Articles Posted in Mergers & Acquisitions

Update: Is it Time for Antitrust Lawyers and Private Equity Clients to Pay Attention to Interlocking Directorates and Section 8 of the Clayton Act? The Answer is Still Yes

November 11, 2025 | Bona Law PC

Authors: Steven Cernak and Luis Blanquez

Section 8 of the Clayton Act prohibits certain interlocking directorates between competing corporations. But while the prohibition has been around since 1914, most antitrust lawyers pay little attention to it, partly because companies can quickly resolve any issues voluntarily.

We first brought Section 8 to the attention of our readers in 2022 because of comments by then-AAG Jonathan Kanter. Even more recent actions by the agencies, detailed below, plus the Hart-Scott-Rodino (HSR) Act’s new requirements under the updated filing form—soliciting information on overlapping directorates—should be enough for everyone to keep a closer eye on the issue, in particular private equity firms.

Clayton Act, Section 8 Basics

The prohibitions of Section 8, in its most recent form, can be simply stated: No person can simultaneously serve as an officer or director of competing corporations, subject to certain jurisdictional thresholds and de minimis exceptions. Truly understanding the prohibition, however, requires understanding all those italicized terms.

First, Section 8’s prohibition applies only if each corporation has “capital, surplus, and undivided profits,” or net worth, of $10M or more, as adjusted. The Federal Trade Commission (FTC) is responsible for annually adjusting that threshold for growth in the economy. Currently, for 2025, the thresholds are $51.380 million for Section 8(a)(1) and $5.138 million for Section 8(a)(2)(A). These new thresholds took effect on February 21, 2025.

Section 8 provides an exception where the competitive sales of either or each of the corporations is de minimis. Specifically for 2025, no interlocks are prohibited if (1) both of the entities have capital, surplus and undivided profits of $51,380,000 or less, or the competitive sales of either entity are less than $5,138,000; 2) the competitive sales of either corporation are less than 2% of that corporation’s total sales; or 3) the competitive sales of each corporation are less than 4% of that corporation’s total sales.

Originally, Section 8 applied only to directors of corporations; however, the 1990 amendments extended the coverage to officers, defined as those elected or chosen by the corporation’s Board. Despite the clear wording of the statute limiting it to officers and directors, some courts have considered the possibility that Section 8 might apply when a corporation’s non-officer employee was to be appointed a director of a competitor corporation.

The language of Section 8 clearly applies to interlocks between competing corporations. An interlock between a corporation and a competing LLC would not be covered by the statutory language or the legislative history of the original statute or amendment. The FTC and DOJ have not explicitly weighed in on application to non-corporations, although the FTC’s implementing regulations for Hart-Scott-Rodino cover LLC explicitly as “non-corporate interests” different from corporations. Still, the spirit of Section 8 would seem to cover any such non-corporate interlock. Also, any corporate director who also serves a similar role for a competing LLC would face an increased risk of violating Sherman Act Section 1.

Section 8 clearly applies if the same natural person sits on the boards of the competing corporations. It might also apply if the same legal entity has the right to appoint a natural person to both Boards, even if that entity appoints two different natural persons to the two Boards. That interpretation is consistent with the Clayton Act’s broad definition of “person” and has been supported by both the FTC and DOJ and the one lower court to consider the question.

As with other parts of the antitrust laws, the question of competition between the two corporations requires some analysis. The few courts to look at the question have held that corporations that could be found to violate Sherman Act Section 1 through an agreement would be considered competitors. On the other hand, these same courts did not define competitors more narrowly to be those corporations that would not be allowed to merge under the more extensive analysis of Clayton Act Section 7.

Recent DOJ and FTC Action

The DOJ has traditionally enforced Section 8’s prohibition on interlocking directorates, which has become a priority under the current Administration.

As a result, there have recently been an increasing number of instances where directors have resigned to resolve DOJ concerns.

In April 2024, two directors from Warner Bros. Discovery Inc. (WBD)–– Steven A. Miron and Steven O. Newhouse––resigned from the WBD board after the Antitrust Division expressed concerns that their positions on both the WBD and Charter Communications Inc. boards potentially violated Section 8 of the Clayton Act. Charter, with its Spectrum cable service, and WBD, through its Max streaming subscription services, both provide video distribution services to customers. The division’s enforcement efforts to date have unwound or prevented interlocks involving at least two dozen companies.

