October 31, 2024 • 56 mins
Originally broadcast: February 27, 2024
Discover how the 2024 US presidential election could transform the regulatory landscape for mergers, antitrust enforcement, and foreign investment. With the prospect of President Joe Biden facing off against former President Donald Trump, this episode unpacks the economic policies and national security priorities of these political titans. Milbank partners Adam DiVincenzo and John Bain join host Allan Marks to provide a sharp analysis of how both administrations have wielded the Committee on Foreign Investment in the United States (CFIUS), particularly in relation to China, and what that means for foreign investment strategies moving forward.
As we navigate the intricate balance between market power, innovation, and regulation, learn how historical antitrust measures influence modern policies. Our conversation draws on the insights of economists like Schumpeter and Arrow to understand the role of large companies in fostering or stifling innovation. We explore the complex interplay of regulatory bodies like the FTC and DOJ in shaping market competition and how geopolitical considerations can impact merger activities. This episode offers a comprehensive look at how shifting political landscapes and economic strategies are poised to redefine the future of business.
We also delve into the nuances of antitrust laws and market strategies, exploring how proposed bans and historical perspectives like the Sherman Act inform current debates. The discussion reflects on Robert Bork's theory of consumer welfare, questioning its relevance today. Learn how administrations may continue to leverage robust antitrust tools and how geopolitical tensions with countries like Russia and China could impact merger regulations. From ESG initiatives to strategies for navigating CFIUS reviews, we provide the insights you need to understand the forces shaping tomorrow's corporate environment.
For more information and insights, follow us on social media and podcast platforms, including Apple, Spotify, Amazon Music, iHeart, Google and Audible.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Law policy and markets.
I'm Alan Marks.
Today, I'm joined by Milbankpartners Adam DiVincenzo and
John Bain, both based inWashington DC.
Together, we'll look at theupcoming US presidential
election and what it means formergers, antitrust and foreign
investment.
Let's get to it.
(00:41):
2024 is an election year, notjust in the United States, but
globally, from Indonesia, indiaand Taiwan to Mexico, europe and
the UK.
About half the world'spopulation lives in the 60 or so
countries that will holdnational elections this year.
The results will have broadimplications on economies, trade
, geopolitics, climate change,war and peace, and democracy
itself In the US.
(01:01):
Uncertainty about futurefederal economic policies makes
investment decisions this yearespecially challenging.
Two places where thisuncertainty is playing out are
mergers and acquisitions, andforeign investment.
M&a activity is so far chargingout of the gate this year,
notwithstanding uncertaintyabout the upcoming US
presidential election.
(01:21):
Will that last?
Taking a wider view, what doesthe polarizing 2024 election in
the United States mean forantitrust or competition policy,
cross-border investment,international capital flows and
corporate behavior?
We have some clues, because thetwo likely presidential
candidates each have a trackrecord on antitrust enforcement
(01:42):
and CFIUS policy.
President Joe Biden and formerPresident Donald Trump differ
sharply on many things, ofcourse, including on economic
policy and national securitypriorities.
They differ, too, on whetherthe administration has
discretion to dictate or departfrom established rules and norms
in enforcing the law andregulating corporate
(02:04):
transactions.
They also share some surprisingsimilarities, especially on
robust enforcement to boostdomestic manufacturing, to
protect US jobs and to challengeanti-competitive behavior that
hurts consumers.
To help sort out what's at stake, I've asked Adam DiVincenzo and
John Bain to join me.
Adam is an antitrust litigatorwho has handled many merger
(02:25):
approvals and other cases beforethe US Department of Justice
and the Federal Trade Commission.
John focuses on matters relatedto the Committee on Foreign
Investment in the United States,or CFIUS, and on related
national security issues.
Both John and Adam are partnersin Milbank's Washington DC
office and have come up to joinme here in New York today for
(02:46):
what I hope will be aprovocative, candid and
opinionated discussion.
As ever, the views expressedare ours alone.
Adam, john, thank you very muchfor taking the time to get
together today.
(03:06):
A lot of clients of ours arecalling and asking what they
should be doing as far asinvestment decisions.
M&a is a good example.
Finance and other areas are alsoimplicated, but they're asking
what they should do given thatwe have an election coming up
and it's not a normalpresidential election in the
United States in 2024, in partbecause of the very strong and
(03:27):
stark differences on economicpolicy, as well as, of course,
many other big things, betweenthe two candidates that look
like they'll be the nomineesPresident Biden seeking
reelection.
Former President Trump seekingto get back in the White House.
It's also different because weknow what each of them has
already done.
We have a track record fullfour years for Trump and almost
(03:48):
four years for President Biden,so we can look, I think, at what
they did in two areas inparticular where you're experts
antitrust and CFIUS nationalsecurity approvals and see how
that might impact, how theelection outcome might impact
decisions that people are makingtoday about how to invest, in
particular, mergers andacquisitions, and what the
(04:10):
environment might be and how itmight change depending on the
outcome of the election.
Adam, why don't we start withyou and just take a quick look
at what we know already aboutthe approaches that the Federal
Trade Commission and theDepartment of Justice have taken
with respect to antitrust undereach of the candidates?
Speaker 2 (04:23):
Sure, and thank you for having me on this podcast
today.
I'm very excited about talkingabout my favorite subject.
So, as you pointed out, we havea very unique election here
because we have two candidateswith a track record in antitrust
and in other areas.
President Trump, when he cameinto office, was predicted to be
much like his Republicanpredecessors.
(04:45):
So George W Bush, ronald Reagan, george H W Bush those
administrations were noticeablyless pro-enforcement in
antitrust and more trusting offree markets than the Democratic
administrations that intercededthem.
(05:06):
So Obama and Clinton.
That expectation was quicklyupset, in the sense that we had
several large cases brought bythe Trump administration early
on.
What we saw over the course offour years were cases being
brought, new guidelines beingissued, particularly new
(05:27):
vertical merger guidelines, anew merger remedy policy.
Now, there were certainelements in there of the old
Republican free marketphilosophy, but by the same
token, I think it's fair to saythat antitrust regulation and
enforcement was quite robustunder the Trump administration.
So fast forward to 2021,.
(05:48):
President Biden is sworn intooffice.
Shortly thereafter, he issuedan executive order calling for a
whole-of-government approach toantitrust, which was not unique
in history, but certainlyunique in recent history.
He has regular meetings that hepresides over with various
agencies that overseecompetition, not just the DOJ
(06:11):
antitrust division and the FTC,but the Department of
Transportation, the FederalCommunications Commission.
So President Biden himself isquite serious about antitrust.
Speaker 1 (06:22):
So what's different about Biden versus Trump?
Speaker 2 (06:25):
So what's different?
So when Biden was elected, hemade a decision early on to give
the leadership of the FTC andthe DOJ over to what we think of
as the progressive Brandeisianmovement.
Speaker 1 (06:39):
And that's Lena Kahn.
Speaker 2 (06:40):
Right, that's Chair Kahn and Jonathan Cantor who
heads the DOJ's AntitrustDivision and, in a nutshell,
what their view is is thatnumber one antitrust enforcement
over the past 40 years has beentoo lax and the result has been
harm to markets and inconsumers and workers.
(07:03):
They believe that the antitrustlaws were passed not to
maximize efficiency or evenconsumer welfare alone, but to
preserve a view of America thatJustice Brandeis once had, which
was to protect small businesses, ensure that larger
corporations were appropriatelyreined in and that their market
(07:26):
power was checked, and so it's amuch broader view of what the
antitrust laws should address,and ever since then, the Biden
administration, at least interms of their goals, has been
trying to pursue that policy andpursuing a broader array of
harms or theories of harms whenthey look at mergers, when they
look at business conduct andwhen they look at other things.
Speaker 1 (07:48):
If you look at the Sherman Act, the Clayton Act,
other key pieces of regulationof the economy that are focused
on antitrust and competition, inparticular, there's this idea
that it's not just protection ofconsumers and small businesses
and looking at prices that, infact, the antitrust laws matter,
because there's other thingsthat are going on that lead to
(08:09):
concentrations of market powerin the hands of relatively few
companies, including in thepopular mind, especially in big
tech.
Speaker 2 (08:15):
Sure, and so there's a lot there.
The White House advisor onantitrust, tim Wu, wrote a book
called the Curse of Bigness,which became a bestseller, and
what he says is what youdescribe as the larger problem
with what he calls bigness.
Right, the curse of bigness.
(08:40):
And that is, once businessesget too big, they can engage in
regulatory capture.
They can capture the regulatorsthemselves and, in turn,
threaten democracy itself.
They become so big that theycan manipulate outcomes of
political processes in theirfavor, either through lobbying
or election interference or anysort of technology that allows
them to have more power thanindividual voters.
(09:03):
Now, that's the theory, butthat is underlying what we are
seeing going on at most of theantitrust agencies these days.
Speaker 1 (09:12):
Right, All right.
So we're going to come back toantitrust in a second.
John, I want to pivot over toyou because, imagine, I've got a
client.
They're a company, they want tomerge with another company and
one of the things they have todo if they're over a certain
size I guess the new thresholdhas been raised to almost $120
million they have to do theirHSR, their Hart-Scott-Rodino
filing and that's antitrust,right.
So now we're looking at DOJ andFTC and Adams, busy with them
(09:36):
trying to make sure thatwhatever they're trying to do is
not going to beanti-competitive and the way
they're doing it is also notanti-competitive in their
behavior.
But there's another way oflooking at this, which is
national security, and that'sthe lens that you focus on with
the Committee on ForeignInvestment in the United States,
or CFIUS, which ultimatelyreports to the White House and
determinations of whether thismerger might, especially if it's
(09:57):
a sensitive asset, be materialand adverse to national security
.
How do you see the trendsbetween former President Trump
and President Biden, what theywere trying to accomplish, at
least initially, and how thatrelates to CFIUS approvals?
Speaker 3 (10:11):
Okay, well, first, thanks for having me.
I'm very excited to talk aboutthis.
So President Trump took a veryaggressive approach to national
security issues through CFIUS.
Unlike prior Republican andDemocratic administrations, he
really used the CFIUS processfor leverage as part of the
geopolitical disputes that wereoccurring with China and others.
(10:34):
It was a real tool that theadministration aggressively used
as part of those discussions,in part to highlight key
differences between the UnitedStates and its adversaries, but
also in part to promote a morekind of America first agenda.
In that way the administrationreally promoted almost economic
(10:56):
protectionism through nationalsecurity.
The way that administrationviewed it and consistent with
how the Obama administration alluses that technological
leadership was a key componentof national security that
America had to maintain and infact even broaden its
technological leadership in anumber of key areas as a key
(11:17):
aspect of national securitystrategy.
So that is something that theTrump administration really
aggressively pursued.
And there was a number ofpretty high-profile transactions
where the Trump administrationreally did go a little bit out
of the lane of CFIUS to try andensure that American companies
were protected, that investmentsinto key industries were not
(11:38):
permitted the Bidenadministration and that was
mostly as it relates to Chinaand kind of other rising powers.
There was a lot of when theBiden administration came in.
There was more continuationthan differences really,
particularly as it relates toChina.
The Biden administration hasfollowed through on a lot of the
Trump priorities as it relatesto national security vis-a-vis
(11:59):
China and CFIUS is a keycomponent of that.
