitive collaborations (or cartels) in distressed sectors or bid rigging affecting public procurement. Although many authorities have been sympathetic to business collaboration designed to increase output, or overcome shortfalls, of vital products and services during the pandemic, the intention has not been to provide a general licence in favour of horizontal co-operation. In the US, for example, the Department of Justice (DOJ) is prioritising the prosecution of procurement collusion offences through its newly created Procurement Collusion Strike Force, including those related to COVID-19; and
- conduct harming broader public policy goals, such as improved environmental standards or protection of workers.