WEBVTT - Antitrust Changes Could Hinder M&A 0:00:14.760 --> 0:00:17.560 Hello, and welcome to the Votes and Verdicts podcast hosted 0:00:17.600 --> 0:00:21.880 by Bloomberg Intelligence, the investment research platform of Bloomberg LP. 0:00:22.560 --> 0:00:25.279 In this podcast series, we talk about the intersection of 0:00:25.320 --> 0:00:28.880 business policy and law. My name is Jennifer Ree. I'm 0:00:28.880 --> 0:00:32.560 a senior analyst with Bloomberg Intelligence covering US anti trust 0:00:32.600 --> 0:00:35.880 litigation and policy. This is the third of the Votes 0:00:35.920 --> 0:00:39.400 and Verdicts podcast series focused on anti trust issues, and 0:00:39.440 --> 0:00:42.159 for this anti trust episode, I'm really excited to be 0:00:42.240 --> 0:00:46.360 joined by mort Skrosure, the Senior Director for Technology Competition 0:00:46.440 --> 0:00:50.640 Policy at the Software and Information Industry Association, which is 0:00:50.760 --> 0:00:54.280 a mouthful, so I'll be calling it SIIA if we 0:00:54.520 --> 0:00:57.560 mention it going forward now. Prior to his current role 0:00:57.560 --> 0:01:00.960 at SIIA, Moret was a non resident Senior Fellow at 0:01:00.960 --> 0:01:04.319 the Atlantic Council's Europe Center, and he served for more 0:01:04.360 --> 0:01:07.120 than a decade as counsel and senior advisor to a 0:01:07.160 --> 0:01:11.080 foreign ambassador in Washington, DC. Earlier in his career, he 0:01:11.120 --> 0:01:14.240 worked in Europe as a government official and as chief 0:01:13.760 --> 0:01:17.360 of staff to a political leader. He holds an LLB 0:01:17.520 --> 0:01:21.039 and an LM from the University of Copenhagen, where he 0:01:21.080 --> 0:01:24.080 studied under a former chief Justice of the European Court 0:01:24.080 --> 0:01:28.000 of Justice and specialized in EU competition law. Now he 0:01:28.040 --> 0:01:30.840 also has a jd from the Washington and Lee University 0:01:30.840 --> 0:01:33.760 School of Law, so he's also well versed in US 0:01:33.800 --> 0:01:36.320 anti trust law. More, thank you so much for joining 0:01:36.400 --> 0:01:37.360 me for this podcast. 0:01:38.319 --> 0:01:40.560 Thanks so much for having me, Jen. It's great to 0:01:40.600 --> 0:01:41.039 be with you. 0:01:41.840 --> 0:01:43.679 He know, you and I see each other at anti 0:01:43.680 --> 0:01:45.640 trust events all the time, and we sit down and 0:01:45.680 --> 0:01:48.720 I feel like we have the most interesting conversations about 0:01:48.760 --> 0:01:51.200 just generally what's going on in the anti trust world. 0:01:51.240 --> 0:01:53.520 And it occurred to me, well, that conversation might be 0:01:53.560 --> 0:01:58.280 good for a podcast, So here we go. So mort 0:01:58.280 --> 0:02:00.000 and I are going to be talking about some propose 0:02:00.280 --> 0:02:03.480 changes the Federal Trade Commission and Department of Justice Anti 0:02:03.520 --> 0:02:06.720 DRUSS Division are making to rules and guidelines, and these 0:02:06.800 --> 0:02:08.919 changes are going to have a significant, in my mind 0:02:08.960 --> 0:02:12.760 at least a significant impact on merger and acquisition activity 0:02:13.080 --> 0:02:16.880 if the changes are implemented as they are proposed today. Now, 0:02:17.320 --> 0:02:20.280 as I mentioned, More represents a trade association that's comprised 0:02:20.280 --> 0:02:23.239 of technology and software companies. But how he thinks about 0:02:23.280 --> 0:02:26.399 these initiatives and analyzes them really generally applies to any 0:02:26.440 --> 0:02:30.000 industry impacted by the activities of the agencies. But we 0:02:30.040 --> 0:02:32.440 are also going to take advantage of Mort's deep experience 0:02:32.440 --> 0:02:35.320 with EU competition laws to discuss some legislation in New 0:02:35.400 --> 0:02:38.280 York that may actually result in New York enacting anti 0:02:38.360 --> 0:02:40.400 dress laws that are similar to those in the EU 0:02:40.520 --> 0:02:43.480 and quite different from what we've been the framework we've 0:02:43.480 --> 0:02:45.799 had in the US. So, but before we jump into 0:02:45.800 --> 0:02:48.200 these topics, Mort, can you tell us a little bit 0:02:48.200 --> 0:02:53.880 more ABOUTASIIA, still a mouthful and your role with the association? 