So there hasn't been a hugekind of substantive difference
in the way that the Bidenadministration has approached
CFIUS, particularly as itrelates to China.
What has been different isthere has been a little bit more
of a trend back to traditionalwhat I would say national
security sensitivities andnational security issues.
(12:19):
With the Biden administrationthere also has been a little bit
of a less politicalinterference.
There also has been a littlebit of a less political
interference.
Some were critical of theformer President Trump that it
was too much political kind ofissues were driving CFIUS
reviews rather than kind oftraditional national security
(12:40):
sensitivity.
So the Biden administrationtried as much as they could to
bring it back more into thetraditional lane of national
security so that transactionspresented to it they did not
have a real nexus to nationalsecurity issues or national
security matters.
They would not necessarilycreate the type of concerns that
Trump administration had.
So there was some.
Unlike antitrust I think thatAdam described.
There's probably moresimilarities in the way that the
(13:00):
Biden administration haspursued CFIUS and CFIUS policy,
as did the prior administration.
Speaker 1 (13:06):
So, essentially, if you look at the numbers, usually
before Trump came into office,there's premature notices, and
obviously, as economic activitygoes up, as there's more M&A
activity, you'll get morenotices.
That's fine.
And you look at numbers, andthat does actually increase 2016
, 2017.
Increase 2016, 2017, the numberof transactions M&A
(13:29):
transactions that were abandonedbecause of CFIUS related
concerns was significantlyhigher under President Trump.
Got the numbers 24 in 2017, 18in 2018.
Before that, it had never beenmore than a few a year, maybe up
to eight, and then under Bidenthat falls off again.
You go back to the kind ofhistoric numbers.
What does not change, though,are notices withdrawn, right.
So is there a difference incommunication?
Is it wrong or simplistic tothink that under President Trump
(13:51):
, some of these are nationalsecurity, some are anti-China,
some were just political, and sothat left less predictability,
so people really didn't knowwhat to notice or how to react,
and then, eventually, some ofthe word is tossed of some of
those policies as they relate tonational security, but not the
kind of I'm going to call itarbitrary political piece.
(14:12):
As a result, people are stillapplying, but there's maybe
different communication so thatyou don't, at the end of the day
, have transactions that areactually rejected.
Speaker 3 (14:20):
Yeah, so under prior administrations there was a
little bit of a sensitivity tooutright rejecting transactions.
So the way that, for instance,the Obama administration handled
a lot of transactions that hadChina ties or China nexuses,
they wouldn't reject them butthey wouldn't approve them.
They would leave them in thiskind of limbo.
And the way the CVS processworks, you would have 90 days to
(14:40):
try and clear a transaction.
If you couldn't, what theadministration would say is why
don't you pull and refile?
We'll keep looking at it.
So effectively they weresticking it in a drawer.
They didn't want to reject,they didn't want to approve,
because they didn't want tocreate any sort of diplomatic or
other kind of internationalgeopolitical tensions with China
.
Obviously, president Trump tooka very different tack.
He was not afraid to confrontChina, not only through but
(15:03):
through a lot of the otherbilateral disputes.
So he almost used it as, as Isaid earlier, a tool that he
would show how muscular he wastrying to be in his anti-China
or confronting China.
So he had no qualms and hisadministration had no qualms
about rejecting transactionsthat had that created any sort
of national security or, as Isaid, economic protectionist
(15:24):
problems.
The Biden administration hasbacked off that a little bit.
There is less of an outrightneed or desire to confront China
and our adversaries byrejecting deals wholesale.
They will still try to workthrough matters but they will
not clear them as maybe easilyas they have in the, as easily
as other administrations have inthe past.
And in that regard the Trumpadministration really did kind
(15:46):
of there was a bit of a fork inthe road, particularly as it
relates to China, and kind ofthe current administration has
followed through in manyrespects as it relates to China,
and kind of the currentadministration has followed, in
many respects as it relates toChina, the process of not
clearing these transactions,maybe like others would.
Speaker 2 (15:59):
And it's funny there's a mirror image there
between CFIUS and antitrust, inthe sense that during the Trump
years when we saw toughenforcement, it was largely
outside of court settlements.
When we shifted to the Bidenyears in antitrust, we see the
DOJ explicitly abandon the useof the consent decree and the
(16:19):
FTC, in the last year or so, hasalso abandoned settlements and
we see more court cases as apercentage of all in-depth
investigations percentage of allin-depth investigations.
And so, in a way, what theantitrust agencies are doing
under Biden that they did not doas much under Trump is to use
the power of litigation and thepower of investigation and what
(16:41):
we call FUD fear, uncertaintyand doubt to deter M&A.
And that is what many criticsare saying about the approach
being flawed, being that, look,if you don't have predictability
in the process, then you're notgoing to get to the right
answer, whether you're aregulator or a merging party.
Speaker 1 (17:01):
Yeah, and parties that want to merge with that
kind of uncertainty?
Either they will do it lessthan they otherwise should in an
efficient economy, or they willspend more resources just
gambling on something where youonly know the outcome Exactly.
Speaker 2 (17:13):
Yeah.
Speaker 3 (17:14):
And that was one of the key things that the Biden
administration tried to bring toCVS, at least with certainty of
the process.
There was a lot of unevennessin the way, maybe that some
commentators thought that theTrump administration handled CVS
, and one of the kind of atleast anticipated and they have
felt through on this in manyrespects is to bring a more
certain approach, a more certainprocess, because that's
obviously what business leadersmost need when they're dealing
(17:34):
with a transaction they need toknow what the rules of the road
are and what's the certainty ofan outcome, whereas something
that can be very apolitical oruncertain creates a lot of
hesitancy to maybe signtransactions because you don't
necessarily know what theoutcome will be.
So I think the Bidenadministration definitely tried
to pursue that and I think theylargely achieved that, with some
exceptions, and we see thatkind of overall.
Speaker 1 (17:53):
I mean, good rules systemically are good, bad rules
are not.
But not knowing what the rulesare correct, even on the micro
level, really chills economicactivity, chills investment.
It scares people.
You don't really know what todo.
So to create morepredictability.
One difference, adam I'm struckyou mentioned court cases.
Now, obviously, in theantitrust area, we're looking at
statutes.
The agency is complying withthem.
(18:15):
So say, there's a DOJ criminalinvestigation or the FTC is
looking at maybe a pre-mergerapplication and you're trying to
figure out whether there'sviolations or conditions that
should be imposed to maintaincompetition in healthy free
markets and not have abuses ofmarket power or aggregations of
market power.
If the agency gets it wrong oroverreaches, there's judicial
(18:36):
recourse because everybody hasto live within the law.
Now, john Sifias, is a littledifferent right.
I mean, this is really muchmore discretionary because we
defer legally in the statute tothe White House or the president
, ultimately overseeing thiscommittee, to determine whether
national security is impacted.
Speaker 3 (18:52):
Yes, it is and it's.
The executive branch hassignificant power under the
CFIUS authorizing statute todetermine whether a transaction
could negatively impact nationalsecurity and if the
administration makes a decision,or an administration makes a
decision regarding that, it isnot appealable to the courts.
Now, the process by which thereview is handled could be and
there has been a case regardingthat the process by which the
review is handled could be, andthere has been a case regarding
(19:12):
that, but the substance of thereview is one that cannot
necessarily be appealed.
So it really does put theburden on the parties to, when
you have a transaction thatyou're going to go through
Sipias to ensure that youproperly position it for
whichever administration you'redealing with Biden or Trump to
know what that administrationmost cares about, what the
administration doesn't careabout, and to highlight the
(19:34):
positives.
Your audience is very importantin CFIUS because, again, you
have to convince those agenciesthat the deal does not present
any securities because,effectively, you do not have any
matter of recourse to thecourts.
Speaker 1 (19:47):
Adam in the antitrust area.
That's different.
Speaker 2 (19:49):
Yeah, very different, and I think what I'm seeing is
a difference in behavior by theregulators.
Because of that, I would thinkit seems to me, based on your
observations, john, that inCFIUS, the agencies know that
they're the judge, the jury andthe executioner, whereas the
antitrust authorities know thatthey have to ultimately go to
court and prove their case.
(20:09):
And the difference might bethat in the antitrust
authorities know that they haveto ultimately go to court and
prove their case, and thedifference might be that in the
antitrust arena, the agenciesfeel they can be more aggressive
in bringing theories of harm tothe courts, knowing that a
judge might turn them down.
In fact, what we see is a lotof rhetoric around.
Well, we should be bringingcases, even cases that we lose,
because that means that we arepushing the bounds of the law
(20:32):
where it should go, and thejudges can tell us when we've
gone too far.
They don't say that part, butthat's implicitly what they're
saying.
Speaker 1 (20:38):
They're pushing the envelope and seeing if it breaks
Exactly the court will tellthem.
Speaker 2 (20:42):
Right and they're saying where's the case law
going to go?
We know where we want it to go,but we have to find out where
judges are going to let us, andthe only way to do that is to
bring the case, Whereas in CFIUSit's obviously a different
story and the decision is madeand it's final.
Speaker 1 (20:58):
So let's bring in the third branch of government for
a second right, because we'vetalked about the agencies and
the administrative action andthe president and what the
administrations are doing.
We've talked about courts, atleast in the case of antitrust
right, and what they're able todo to make sure that the
agencies are not overreaching ormisinterpreting the statutes.
Congress has not legislatedmuch.
Although they've investigatedon antitrust and competition
(21:20):
issues, especially in thedigital and tech domains, they
haven't really changed the lawin any significant way, probably
since the 1970s.
In contrast, in CFIUS thereactually has been some
tightening of it.
Can you comment a bit on howthat plays out and what it might
mean for this upcoming election, not just between the White
House but also between theparties, and whether there's
prospects for legislative changein either area?
Speaker 3 (21:41):
So on CFIUS, as you mentioned, there was a
significant expansion of theCFIUS statute in 2018.
Effectively, policymakersdecided that the prior set of
statutes were not sufficient toaddress kind of the evolving not
only geopolitical but reallytechnology and marketplace
developments as to how investorswere investing or acquiring US
(22:01):
assets.
So there was a broad expansionof the authorities in 2018.
The implementing regulationswent into effect over the
subsequent two years, so we'vebeen operating under those
regulations now for three orfour years.
I don't think that there's areal appetite to fully reform
the process again.
I think, if anything, it'll betinkering around the edges.
Do they want to sweep in moretypes of transactions?
(22:24):
Do they want to subject othertypes of investments to CFIUS
reviews?
Not all transactions aresubject to CFIUS authority.
So I think really what you'regoing to see is kind of updating
the statute and tinkeringreally with the substance,
rather than a wholesale review.
I think everybody by and largeto the extent that they comment
on it think that the currentauthorities and regulations are
(22:44):
probably sufficient enough toprotect national security but,
importantly, not todisincentivize foreign
acquisitions, because we reallydo need foreign capital in this
economy and policymakersrecognize that trusted sources
of capital should not beprohibited and there should not
be kind of large impediments tothose types of transactions
because the country economicallyreally does require it.
Speaker 1 (23:05):
Let me poke on that, though, for a second.
So there's this.
One strand says we need foreigninvestment.
In fact, capital flows into theUS help our balance of payments
.
They create jobs.
They're great, bring it on.
And if we believe in freemarkets and free trade, we
probably believe pretty much infree capital flows as well.
