Sens. Call For Antitrust Vigilance During, After Pandemic

By Matthew Perlman
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Law360 (May 4, 2020, 9:20 PM EDT) -- A group of senators has called on the heads of the U.S. Department of Justice's Antitrust Division and the Federal Trade Commission to remain vigilant against anti-competitive mergers and conduct as the country continues to suffer the effects of the COVID-19 pandemic.

Fifteen senators led by Amy Klobuchar, D-Minn., ranking member of the Senate antitrust subcommittee, on Friday sent a letter to the federal government's top antitrust officials. The letter said that economic disruption caused by the pandemic will likely create numerous possibilities for anti-competitive activity, and it urged the agencies to continue enforcing antitrust and consumer protection laws "during and after this chaotic period in our history."

"The challenges involved in protecting competitive markets and enforcing the antitrust laws have undoubtedly increased during this public health and economic crisis, as employees are forced to work from home and limited agency resources are stretched even further," the letter said. "But if American companies and workers are to thrive in the global marketplace once COVID-19 is behind us, we need open and competitive U.S. markets."

While many businesses are suffering from the pandemic and the resulting economic fallout, some companies operating in the digital economy appear to be thriving, the lawmakers said. This discrepancy could lead to a new wave of consolidation, the letter said, as technology outfits and others that are still performing well look to snap up distressed assets on the cheap.

"Such transactions may raise difficult issues for agencies tasked with preventing anticompetitive mergers," the senators said. "COVID-19 has not driven away threats to competition, far from it."

Last week, Sen. Elizabeth Warren, D-Mass., and Rep. Alexandria Ocasio-Cortez, D-N.Y., announced plans to introduce legislation that would ban most mergers and acquisitions by companies over a certain size while the country recovers from the pandemic. The lawmakers said a moratorium is needed to stop large corporations and investment funds from exploiting the outbreak and its economic impact.

Rep. David Cicilline, D-R.I., head of the House antitrust panel, has called for a temporary moratorium on merger activity to be included in the next coronavirus relief bill, though also said it may need carveouts for firms that are failing or in bankruptcy.

Friday's letter points to recent mergers in the tax preparation, textbook and pharmaceutical sectors as demonstrating that pending deals require scrutiny in the current environment. Democratic lawmakers urged the DOJ last month to investigate Intuit's $7 billion purchase of Credit Karma over concerns about Intuit's ownership of TurboTax and competition for free tax-filing services.

Last month, Swiss pharmaceutical giant Novartis AG dropped a planned $900 million deal to sell a portion of its U.S. Sandoz portfolio to Aurobindo Pharma USA after the companies were unable to win clearance from the FTC. Johnson & Johnson also dropped its planned $400 million purchase of a surgical patch business from Takeda Pharmaceuticals last month after the FTC and European enforcers raised concerns.

Textbook publishing giants Cengage and McGraw-Hill called off their proposed merger on Monday, citing DOJ demands for fixes to address competitive concerns the agency raised.

In addition to mergers, Friday's letter said that enforcers should also remain vigilant for potential anti-competitive conduct to ensure that the pandemic does not become "an opportunity for dominant firms to abuse or further entrench their market power." While some large companies are taking welcomed steps to help the public and their customers during the pandemic, these efforts do not give those firms any kind of a free pass, the senators said.

The lawmakers also pointed to the cattle, pork and crude oil markets and said they could be particularly susceptible to market manipulation or collusion during the pandemic.

"The agencies must continue to thoroughly investigate potential violations and take enforcement action if there is evidence of illegal conduct," the letter said.

The senators asked the FTC and DOJ in the letter to answer questions surrounding how COVID-19 has affected the agencies' enforcement abilities and asks if they can continue fulfilling their missions during the crisis without congressional action. It also asks how the agencies are accounting for the economic uncertainty that the pandemic has caused and whether they have been able to keep up with the deadlines for merger reviews imposed by the Hart-Scott-Rodino Act.

In addition, the letter asks the enforcers to commit to conducting retrospective reviews of mergers that were allowed to proceed during the pandemic, "if the decisions not to take action were based on market assumptions or predictions that turn out to have been incorrect."

In March, Klobuchar introduced legislation that would prohibit the excessively high pricing of consumer goods and services during a natural disaster, pandemic or state of emergency. Rep. Emanuel Cleaver II, D-Mo., introduced a House version of the bill last month.

No federal statute forbids price gouging, though many states and localities have their own laws. President Donald Trump's invocation of the Defense Production Act has also given federal enforcers authority to go after price gouging and the hoarding of needed medical supplies during the pandemic.

Klobuchar, along with Sen. Chuck Grassley, R-Iowa, sent a letter to Attorney General William Barr last month asking for details of the Justice Department's efforts to enforce the executive order. House Democrats also sent a letter in March to the FTC calling for vigilance and urging action to combat price gouging during the coronavirus pandemic.

--Additional reporting by Dylan Moroses, Nadia Dreid, Dorothy Atkins and Bryan Koenig. Editing by Peter Rozovsky.

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