February 23, 2021

Antitrust: Agencies Increase Use of Sherman Act in M&A Enforcement

This Arnold & Porter memo looks at 2020 antitrust M&A enforcement and what may lie ahead in 2021.  This excerpt says that the DOJ & FTC are increasingly turning to the Sherman Act’s anti-monopoly provisions when bringing enforcement actions involving acquisitions of nascent competitors:

Enforcers usually bring their merger challenges under Clayton Act § 7, which specifically addresses mergers and acquisitions. But enforcers may also allege a conspiracy to restrain trade under Sherman Act § 1 and they may allege monopolization or attempted monopolization under Sherman Act § 2. DOJ can bring these claims directly under the Sherman Act while FTC brings such claims under FTC Act § 5, which prohibits “unfair methods of competition” or “unfair or deceptive acts or practices.”

In recent years, enforcers have emphasized use of Sherman Act challenges. Last year, we noted that both FTC and DOJ suggested that they may use Sherman Act § 2 to investigate and challenge serial acquisitions of nascent competitors to allow enforcers to analyze mergers as part of a broader pattern of conduct. In 2020, both FTC and DOJ challenged several transactions citing both the Sherman Act and the Clayton Act.

DOJ alleged that the “Collaboration Agreement” between Geisinger and Evangelical constituted a conspiracy to restrain trade in violation of Sherman Act § 1, and that Visa/Plaid constituted monopolization in violation of Sherman Act § 2. FTC challenged Altria’s minority investment in Juul Labs Inc and associated agreements on the basis that it violated Sherman Act § 1, while Commissioners Chopra and Slaughter argued that FTC should also have challenged the transaction as a conspiracy to monopolize electronic cigarettes in violation of Sherman Act § 2. FTC also is challenging Facebook’s consummated acquisitions of Instagram and WhatsApp as part of broader monopolization scheme in violation of Sherman Act § 2.

The increased use of the Sherman Act may be another signal that the agencies are ratcheting up merger enforcement. The Clayton Act isn’t a criminal statute, but that’s not the case with the Sherman Act. Here’s an excerpt from the FTC’s description of the Sherman Act in its “Guide to the Antitrust Laws”:

The penalties for violating the Sherman Act can be severe. Although most enforcement actions are civil, the Sherman Act is also a criminal law, and individuals and businesses that violate it may be prosecuted by the Department of Justice. Criminal prosecutions are typically limited to intentional and clear violations such as when competitors fix prices or rig bids.

The Sherman Act imposes criminal penalties of up to $100 million for a corporation and $1 million for an individual, along with up to 10 years in prison. Under federal law, the maximum fine may be increased to twice the amount the conspirators gained from the illegal acts or twice the money lost by the victims of the crime, if either of those amounts is over $100 million.

John Jenkins