By the same token, nationalsecurity matters.
We don't want people coming inand causing things that would
(23:25):
threaten our way of life and ourpower in the world.
Right, and that's certainly aconcern.
There's a tension there and Ithink there's the way Congress
and the recent statutes and alsothe Biden executive order on
CIFI is kind of reconciled, asthey say.
Well, there's an alignmentEconomic security, yes, and
national security are part andparcel of the same thing.
(23:45):
Is that too simplistic, or arethey wrong?
Speaker 3 (23:48):
No, it's not too simplistic, it's fairly accurate
.
There's an acknowledgment andeven the Trump administration
recognized the benefits offoreign investment in the United
States that foreign capital isone of the many engines of the
US economy.
So we need to continue it andallow it to grow and expand as
much as we can.
So there was certain exceptionsbuilt into the rules for
capital from kind of, again,trusted sources.
Speaker 1 (24:10):
So if it's a trusted source of capital, the US
government A country which isdesignated as like Great Britain
or New Zealand.
Speaker 3 (24:17):
There's a handful of countries that are specifically
designated by regulation to havecertain kind of expedited
treatment or exceptions to someof the regulations that are
serious.
Other countries don't have that, but, based on their
interaction with the USgovernment, there's a kind of a
broad deal of comfort with them.
Other countries, though,however, is really where the
tension that you describe arisesand certain investments from
(24:39):
those countries and investorsfrom those countries can occur.
They probably have to bestructured differently maybe
than others.
There's probably more passivity.
That is required, less accessto US information, less access
to US information, less accessto US facilities.
Speaker 1 (24:53):
Less proximity to military bases.
Speaker 3 (24:55):
Things of that nature exactly.
So there still is a desire tohave capital from all sources
come, but when it comes fromcountries with which the US has,
I would say, less kind offriendly diplomatic relations,
what you'll see is there's waysto get the regulators
comfortable with the investment,and those are, as I said,
structuring passivity, things ofthat nature, whereas investors
(25:18):
from trusted countries don'thave those kind of hurdles to
get over.
Speaker 1 (25:21):
So, adam, when you look at it from the antitrust
side, there's also sort of this,maybe intellectual tension
between not wanting some largecompanies to be too large to the
point where their market powercould have anti-competitive
effects.
But on the international stage,of course, we actually might
want to champion.
They're the national championsand we want them very much to be
dominating their industries sothat foreign companies don't do
(25:43):
that.
Is that relevant to theantitrust analysis, and should
it be?
Speaker 2 (25:47):
Yeah.
So I think yes in the answer toboth questions.
As my partner colleague, RichParker, likes to say, if Apple
were founded and run out ofMoscow, we would be having a
very different conversation.
Speaker 1 (26:01):
And a very different iPhone.
Speaker 2 (26:02):
Exactly About what antit outside of this country?
No-transcript.
(26:27):
Now, do we credit or call outantitrust policy as the cause?
Hard to say, but I can tell youthat in Europe there is a very
different debate going on,especially in the UK, about
whether regulations includingthe DMA which was recently
passed, including theirrelatively tougher stance on
(26:48):
monopolies and antitrust overthe course of the past few
decades, have contributed to thereality that the tech economy
in Europe has not grown and isnot as innovative as the economy
here.
So, yes, it is relevant andthat is something that is
heavily debated within antitrustcircles.
(27:10):
There is a school of thoughtemerging in antitrust called
dynamic competition, and I'mputting in a plug for it because
I'm helping put together asymposium for the antitrust
journal Law Journal on thistopic.
But the concept is that weshouldn't worry too much about
competition within markets.
So if a market gets monopolized, there might be some benefits,
(27:34):
because even monopolists need toinnovate.
The competition we really careabout is competition for the
next market or to create thenext market.
And if you take a look atAmazon, apple, name your big
tech company those are themarkets that they're worried
about because they're competingwith each other for those
markets, including startups andbig companies from other parts
(27:57):
of the world.
So I'm not suggesting thatthat's the correct school of
thought.
Some might claim that that'sjust a rebranding of the Chicago
school, which the progressiveand the Brandeisians would say
got us into this mess in thefirst place.
But that's the debate that'sgoing on and, to your point, it
will inform how antitrust tokeep our international
(28:20):
competitiveness up to where itis today.
Speaker 1 (28:38):
So the starting point of that, though, it seems to me
, is the idea, which is prettyprevalent you mentioned Chicago
School, their approach toantitrust, but also, I think,
most of the history of antitrustwe assume we have a free market
.
To the history of antitrust.
We assume we have a free market, we assume it's competitive and
we're worried aboutanti-competitive behavior or
combinations that would createmarket power that then limit
that competition.
(28:59):
One might say today, with someof the concentration of market
power in certain companies, yes,it may encourage, because of
economies of scale, moreinnovation, or it may chill it
if they're buying theircompetitors and shutting them
down.
There's not inherently one orthe other.
What could come from that,though, is if you flip the
analysis and you said assume fora second that this sector is
(29:19):
not competitive, but we takeyour dynamic model.
Therefore, what should happen?
It's not just how do youprotect the next entrant or the
next sector.
It's also a question of is thatkilling innovation?
Is it extracting rents and notbeing productive in the economy,
as opposed to fostering whatcompetition is supposed to
foster, which is more innovation, more access, fewer barriers to
(29:39):
entry and the benefits thatcome from competition to
producers and consumers?
Speaker 2 (29:44):
Right, right, and I think that's the nub of the
debate, because you can point toexamples around the world where
there are monopolies, some ofthem state-sponsored.
I'll take Pemex in Mexico,where there isn't competition,
and I think we can all agreethat there isn't very much
dynamism in the oil and gasmarket in Mexico, and that's
(30:06):
been an issue that the Mexicangovernment has been trying to
address in recent years.
Government has been trying toaddress in recent years.
Regulation can calcify marketsand there are many examples of
this occurring over the years.
Before there was widespreadantitrust regulation in this
economy.
Most don't remember I certainlymight not be old enough to
(30:26):
remember but the ICC governedprices and output, which is
quite extraordinary when youthink about it by today's
standards and the types ofdebates we're having today.
And so I think, to get back toyour point, I'm not suggesting
monopolies are always good andthat they always innovate.
That's the debate.
Joseph Schumpeter and KennethArrow would debate this right.
(30:47):
They both had very differenttheories about whether large
companies can do this, butundoubtedly scale is needed to
invest in big ideas.
At the same time, startups areresponsible for many of the big
ideas that we have today.
So the question is, what is thenature of the market?
What is the nature of thetechnology?
(31:07):
When does regulation make sense?
How much error tolerance do wehave and in which direction?
Those are all questions that Idon't have answers to.
Speaker 3 (31:15):
Yeah, it's interesting listening to this
discussion that lent the focusof national security and ciphius
is obviously different and it'snot the size of the investment
or the size of the company.
There could be a company thatis developing some next
generation technology and it'sliterally a few people in a
garage developing that and ourgovernment is very focused on.
Policymakers want to ensurethat investments in those
(31:37):
companies which are creating thenext market are only from
investors in countries that wecan trust.
They don't want to lose controlor have that next technology be
available potentially to ouradversaries.
So the statute the reformstatute that you mentioned a few
minutes ago was really focusedon investments in those types of
(31:58):
companies.
We call them criticaltechnology companies and it
wasn't a.
The policymakers didn't sayit's a hard no for investments
in those companies.
It just raised the bar suchthat when investments like that
are make there they couldautomatically be subject to
CFIUS review a mandatory CFIUSreview and there's a keener
focus from the national securityagencies on those industries.
(32:19):
So there's been a real shift inthe last six or ten years on
the types of industries that aresubject to higher scrutiny by
CFIUS, where before we didn'tnecessarily have that.
It almost went undefined in thestatute.
National security was somethingthat regulators would interpret
themselves, but now it's aclear focus on technology and
making sure that next-gentechnology, whether it's AI,
(32:41):
whether whatever it is, remainsin trusted hands with trusted
owners.
It's very important to ourgovernment.
Speaker 1 (32:46):
Yeah, and AI is interesting and of course the
European Union is, I will say,ahead of us at the moment, at
least procedurally, in coming upwith a protocol rubric for how
AI should be.
They're focusing on how itshould be used, not so much how
it's developed and whether thatcould cause harm.
So I don't know what we'll doon that.
But what I think is relevant towhat each of you are focusing
(33:08):
on is if you look at theindustries that are sensitive
from a national securitystandpoint and you look at the
division somewhat between DOJand the FTC and the antitrust
space, where regulatedindustries tend to end up in one
bucket, so that could be energyor telecommunications what have
you?
And maybe transportation,airlines.
That's different than moreconsumer-facing types of things.
(33:30):
The divisions are different andI don't know if that regulatory
overlay the fact that there'sother regulators paying
attention even to regulate themonopolies which we need for
things like power delivery, howthat plays out if that's
different, because obviously theelection that's coming up will
probably change one way or theother the way we regulate
certain of those key industriesand that change in regulation
(33:51):
could spill over, have very big,maybe unintended, effects in
both CFIUS reviews and antitrustreviews.
Speaker 3 (33:57):
Yeah, for sure.
I think that if there is achange in administrations and
the Trump administration returns, I think you're going to see a
keener focus on what those nextgeneration technologies are and
what could be the next to useAdam's example the next Apple in
the world to making sure thatthose are continued to be
innovative in this country,develop in this country and not
(34:19):
made available to ouradversaries.
And that's really what thatadministration kind of was
full-throated in protection ofis not just necessarily what are
the harms today?
What could the harms occur in10 or 20 years?
That's really where they werefocused.
The Biden administration hasbeen good about that, but I
think the Trump administrationmight be more kind of keenly
focused on what those next-gentechnologies are, out of
(34:40):
foresight or out of fear?
Probably both.
It's probably two sides of thesame coin.
Speaker 2 (34:45):
Yeah, and I want to pick up on one question you had
towards the end and that is howhow do regulators other
regulators other than DOJ andthe FTC impact how the DOJ and
FTC thinks about markets,because I think this goes to the
overall question of thedifference between the
administrations.
So traditionally the antitrustdivision and the FTC have had
(35:06):
different views than theirsister agencies, whatever the
regulator is about mergersconduct, and they have tended to
be a bit more strict in mostcases not all cases, but many
Regulators, sectoral regulators,in the minds of the DOJ and the
FTC, tend to be too lenientbecause in their view they're
(35:27):
either subject to capture orthose regulators are heavily
reliant on the companies thatthey're regulating, whereas the
DOJ and the FTC are lawenforcers, they oversee the
entire economy.
So when we go to the FTC and Ihave had this experience many
times on pipeline gas, pipelinemergers we make the argument
that you have FERC over hereregulating everything we do.
(35:50):
They regulate interconnection,they regulate the tariff.
Speaker 1 (35:54):
Interest and tariffs are covered by them.
Yeah, who gets on?
Speaker 2 (35:57):
Exactly.
We cannot prevent anotherpipeline from connecting to us.
We cannot prevent that pipelinefrom getting a tariff rate.
We cannot prevent marketersfrom going wherever they want
and getting whatever volumesthey want.
All of those arguments are made,but the way that the FTC and
the DOJ see the world is that,yes, all the other regulators
(36:18):
are doing is creating a marketwithin a market.
We need to regulate the marketthat is left over.
