Alert: President Biden’s Executive Order on Competition: Three Important Points to Remember for Tech and Life Sciences Companies | Cooley LLP
On July 9, President Joe Biden issued an executive order “Promoting Competition in the US Economy”. With 72 initiatives and directives from more than a dozen federal agencies, the ordinance aims to “aggressively reduce the tendency to consolidate businesses, increase competition and deliver tangible benefits to consumers, workers, to farmers and small businesses in the United States ”.
President Biden said the order was necessary because “[w]e now have 40 years of experience letting giant corporations accumulate more and more power, and what have we taken away from it? Less growth, weakened investments, fewer small businesses. … I think the experiment failed.
The decree does not implement specific policies or establish requirements at this time. Rather, President Biden is asking federal agencies to consider general policies and rules across many sectors, with a focus on the tech and life science industries. This is not surprising given recent White House criticisms of market concentration and conduct in these areas.
Here’s a breakdown of the key aspects of the order affecting tech and life science companies, and what to expect around the corner:
Expect increased merger monitoring
Tech and life science companies, including those focused on pharmaceuticals and medical devices, should expect a more in-depth review of their M&A activity, with the government paying particular attention to the acquisition of nascent competitors, to serial mergers and murderous acquisitions, that is, those that meant to stop a potential competitive threat. Additionally, when it comes to technology mergers, one would expect antitrust agencies to consider factors beyond consumer prices (especially in light of the number of ‘free’ digital platforms and services. “), For example if a merge will result in the accumulation of data. or affect user privacy.
The administration also noted that there should be a direct focus on “uncontrolled mergers”, referring to past consolidation in the technology and life sciences fields and noting that “[t]Too often, federal agencies have failed to block, condition or, in some cases, meaningfully review these acquisitions. The White House has called on the antitrust agencies to straighten things out and “challenge past bad mergers that the previous administration had not challenged before.”
The ordinance further encourages the FTC and DOJ to revise the horizontal and vertical merger guidelines, last published in 2010 and 2020, respectively, to reflect a “rigorous analytical approach.” Within hours of the order, FTC President Lina Khan and Acting Deputy Attorney General of the Department of Justice’s Antitrust Division Richard A. Powers said in a joint statement: “[w]We plan to jointly launch a review of our merger guidelines soon, ”to understand if they may be too permissive. A review of merger guidelines can lead to significant changes, such as lowering market concentration thresholds or focusing on barriers to entry, making it more difficult for companies – especially technology and pharmaceutical companies already in the limelight – to authorize the government’s review of the merger and acquisition process.
Khan also announced that the FTC will vote later this month to repeal a 1995 policy statement in which the FTC relaxed pre-approval requirements in merger authorization regulations and moved away from the practice of requiring parties to the settlement to notify the government of future transactions. In 2019, 43 state attorneys general applied to the FTC for pre-approval of an application to technology platforms, without success. But now, if the 1995 policy is repealed, companies agreeing to terms with the government to complete a merger would be required to obtain pre-approval before embarking on any future merger and acquisition activity.
Expect increased focus on the collection and use of sensitive personal information
The ordinance encourages Khan to issue directives or exercise the regulatory power of the FTC to combat the collection of too much personal information by technology platforms. According to the White House, “[m]all major platform business models have depended on the accumulation of extraordinary amounts of sensitive personal data.
The ordinance further encourages the FTC to issue guidelines or exercise the regulatory power of the FTC to combat “unfair competition in major internet markets,” specifically noting that these rules and guidelines could target market use. dominant online retail data small businesses to launch their own competitive product.
Tech companies should be on the lookout for future guidelines or rules regarding monitoring and data accumulation. Additionally, businesses should expect the FTC or DOJ to view data collection or data misuse as a potentially detrimental effect on competition.
Expect more attention on drug prices
The order also focuses on the life sciences industry, seeking to tackle areas where “the lack of competition in health care increases prices and reduces access to quality care”. According to the White House, “Americans pay more than 2.5 times more for the same prescription drugs as peer countries,” and “[a]As a result, nearly one in four Americans report difficulty paying for their medication. The ordinance encourages the HHS to issue a comprehensive plan within 45 days “to continue efforts to tackle excessive prescription drug prices” and “the recurring problem of rising prices.”
Further, the order directs Khan, as well as the HHS, to identify and address efforts that impede competition from generics and biosimilars, resulting in higher prices, including “unfair anti-competitive behavior or abuses. agreements in the prescription drug industry, such as agreements to delay the entry into the market of generic drugs or biosimilars. Indeed, the ordinance goes so far as to suggest that such agreements should be prohibited by the rule, instead of being assessed under the current antitrust legal framework. The order also directs the HHS and FTC to identify any false, misleading, or misleading statements regarding the safety or effectiveness of generic drugs or biosimilars.
The scrutiny of competition in the technology and life sciences sectors is nothing new. Reigning in big tech has been a key law enforcement priority over the past year, with the DOJ and FTC pursuing massive monopolization cases against dominant digital platforms and Congress considering a list of legislative proposals. that would give authorities new tools to take on tech giants, following the Judicial Chamber’s antitrust subcommittee last year ‘s investigation into the tech industry. Likewise, drug pricing and consolidation in the life sciences industry has been a major concern for antitrust agencies, with the FTC announcing a multilateral task force on drug mergers to modernize the agencies’ approach to analyzing the effects of pharmaceutical mergers earlier this year.
President Biden’s executive order, while in line with these trends, goes further than ever, establishing a whole-of-government effort to protect competition and fully committing to focus on the laser and closely monitor business practices and strategic transactions. in the technology and life sciences sectors. . In the future, transactions and practices that may have gone unnoticed before may now attract the attention of antitrust authorities and other regulators. This can lead to costly and cumbersome investigations, but is also likely to trigger long-standing private litigation.