More recently, in September 2025, the FTC found that Sevita and Beacon Specialized Living Services, Inc.—both owned by private equity investors and providers of services for individuals with intellectual and developmental disabilities—had overlapping board members, violating Section 8 of the Clayton Act. As a result, three directors resigned from the board of Sevita Health following FTC enforcement actions. The FTC didn’t engage in any formal legal action against the companies, and the resignations were enough to resolve the FTC’s competition concerns without further legal action.

Recent DOJ Speeches

The DOJ action that led to the resignations is consistent with recent speeches by DOJ officials

In 2022, Jonathan Kanter, former assistant attorney general in charge of the Antitrust Division at the DOJ, made some significant remarks about Section 8. First, he highlighted the fact that the Division is committed to litigating cases using the whole legislative toolbox that Congress has given them to promote competition, including Section 8 of the Clayton Act. Second, he reminded everyone that Section 8 helps prevent collusion before it can occur by imposing a bright-line rule against interlocking directorates. Third, that for too long, Section 8 enforcement has essentially been limited to their merger review process. And last but not least, that the Division will start ramping up efforts to identify violations across the broader economy and will not hesitate to bring Section 8 cases to break up interlocking directorates. Another former head from the FTC made a similar statement back in 2019, indicating how Section 8 of the Clayton Act protects against potential information sharing and coordination by prohibiting an individual from serving as an officer or director of two competing companies.

Continue reading →

Could Elon Musk Acquire TikTok Under a Joint Operating Agreement Exception to the Antitrust Laws?

January 17, 2025 | Bona Law PC

Authors: Pat Pascarella and Aaron Gott

The idea of Elon Musk purchasing TikTok might sound like a headline ripped from a speculative business column, and maybe it is. But as antitrust lawyers, we couldn’t resist. Obviously, Mr. Musk already owns X, and any such acquisition might raise antitrust concerns.

But could you head off those concerns by structuring the deal with an exception to the antitrust laws known as a Joint Operating Agreement? While JOAs were related to the newspaper industry and are largely seen as a relic of the past, their principles could provide a framework for addressing modern concerns.

A Brief History of Joint Operating Agreements

Joint Operating Agreements emerged during the 20th century as a mechanism to save failing newspapers thereby maintaining at least some level of editorial competition. By the mid-20th century, many U.S. cities had two major newspapers, but declining revenues and readership often left one teetering on the edge of closure. To prevent monopolization of the news market, Congress enacted the Newspaper Preservation Act of 1970, which allowed competing newspapers to enter into JOAs.

Under a JOA the two newspapers would be permitted to merge their business operations, so long as they agreed to maintain separate editorial teams. The goal was to preserve journalistic diversity in cities that were about to find themselves with only one surviving paper. But JOAs required approval from the Department of Justice (DOJ) and were contingent on demonstrating that one of the newspapers was “failing.”

JOA Requirements

For a JOA to be approved, the following conditions had to be met:

Failing Firm Doctrine: One of the parties had to demonstrate that it was financially unsustainable and would likely exit the market absent the agreement.
No less anticompetitive alternative: There must not be a less anticompetitive alternative to the joint operation agreement.
Preservation of Competition: The agreement had to preserve a degree of competition, particularly in areas such as content creation or editorial independence.
DOJ Oversight: The DOJ maintained the authority to review and approve any proposed JOAs, ensuring they aligned with antitrust laws.

Applying the JOA Framework to a Musk-TikTok Deal

Elon Musk’s ownership of X likely would raise antitrust concerns about the acquisition of TikTok. But a JOA (or JOA.2) could provide a creative solution to balance these concerns with broader policy objectives, such as ensuring competition with other tech giants like Meta and Alphabet while also addressing national security issues tied to TikTok’s current Chinese ownership.

A critical hurdle, however, would be demonstrating that TikTok meets the “failing firm” criterion. While TikTok is far from failing financially, isn’t “failing” simply another term for “about to involuntarily exit the market.” Same outcome, hence same justification.

But this difference could mean a crucial difference under the JOA legal framework. As explained above, there must be no less anticompetitive alternative available. When it came to the failing newspapers, there was no alternative: failing newspapers did not have buyers lining up to buy them. But popular social media platforms do.

But there’s an answer here as well. One idiosyncrasy of the TikTok situation is that the Chinese government has taken the position that the TikTok algorithm is a Chinese national security secret. So any sale of TikTok means, as a practical matter, that it is not likely to come with a functioning algorithm. This limits the potential pool of buyers to those who either have one they can adapt or who can put one together on the fly.