You might discount below yourtariff on a gas pipeline and
therefore competition may drivewhatever discount you offer, and
the FERC can't make anyonebuild a pipeline.
So what the other regulators dois set the limits and set the
(36:40):
market.
But within the market there isstill competition and this goes
to the Telecommunications Actwith the FCC, every other
regulator, and there's a debategoing on.
There's yet another debategoing on within antitrust as to
whether we ought to have rules,regulations, whether the FTC
ought to pass regulations.
It has rulemaking authority.
Arguably, it has proposed a banon all non-competes in the
(37:03):
United States with thisrulemaking authority.
We'll see if it passes musterin the courts, but—.
Speaker 1 (37:08):
You'll turn the whole country into California.
Speaker 2 (37:10):
Exactly, but it will have uniformity right.
So what we're trying to figureout as an antitrust community is
should we have these rules,like other sectoral regulators,
that everyone can follow?
Eliminates the fear,uncertainty and doubt, but it
might be quite constraining.
And then who should decide whatthose rules are?
Speaker 3 (37:29):
Is it the federal government or is it the states?
It's interesting and tiffy isthat there's no behavioral rules
like that.
They do a verytransaction-specific review but
to the extent a transactionpresents national security risks
or concerns and they're worriedthat the behavior of the
combined company or thepost-transaction company could
threaten national security, whatthey do is they effectively
enter into one-off agreementswith those companies, very
(37:49):
similar to what a consent decreewould look like, except there's
not a court overseeing it.
You sign an agreement withagencies and you agree to
certain behavioral commitmentsto mitigate the national
security concerns that arepresented by the deal.
So it's done in kind of aone-off basis rather than kind
of proactive rules to governkind of actions and behaviors by
companies.
Speaker 1 (38:10):
This behavioral piece is really interesting to me and
it's different than the harmsconversation we had a moment ago
.
Whether it's harm to nationalsecurity or harm to markets,
what have you?
Harm to consumers, harm toothers?
If you look at behaviors and Iwant to, adam, maybe look at the
origin of some of the antitrustlaws we can go back to John
Sherman of Ohio, with theSherman Act coming in which, by
(38:30):
the way, was right after GroverCleveland lost his first bid for
reelection and, interestingly,the only other time their
president lost reelection,having won the popular vote but
he lost the Electoral College.
So go back to 1890.
John Sherman gets this done.
He's from Ohio.
Are there any lessons from thehistory of this that might be
(38:50):
relevant to what we're lookingat today and as to whether,
frankly, our arguments over whatthe antitrust laws are meant to
do, including the ones thatcame later, in 1914 and so forth
, what they're meant to do andactually what we're trying to
make them do are consistent withfostering either healthy
businesses or healthy consumermarkets or anything else?
Speaker 2 (39:10):
Sure.
So I'm going to start byfast-forwarding to the 70s and
talking about Robert Bork andhis then contemporaries.
And Robert Bork wrote a veryfamous book called the Antitrust
Paradox.
He wrote several law reviewarticles on the origins of the
antitrust laws and, based on hisstudy of the legislative
history and the origins of theSherman Act and other antitrust
(39:30):
laws, he concluded that the goalthat Congress had in mind was
something called consumerwelfare, which means that if a
business practice or a mergerleads to consumers being better
off than they were before, thenin most cases that should be
legal under the antitrust laws.
Speaker 1 (39:47):
Let's pause on that.
So if we're in a small town andyou and I each have a grocery
store and we're the only twogrocery stores in town, if we
divide the market, if we doprice fixing, consumers are hurt
.
So that'd be bad, correct.
But there are some things thatwe might do.
Let's say we have an onlinesearch company and we do things
that maybe aren't very good forthe people trying to get listed
in the search results, and maybea discriminatory pricing that's
(40:09):
not related to differences incost.
But consumers get this fabuloussearch engine that has lots of
stuff in it, mainly because itdominates the market.
We get really reliable resultsand we don't pay anything for it
, so maybe the consumer is nothurt.
Speaker 2 (40:23):
Right, exactly.
Speaker 1 (40:25):
If the consumer is better off in that scenario,
then you would have an argument,so Bork would be fine with that
second one.
Speaker 2 (40:31):
Oh Bork would be fine with that.
Second one.
Oh Bork would be fine with itand the court might be fine with
it.
He would look at it as more ofa balancing test.
Would the harms outweigh theefficiencies and the benefits to
consumers?
When you look at thelegislative history of the
Sherman Act more holisticallyand not through the Bork lens,
I'm not suggesting Bork wasnecessarily wrong, but there is
quite a bit of rhetoric aboutreining in big business.
Speaker 1 (40:53):
Especially railroads.
Speaker 2 (40:54):
Especially railroads, especially oil and refining,
the existing trusts of the day.
And that was a grave,concernailing concern that if
the government stepped in andpassed a wine-raging law banning
trusts or reining them in in ablanket way, that you would lose
(41:18):
many of the efficiencies thatresulted.
Certainly, the unifying ofrailroads and refining carried
with it some efficiencies.
Massive economies of scale,massive economies of scale and
network effects.
And arguably in the early stages, allowed industries to exist
that wouldn't have otherwiseexist, and so the question is
how far did it go?
How did it go too far?
(41:39):
Did it create durable anddemocracy-threatening trusts
that couldn't be reined in?
If they got too far and if thefederal government didn't step
in?
That debate was going on.
It took a while for the ShermanAct to pass, and it had many
iterations before it became whatwe now know it to be, but
interesting factoid from thatperiod of time is that there was
(41:59):
another important person fromOhio and his name was John.
Rockefeller, who owned StandardOil and was the founder of
Standard Oil and was a very keenand politically active business
person, and John Sherman.
Senator Sherman from Ohio, wasalso from Ohio and I venture to
(42:20):
say that they probably knew eachother and so had the Sherman
Act.
Was the Sherman Act passedunder Rockefeller's supervision
or with his blessing?
I can't speculate on that, butwhat I can say is where the
Sherman Act was left was, andthe way the courts have
interpreted it is.
It doesn't ban any and allagreements between companies or
(42:42):
competitors or trusts, Even ifthey're very large.
Even if they're very large.
It looks at the reasonablenessof the practice.
And what does reasonablenessmean?
It means is it commerciallyreasonable?
It is.
In my view, the law is closerto what Bork sees it than the
way that others in the currentadministration may see it.
(43:06):
Now, legislative history isalways dangerous.
Right, We've had numerousSupreme Court justices that have
cautioned against the overuseof it.
But here we see we have morethan a century of case law which
, on balance, favors areasonableness analysis of a
business practice or a merger,and I don't think you can ignore
(43:26):
that much case law.
Speaker 1 (43:27):
Let me ask you both something else, which is not
just predicting what couldhappen after the election, but
instead between now and then.
You're a large corporation.
You've got a bunch of cashsitting in your balance sheet.
You'd like to go buy somebodyelse and grow your business
through acquisitions, or you'rea private equity fund manager
and you're trying to decide howto deploy all this capital in a
(43:47):
world where, finally, inflationseems to be tamed and maybe
interest rates have stoppedgoing up.
They may even come down two orthree times this year.
So you're looking to deploythat capital and between now and
the election, you might be alittle concerned about the
uncertainty of where that'sgoing to go.
So how should you approachantitrust, cfius, pre-merger
(44:08):
notices, the types ofinvestments you might consider
making, so that you're a littleinsulated from that uncertainty?
Speaker 2 (44:14):
Sure.
So we think about this quite abit, and the way that we would
approach a merger now, goinginto an election, is assuming
that there's going to be achange, because if you assume
continuity, it's a little biteasier.
Now you can have a contract thatallows one or both parties it
out At point in time that mightapproximate when the changeover
(44:37):
happens.
That's an obvious way to do.
It is look, we're going to stopand pause and decide whether we
want to keep going with thismerger and this alludes to how I
was talking about the changingadministrations before is that
antitrust enforcement is goingto be quite tough in the future
(44:59):
years.
I think there are some policiesthat have staying power.
It's unclear to me thatsettlements will return, for
example.
It's unclear to me, and franklyI don't think a new
administration under Trump wouldback away from going after
vertical mergers, so mergersbetween competitor I'm sorry
(45:22):
suppliers and their customers, atrend which started under the
first Trump administration.
I'm not so sure that they'regoing to throw away the new
merger guidelines just becausethey were drafted under a Biden
administration.
Speaker 1 (45:35):
We'll be pausing on that for a second.
If a new administration isfocused on an ideologically
coherent approach to this as amatter of economic theory,
that's one thing.
If they're looking for tools ofexecutive power, john, to your
point about politics in thenational security side if you're
looking at that, then the Bidenadministration has just given
them a nice gift of all thesenew tools that they can use.
Speaker 2 (45:58):
Exactly.
I think what's happened overthe last four years is
enforcement is down.
There are fewer cases beingbrought, but the building blocks
of much more robust enforcementare in place and if you're a
new administration and you'rewanting to make your mark, you
can pick and choose the casesyou bring, but you have a bigger
toolbox to work with.
Speaker 3 (46:18):
Yeah, on the CVS side it's interesting to hear Adam
talk about a hundred years ofprecedent and things.
Obviously CVS is much more inits infancy.
But the thing that we worryabout more is not necessarily
the change in administration.
There will be a slight changein tech.
It's geopolitical developments.
Geopolitical developments canheavily influence the way an
administration views atransaction or a transaction
(46:41):
party and, given the way theworld is today and the
never-ending changes that arehappening almost on a monthly
basis, if there's a transaction,the longer it is unsigned, the
longer it's not being reviewed,the more likely it is, the
greater the likelihood thatthere could be some sort of
geopolitical development thatinfluences the way a new
administration could addressthat or handle it or want to
(47:03):
deal with it.
So and again, particularly withthe Trump administration, there
was never a hesitancy to usethe CFIUS process as leverage or
as a tool to achieve other kindof objectives, particularly
those geopolitically.
So to the extent that there's atransaction that is being
contemplated, sooner, probablythe better.
Again, just likely because ofthose geopolitical developments.
(47:24):
Those are kind of the we don'tknow what can happen in the
world and those can greatlyinfluence our defense, can we?
Speaker 1 (47:29):
get more granular, though, on that for a second,
Because from a CFIUS standpointwe're looking at foreign
investment.
That's what's being regulated,if you will, Geopolitics say,
with Russia and Ukraine.
Maybe not that big a deal,because Russia's not investing
in the United States very much.
In fact, the economy is toosmall really to do that anyway,
For sure Less than 10% of theworld's GDP.
China, totally different story.
(47:49):
Now, if we're on-shoringmanufacturing look at, say, the
CHIPS Act, which was passed on abipartisan basis under the
Biden administration, meant tocause reinvestment in
manufacturing capacity and isvery successfully doing that.
Now, If we're less dependent,say, on Taiwan in four years
than we are today for criticalchips that are needed across
industry as well as tech, maybewe don't care as much about
(48:11):
Chinese capital coming in.
And, by the way, the Chineseeconomy is having some
challenges as well, which islimiting its both ability and
willingness to invest in theUnited States.
So if the geopolitics arehappening Middle East, another
good example if they'rehappening in places where
they're not sources of foreigninvestment in a big material way
to the US, it doesn't matter,just from a CFIA standpoint.