0:02:55.040 --> 0:03:00.520 Sure? So. My role at SIIA is primarily focused on 0:03:00.800 --> 0:03:05.840 three issues. So one bucket is competition law and policy 0:03:06.120 --> 0:03:11.880 in the US and Europe. Another bucket is content moderation 0:03:12.120 --> 0:03:17.239 slash Section two thirty issues, and the third bucket is 0:03:18.400 --> 0:03:22.119 made up of some discrete transatlantic digital issues such as 0:03:22.240 --> 0:03:27.040 the EUS Digital Services Act, the EU Data Act, and 0:03:27.160 --> 0:03:33.280 data flows. With respect to SIA, we're as an organization, 0:03:33.400 --> 0:03:38.200 we're dedicated to the business of information. We represent about 0:03:38.560 --> 0:03:43.520 three hundred and fifty large and small companies across the industry. 0:03:44.080 --> 0:03:49.520 Our members provide the platforms, data, content and information that 0:03:49.680 --> 0:03:55.360 drive the global economy, informs financial networks, and connects students 0:03:55.360 --> 0:03:59.280 and educators. And to give you just a couple of examples, 0:04:00.040 --> 0:04:03.400 policy Division of which I'm a part. We work to 0:04:03.520 --> 0:04:08.480 shape technology and information policies to foster innovation and protect 0:04:08.480 --> 0:04:14.840 consumer welfare. Our Financial Information Services Division or PHIZZZ, on 0:04:14.920 --> 0:04:17.400 the other hand, it is the global form of choice 0:04:17.440 --> 0:04:23.400 for financial information services companies and professionals UH and where 0:04:23.440 --> 0:04:28.559 they can engage on trends in their industry. Great. 0:04:28.839 --> 0:04:30.720 Now, I guess I should ask you, since you said 0:04:30.800 --> 0:04:34.520 fizz D, whether i'm s I I A is correct 0:04:34.600 --> 0:04:35.680 or do you say CIA. 0:04:37.040 --> 0:04:39.920 We said it's called s I I A H it 0:04:39.960 --> 0:04:42.000 is an out though I agree. I mean, I still 0:04:42.120 --> 0:04:43.760 you know, I've been here for a while. I still 0:04:43.800 --> 0:04:45.000 mix it up from. 0:04:44.839 --> 0:04:47.440 There, right, And I get that, you know what, what 0:04:47.600 --> 0:04:51.320 more described it seems so very focused on, you know, 0:04:51.480 --> 0:04:54.719 tech and tech companies, but really when he's looking at 0:04:54.760 --> 0:04:57.840 anti trust policy, you know, he's thinking about how that 0:04:57.880 --> 0:05:00.960 policy is can impact tech companies. But that same policy 0:05:01.000 --> 0:05:03.520 and the way it could impact a tech company will 0:05:03.600 --> 0:05:08.359 impact any industry that is basically engaging in m and 0:05:08.400 --> 0:05:12.200 A mergers and acquisitions activity and has to file before 0:05:12.440 --> 0:05:15.400 the Federal Trade Commissioner, Department of Justice, and deal with 0:05:15.680 --> 0:05:22.560 a potential following investigation. So let's move into this. I 0:05:22.640 --> 0:05:24.680 mentioned that there are these initiatives at the FTC and 0:05:24.760 --> 0:05:28.480 DJ and in my mind, for all intents and purposes, 0:05:28.880 --> 0:05:33.560 it's really intended to combat consolidation across many industries. The 0:05:33.600 --> 0:05:36.599 antitrust enforcers appointed by the Bid Administration have made it 0:05:36.640 --> 0:05:39.120 really clear that they're going to aggressively seek to slower 0:05:39.160 --> 0:05:42.039 stop consolidation, and we've definitely seen a lot of activity 0:05:42.279 --> 0:05:44.680 aligned with this goal. So what I'm going to start 0:05:44.720 --> 0:05:48.200 with are something a lot of people probably have never 0:05:48.240 --> 0:05:51.000 even heard of, but they are proposed changes to the 0:05:51.040 --> 0:05:54.880 heart Scott Redino filing rules sometimes called HSR filing rules. 