This likely narrows significantly the existing pool of willing buyers to those who already have social media companies, or possibly even to those people who are known to drive their teams to accomplish skunkworks-like missions on impossible timelines.

Political and Regulatory Considerations

Continue reading →

Antitrust Agency Publishes Revised HSR Notification Thresholds and Filing Fees For 2025

January 15, 2025 | Bona Law PC

Authors: Steven Cernak and Luis Blanquez

On January 10, 2025, the Federal Trade Commission (FTC) issued its usual annual announcement to increase the Hart-Scott-Rodino (HSR) Act thresholds. The 2025 thresholds will take effect 30 days after publication in the Federal Register, which means February 10, 2025.

HSR requires the parties to submit certain information and documents and then wait for approval before closing a transaction. The FTC and DOJ then have 30 days to determine if they will allow the merger to proceed or seek much more detail through a “second request” for information. The parties may also ask for “Early Termination” to shorten the 30-day waiting period, although for nearly two years the agencies have suspended this option.

The HSR Act notification requirements apply to transactions that satisfy the specified “size of transaction” and “size of person” thresholds. These thresholds adjust annually to reflect changes in the U.S. gross national product.

Three thresholds determine the applicability of HSR filing requirements.

First, one of the parties to the transaction must be in commerce in the United States or otherwise affect U.S. commerce.

Second, the acquiring party must be acquiring securities, non-corporate interest, or assets of the target in excess of $126.4 million––the “size of transaction” threshold. Entities need not file notifications when the value of the voting securities and assets is below this threshold.

Third, if the transaction exceeds $126.4 million but does not exceed $505.8 million–the “size of the parties” threshold–– then at least one party involved in the transaction must have annual net sales or total assets of at least $252.9 million, and the other party must have annual net sales or total assets of at least $25.3 million.

Transactions valued at more than $505.8 million are reportable regardless of the size of the parties, unless an HSR Act exemption applies.

The FTC’s notice also implemented a new filing fee structure from the new legislation. The new structure will be in place starting with filings made on or after February 10, 2025. Below are the new fee thresholds:

2025

Size of the Transaction                        Merger Fee

$126.4 million – $179.4 million             $30,000

$179.4 million – $555.5 million        $105,000

$555.5 million – $1.111 billion           $265,000

$1.111 billion – $2.222 billion                   $425,000

$2.222 billion – $5.555 billion                   $850,000

$5.555 billion or more                                  $2,390,000

As a result of the new legislation, those fees will also adjust annually, based on changes to the consumer price index.

The FTC further published revised thresholds relating to Section 8 of the Clayton Act. Section 8 prohibits interlocking directorates in which one “person” serves simultaneously as an officer or director of competing corporations, subject to certain exceptions. Now, Section 8 of the Clayton Act applies when each of the competing corporations has capital, surplus, and undivided profits aggregating more than $51,380,000 and each corporation’s competitive sales are at least $5,138,000 again with certain exceptions.

Continue reading →

Mergers & Acquisitions, AI and Antitrust: The New Creative Ways for Big Tech to Enter the AI Market and Avoid HSR Rules

July 21, 2024 | Bona Law PC

Author: Luis Blanquez

Two of the main pillars from the Biden Administration Antitrust Policy in 2023 have been an aggressive merger enforcement agenda and its crusade against Big Tech and vertical integration.

On the merger side, the Department of Justice (DOJ) and Federal Trade Commission (FTC) have published new Merger Guidelines (see also here) and proposed new changes to Hart-Scott-Rodino Act (HSR) notification requirements (see also here.) In addition, both antitrust agencies have challenged more mergers in 2022 and 2023 than ever before. In a letter from November 2023 responding to questions from Rep. Tom Tiffany, R-Wis., FTC Chair Lina Khan stressed the fact that:

“a complete assessment of the FTC’s success in stopping harmful mergers reveals that of the 38 mergers challenged during my tenure as Chair, 19 were abandoned, another 14 were settled with divestitures, and two are pending a final outcome.”

This includes key acquisitions such as the Nvidia/Arm Ltd or Meta/Within, among many others. And the FTC is showing no signs of slowing down this aggressive approach. Another recent example of a merger challenge by the DOJ is the Live Nation/Ticketmaster’s complaint.