Speaker 3 (48:30):
It can from a CFIA standpoint, because a lot of the
investors that are active inthe US are state-affiliated
investors and our government,particularly a new
administration, would want tounderstand are those investors
(48:50):
and this is a question that'salways focused on in
transactions is the investorpursuing a commercial investment
?
Are they trying to pursue somesort of state-affiliated
objective by acquiring an asset,by acquiring a technology,
investing in a certain industry?
So it's very keen, depending onwhat's happening and the way
you position a transaction forCFIUS is to highlight the
commercial benefits and thereason why, particularly a state
investor is undertaking aninvestment, to reduce the
(49:10):
concern from an administrationthat wait a minute, this is a
foreign state actor trying topursue some other objective
rather than commercial benefitsand commercial profits.
So they can and the way Russiais a very good example.
China is a very good examplecertain Mideast countries that
there can be an evolution in theway that the US government
approaches these transactionsbased on geopolitical
(49:31):
developments.
Speaker 1 (49:32):
Okay, Adam, just kind of to wrap up.
So what do you think actuallymight change then?
Speaker 2 (49:36):
Sure, so they're not completely one and the same,
although there'll be somecontinuity.
One thing that we're seeing alot of on the Republican side,
especially from Republicanattorneys general, is a focus on
ESG, and why would that be anantitrust concern?
Esg is good for the world.
(50:00):
The concern that has beenvoiced is that ESG involves
companies, sometimes competitorsgetting together and
cooperating to do things thatmight otherwise be viewed as
anti-competitive.
So take climate change, forexample.
What some in Congress and atthe state level have said is
that the push to address climatechange has amounted to, in part
(50:20):
, an agreement between investors, between companies, to stop
investing in coal, oil and gasdevelopment Far from the truth,
based on what we see in themarket.
But I think when it goes to ESGpractices, we've seen this movie
before with the Trumpadministration when the
antitrust division investigatedthe major car manufacturers for
(50:44):
agreeing allegedly to go to thestate of California together and
negotiate emissionsrestrictions.
Now we can debate about theantitrust merits of that, but I
think we're going to see a lotmore of that.
There are congressionalinvestigations, there are state
investigations.
It's a hot topic withinantitrust, but those types of
(51:05):
practices will be looked at.
We don't see.
We've seen some rhetoric fromthe current administration, but
not a lot of action.
Speaker 1 (51:11):
It's funny about four years ago there was a letter
written by Senate RepublicansMarco Rubio and others on just
that point and it was addressedto whoever nominally they
thought was the head of ESG atvarious law firms.
I got ours and it's a littlechilly, you see this letter with
Senate letterhead, signed byall these people you've heard of
, and it basically says that itsays well, gee, if you're
(51:32):
advising clients and you'readvising them with respect to
ESG and you're counseling themto do things that are
anti-competitive, we might liketo talk to you about that, right
.
And I will tell you that, in mypersonal experience, looking at
the business world for the lastthree decades and looking at
government interface, whetherthat's regulations or what have
you the level of coordinationthat conspiracy theories require
just isn't there, right, evenif you had intellectual merit
(51:55):
around that the theory thatsomehow antitrust and ESG are
conflated.
But I think your point is welltaken that political trends
happen because they happen, andI think you are foolish to turn
a blind eye to wherever thosetrends might go.
Speaker 2 (52:11):
Yeah, I think it's be ready for the investigations.
Investigations have power, evenif they ultimately don't wind
up in court, sure.
Speaker 3 (52:20):
Yeah and Sylvius, I think, as I said at the top,
we're going to see a lot ofcontinuation on the substance,
particularly as it relates toChina and other kind of economic
protectionism approach from theadministration, a much more
populist view of acquisitions ofhigh-profile US assets,
(52:41):
well-known brands.
The Trump administration wouldbe much less keen on approving
those than maybe the Bidenadministration has.
I think, unlike in NHS, you'llprobably see less enforcement.
The Biden administration hasbeen very keen on enhancing its
enforcement of the CFIUSregulations.
I think you'll see the Trumpadministration would back off in
that area and then the onething you would probably see
(53:03):
much more of is unevenness anduncertainty in the way that no
administration would handle kindof the CFIUS authorities and
again using them for leverageand geopolitical disputes, right
.
So more politicized Morepoliticized is very likely, yes,
interesting.
Speaker 1 (53:19):
So, nonetheless, it's really interesting If you look
at what's happening in themarket right now.
Despite all this uncertainty,deals are getting done.
Is that your experience too?
Speaker 2 (53:27):
It is, and in fact, when you look at the track
record of the Bidenadministration some numbers came
out earlier this yearreflecting on the first few
years of the administrationenforcement is actually down by
most metrics.
There are fewer court casesbeing brought, there are fewer
deals being abandoned, there arefewer significant
investigations of mergers and alot of the rhetoric has not yet
(53:50):
panned out into that, into themore enforcement.
And part of the reason is theagencies are resource
constrained.
Bringing a court case takes alot of resources.
You have to pay economists, youhave to have dozens of
attorneys involved in court timeand the agencies don't have the
resources to bring them all andCongress hasn't given them more
money.
Speaker 1 (54:09):
It could also be self-regulation, where people
know that they don't want to beon the private sector side.
You don't want litigationeither, so you might be bringing
deals to maturity that arelikely to pass muster.
True, because there is actuallyconsistency in how the rules
are being interpreted.
At least it's articulated.
Speaker 2 (54:24):
Yeah, and there certainly has been more
self-selection among clients asto what deals they bring forward
.
But I can tell you that dealsare getting done, including
deals that raise antitrustissues lots of them and a lot of
it happens behind the scenes,where you present something to
the regulator and the regulatorblesses that.
There's no press release,there's no court case.
We don't know the details, butit happens.
(54:45):
And I think, as a last word,what we would tell clients who
are worried about the fear,uncertainty and doubt that is
coming out of the rhetoric isthat your deals are still
getting done and havingexperienced counsel at hand is
pretty important.
Speaker 3 (54:59):
I would say the same thing on CVS that under either
administration and or bothadministrations, looking back,
the overwhelming majority oftransactions presented to CVS
cleared CVS without much hassle.
So in our experience, if thereare issues there's ways to.
You can still move forward withthe deal.
You would just have to maybestructure the deal slightly
differently to kind ofanticipate the concerns that the
(55:19):
regulators or an administrationwould bring.
So knowing exactly how theadministration, what the
administration cares about andthe issues that they are
concerned with allows you toanticipate those concerns.
You can address them in thestructuring of the transactions,
the assets that may be in themix, so that when you go to the
regulator with the transactionit's best positioned for success
(55:40):
.
And I think counsel likeourselves are very well
positioned to help clients withthat.
Speaker 1 (55:45):
Well, I want to thank you both.
This has been an absolutelyfabulous conversation and I've
learned a lot, so thank you,thank you.
Thank you.
Thank you for joining us onanother episode of Law Policy
Markets Milbank Conversations.
Follow us on your favoritepodcast platform and learn more
at milbankcom.
Law policy and markets.
I'm Alan Marks.
Today, I'm joined by Milbankpartners Adam DiVincenzo and
John Bain, both based inWashington DC.
Together, we'll look at theupcoming US presidential
election and what it means formergers, antitrust and foreign
investment.
Let's get to it.
(00:41):
2024 is an election year, notjust in the United States, but
globally, from Indonesia, indiaand Taiwan to Mexico, europe and
the UK.
About half the world'spopulation lives in the 60 or so
countries that will holdnational elections this year.
The results will have broadimplications on economies, trade
, geopolitics, climate change,war and peace, and democracy
itself In the US.
(01:01):
Uncertainty about futurefederal economic policies makes
investment decisions this yearespecially challenging.
Two places where thisuncertainty is playing out are
mergers and acquisitions, andforeign investment.
M&a activity is so far chargingout of the gate this year,
notwithstanding uncertaintyabout the upcoming US
presidential election.
(01:21):
Will that last?
Taking a wider view, what doesthe polarizing 2024 election in
the United States mean forantitrust or competition policy,
cross-border investment,international capital flows and
corporate behavior?
We have some clues, because thetwo likely presidential
candidates each have a trackrecord on antitrust enforcement
(01:42):
and CFIUS policy.
President Joe Biden and formerPresident Donald Trump differ
sharply on many things, ofcourse, including on economic
policy and national securitypriorities.
They differ, too, on whetherthe administration has
discretion to dictate or departfrom established rules and norms
in enforcing the law andregulating corporate
(02:04):
transactions.
They also share some surprisingsimilarities, especially on
robust enforcement to boostdomestic manufacturing, to
protect US jobs and to challengeanti-competitive behavior that
hurts consumers.
To help sort out what's at stake, I've asked Adam DiVincenzo and
John Bain to join me.
Adam is an antitrust litigatorwho has handled many merger
(02:25):
approvals and other cases beforethe US Department of Justice
and the Federal Trade Commission.
John focuses on matters relatedto the Committee on Foreign
Investment in the United States,or CFIUS, and on related
national security issues.
Both John and Adam are partnersin Milbank's Washington DC
office and have come up to joinme here in New York today for
(02:46):
what I hope will be aprovocative, candid and
opinionated discussion.
As ever, the views expressedare ours alone.
Adam, john, thank you very muchfor taking the time to get
together today.
(03:06):
A lot of clients of ours arecalling and asking what they
should be doing as far asinvestment decisions.
M&a is a good example.
Finance and other areas are alsoimplicated, but they're asking
what they should do given thatwe have an election coming up
and it's not a normalpresidential election in the
United States in 2024, in partbecause of the very strong and
(03:27):
stark differences on economicpolicy, as well as, of course,
many other big things, betweenthe two candidates that look
like they'll be the nomineesPresident Biden seeking
reelection.
Former President Trump seekingto get back in the White House.
It's also different because weknow what each of them has
already done.
We have a track record fullfour years for Trump and almost
(03:48):
four years for President Biden,so we can look, I think, at what
they did in two areas inparticular where you're experts
antitrust and CFIUS nationalsecurity approvals and see how
that might impact, how theelection outcome might impact
decisions that people are makingtoday about how to invest, in
particular, mergers andacquisitions, and what the
(04:10):
environment might be and how itmight change depending on the
outcome of the election.
Adam, why don't we start withyou and just take a quick look
at what we know already aboutthe approaches that the Federal
Trade Commission and theDepartment of Justice have taken
with respect to antitrust undereach of the candidates?
Speaker 2 (04:23):
Sure, and thank you for having me on this podcast
today.
I'm very excited about talkingabout my favorite subject.
So, as you pointed out, we havea very unique election here
because we have two candidateswith a track record in antitrust
and in other areas.
President Trump, when he cameinto office, was predicted to be
much like his Republicanpredecessors.
(04:45):
So George W Bush, ronald Reagan, george H W Bush those
administrations were noticeablyless pro-enforcement in
antitrust and more trusting offree markets than the Democratic
administrations that intercededthem.
(05:06):
So Obama and Clinton.
That expectation was quicklyupset, in the sense that we had
several large cases brought bythe Trump administration early
on.
What we saw over the course offour years were cases being
brought, new guidelines beingissued, particularly new
(05:27):
vertical merger guidelines, anew merger remedy policy.
Now, there were certainelements in there of the old
Republican free marketphilosophy, but by the same
token, I think it's fair to saythat antitrust regulation and
enforcement was quite robustunder the Trump administration.