0:05:55.040 --> 0:05:57.640 So let's start just with background more. Do you just 0:05:57.640 --> 0:06:00.680 want to explain what HSR is and what HSR notification 0:06:00.760 --> 0:06:01.240 rules are? 0:06:02.279 --> 0:06:08.000 Sure, So, between nineteen forty when Congress passed the Clayton 0:06:08.040 --> 0:06:12.520 Act in nineteen seventy six, there was no obligation for 0:06:12.640 --> 0:06:16.279 companies to give notice of a proposed merger. If a 0:06:16.320 --> 0:06:21.800 transaction raised anti competitive concerns, the only avenue available to 0:06:22.000 --> 0:06:25.440 the enforcement agency, so the Anti Trust Division and the 0:06:26.720 --> 0:06:30.160 FTC was to go to court after the deal had 0:06:30.200 --> 0:06:35.640 already closed and asked for a breakup. Order to remedy that, 0:06:36.120 --> 0:06:41.279 Congress passed the HSR Act that you reference before, and 0:06:41.320 --> 0:06:45.760 the HSR Act imposed an obligation to notify the agency 0:06:46.440 --> 0:06:51.720 the agencies before con consummating mergers over a certain size, 0:06:52.279 --> 0:06:57.760 and that number deal size is adjusted every year and 0:06:58.080 --> 0:07:02.960 after the last adjust deals over with a value of 0:07:03.000 --> 0:07:06.400 over four hundred and forty five point five million dollars 0:07:07.440 --> 0:07:11.680 must always be notified, and deals with a value of 0:07:11.720 --> 0:07:15.400 over one hundred and fourteen point five million dollars must 0:07:15.440 --> 0:07:19.680 be notified if certain conditions are met. And in addition, 0:07:19.760 --> 0:07:25.440 the HSRX set a timeline for merger reviews, so if 0:07:25.480 --> 0:07:28.720 these requirements are met, the parties must file what is 0:07:28.800 --> 0:07:33.720 called a merger notification and they along with that notification, 0:07:33.800 --> 0:07:38.840 they must submit some basic information about their deal. The 0:07:38.920 --> 0:07:42.680 notification also starts what is called an initial waiting period, 0:07:43.240 --> 0:07:46.880 during which the agencies conduct an initial review, and it 0:07:46.920 --> 0:07:50.880 also bars the parties from closing the deal. At the 0:07:50.960 --> 0:07:54.440 end of that initial waiting period, the agencies can decide 0:07:54.440 --> 0:07:57.160 to do nothing, which then frees up the parties to 0:07:57.200 --> 0:08:00.240 close their deal, or they can issue what is called 0:08:00.240 --> 0:08:04.120 a second request, which requires the parties to submit a 0:08:04.160 --> 0:08:09.080 substantial amount of additional information, and the second request also, 0:08:09.640 --> 0:08:12.200 or the issuance of a second request also starts a 0:08:12.320 --> 0:08:13.800 new waiting period. 0:08:15.320 --> 0:08:17.840 Yeah, exactly. I mean, that's a great background on it all. 0:08:17.880 --> 0:08:20.320 And I should say that, you know, there are at 0:08:20.360 --> 0:08:23.320 the big law firms that tend to handle mergers I 0:08:23.320 --> 0:08:27.480 should say transactions, because they're not all mergers. There's always 0:08:27.800 --> 0:08:31.000 somebody specialized or a small group specialized that just deal 0:08:31.040 --> 0:08:33.320 with HSR. And that's it. You know. They look at 0:08:33.360 --> 0:08:35.800 a deal that's coming in, they determine, you know, does 0:08:35.800 --> 0:08:38.480 it exceed these thresholds, does it have to vile HSR? 0:08:38.800 --> 0:08:40.800 And if it's determined that they do, then they go 0:08:40.840 --> 0:08:43.480 ahead and start to prepare the materials. That's back when 0:08:43.520 --> 0:08:46.199 I practiced, that's a little bit of what I did, 0:08:46.240 --> 0:08:48.360 or at least I helped the sort of the primary 0:08:48.360 --> 0:08:50.440 people in our law firm that did that to pull 0:08:50.480 --> 0:08:53.280 those together and think about that, you know. And the 0:08:53.360 --> 0:08:56.920 thing is really, at least at this point, the majority 0:08:56.920 --> 0:09:00.520 of deals filed generally close after the first thirty days 0:09:00.559 --> 0:09:03.520 the initial waiting period, right, and rather than as important 0:09:03.600 --> 0:09:04.560 to that in depth or view. 0:09:04.640 --> 0:09:04.800 Right. 