But despite the FTC’s Chair confidence and the recent new challenge by the DOJ, this hasn’t been an easy path for the antitrust enforcers. Courts in the US have pushed back several of the agencies’ extreme challenges and new theories, such as in the Microsoft/Activision, (see also here, here, and here.)

On the Big Tech front things do not look much better. Both agencies have filed major illegal monopolization cases, sometimes together with State AGs, against Apple (Smartphones), Google (Google Search and Google Ad Technology), Amazon (Online Retail), and Meta (Instagram/WhatsApp––see also here––, and Within acquisitions.)

In other words, if you work in Big Tech, forget about acquiring an AI startup, unless you want to go through a long and hostile review process. This is having a serious impact on the most disruptive and growing industry we’ve seen in years.

The “Magnificent Seven” Tech Companies

The ascendency of Apple, Microsoft, Nvidia, Tesla, Meta, Alphabet and Amazon, the so-called “Magnificent Seven” tech stocks––is indicative of “a fundamental shift”, primarily propelled by advancements in AI. Currently, the top seven tech stocks have not only accounted for about half of the gains in the entire S&P 500, but also contributed to over a quarter of the index’s total market capitalization. These companies are not merely riding the wave of current technologies but actively shaping the future of AI. They collectively gather most of the market cap in the industry.

But until we see a shift on the current enforcers’ antitrust policy against acquisitions involving Big Tech, it doesn’t matter how well these companies perform. Why? Because as a startup in the tech industry (and really in any industry), your main goal is to either try to eventually go public through an IPO––if you become big enough––, or rather look for one of the Big Tech companies to acquire you. But with the antitrust agencies’ current appetite to block such transactions, Venture Capital companies and investors in the AI industry are thinking twice before risking their money on a startup, unless they specifically know that company is going public. Otherwise, the risk that VCs and investors see to get the deal blocked by either the FTC or DOJ is just too high, regardless of the potential these startups might have. And let’s be honest, the number of companies that make it to that level is already extremely low.

First, this is clear evidence of how such an aggressive and disproportionate approach to acquisitions involving Big Tech is currently hindering innovation in the most relevant and disruptive industry we’ve seen in years. But this is a topic for another article.

Second, what I want to discuss in this article is how because of such an extreme approach from the Biden Administration, Big Tech are starting to develop new and creative strategies to get involved in the AI industry, without having to acquire any startups and face the antitrust agencies. At least not until now, because this has already raised some eyebrows at both the DOJ and FTC.

Microsoft/Inflection

The first of these deals involves Microsoft and Inflection.

Backed by Microsoft, Nvidia and billionaires Reid Hoffman, Bill Gates and Eric Schmidt; ex-DeepMind leader Mustafa Suleyman––now Google’s main AI lab, and Reid Hoffman, who co-founded LinkedIn, started Inflection in 2022, claiming to have the world’s best AI hardware setup.

Inflection thesis was based on AI systems that can engage in open-ended dialogue, answer questions and assist with a variety of tasks. Named Pi for “personal intelligence,” Inflection’s first release helped users talk through questions or problems over back-and-forth dialog it then remembers, seemingly getting to know its user over time. While it can give fact-based answers, it’s more personal and “human” than any other chatbot.

In March of this year, Microsoft announced the payment of $650 million to inflection. $620 million for non-exclusive licensing fees for the technology (meaning Inflection is free to license it elsewhere) and $30 million for Inflection to agree not to sue over Microsoft’s poaching, which includes co-founders Mustafa Suleyman and Karén Simonyan. Suleyman will run Microsoft’s newly formed consumer AI unit, called Microsoft AI–– a new division at Microsoft that will bring together their consumer AI efforts, as well as Copilot, Bing and Edge––, whereas Simonyan is joining the company as a chief scientist in the same new group. Inflection will host Inflection-2.5 on Microsoft Azure. It will be also pivoting away from building the personalized AI chatbot Pi to become an AI studio helping other companies work with large language model AI.

So here is where it gets interesting. Microsoft didn’t formally need to make an offer to acquire Inflection. In other words, technically Inflection remains an independent company. But the antitrust agencies seem to disagree and have started asking themselves the following questions.

First, if the key people, money and technology have all left the company to go to Microsoft, what’s really left in Inflection to still be considered as a competitor in the market?

Second, could this qualify as a change in control according to 16 C.F.R. §801.1(b)? What about a file-able acquisition of just “assets”––a term currently undefined by the HSR statute and regulations?