So fast forward to 2021,.
(05:48):
President Biden is sworn intooffice.
Shortly thereafter, he issuedan executive order calling for a
whole-of-government approach toantitrust, which was not unique
in history, but certainlyunique in recent history.
He has regular meetings that hepresides over with various
agencies that overseecompetition, not just the DOJ
(06:11):
antitrust division and the FTC,but the Department of
Transportation, the FederalCommunications Commission.
So President Biden himself isquite serious about antitrust.
Speaker 1 (06:22):
So what's different about Biden versus Trump?
Speaker 2 (06:25):
So what's different?
So when Biden was elected, hemade a decision early on to give
the leadership of the FTC andthe DOJ over to what we think of
as the progressive Brandeisianmovement.
Speaker 1 (06:39):
And that's Lena Kahn.
Speaker 2 (06:40):
Right, that's Chair Kahn and Jonathan Cantor who
heads the DOJ's AntitrustDivision and, in a nutshell,
what their view is is thatnumber one antitrust enforcement
over the past 40 years has beentoo lax and the result has been
harm to markets and inconsumers and workers.
(07:03):
They believe that the antitrustlaws were passed not to
maximize efficiency or evenconsumer welfare alone, but to
preserve a view of America thatJustice Brandeis once had, which
was to protect small businesses, ensure that larger
corporations were appropriatelyreined in and that their market
(07:26):
power was checked, and so it's amuch broader view of what the
antitrust laws should address,and ever since then, the Biden
administration, at least interms of their goals, has been
trying to pursue that policy andpursuing a broader array of
harms or theories of harms whenthey look at mergers, when they
look at business conduct andwhen they look at other things.
Speaker 1 (07:48):
If you look at the Sherman Act, the Clayton Act,
other key pieces of regulationof the economy that are focused
on antitrust and competition, inparticular, there's this idea
that it's not just protection ofconsumers and small businesses
and looking at prices that, infact, the antitrust laws matter,
because there's other thingsthat are going on that lead to
(08:09):
concentrations of market powerin the hands of relatively few
companies, including in thepopular mind, especially in big
tech.
Speaker 2 (08:15):
Sure, and so there's a lot there.
The White House advisor onantitrust, tim Wu, wrote a book
called the Curse of Bigness,which became a bestseller, and
what he says is what youdescribe as the larger problem
with what he calls bigness.
Right, the curse of bigness.
(08:40):
And that is, once businessesget too big, they can engage in
regulatory capture.
They can capture the regulatorsthemselves and, in turn,
threaten democracy itself.
They become so big that theycan manipulate outcomes of
political processes in theirfavor, either through lobbying
or election interference or anysort of technology that allows
them to have more power thanindividual voters.
(09:03):
Now, that's the theory, butthat is underlying what we are
seeing going on at most of theantitrust agencies these days.
Speaker 1 (09:12):
Right, All right.
So we're going to come back toantitrust in a second.
John, I want to pivot over toyou because, imagine, I've got a
client.
They're a company, they want tomerge with another company and
one of the things they have todo if they're over a certain
size I guess the new thresholdhas been raised to almost $120
million they have to do theirHSR, their Hart-Scott-Rodino
filing and that's antitrust,right.
So now we're looking at DOJ andFTC and Adams, busy with them
(09:36):
trying to make sure thatwhatever they're trying to do is
not going to beanti-competitive and the way
they're doing it is also notanti-competitive in their
behavior.
But there's another way oflooking at this, which is
national security, and that'sthe lens that you focus on with
the Committee on ForeignInvestment in the United States,
or CFIUS, which ultimatelyreports to the White House and
determinations of whether thismerger might, especially if it's
(09:57):
a sensitive asset, be materialand adverse to national security
.
How do you see the trendsbetween former President Trump
and President Biden, what theywere trying to accomplish, at
least initially, and how thatrelates to CFIUS approvals?
Speaker 3 (10:11):
Okay, well, first, thanks for having me.
I'm very excited to talk aboutthis.
So President Trump took a veryaggressive approach to national
security issues through CFIUS.
Unlike prior Republican andDemocratic administrations, he
really used the CFIUS processfor leverage as part of the
geopolitical disputes that wereoccurring with China and others.
(10:34):
It was a real tool that theadministration aggressively used
as part of those discussions,in part to highlight key
differences between the UnitedStates and its adversaries, but
also in part to promote a morekind of America first agenda.
In that way the administrationreally promoted almost economic
(10:56):
protectionism through nationalsecurity.
The way that administrationviewed it and consistent with
how the Obama administration alluses that technological
leadership was a key componentof national security that
America had to maintain and infact even broaden its
technological leadership in anumber of key areas as a key
(11:17):
aspect of national securitystrategy.
So that is something that theTrump administration really
aggressively pursued.
And there was a number ofpretty high-profile transactions
where the Trump administrationreally did go a little bit out
of the lane of CFIUS to try andensure that American companies
were protected, that investmentsinto key industries were not
(11:38):
permitted the Bidenadministration and that was
mostly as it relates to Chinaand kind of other rising powers.
There was a lot of when theBiden administration came in.
There was more continuationthan differences really,
particularly as it relates toChina.
The Biden administration hasfollowed through on a lot of the
Trump priorities as it relatesto national security vis-a-vis
(11:59):
China and CFIUS is a keycomponent of that.
So there hasn't been a hugekind of substantive difference
in the way that the Bidenadministration has approached
CFIUS, particularly as itrelates to China.
What has been different isthere has been a little bit more
of a trend back to traditionalwhat I would say national
security sensitivities andnational security issues.
(12:19):
With the Biden administrationthere also has been a little bit
of a less politicalinterference.
There also has been a littlebit of a less political
interference.
Some were critical of theformer President Trump that it
was too much political kind ofissues were driving CFIUS
reviews rather than kind oftraditional national security
(12:40):
sensitivity.
So the Biden administrationtried as much as they could to
bring it back more into thetraditional lane of national
security so that transactionspresented to it they did not
have a real nexus to nationalsecurity issues or national
security matters.
They would not necessarilycreate the type of concerns that
Trump administration had.
So there was some.
Unlike antitrust I think thatAdam described.
There's probably moresimilarities in the way that the
(13:00):
Biden administration haspursued CFIUS and CFIUS policy,
as did the prior administration.
Speaker 1 (13:06):
So, essentially, if you look at the numbers, usually
before Trump came into office,there's premature notices, and
obviously, as economic activitygoes up, as there's more M&A
activity, you'll get morenotices.
That's fine.
And you look at numbers, andthat does actually increase 2016
, 2017.
Increase 2016, 2017, the numberof transactions M&A
(13:29):
transactions that were abandonedbecause of CFIUS related
concerns was significantlyhigher under President Trump.
Got the numbers 24 in 2017, 18in 2018.
Before that, it had never beenmore than a few a year, maybe up
to eight, and then under Bidenthat falls off again.
You go back to the kind ofhistoric numbers.
What does not change, though,are notices withdrawn, right.
So is there a difference incommunication?
Is it wrong or simplistic tothink that under President Trump
(13:51):
, some of these are nationalsecurity, some are anti-China,
some were just political, and sothat left less predictability,
so people really didn't knowwhat to notice or how to react,
and then, eventually, some ofthe word is tossed of some of
those policies as they relate tonational security, but not the
kind of I'm going to call itarbitrary political piece.
(14:12):
As a result, people are stillapplying, but there's maybe
different communication so thatyou don't, at the end of the day
, have transactions that areactually rejected.
Speaker 3 (14:20):
Yeah, so under prior administrations there was a
little bit of a sensitivity tooutright rejecting transactions.
So the way that, for instance,the Obama administration handled
a lot of transactions that hadChina ties or China nexuses,
they wouldn't reject them butthey wouldn't approve them.
They would leave them in thiskind of limbo.
And the way the CVS processworks, you would have 90 days to
(14:40):
try and clear a transaction.
If you couldn't, what theadministration would say is why
don't you pull and refile?
We'll keep looking at it.
So effectively they weresticking it in a drawer.
They didn't want to reject,they didn't want to approve,
because they didn't want tocreate any sort of diplomatic or
other kind of internationalgeopolitical tensions with China
.
Obviously, president Trump tooka very different tack.
He was not afraid to confrontChina, not only through but
(15:03):
through a lot of the otherbilateral disputes.
So he almost used it as, as Isaid earlier, a tool that he
would show how muscular he wastrying to be in his anti-China
or confronting China.
So he had no qualms and hisadministration had no qualms
about rejecting transactionsthat had that created any sort
of national security or, as Isaid, economic protectionist
(15:24):
problems.
The Biden administration hasbacked off that a little bit.
There is less of an outrightneed or desire to confront China
and our adversaries byrejecting deals wholesale.
They will still try to workthrough matters but they will
not clear them as maybe easilyas they have in the, as easily
as other administrations have inthe past.
And in that regard the Trumpadministration really did kind
(15:46):
of there was a bit of a fork inthe road, particularly as it
relates to China, and kind ofthe current administration has
followed through in manyrespects as it relates to China,
and kind of the currentadministration has followed, in
many respects as it relates toChina, the process of not
clearing these transactions,maybe like others would.
Speaker 2 (15:59):
And it's funny there's a mirror image there
between CFIUS and antitrust, inthe sense that during the Trump
years when we saw toughenforcement, it was largely
outside of court settlements.
When we shifted to the Bidenyears in antitrust, we see the
DOJ explicitly abandon the useof the consent decree and the
(16:19):
FTC, in the last year or so, hasalso abandoned settlements and
we see more court cases as apercentage of all in-depth
investigations percentage of allin-depth investigations.
And so, in a way, what theantitrust agencies are doing
under Biden that they did not doas much under Trump is to use
the power of litigation and thepower of investigation and what
(16:41):
we call FUD fear, uncertaintyand doubt to deter M&A.
And that is what many criticsare saying about the approach
being flawed, being that, look,if you don't have predictability
in the process, then you're notgoing to get to the right
answer, whether you're aregulator or a merging party.
Speaker 1 (17:01):
Yeah, and parties that want to merge with that
kind of uncertainty?
Either they will do it lessthan they otherwise should in an
efficient economy, or they willspend more resources just
gambling on something where youonly know the outcome Exactly.
Speaker 2 (17:13):
Yeah.
Speaker 3 (17:14):
And that was one of the key things that the Biden
administration tried to bring toCVS, at least with certainty of
the process.
There was a lot of unevennessin the way, maybe that some
commentators thought that theTrump administration handled CVS
, and one of the kind of atleast anticipated and they have
felt through on this in manyrespects is to bring a more
certain approach, a more certainprocess, because that's
obviously what business leadersmost need when they're dealing
(17:34):
with a transaction they need toknow what the rules of the road
are and what's the certainty ofan outcome, whereas something
that can be very apolitical oruncertain creates a lot of
hesitancy to maybe signtransactions because you don't
necessarily know what theoutcome will be.
So I think the Bidenadministration definitely tried
to pursue that and I think theylargely achieved that, with some
exceptions, and we see thatkind of overall.
Speaker 1 (17:53):
I mean, good rules systemically are good, bad rules
are not.
But not knowing what the rulesare correct, even on the micro
level, really chills economicactivity, chills investment.
It scares people.
You don't really know what todo.
So to create morepredictability.