0:09:05.360 --> 0:09:09.520 Yeah, So okay, so there are proposing changes to these rules, 0:09:09.840 --> 0:09:12.559 and I have to say that, you know, other than 0:09:12.600 --> 0:09:17.559 tiny little tweaks or thresholds changing, maybe a few exemptions 0:09:17.600 --> 0:09:20.120 being tweaked over the years that I practiced, I don't 0:09:20.160 --> 0:09:23.480 really remember any kind of major changes to the HSR. 0:09:23.559 --> 0:09:25.880 So more, what what is it they're trying to address 0:09:25.920 --> 0:09:27.679 with the changes and what are those changes? 0:09:29.480 --> 0:09:32.160 So, so the agency is you know, tying into what 0:09:32.240 --> 0:09:36.320 you said at the outset about the agencies clearly looking 0:09:36.440 --> 0:09:41.120 to you know, make it more difficult to engage in 0:09:41.760 --> 0:09:46.319 m an a activity. You know, you know they've proposed 0:09:46.360 --> 0:09:49.280 these rules or these changes to the ahs R rules, 0:09:49.320 --> 0:09:52.160 and you know, also to the merger guides before, which 0:09:52.200 --> 0:09:55.280 we're going to talk about later. So specifically as it 0:09:55.320 --> 0:09:58.400 relates to the HSR or the proposed changes to the 0:09:58.559 --> 0:10:02.080 hs ARE rule, the reason the agencies are proposing these 0:10:02.160 --> 0:10:06.760 changes is that, according to them, the information collected under 0:10:06.800 --> 0:10:09.600 the current rules and in the initial phases of an 0:10:09.600 --> 0:10:14.319 investigation doesn't allow them to conduct an effective and initial, 0:10:15.440 --> 0:10:21.440 effective and efficient initial review of a proposed merger. So 0:10:21.480 --> 0:10:23.960 what are they trying to do or what are they 0:10:24.000 --> 0:10:27.960 proposing to do? So if if these changes are adopted 0:10:27.960 --> 0:10:32.160 in their current form. The changes would substantially and I 0:10:32.240 --> 0:10:36.280 mean substantially, expand the scope of documents that the parties 0:10:36.320 --> 0:10:40.840 would be required to submit at the outset, including all 0:10:40.880 --> 0:10:45.320 agreements related to the transaction. But more important than that, 0:10:45.480 --> 0:10:49.720 actually the parties would be required to submit narrative explanations 0:10:50.200 --> 0:10:53.000 of their not only of their current business operations, but 0:10:53.040 --> 0:10:56.960 they're rationale for the proposed transaction, something that we don't 0:10:56.960 --> 0:11:00.800 have in the US, but which is fairly and in 0:11:01.080 --> 0:11:03.880 you know, in in the EU, it's fairly common in 0:11:03.960 --> 0:11:07.160 the in the UK if you notify a transaction, I 0:11:07.160 --> 0:11:10.319 should say in the UK, parties are under no obligation 0:11:10.400 --> 0:11:13.480 to notify transactions, but if they do, they're often asked 0:11:13.480 --> 0:11:19.559 to submit these narrative explanations. In essence, what the proposal 0:11:19.600 --> 0:11:23.600 would mean is that it would frontload, front load the 0:11:23.640 --> 0:11:28.240 current the current process and require the parties at the 0:11:28.280 --> 0:11:32.199 outset a lot of information that you know, they would 0:11:32.240 --> 0:11:34.720 only under the current rules they would only be required 0:11:34.760 --> 0:11:39.240 to produce if a second request is issued, and that is, 0:11:39.360 --> 0:11:41.920 you know, second requests are only issued if a deal 0:11:42.040 --> 0:11:49.320 after an initial review raises potential anti competitive concerns. It's 0:11:49.320 --> 0:11:53.440 also important to UH to point out that the agencies 0:11:53.520 --> 0:11:57.880 acknowledge that the proposed changes would increase the burden on 0:11:58.000 --> 0:12:01.480 all filers UH, and that some of these changes would 0:12:01.520 --> 0:12:05.480 increase the burden substantially on some filers. 