And third, does this move create a “reverse acqui-hire” transaction, a practice which is becoming very popular in the AI industry? The so-called “acqui-hires,” are transactions in which one company acquires another with the main purpose to absorb key talent. But what’s going on in the AI industry is not quite the same. Big Tech are acquiring key employees––such as Suleyman and Simonyan with their core teams in this case––, while licensing technology, leaving the targeted company still functioning independently––so no HSR filing requirement is apparently triggered. This is not the first time we’ve seen this scenario in the AI industry. Last month, Amazon poached Adept’s CEO and key employees, while getting a license to Adept’s AI systems and datasets.

But the antitrust enforcers have started to ask themselves whether Inflection and Adept are still real competitors in the AI market. The FTC has already sent subpoenas to both parties in the Microsoft/Inflection transaction, asking for information about a potential gun-jumping scenario: whether the $650 million deal may qualify as an informal acquisition requiring previous government approval. In the case of Amazon/Adept, the FTC has also decided to start an investigation and asked for more information.

OpenAI, Nvidia and Microsoft

The FTC and DOJ are finalizing an agreement to split duties to investigate potential antitrust violations of Microsoft, OpenAI, and Nvidia.

According to Politico, the DOJ will lead the Nvidia investigation, and its leading position in supplying the high-end semiconductors underpinning AI computing, while the FTC is set to probe whether Microsoft, and its partner OpenAI, have unfair advantages with the rapidly evolving technology, particularly around the technology used for large language models. At issue is the so-called AI stack, which includes high-performance semiconductors, massive cloud computing resources, data for training large language models, the software needed to integrate those components and consumer-facing applications like ChatGPT.

Continue reading →

Best Practices for Merger Reviews before the Federal Agencies and the California Attorney General’s Office

February 5, 2024 | Bona Law PC

Author: Paul Moore²

Introduction

Over the past several decades State Attorneys General have become increasingly involved in merger reviews in tandem with the Federal Trade Commission and/or the U.S. Department of Justice’s Antitrust Division (the Regulatory Agencies). This increase in state merger reviews has been in parallel with states raising their merger and non-merger profile and general antitrust enforcement efforts statewide and nationally. This trend has occurred, in part, as Attorneys General expanded their staffs and have become increasingly experienced in antitrust enforcement efforts and merger analysis. While many states, including California, do not have statutes mandating proposed merger registration, Attorneys General have statutory authority to investigate conduct to ensure no laws have been violated³. This means that an Attorney General can decide to review a proposed merger whenever they think it may violate a state’s antitrust laws. Therefore, it makes sense to notify an Attorney General when a proposed merger may have a competitive impact in a specific state and is likely to trigger an in-depth analysis at the federal level. Some examples might be a merger between two competitors who have substantial overlapping retailing assets, service routes, or service areas in one state. Such a notification to a state allows parties to avoid duplicative and possibly successive investigations. Best practices have emerged around how to conduct a merger investigation with a Regulatory Agency and tandem with the California Attorney General’s office.

Best Practices When Cooperating with Staff

Contacting the federal agency likely to review a transaction before submitting an HSR filing is increasingly becoming part of merger review practice. Since there is no statutory requirement to seek regulatory authority to merge at the state level in California a best practice is to invite the Attorney General to participate in the review process to avoid subsequent investigations that could have been run in parallel with other agencies and possibly avoid efforts by the staff ex-post to unwind a transaction⁴. Contacting the California Attorney General (Cal-AG) before an HSR is filed is generally well-received by staff and is typically considered a smart strategy because it allows the staff assigned to the transaction the ability to begin reviewing the transaction before the 30-day statutory clock has started. This extra time allows staff more time to conduct a review before any enforcement decisions need to be made and in some cases provides the time necessary to avoid one altogether. In addition, a pre-filing notification to both staffs permits the two agencies to interact freely since there is no HSR confidence to maintain.

We are in an era where many meetings are conducted over video. Generally, saving time and client resources is a good thing; however, visiting a State Attorney General’s staff in their office at the beginning of a merger can pay significant dividends. An in-person visit can establish the foundation for a positive working relationship, allow for clear communications⁵ and most importantly, communicate to the staff and Attorney General that you are aware of the importance of their involvement and welcome their participation. The in-person visit makes a significant first-step in ensuring that things start off on the right foot.