One difference, adam I'm struckyou mentioned court cases.
Now, obviously, in theantitrust area, we're looking at
statutes.
The agency is complying withthem.
(18:15):
So say, there's a DOJ criminalinvestigation or the FTC is
looking at maybe a pre-mergerapplication and you're trying to
figure out whether there'sviolations or conditions that
should be imposed to maintaincompetition in healthy free
markets and not have abuses ofmarket power or aggregations of
market power.
If the agency gets it wrong oroverreaches, there's judicial
(18:36):
recourse because everybody hasto live within the law.
Now, john Sifias, is a littledifferent right.
I mean, this is really muchmore discretionary because we
defer legally in the statute tothe White House or the president
, ultimately overseeing thiscommittee, to determine whether
national security is impacted.
Speaker 3 (18:52):
Yes, it is and it's.
The executive branch hassignificant power under the
CFIUS authorizing statute todetermine whether a transaction
could negatively impact nationalsecurity and if the
administration makes a decision,or an administration makes a
decision regarding that, it isnot appealable to the courts.
Now, the process by which thereview is handled could be and
there has been a case regardingthat the process by which the
review is handled could be, andthere has been a case regarding
(19:12):
that, but the substance of thereview is one that cannot
necessarily be appealed.
So it really does put theburden on the parties to, when
you have a transaction thatyou're going to go through
Sipias to ensure that youproperly position it for
whichever administration you'redealing with Biden or Trump to
know what that administrationmost cares about, what the
administration doesn't careabout, and to highlight the
(19:34):
positives.
Your audience is very importantin CFIUS because, again, you
have to convince those agenciesthat the deal does not present
any securities because,effectively, you do not have any
matter of recourse to thecourts.
Speaker 1 (19:47):
Adam in the antitrust area.
That's different.
Speaker 2 (19:49):
Yeah, very different, and I think what I'm seeing is
a difference in behavior by theregulators.
Because of that, I would thinkit seems to me, based on your
observations, john, that inCFIUS, the agencies know that
they're the judge, the jury andthe executioner, whereas the
antitrust authorities know thatthey have to ultimately go to
court and prove their case.
(20:09):
And the difference might bethat in the antitrust
authorities know that they haveto ultimately go to court and
prove their case, and thedifference might be that in the
antitrust arena, the agenciesfeel they can be more aggressive
in bringing theories of harm tothe courts, knowing that a
judge might turn them down.
In fact, what we see is a lotof rhetoric around.
Well, we should be bringingcases, even cases that we lose,
because that means that we arepushing the bounds of the law
(20:32):
where it should go, and thejudges can tell us when we've
gone too far.
They don't say that part, butthat's implicitly what they're
saying.
Speaker 1 (20:38):
They're pushing the envelope and seeing if it breaks
Exactly the court will tellthem.
Speaker 2 (20:42):
Right and they're saying where's the case law
going to go?
We know where we want it to go,but we have to find out where
judges are going to let us, andthe only way to do that is to
bring the case, Whereas in CFIUSit's obviously a different
story and the decision is madeand it's final.
Speaker 1 (20:58):
So let's bring in the third branch of government for
a second right, because we'vetalked about the agencies and
the administrative action andthe president and what the
administrations are doing.
We've talked about courts, atleast in the case of antitrust
right, and what they're able todo to make sure that the
agencies are not overreaching ormisinterpreting the statutes.
Congress has not legislatedmuch.
Although they've investigatedon antitrust and competition
(21:20):
issues, especially in thedigital and tech domains, they
haven't really changed the lawin any significant way, probably
since the 1970s.
In contrast, in CFIUS thereactually has been some
tightening of it.
Can you comment a bit on howthat plays out and what it might
mean for this upcoming election, not just between the White
House but also between theparties, and whether there's
prospects for legislative changein either area?
Speaker 3 (21:41):
So on CFIUS, as you mentioned, there was a
significant expansion of theCFIUS statute in 2018.
Effectively, policymakersdecided that the prior set of
statutes were not sufficient toaddress kind of the evolving not
only geopolitical but reallytechnology and marketplace
developments as to how investorswere investing or acquiring US
(22:01):
assets.
So there was a broad expansionof the authorities in 2018.
The implementing regulationswent into effect over the
subsequent two years, so we'vebeen operating under those
regulations now for three orfour years.
I don't think that there's areal appetite to fully reform
the process again.
I think, if anything, it'll betinkering around the edges.
Do they want to sweep in moretypes of transactions?
(22:24):
Do they want to subject othertypes of investments to CFIUS
reviews?
Not all transactions aresubject to CFIUS authority.
So I think really what you'regoing to see is kind of updating
the statute and tinkeringreally with the substance,
rather than a wholesale review.
I think everybody by and largeto the extent that they comment
on it think that the currentauthorities and regulations are
(22:44):
probably sufficient enough toprotect national security but,
importantly, not todisincentivize foreign
acquisitions, because we reallydo need foreign capital in this
economy and policymakersrecognize that trusted sources
of capital should not beprohibited and there should not
be kind of large impediments tothose types of transactions
because the country economicallyreally does require it.
Speaker 1 (23:05):
Let me poke on that, though, for a second.
So there's this.
One strand says we need foreigninvestment.
In fact, capital flows into theUS help our balance of payments
.
They create jobs.
They're great, bring it on.
And if we believe in freemarkets and free trade, we
probably believe pretty much infree capital flows as well.
By the same token, nationalsecurity matters.
We don't want people coming inand causing things that would
(23:25):
threaten our way of life and ourpower in the world.
Right, and that's certainly aconcern.
There's a tension there and Ithink there's the way Congress
and the recent statutes and alsothe Biden executive order on
CIFI is kind of reconciled, asthey say.
Well, there's an alignmentEconomic security, yes, and
national security are part andparcel of the same thing.
(23:45):
Is that too simplistic, or arethey wrong?
Speaker 3 (23:48):
No, it's not too simplistic, it's fairly accurate
.
There's an acknowledgment andeven the Trump administration
recognized the benefits offoreign investment in the United
States that foreign capital isone of the many engines of the
US economy.
So we need to continue it andallow it to grow and expand as
much as we can.
So there was certain exceptionsbuilt into the rules for
capital from kind of, again,trusted sources.
Speaker 1 (24:10):
So if it's a trusted source of capital, the US
government A country which isdesignated as like Great Britain
or New Zealand.
Speaker 3 (24:17):
There's a handful of countries that are specifically
designated by regulation to havecertain kind of expedited
treatment or exceptions to someof the regulations that are
serious.
Other countries don't have that, but, based on their
interaction with the USgovernment, there's a kind of a
broad deal of comfort with them.
Other countries, though,however, is really where the
tension that you describe arisesand certain investments from
(24:39):
those countries and investorsfrom those countries can occur.
They probably have to bestructured differently maybe
than others.
There's probably more passivity.
That is required, less accessto US information, less access
to US information, less accessto US facilities.
Speaker 1 (24:53):
Less proximity to military bases.
Speaker 3 (24:55):
Things of that nature exactly.
So there still is a desire tohave capital from all sources
come, but when it comes fromcountries with which the US has,
I would say, less kind offriendly diplomatic relations,
what you'll see is there's waysto get the regulators
comfortable with the investment,and those are, as I said,
structuring passivity, things ofthat nature, whereas investors
(25:18):
from trusted countries don'thave those kind of hurdles to
get over.
Speaker 1 (25:21):
So, adam, when you look at it from the antitrust
side, there's also sort of this,maybe intellectual tension
between not wanting some largecompanies to be too large to the
point where their market powercould have anti-competitive
effects.
But on the international stage,of course, we actually might
want to champion.
They're the national championsand we want them very much to be
dominating their industries sothat foreign companies don't do
(25:43):
that.
Is that relevant to theantitrust analysis, and should
it be?
Speaker 2 (25:47):
Yeah.
So I think yes in the answer toboth questions.
As my partner colleague, RichParker, likes to say, if Apple
were founded and run out ofMoscow, we would be having a
very different conversation.
Speaker 1 (26:01):
And a very different iPhone.
Speaker 2 (26:02):
Exactly About what antit outside of this country?
No-transcript.
(26:27):
Now, do we credit or call outantitrust policy as the cause?
Hard to say, but I can tell youthat in Europe there is a very
different debate going on,especially in the UK, about
whether regulations includingthe DMA which was recently
passed, including theirrelatively tougher stance on
(26:48):
monopolies and antitrust overthe course of the past few
decades, have contributed to thereality that the tech economy
in Europe has not grown and isnot as innovative as the economy
here.
So, yes, it is relevant andthat is something that is
heavily debated within antitrustcircles.
(27:10):
There is a school of thoughtemerging in antitrust called
dynamic competition, and I'mputting in a plug for it because
I'm helping put together asymposium for the antitrust
journal Law Journal on thistopic.
But the concept is that weshouldn't worry too much about
competition within markets.
So if a market gets monopolized, there might be some benefits,
(27:34):
because even monopolists need toinnovate.
The competition we really careabout is competition for the
next market or to create thenext market.
And if you take a look atAmazon, apple, name your big
tech company those are themarkets that they're worried
about because they're competingwith each other for those
markets, including startups andbig companies from other parts
(27:57):
of the world.
So I'm not suggesting thatthat's the correct school of
thought.
Some might claim that that'sjust a rebranding of the Chicago
school, which the progressiveand the Brandeisians would say
got us into this mess in thefirst place.
But that's the debate that'sgoing on and, to your point, it
will inform how antitrust tokeep our international
(28:20):
competitiveness up to where itis today.
Speaker 1 (28:38):
So the starting point of that, though, it seems to me
, is the idea, which is prettyprevalent you mentioned Chicago
School, their approach toantitrust, but also, I think,
most of the history of antitrustwe assume we have a free market
.
To the history of antitrust.
We assume we have a free market, we assume it's competitive and
we're worried aboutanti-competitive behavior or
combinations that would createmarket power that then limit
that competition.
(28:59):
One might say today, with someof the concentration of market
power in certain companies, yes,it may encourage, because of
economies of scale, moreinnovation, or it may chill it
if they're buying theircompetitors and shutting them
down.
There's not inherently one orthe other.
What could come from that,though, is if you flip the
analysis and you said assume fora second that this sector is
(29:19):
not competitive, but we takeyour dynamic model.
Therefore, what should happen?
It's not just how do youprotect the next entrant or the
next sector.
It's also a question of is thatkilling innovation?
Is it extracting rents and notbeing productive in the economy,
as opposed to fostering whatcompetition is supposed to
foster, which is more innovation, more access, fewer barriers to
(29:39):
entry and the benefits thatcome from competition to
producers and consumers?
Speaker 2 (29:44):
Right, right, and I think that's the nub of the
debate, because you can point toexamples around the world where
there are monopolies, some ofthem state-sponsored.
I'll take Pemex in Mexico,where there isn't competition,
and I think we can all agreethat there isn't very much
dynamism in the oil and gasmarket in Mexico, and that's
(30:06):
been an issue that the Mexicangovernment has been trying to
address in recent years.
Government has been trying toaddress in recent years.
Regulation can calcify marketsand there are many examples of
this occurring over the years.
Before there was widespreadantitrust regulation in this
economy.
Most don't remember I certainlymight not be old enough to
(30:26):
remember but the ICC governedprices and output, which is
quite extraordinary when youthink about it by today's
standards and the types ofdebates we're having today.