0:12:06.040 --> 0:12:09.760 Yeah, I mean I think that's that's absolutely true. You know, 0:12:10.000 --> 0:12:12.840 when I think about HSR filings in the past, I mean, 0:12:12.880 --> 0:12:15.920 they were a relatively in the scheme of things, right 0:12:16.480 --> 0:12:20.040 when when you have the legal aspects of mergers and acquisitions, 0:12:20.280 --> 0:12:22.520 they were a relatively easy thing to do. I mean, 0:12:22.559 --> 0:12:24.640 it was filling out a form. It was a small 0:12:24.720 --> 0:12:27.400 number of documents most of the time, not even in 0:12:27.440 --> 0:12:29.880 the old days of paper copies, not even a full box. 0:12:31.040 --> 0:12:34.480 And right, and companies even agree in their merger agreements, 0:12:34.559 --> 0:12:37.000 we're going to get this filed within you know, a 0:12:37.040 --> 0:12:40.199 week or ten business days or two weeks of signing 0:12:40.280 --> 0:12:42.679 the agreement, which is, you know, pretty fast work. When 0:12:42.720 --> 0:12:46.559 it comes to lawyers, I think this changes a lot 0:12:46.600 --> 0:12:49.880 of things. I mean I think this really and also 0:12:49.960 --> 0:12:51.720 I think there was no need, at least at that 0:12:51.920 --> 0:12:55.360 point in time to start to strategize. I mean, lawyers 0:12:55.400 --> 0:12:59.320 might already be internally strategizing about the deal and in 0:12:59.440 --> 0:13:01.960 whether they're might need to be some anti trust defense 0:13:02.240 --> 0:13:04.680 to the deal constructed, and what kind of arguments could 0:13:04.679 --> 0:13:08.280 be made that the deal is pro competitive. But here 0:13:09.679 --> 0:13:12.439 you may have to start thinking about that much earlier 0:13:12.480 --> 0:13:16.040 on before actually getting the deal notified at all, which is, 0:13:16.120 --> 0:13:18.319 as you mentioned, a little bit more like the way 0:13:18.360 --> 0:13:22.200 it's done in the EU. I mean, I think this 0:13:22.280 --> 0:13:24.200 is a really big change. I know you do too. 0:13:24.320 --> 0:13:27.920 On behalf of SIIA. You did submit some comments to 0:13:27.960 --> 0:13:31.960 the FTC and you outlined your thoughts and some concerns 0:13:32.000 --> 0:13:35.320 about these proposed rules. So why don't we walk through 0:13:35.360 --> 0:13:37.600 those because I thought, you know, they had a lot 0:13:37.600 --> 0:13:39.640 of merit when I look through what you all had 0:13:39.679 --> 0:13:43.920 proposed and submitted, and there are concerns that companies should 0:13:43.920 --> 0:13:44.400 have today. 0:13:46.040 --> 0:13:49.920 Absolutely, so we have we have a number of concerns. 0:13:50.960 --> 0:13:53.880 So at a very basic level, I mean, we believe 0:13:53.920 --> 0:13:58.160 that the proposed changes run counter to the legislative intent 0:13:58.240 --> 0:14:02.280 behind the HSR Act and also the express purpose of 0:14:02.360 --> 0:14:09.920 the Paperwork Reduction Act. When Congress passed the HSR Act, 0:14:10.200 --> 0:14:15.840 they said that the goal was to carefully balance the 0:14:15.880 --> 0:14:21.400 need to detect and prevent the llegal mergers and acquisitions 0:14:21.440 --> 0:14:28.800 prior to consummation without unduly burdening business with unnecessary paperwork 0:14:29.040 --> 0:14:36.120 or delays. That's almost an exact quote from the relevant 0:14:36.120 --> 0:14:42.200 Committee during its markup of the HSR Act. As far 0:14:42.240 --> 0:14:46.880 as the Paperwork Reduction Act is concerned, the purpose of 0:14:46.880 --> 0:14:51.359 that act or that law is to minimize the paperwork 0:14:51.400 --> 0:14:56.880 burden for, among others, businesses, and to maximize the utility 0:14:56.880 --> 0:15:02.040 of information collected and used by the federal government. In 0:15:02.080 --> 0:15:05.080 this specific case, as it relates to the HSR Actor, 0:15:05.080 --> 0:15:08.600 the proposed changes to the hs are rule. If you 0:15:08.640 --> 0:15:11.400 look at the agency's own estimates, I said at the 0:15:11.440 --> 0:15:14.200 outset that they recognized that it would be you know, 0:15:14.240 --> 0:15:17.520 it would increase the burden on filers. And they they 0:15:17.600 --> 0:15:20.040 say that a run of the mill, their own estimates 0:15:20.520 --> 0:15:22.880 say that a run of the mill filing under the 0:15:22.920 --> 0:15:26.680 proposed rule would take one hundred and forty four hours 0:15:26.720 --> 0:15:32.120 to complete. That is four times the current average and 0:15:32.160 --> 0:15:37.760 therefore not a trivial trivial increase, but even more than that, 0:15:37.840 --> 0:15:41.120 A recent survey of in house councils and law firm 0:15:41.200 --> 0:15:46.240 