Once the HSR is submitted, the Cal-AG is able to file her Form 712 and to continue the interagency dialogue with the benefit of the documents and filings the parties have made. The Cal-AG’s staff can also begin to reach out to third parties and seek waivers that permit the FTC/DOJ to share what is produced with the states. This is more efficient for the producing parties as well, as they can make what amounts to a single production to satisfy both reviewing agencies⁶. Securing these waivers early in the process also allows the staffs to communicate freely, to share economic analyses based on produced information, and for the CAL-AG staff to join party meetings with the FTC/DOJ⁷. This level of cooperation benefits all involved as it prevents parties from making the same presentation twice and it allows both regulatory agencies to hear the same information simultaneously.

Continue reading →

Did You Receive an FTC or DOJ Subpoena? Be Sure To Preserve Everything Ephemeral

February 2, 2024 | Bona Law PC

Authors: Steven Cernak & Molly Donovan

The Federal Trade Commission and the Department of Justice are reminding companies that, in responding to grand jury subpoenas and second requests, there is an obligation to preserve data and communications created using “new methods of collaboration and information sharing tools, even including tools that allow for messages to disappear via ephemeral messaging capabilities.” The government has specifically called out Slack, Microsoft Teams and Signal as being some of the applications of concern “designed to hide evidence.”

The government says that while there has always been an obligation to produce information from ephemeral messaging applications in investigations and litigations, the purpose of the reminder is to ensure that counsel and clients do not “feign ignorance” when choosing to use ephemeral messaging to do business. Thus, the FTC and DOJ will include new, explicit language in subpoenas and other requests specifically stating that data from ephemeral messaging applications must be preserved. A failure to meet that obligation could result in obstruction of justice charges.

More generally, once a company has been served with a subpoena, a document hold should be prepared and circulated right away. A document hold is a written notification to relevant employees not to delete, destroy or alter any electronic or paper materials potentially relevant to the subpoena. The notice must unpack what that language means in plain English and should be conservative in describing what “potentially relevant” means—(remember that just because something is being preserved does not necessarily mean it will have to be produced.)

The document hold should apply to all types of messaging (text, IM, DMs, ephemeral) to ensure that all existing and going-forward materials will not be deleted. The relevant persons with IT expertise should certify internally that preservation is occurring effectively, that all auto-delete functions have been turned off, and that back-up tapes are not being purged automatically.

It’s also a good idea to instruct employees not to talk to each other about the subpoena or the underlying subject matter. When employees talk to each other, it can create the appearance of collusion—i.e., employees are coordinating with each other about what to say or not say to the lawyers or to the government. This can raise obstruction suspicions that may only grow if the discussions occur over ephemeral messaging applications that employees think will not leave a paper trail behind.

If employees believe that they or others have violated, or behaved inconsistently with, company policies or relevant laws, employees should discuss that only with in-house or outside counsel—not with each other.

Continue reading →

Antitrust Agency Publishes Revised HSR Notification Thresholds and Filing Fees For 2024

January 23, 2024 | Bona Law PC

Authors: Steven Cernak and Luis Blanquez

On January 22, 2024, the Federal Trade Commission (FTC) issued its usual annual announcement to increase the Hart-Scott-Rodino (HSR) Act thresholds. The 2024 thresholds will take effect 30 days after publication in the Federal Register, which is expected soon, so the thresholds likely will be effective in late February.

Continue reading →

FTC Sues IQVIA To Block Healthcare Programmatic Advertising Acquisition

January 3, 2024 | Bona Law PC

Authors: Molly Donovan & Steven Cernak

Update: The FTC has won a preliminary injunction to stop IQVIA from acquiring Propel Media. The judge (Judge Ramos in the Southern District of New York) ruled the injunction is in the public’s interest and the FTC has shown a reasonable probability of a substantial impairment in competition should the deal proceed. A written opinion is not available as of this post (January 3, 2024).

***

The Federal Trade Commission has sued to block IQVIA’s proposed acquisition of Propel Media—a deal the FTC says would combine two of the top three providers of programmatic advertising that target U.S. healthcare providers on a one-to-one basis. The FTC says IQVIA and Propel both operate demand-side platforms or “DSPs” (called Lasso and DeepIntent, respectively) in an already-concentrated “healthcare provider programmatic advertising market” (a “subset of the total healthcare digital advertising industry”). And the FTC argues the deal would result in further concentration in that market and would significantly decrease advertising competition, which would contribute to higher prescription drug costs for U.S. consumers.

The FTC has filed an administrative complaint and has asked the Southern District of New York to block the acquisition until the administrative trial is completed—projected for December 2023. The FTC requested that the injunction issue in the next few days on or before July 21.

