The members of BakerHostetler’s Antitrust and Competition Team are pleased to present these brief updates from the conference sessions at this week’s ABA Antitrust Spring Meeting in Washington, D.C.
State Antitrust Enforcement on the Rise
At a panel hosted by BakerHostetler’s Julian Perlman, state enforcers emphasized that antitrust enforcement continues despite the changing landscape at the federal level. The state enforcers made clear that they are not afraid to pursue actions and cited numerous examples of doing so.
The labor market is one area the panelists focused on. They noted that the labor market is still an enforcement priority for state attorneys general. Attorneys general across the county are still pushing back on noncompetition agreements despite the FTC’s rule being up in the air. For instance, Pennsylvania recently passed a law banning non-competes, with some exceptions, in the healthcare industry. The panelists also noted that states are leading the charge against no-poach agreements, and that the impact on labor markets will be considered when evaluating potential mergers.
Agency Update With the DOJ DAAGs
At a panel of former members of the DOJ Antitrust Division, the main topic was what form antitrust enforcement would take under the new administration. The former enforcers speculated that the new administration would carry over some of the priorities of the previous administration, such as Big Tech, labor markets, pharmaceuticals and agriculture. However, they cautioned that the new administration will likely have new priorities as well, such as ESG.
The panel discussed that enforcement might be less aggressive in the new administration. They cited a lack of resources for the Antitrust Division and potential turnover in the staffs of the DOJ and the FTC. The panel further speculated that due to this lack of resources, the new administration might focus more on settlements rather than pursuing cases to a final ruling.
Advertising AI: Best Practices & Litigation Risk
With the emergence of AI has come AI regulation, leaving practitioners with the question of how to advise clients in the face of uncertainty, particularly advertising companies subject to Section 5 of the FTC Act and various state laws that have come into effect in recent years.
The change in presidential administrations brings with it a change in how federal law implicating AI practices might be enforced. For example, Section 5 of the FTC Act prohibits unfair or deceptive acts or practices affecting commerce. The prior administration saw Section 5 as useful to address allegedly deceptive conduct resulting from the use of AI – an application of the law which some thought to be an overreach of FTC authority. For example, Andrew Ferguson said before his selection as the current FTC Chair that he would end the FTC’s attempt to be an AI regulator. However, the future of the FTC’s AI efforts is unclear, as Chairman Ferguson has stated that Big Tech is a top priority.
At the state level, AI legislation is growing. Last year, Colorado passed the Anti-Discrimination in AI Act. That legislation, introduced and passed in 10 days, provides various regulatory hurdles for the use of AI to make “big decisions” impacting consumers. But the legislation has drawn concerns about balancing consumer protection with the need to encourage technological advancement. Colorado expects additional legislation to be passed before the end of its current legislative session.
Other states, such as California, have introduced a number of bills – some of which have passed while others have not – around the regulation of AI. But while such legislation is becoming more ubiquitous, states would welcome a federal law addressing these issues. As the panel explained, AI is inherently an interstate issue and federal law is often in the best position to address such nationwide issues.
While the AI regulatory landscape continues to evolve, the panel advised that companies using AI in their advertising practices would be wise to ensure that the information produced is true and substantiated.
Cleanup on Aisle 7: Labor in M&As
Labor issues in mergers and acquisitions were a proposed addition to the new HSR form, but this was one of the few proposals that did not make it into the FTC’s final rule. Although labor considerations did not make the cut, transacting parties should still pay attention to these issues.
The 2023 revisions to the merger guidelines provide that the agencies are to review labor markets using the same methodology they use to address concentration in other markets, and the revisions also take note that substitutability may be lower in labor markets than in other product markets. This means the effect of synergies and efficiencies is less likely to offset reductions to competition.
Labor markets have been considered in merger litigation for nearly two decades, but have more recently tended to take a more central role. In two recent high-profile merger cases, alleged harm to labor markets was a feature of the cases brought by state and federal enforcers.
While it is tough for enforcers to meet their burden to enjoin transactions for labor considerations alone, labor as a focus of merger investigations and litigation is here to stay. Given the uncertainty in federal enforcement looking forward, state enforcers may be interested in protecting lower-income workers via enhanced labor scrutiny in merger enforcement.
Be on the Lookout: Surveillance Pricing
This panel discussed the rise of surveillance pricing – using pricing software to estimate the maximum price an individual would be willing to pay for a given product or service. This is different from blanket price recommendation algorithms and instead concerns each individual consumer – using personalized data to determine targeted, individualized prices. The panel said this type of pricing strategy could potentially be viewed by some as a technologically optimized form of price discrimination.
The concern here for enforcers is that corporate actors have been collecting data on consumers for years, sometimes unbeknownst to the consumers. Now those same actors may be looking to leverage the data to maximize pricing extended to individual consumers.
The panel discussed that some believe price discrimination may occur in our economy, particularly in places where consumers are expected to negotiate for a purchase. To what extent will this new technology minimize the phenomenon by eliminating perceived bias among salespersons, or conversely, to what extent will businesses leverage this technology to potentially harm consumers? The panel said only time will tell.
According to the panel, to the extent surveillance pricing harms consumer utility, such harms may be better addressed by the consumer protection laws rather than the antitrust laws. This is because surveillance pricing is not inherently anticompetitive, absent some paired collusive behavior.
Interested parties should follow regulatory developments in this area over the coming years.
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