antitrust practitioners actually put the number closer to three hundred 0:15:46.280 --> 0:15:50.360 and thirty hours. And that is to say, nothing of 0:15:50.400 --> 0:15:54.960 the you know, the substantial additional cost that compliance for 0:15:55.080 --> 0:15:59.640 companies would entail. On the agency side of the lecture, 0:15:59.680 --> 0:16:02.640 there's also, I think a question of whether, as a 0:16:02.800 --> 0:16:06.480 purely practical matter, they would even have the time to 0:16:06.600 --> 0:16:09.640 review and process, or in the words of the Paperwork 0:16:09.720 --> 0:16:14.680 Reduction Act, utilize all this additional information as part of 0:16:14.720 --> 0:16:19.640 their initial review. In its most recent budget requests, the 0:16:19.720 --> 0:16:24.280 FTC requests that a large increase in funding for its 0:16:24.320 --> 0:16:27.520 Bureau of Competition, which is the bureau within the FTC 0:16:27.680 --> 0:16:32.920 that handles mergers, just to be able to maintain its 0:16:32.960 --> 0:16:35.920 current performance level and so on the basis of that, 0:16:35.960 --> 0:16:39.000 I think the answer would appear to be that the 0:16:39.880 --> 0:16:43.880 agencies actually would not be able to really take advantage 0:16:43.960 --> 0:16:49.359 of or utilize this additional information so early in the process. 0:16:50.520 --> 0:16:52.840 Together with the proposed changes to the merger guides that 0:16:52.880 --> 0:16:56.480 we're going to talk about later, were concerned that these 0:16:56.560 --> 0:17:00.239 changes or these proposed changes would have a chilling effect 0:17:00.440 --> 0:17:04.680 on merger activity more broadly, which would in our mind, 0:17:05.640 --> 0:17:10.120 deter innovation and hamper economic growth and those that are 0:17:10.480 --> 0:17:14.240 likely to be hit the hardest, or actually small companies 0:17:14.280 --> 0:17:19.480 and startups whose business models often are designed to maximize 0:17:19.720 --> 0:17:24.440 exit options. So our bottom line is this, there may 0:17:24.480 --> 0:17:28.360 be good reasons to update the current merger notification regime, 0:17:28.480 --> 0:17:31.919 like you talked about, Jen, you know, it hasn't been 0:17:32.000 --> 0:17:35.280 updated in many, many years, I think over forty years. 0:17:36.240 --> 0:17:39.200 But we do not believe that the agencies have provided 0:17:39.240 --> 0:17:43.199 a compelling or even a sufficient reason to justify the 0:17:43.240 --> 0:17:48.280 imposition of substantial new burdens without any benefit for the 0:17:48.359 --> 0:17:51.639 vast number of transactions that raise no concerns. 0:17:52.200 --> 0:17:54.560 Yeah, and it really seems like, you know, some of 0:17:54.600 --> 0:17:58.080 the goal here is just to simply discourage M and 0:17:58.160 --> 0:18:01.240 A activity at its out me particularly you know you're 0:18:01.280 --> 0:18:04.480 talking about the startups that are getting hard to hit. 0:18:04.520 --> 0:18:08.440 I mean, this is an area that's created some difficulty 0:18:08.520 --> 0:18:11.320 I think for business strategies and a lot of industries 0:18:11.320 --> 0:18:14.600 because we are seeing these attempts by the Federal Trade 0:18:14.600 --> 0:18:19.280 Commission and Department of Justice to try to stop in 0:18:19.520 --> 0:18:21.800 a couple different ways. One try to stop what they 0:18:21.840 --> 0:18:25.040 call potential competition deals where an incumbent buys up a 0:18:25.080 --> 0:18:28.560 small startup. I intended just sort of quelch the competition 0:18:28.640 --> 0:18:31.000 that might be posed in the future by that startup, 0:18:31.400 --> 0:18:35.960 And you know, it makes it very difficult for those 0:18:36.000 --> 0:18:39.920 startups that really intend to ultimately get sold for a 0:18:39.960 --> 0:18:43.280 lot of money to some bigger company. This really gets 0:18:43.320 --> 0:18:44.800 in the way and it does add a lot of 0:18:44.800 --> 0:18:47.640 burdens for that startup, and I think that really impacts 0:18:47.680 --> 0:18:50.280 the tech industry. I mean, we saw the FTC challenge 0:18:50.320 --> 0:18:52.720 Meta when it tried to acquire within which sort of 0:18:52.800 --> 0:18:55.080 falls within this category, and we've seen it in the 0:18:55.080 --> 0:19:00.639 pharmaceutical area too, So you know, this this adds a 0:19:00.640 --> 0:19:05.040 burden and it could actually in some ways dampen certain 0:19:05.119 --> 0:19:05.920 kinds of innovation. 