According to the FTC, programmatic advertising matches buyers and sellers of advertising space in virtual auctions that occur in seconds or less. Programmatic advertising automates the more traditional negotiations between advertiser and publisher of print or digital ads. DSPs like Lasso and DeepIntent provide programmatic advertising to healthcare advertisers specifically (i.e., pharmaceutical companies and their advertising agencies).

According to the FTC, IQVIA and Propel are the leading DSPs providing programmatic advertising that targets healthcare providers on a one-to-one basis. This means IQVIA and Propel have the scope and quality of healthcare data to identify individual doctors—and their digital devices—who are relevant to a particular ad campaign. DSPs target healthcare providers because they make the “prescribing decisions” and shape consumers’ perceptions of drugs and drug brands.

Although the FTC admits that there are many “generalist” programmatic advertisers, the FTC urges that healthcare DSPs operate in a distinct relevant market specific to healthcare advertising with clients who have unique advertising demands.

The FTC calls the proposed acquisition presumptively unlawful under the Horizontal Merger Guidelines and caselaw. The FTC’s major concerns are twofold: the combination would eliminate “head-to-head” competition between 2 of only 3 competitors in the relevant market and would enhance IQVIA’s ability to reduce or eliminate potential competition by refusing to sell its healthcare data to would-be competitors or by selling it at anticompetitive prices. The FTC charges that IQVIA is the world leader in terms of the scale and quality of its healthcare data. And while IQVIA currently sells that data to DSPs and others, the FTC says IQVIA would be positioned to increase price and/or reduce access to data critical to one-to-one healthcare DSPs should the deal go through.

Continue reading →

Five Key Takeaways from Fifth Circuit’s Illumina Merger Review Opinion

December 26, 2023 | Bona Law PC

Author: Steven Cernak

On December 15, 2023, the Fifth Circuit remanded to the FTC its order requiring Illumina to divest its re-acquired subsidiary, Grail. Despite the remand, the opinion is a big win for the FTC. Below, we offer five takeaways for future merging parties and their counsel.

[Disclosure: Bona Law filed an amicus brief for 34 Members of Congress arguing that the FTC’s action violated the “major questions” doctrine and misinterpreted Clayton Act Section 7 in several ways.]

Here is a quick summary of the twists and turns of this case from our earlier writings. Illumina is a dominant provider of a certain type of DNA sequencing. Grail is one of several companies developing a multi-cancer early detection (MCED) test. An MCED promises to be able to detect biomarkers associated with up to fifty types of cancer by extracting the DNA from a simple blood sample. To work, the MCED needs DNA sequencing supply. According to the complaint, the type of DNA sequencing that works best — and with which Grail and all other MCED developers have been working — is the type supplied by Illumina.

The parties announced Illumina’s proposed acquisition of Grail in September 2020 and said that it would speed global adoption of Grail’s MCED and enhance patient access to the tool. In late March 2021, the FTC challenged this transaction by filing an administrative complaint before its own administrative law judge (ALJ). Shortly thereafter, the European Commission announced that it too would investigate the transaction, even though the transaction did not meet its usual thresholds.

During these investigations, the parties closed the transaction. The European Commission decided to block the transaction and the parties appealed. Just before the European decision, the FTC ALJ dismissed the complaint in an unexpected decision ruling for the first time against the FTC in a merger case. In a nutshell, the ALJ concluded that the FTC failed to prove that Illumina’s post-acquisition ability and incentive to advantage Grail to the disadvantage of Grail’s alleged rivals would likely result in a substantial lessening of competition in the relevant market for the research, development, and commercialization of MCED tests. FTC Complaint Counsel appealed the ALJ decision. The four Commissioners unanimously agreed to overturn it. Now, the Fifth Circuit has largely upheld that decision of the Commission, though with a remand for reconsideration of one aspect of the decision, as described below.

Takeaway 1: This Development is Largely an FTC Win

Some of the initial tweets and headlines, perhaps after reading only the opinion’s opening paragraph vacating the FTC’s order and remanding for further consideration, seemed to characterize the Fifth Circuit opinion as another loss for the FTC. But make no mistake, this development is a big win for the FTC for several reasons. First, the FTC challenged this transaction to block, then later, unwind, the acquisition of Grail. About a day after the opinion was filed, Illumina announced it would divest Grail. Mission accomplished.

