Antitrust and foreign investment in a post COVID-19 World | Brunswick

Antitrust and foreign investment in a post COVID-19 World

Just as it has profoundly affected nearly every aspect of everyday life around the world, the coronavirus pandemic will have deep and lasting policy implications for US and EU antitrust and competition policy.

As the US and EU reopen their economies, politicians and regulators will increasingly look at competition and foreign investment to support the financial recovery, leading to a probable redefinition of consumer welfare, and an acceleration of protectionism and interventionism.

In a recent webinar, Brunswick’s antitrust and regulatory experts convened to discuss these issues and how companies can best navigate the antitrust landscape in a post-COVID-19 world. The discussion was moderated by Terry Calvani, former Commissioner at the US Federal Trade Commission and currently a senior advisor in Brunswick’s Washington, DC office. 

The panelists included:

  • Philippe Blanchard, Partner and head of Brunswick’s Brussels office;
  • Jonathan Faull, former Director-General and Director of Competition Policy for the European Commission and currently chair of European Public Affairs in Brunswick’s Brussels office; and
  • Emma Schultz, Partner in Brunswick’s Washington, DC office.

Below is a summary of key themes discussed on the call. A full recording of the webinar is available on the Brunswick Group website, linked here. 

Key Themes 

Antitrust & the COVID-19 pandemic

Certain industries around the globe will likely be more affected by the COVID-19 recession in the long term than others, and will require more protection and support for job creation to support their recovery. Trade tensions could result from this given the lack of strong subsidy control internationally, or there could be an opportunity to relaunch the global order in a way that is more mutually beneficial. The EU has already announced its intention to increase its ability to scrutinize, and ultimately reject, takeovers or significant investments by foreign firms if it suspects that they are supported by subsidies. Philippe Blanchard also noted that the injection of public money by governments in companies may lead to more interventionism by politicians in corporate strategies.

Any “return to normal” is predicated on the discovery of a vaccine, so that production and consumption can resume as they were before the pandemic. There too, government subsidies are playing an important role in supporting scientific research, and the country or region who will obtain a vaccine first will be at a significant economic advantage, with its businesses able to regain their footing earlier.

The pandemic also highlighted the importance of technology in our lives, from making remote work and remote learning possible to facilitating food delivery and contact tracing, giving new impetus to the discussion of tech companies as utilities. In both the EU and the US, there are discussions of creating separate antitrust laws for the technology sector. In Europe this is likely to occur, although Jonathan Faull argued the existing legal framework is broad and flexible enough to allow competition authorities to deal with issues presented by the tech sector. Yet, we see the European Commission pursuing the creation of a new competition tool that would give it power to investigate either a sector or specific companies regardless of whether an actual competition infringement has occurred – with the specific objective of preventing digital markets from ‘tipping’. Both Jonathan Faull and Philippe Blanchard called this “one of the most significant developments in EU competition powers since the establishment of the EU merger review process”. 

Increasing politicization of antitrust and competition enforcement

In many ways, trends such as the gradual shift towards protectionism and interventionism were already in motion before COVID-19. But the pandemic has accelerated them by bringing issues, such as the dependence of our economies on globalized supply chains, or the lack of competition in certain consolidated markets (ventilators in the US, for example), into stark relief. As a result, governments may look to redefine the role that competition policy plays in the achievement of other domestic and international policies, including industrial policies, relocalization of supply chains or local job protection. 

Enforcement priority setting will become more important in this context. Case choice will likely reflect a more conscious deployment of competition policy to support reconstruction efforts post-pandemic. In Europe in particular, European sovereignty in key sectors, such as the digital economy, will likely be one of these priorities given its significance during the pandemic.

In the EU, the question of agency independence from political ties has been a major focus recently with the ambition of certain politicians to facilitate the emergence of “European champions” able to compete on the international stage and their desire to have competition policy serve industrial policy objectives. As the EU starts to consider what a sustainable recovery may look like after COVID-19, this question will become a more prominent issue. Whether the Directorate-General for Competition will become less independent and act more like an arm of larger EU policy remains to be seen.

In the US, antitrust policy for the next few years will likely be dictated by the outcome of the November presidential election, and whether or not the nationalist sentiment that has dominated the US government’s discourse in recent years continues. Emma Schultz noted that President Trump has so far taken a much more active role in antitrust cases than any of his predecessors, looking to antitrust investigations to help him serve other political objectives. On the other side of the aisle, several of the unsuccessful Democratic presidential candidates have taken unusually active positions on competition law topics. Senators Klobuchar and Warren, for example, are urging a much more activist enforcement agenda and legislation to facilitate change. Yet the Democratic nominee, Vice President Joe Biden, has not voiced a strong stance regarding antitrust other than to support the standard commitment to vigorous enforcement during his tenure on the Senate Judiciary Committee. As with previous Democratic administrations, we should expect a Biden Administration policy to be largely driven by his appointments to the DOJ and FTC. 

Future of the consumer welfare standard

What constitutes consumer welfare, which was already being redefined prior to the pandemic due to the protectionist and interventionist trends mentioned earlier, will likely continued to be challenged as the definition of what is beneficial to most consumers evolves. This could include considerations such as the impact of a merger or acquisition on local jobs, local supply chains, technological or industrial sovereignty, but also broader policy goals such as the protection of the environment or privacy. In the EU, as this concept becomes wider, there will likely be more participation and integration from other commissioners in competition-related matters. 

Emma Schultz highlighted that in the US, this shift will likely be slower to emerge due to US antitrust and competition agencies being constrained by the courts – unlike authorities in many other countries where relevant agencies act as investigators, prosecutors, and adjudicators. In the recent Sabre/Farelogix case, for example, the DOJ failed to convince the court that the merger would threaten consumer welfare and lost its challenge against the transaction as a result. Case-law allowing for a broader definition of consumer welfare beyond price will likely take time to emerge.

Navigating the competition landscape post COVID-19

All three speakers agreed that the trends created or accelerated by the pandemic will mean a higher scrutiny of mergers and acquisitions by politicians in Europe and in the US, particularly when such transactions involve foreign firms.

Companies have increasingly had to contend with a broad range of stakeholders taking position against a proposed acquisition. As the focus of competition authorities broadens beyond price as a signal for consumer welfare, companies engaged in a transaction will need to articulate its benefits in more general terms and be ready to defend it beyond purely legal arguments. Trade unions, environmental NGOs, or civil liberties groups may be increasingly able to extract non-price concessions from merging parties as competition enforcers lend a more friendly ears to their concerns.

Politicians who have traditionally not paid much attention to competition enforcement due to its technical nature will start becoming more involved as they look to use competition policy to further their policy objectives. In turn, this will mean increased attention from media and from third parties, requiring companies to consider their communications strategies as carefully as they consider the legal and economic strategies to achieving a successful transaction.