0:19:06.800 --> 0:19:10.200 Absolutely, absolutely, Yeah. 0:19:10.000 --> 0:19:12.640 It's it's a big change. And I know that they're 0:19:12.680 --> 0:19:15.879 not final yet, so we do know that at the end, 0:19:15.880 --> 0:19:18.960 they're accepting comments, they think about those comments, they discuss them. 0:19:19.200 --> 0:19:21.320 You know, it's possible that the rules will have a 0:19:21.359 --> 0:19:23.920 narrower scope. We don't know for sure. I mean, all 0:19:23.960 --> 0:19:25.920 of this is going to kind of flesh itself out 0:19:25.960 --> 0:19:28.560 next year, and nothing will get implemented till some point 0:19:28.640 --> 0:19:32.120 next year. We don't really know when. But still it's 0:19:32.119 --> 0:19:34.320 a warning that you know, companies need to think about, 0:19:34.440 --> 0:19:37.240 and it may be maybe why I mean, I feel 0:19:37.240 --> 0:19:39.240 like I'm kind of seeing an uptick in mergers now, 0:19:39.280 --> 0:19:41.720 and it may be because of companies trying to get 0:19:41.720 --> 0:19:46.320 these easier HSR filings in now before these rules change. Absolutely, 0:19:47.040 --> 0:19:48.920 let's move over to the merger guidelines because I think 0:19:48.920 --> 0:19:52.640 that's an even bigger deal in my mind. Maybe it'll 0:19:52.680 --> 0:19:55.560 impact fewer deals than the HSR changes do it, but 0:19:55.760 --> 0:19:58.840 it's a big change and also add to the burden 0:19:58.960 --> 0:20:03.160 imposed on companies to certain deals at least. So let's 0:20:03.160 --> 0:20:05.880 start again like we did with AHSR. Let's look at background. 0:20:06.000 --> 0:20:08.639 Just for people who may be listening to aren't attorneys 0:20:08.680 --> 0:20:10.679 don't really have a background in how this all works? 0:20:10.880 --> 0:20:12.840 Do you want to at least explain more what the 0:20:12.880 --> 0:20:13.960 merger guidelines are? 0:20:14.560 --> 0:20:19.280 Sure so distilled to its essence. Section seven of the 0:20:19.320 --> 0:20:25.080 Clayton Act says that mergers and acquisitions whose effect may 0:20:25.080 --> 0:20:30.199 be to substantially lessen competition and create a monopoly are prohibited. 0:20:32.080 --> 0:20:35.320 You know. The statutory language, you know, as anyone can see, 0:20:35.840 --> 0:20:39.119 is fairly vague, and because of that, the courts have 0:20:39.200 --> 0:20:43.520 played an outsized role in developing the body of law 0:20:43.600 --> 0:20:49.160 that today governs mergers and acquisition activity in the United States. Traditionally, 0:20:49.520 --> 0:20:53.840 the merger guidelines have provided a consensuve view of what 0:20:53.920 --> 0:21:00.159 the law is, and through the guides, the agencies have 0:21:00.240 --> 0:21:04.640 advised the business community, the courts, and the broader public 0:21:05.240 --> 0:21:09.720 of how they so. In other words, the agencies that 0:21:09.840 --> 0:21:13.640 the enforcement agencies intend to apply the law to individual cases. 0:21:15.040 --> 0:21:18.800 This has allowed businesses to predict, predict with a fairly 0:21:18.920 --> 0:21:24.080 high degree of certainty, what if any, actions the agencies 0:21:24.240 --> 0:21:28.680 might take in response to a proposed merger. It's important 0:21:28.680 --> 0:21:33.000 to understand also that the merger guides are what is 0:21:33.119 --> 0:21:36.480 called a policy statement, which means that they are not 0:21:36.640 --> 0:21:40.520 binding on the courts in order the courts owe them 0:21:40.520 --> 0:21:44.520 any any deference. But the courts in general have found 0:21:44.520 --> 0:21:47.560 the guides to be very helpful and have you know, 0:21:47.680 --> 0:21:51.120 are using them or have been using them fairly extensively. 