Second, the court found “substantial evidence” for the Commission’s conclusions, despite arguments by the parties (and amici) to the contrary. As detailed below, the court did not question the Commission’s use of older cases and theories to review mergers.

Third, even the court’s rationale for the remand was not that strong a rebuke of the FTC. During the investigation, Illumina made an Open Offer to other customers of its sequencing, promising to treat them as well as Grail. The ALJ found this a useful additional fact in concluding that Illumina did not have the incentive to harm Grail competitors. The FTC majority opinion disagreed with the ALJ and only considered the Open Offer in the remedy phase of the merger review. Commissioner Wilson also disagreed with the ALJ but considered the Open Offer in Illumina’s rebuttal portion of the liability phase of the review. The parties argued that the Open Offer should be addressed by the FTC Complaint Counsel in its prima facie case for liability. The Fifth Circuit agreed with Commissioner Wilson. It seems certain that the other three Commissioners would have reached the same ultimate conclusion on remand when considering the Open Offer earlier in the process.

Takeaway 2: The Court Quickly Punted Constitutional Concerns

As with several other recent challenges to the FTC and other administrative agencies, the parties raised serious, difficult constitutional questions about the structure and processes of the FTC and its review of mergers. The court wrestled with none of them. Instead, the court took only two pages to explain that the four questions were answered by precedent, either from the Fifth Circuit or the Supreme Court, and saw no reason to explore whether any court should change. While this opinion is not the final word on these and similar issues, the FTC at least avoided a number of thorny issues for now.

Takeaway 3: Vertical Might be the New Horizontal

We hear sometimes that a proposed transaction should sail through the Hart-Scott-Rodino merger review process because “the parties don’t compete.” While that focus on current horizontal competition might have been a sufficient screen for antitrust issues a few years ago, it no longer is. Whether the Trump Administration’s challenge of the AT&T/TimeWarner transaction or the Biden Administration’s challenge of this transaction, Microsoft/Activision, or others, vertical (and potential competition) mergers have been ripe for challenge for a few years. Illumina’s abandonment of this vertical deal after this ruling will only encourage further challenges by federal and state antitrust enforcement agencies.

Takeaway 4: Courts Sometimes Agree with New/Renewed Antitrust Theories

As the Biden Administration DOJ and FTC have issued new merger guidelines or unilaterally taken other actions, one popular response from parts of the antitrust commentariat has been “but just wait until the courts consider them.” It is true that a long-lasting change in antitrust interpretation (like, say, the Chicago School) can only start with law review articles and enforcer speeches but eventually will require supportive court opinions; however, the “wait for the courts” sentiment seems built on two faulty premises.

Continue reading →

Antitrust for Kids: Back to School with Tough New Rules—The Draft Merger Guidelines

September 5, 2023 | Bona Law PC

Author: Molly Donovan

You may remember Gordon—in many ways, he was dominant in the 5^th grade, and though his behavior was questionable at times, he was very popular.

I’m writing this story because Gordon is starting a new school year and has ascended to MIDDLE SCHOOL. Very cool, but very intimidating—even for Gordon. For one thing, there is an entirely new set of rules about how students are supposed to behave.

In elementary school, there are rules, of course, but they’re intuitive (no pushing, no yelling, please share) and all kids are encouraged to form friendships with all other kids. You can walk to lunch with any other kid you choose to. You can play at recess with any group of kids you want to. This made things easy for Gordon who was a natural at buddying-up with classmates and forming new relationships with ease.

In middle school, things aren’t the same—there’s actually a rule against the buddy system that feels contrary to everything Gordon previously knew. Basically, the rule is: you cannot run around in friendship packs—or duos even—unless they are teacher approved. Why? The principal says the school is trying to eliminate friend groups that are probably going to cause trouble—by, for example, ganging up against the weaker kids who aren’t popular and don’t like gym, or getting too powerful on the playground and pestering the younger kids. The rule is not against combinations that will cause trouble, only that probably will.

You’re likely wondering how it will be determined whether a particular friend group meets that standard. Good question. Apparently, the test is not whether the parents and students —experts on who’s who in the ever-changing social dynamics of middle schools—believe a certain combination spells trouble. The principal and teachers will decide based on dusty old textbooks with opinions written years and years ago (we’re talking 1970s) about tween society.

Query whether that’s the best way. But that’s the way the teachers want to do things.

Did it work out? The school year just started, so it’s too soon to tell and the rules are in purgatory—they’re being publicly tested but are not official yet.

Continue reading →