0:21:51.680 --> 0:21:53.560 Yeah, and in particular, and I know you're going to 0:21:53.560 --> 0:21:56.520 get into this later, but in particular they are willing 0:21:56.560 --> 0:22:00.240 to use them many courts because at least up until now, 0:22:00.320 --> 0:22:05.199 they haven't viewed the guidelines necessarily as a political a 0:22:05.400 --> 0:22:10.320 political doctrine or a political document. They have been adopted 0:22:10.440 --> 0:22:13.320 over the years slight changes made over the years in 0:22:13.359 --> 0:22:18.240 a bipartisan manner by many different appointees from different administrations 0:22:18.960 --> 0:22:21.440 and kind of have always had the same general core 0:22:21.560 --> 0:22:25.560 and framework. I mean I am very intimately familiar with 0:22:25.600 --> 0:22:27.600 what the guidelines say because that was my main area 0:22:27.640 --> 0:22:30.560 of practice when I was a lawyer, was basically working 0:22:30.600 --> 0:22:32.960 on M and A, dealing with those guidelines and walking 0:22:33.000 --> 0:22:35.720 through them to say to the companies, hey, here is 0:22:35.800 --> 0:22:38.840 how the agencies are going to evaluate your deal. And 0:22:39.000 --> 0:22:41.080 you know, for people not familiar with the guidelines, look, 0:22:41.119 --> 0:22:45.320 they talk about competitive conditions resulting from a merger, how 0:22:45.320 --> 0:22:48.119 they might change. They look at markets, they look at competition, 0:22:48.480 --> 0:22:52.040 they look at concentration in markets, they look at potential entry, 0:22:52.720 --> 0:22:56.639 they look at coordination on price or output. Essentially, you 0:22:56.680 --> 0:22:59.560 know the competitive conditions in an industry and how those 0:22:59.720 --> 0:23:02.960 can dotions may change by virtue of a merger. So 0:23:04.320 --> 0:23:07.840 similar to the HSR changes, I think that the agencies, 0:23:08.040 --> 0:23:10.479 with some of the changes they're proposing and more you're 0:23:10.520 --> 0:23:12.600 going to get into those in a minute, are again 0:23:13.119 --> 0:23:15.639 sort of making it not only trying to sort of 0:23:15.640 --> 0:23:19.520 hamper merger activity at the outset, making it a lot scarier, 0:23:19.640 --> 0:23:22.040 let's say, to jump into one, but they're also trying 0:23:22.080 --> 0:23:25.199 to identify mergers, making it easier to identify mergers that 0:23:25.240 --> 0:23:28.840 have any trust problems easier to investigate them and potentially 0:23:29.280 --> 0:23:31.760 ease their path in court as well when they try 0:23:31.800 --> 0:23:34.400 to block those deals. So let's dig into these merger 0:23:34.480 --> 0:23:37.720 guidelines changes, so more talk to us about what the 0:23:37.800 --> 0:23:39.240 changes are trying to address. 0:23:39.840 --> 0:23:44.439 Sure, so you know, as you said earlier, Jen, I mean, 0:23:44.480 --> 0:23:47.000 it's no secret that the current heads of the enforcement 0:23:47.119 --> 0:23:51.600 agencies have been critical of what they think was or 0:23:51.680 --> 0:23:56.920 has been lax enforcement in previous administrations of both parties, 0:23:57.160 --> 0:23:59.720 and that they are looking for ways to apply the 0:23:59.800 --> 0:24:04.600 law law much more aggressively. In the proposed changes to 0:24:04.640 --> 0:24:10.920 the merger guides, these agencies say that they want these 0:24:10.960 --> 0:24:14.480 new guides, or the proposal that they have made there, 0:24:14.760 --> 0:24:20.080 they're looking to achieve three primary objectives. So they want 0:24:20.520 --> 0:24:23.720 the guides to reflect the law as written by conguerors 0:24:23.720 --> 0:24:27.320 and interpret it by the courts. I think there's definitely 0:24:27.359 --> 0:24:30.840 disagreement over whether their interpretation of what the law says 0:24:30.920 --> 0:24:36.280 and what the courts have said fifty years ago exactly exactly, 0:24:37.680 --> 0:24:41.000 But that's one of their goals. So a second goal 0:24:41.119 --> 0:24:43.480 is that they want the guides to be more accessible 0:24:43.520 --> 0:24:48.119 and transparent, and they they're also looking to provide a 0:24:48.160 --> 0:24:52.200 framework that again and their you know, in their view 0:24:52.200 --> 0:24:56.840