And so I think, to get back toyour point, I'm not suggesting
monopolies are always good andthat they always innovate.
That's the debate.
Joseph Schumpeter and KennethArrow would debate this right.
(30:47):
They both had very differenttheories about whether large
companies can do this, butundoubtedly scale is needed to
invest in big ideas.
At the same time, startups areresponsible for many of the big
ideas that we have today.
So the question is, what is thenature of the market?
What is the nature of thetechnology?
(31:07):
When does regulation make sense?
How much error tolerance do wehave and in which direction?
Those are all questions that Idon't have answers to.
Speaker 3 (31:15):
Yeah, it's interesting listening to this
discussion that lent the focusof national security and ciphius
is obviously different and it'snot the size of the investment
or the size of the company.
There could be a company thatis developing some next
generation technology and it'sliterally a few people in a
garage developing that and ourgovernment is very focused on.
Policymakers want to ensurethat investments in those
(31:37):
companies which are creating thenext market are only from
investors in countries that wecan trust.
They don't want to lose controlor have that next technology be
available potentially to ouradversaries.
So the statute the reformstatute that you mentioned a few
minutes ago was really focusedon investments in those types of
(31:58):
companies.
We call them criticaltechnology companies and it
wasn't a.
The policymakers didn't sayit's a hard no for investments
in those companies.
It just raised the bar suchthat when investments like that
are make there they couldautomatically be subject to
CFIUS review a mandatory CFIUSreview and there's a keener
focus from the national securityagencies on those industries.
(32:19):
So there's been a real shift inthe last six or ten years on
the types of industries that aresubject to higher scrutiny by
CFIUS, where before we didn'tnecessarily have that.
It almost went undefined in thestatute.
National security was somethingthat regulators would interpret
themselves, but now it's aclear focus on technology and
making sure that next-gentechnology, whether it's AI,
(32:41):
whether whatever it is, remainsin trusted hands with trusted
owners.
It's very important to ourgovernment.
Speaker 1 (32:46):
Yeah, and AI is interesting and of course the
European Union is, I will say,ahead of us at the moment, at
least procedurally, in coming upwith a protocol rubric for how
AI should be.
They're focusing on how itshould be used, not so much how
it's developed and whether thatcould cause harm.
So I don't know what we'll doon that.
But what I think is relevant towhat each of you are focusing
(33:08):
on is if you look at theindustries that are sensitive
from a national securitystandpoint and you look at the
division somewhat between DOJand the FTC and the antitrust
space, where regulatedindustries tend to end up in one
bucket, so that could be energyor telecommunications what have
you?
And maybe transportation,airlines.
That's different than moreconsumer-facing types of things.
(33:30):
The divisions are different andI don't know if that regulatory
overlay the fact that there'sother regulators paying
attention even to regulate themonopolies which we need for
things like power delivery, howthat plays out if that's
different, because obviously theelection that's coming up will
probably change one way or theother the way we regulate
certain of those key industriesand that change in regulation
(33:51):
could spill over, have very big,maybe unintended, effects in
both CFIUS reviews and antitrustreviews.
Speaker 3 (33:57):
Yeah, for sure.
I think that if there is achange in administrations and
the Trump administration returns, I think you're going to see a
keener focus on what those nextgeneration technologies are and
what could be the next to useAdam's example the next Apple in
the world to making sure thatthose are continued to be
innovative in this country,develop in this country and not
(34:19):
made available to ouradversaries.
And that's really what thatadministration kind of was
full-throated in protection ofis not just necessarily what are
the harms today?
What could the harms occur in10 or 20 years?
That's really where they werefocused.
The Biden administration hasbeen good about that, but I
think the Trump administrationmight be more kind of keenly
focused on what those next-gentechnologies are, out of
(34:40):
foresight or out of fear?
Probably both.
It's probably two sides of thesame coin.
Speaker 2 (34:45):
Yeah, and I want to pick up on one question you had
towards the end and that is howhow do regulators other
regulators other than DOJ andthe FTC impact how the DOJ and
FTC thinks about markets,because I think this goes to the
overall question of thedifference between the
administrations.
So traditionally the antitrustdivision and the FTC have had
(35:06):
different views than theirsister agencies, whatever the
regulator is about mergersconduct, and they have tended to
be a bit more strict in mostcases not all cases, but many
Regulators, sectoral regulators,in the minds of the DOJ and the
FTC, tend to be too lenientbecause in their view they're
(35:27):
either subject to capture orthose regulators are heavily
reliant on the companies thatthey're regulating, whereas the
DOJ and the FTC are lawenforcers, they oversee the
entire economy.
So when we go to the FTC and Ihave had this experience many
times on pipeline gas, pipelinemergers we make the argument
that you have FERC over hereregulating everything we do.
(35:50):
They regulate interconnection,they regulate the tariff.
Speaker 1 (35:54):
Interest and tariffs are covered by them.
Yeah, who gets on?
Speaker 2 (35:57):
Exactly.
We cannot prevent anotherpipeline from connecting to us.
We cannot prevent that pipelinefrom getting a tariff rate.
We cannot prevent marketersfrom going wherever they want
and getting whatever volumesthey want.
All of those arguments are made,but the way that the FTC and
the DOJ see the world is that,yes, all the other regulators
(36:18):
are doing is creating a marketwithin a market.
We need to regulate the marketthat is left over.
You might discount below yourtariff on a gas pipeline and
therefore competition may drivewhatever discount you offer, and
the FERC can't make anyonebuild a pipeline.
So what the other regulators dois set the limits and set the
(36:40):
market.
But within the market there isstill competition and this goes
to the Telecommunications Actwith the FCC, every other
regulator, and there's a debategoing on.
There's yet another debategoing on within antitrust as to
whether we ought to have rules,regulations, whether the FTC
ought to pass regulations.
It has rulemaking authority.
Arguably, it has proposed a banon all non-competes in the
(37:03):
United States with thisrulemaking authority.
We'll see if it passes musterin the courts, but—.
Speaker 1 (37:08):
You'll turn the whole country into California.
Speaker 2 (37:10):
Exactly, but it will have uniformity right.
So what we're trying to figureout as an antitrust community is
should we have these rules,like other sectoral regulators,
that everyone can follow?
Eliminates the fear,uncertainty and doubt, but it
might be quite constraining.
And then who should decide whatthose rules are?
Speaker 3 (37:29):
Is it the federal government or is it the states?
It's interesting and tiffy isthat there's no behavioral rules
like that.
They do a verytransaction-specific review but
to the extent a transactionpresents national security risks
or concerns and they're worriedthat the behavior of the
combined company or thepost-transaction company could
threaten national security, whatthey do is they effectively
enter into one-off agreementswith those companies, very
(37:49):
similar to what a consent decreewould look like, except there's
not a court overseeing it.
You sign an agreement withagencies and you agree to
certain behavioral commitmentsto mitigate the national
security concerns that arepresented by the deal.
So it's done in kind of aone-off basis rather than kind
of proactive rules to governkind of actions and behaviors by
companies.
Speaker 1 (38:10):
This behavioral piece is really interesting to me and
it's different than the harmsconversation we had a moment ago
.
Whether it's harm to nationalsecurity or harm to markets,
what have you?
Harm to consumers, harm toothers?
If you look at behaviors and Iwant to, adam, maybe look at the
origin of some of the antitrustlaws we can go back to John
Sherman of Ohio, with theSherman Act coming in which, by
(38:30):
the way, was right after GroverCleveland lost his first bid for
reelection and, interestingly,the only other time their
president lost reelection,having won the popular vote but
he lost the Electoral College.
So go back to 1890.
John Sherman gets this done.
He's from Ohio.
Are there any lessons from thehistory of this that might be
(38:50):
relevant to what we're lookingat today and as to whether,
frankly, our arguments over whatthe antitrust laws are meant to
do, including the ones thatcame later, in 1914 and so forth
, what they're meant to do andactually what we're trying to
make them do are consistent withfostering either healthy
businesses or healthy consumermarkets or anything else?
Speaker 2 (39:10):
Sure.
So I'm going to start byfast-forwarding to the 70s and
talking about Robert Bork andhis then contemporaries.
And Robert Bork wrote a veryfamous book called the Antitrust
Paradox.
He wrote several law reviewarticles on the origins of the
antitrust laws and, based on hisstudy of the legislative
history and the origins of theSherman Act and other antitrust
(39:30):
laws, he concluded that the goalthat Congress had in mind was
something called consumerwelfare, which means that if a
business practice or a mergerleads to consumers being better
off than they were before, thenin most cases that should be
legal under the antitrust laws.
Speaker 1 (39:47):
Let's pause on that.
So if we're in a small town andyou and I each have a grocery
store and we're the only twogrocery stores in town, if we
divide the market, if we doprice fixing, consumers are hurt
.
So that'd be bad, correct.
But there are some things thatwe might do.
Let's say we have an onlinesearch company and we do things
that maybe aren't very good forthe people trying to get listed
in the search results, and maybea discriminatory pricing that's
(40:09):
not related to differences incost.
But consumers get this fabuloussearch engine that has lots of
stuff in it, mainly because itdominates the market.
We get really reliable resultsand we don't pay anything for it
, so maybe the consumer is nothurt.
Speaker 2 (40:23):
Right, exactly.
Speaker 1 (40:25):
If the consumer is better off in that scenario,
then you would have an argument,so Bork would be fine with that
second one.
Speaker 2 (40:31):
Oh Bork would be fine with that.
Second one.
Oh Bork would be fine with itand the court might be fine with
it.
He would look at it as more ofa balancing test.
Would the harms outweigh theefficiencies and the benefits to
consumers?
When you look at thelegislative history of the
Sherman Act more holisticallyand not through the Bork lens,
I'm not suggesting Bork wasnecessarily wrong, but there is
quite a bit of rhetoric aboutreining in big business.
Speaker 1 (40:53):
Especially railroads.
Speaker 2 (40:54):
Especially railroads, especially oil and refining,
the existing trusts of the day.
And that was a grave,concernailing concern that if
the government stepped in andpassed a wine-raging law banning
trusts or reining them in in ablanket way, that you would lose
(41:18):
many of the efficiencies thatresulted.
Certainly, the unifying ofrailroads and refining carried
with it some efficiencies.
Massive economies of scale,massive economies of scale and
network effects.
And arguably in the early stages, allowed industries to exist
that wouldn't have otherwiseexist, and so the question is
how far did it go?
How did it go too far?
(41:39):
Did it create durable anddemocracy-threatening trusts
that couldn't be reined in?
If they got too far and if thefederal government didn't step
in?
That debate was going on.
It took a while for the ShermanAct to pass, and it had many
iterations before it became whatwe now know it to be, but
interesting factoid from thatperiod of time is that there was
(41:59):
another important person fromOhio and his name was John.
Rockefeller, who owned StandardOil and was the founder of
Standard Oil and was a very keenand politically active business
person, and John Sherman.
Senator Sherman from Ohio, wasalso from Ohio and I venture to
(42:20):
say that they probably knew eachother and so had the Sherman
Act.
Was the Sherman Act passedunder Rockefeller's supervision
or with his blessing?
I can't speculate on that, butwhat I can say is where the
Sherman Act was left was, andthe way the courts have
interpreted it is.
It doesn't ban any and allagreements between companies or
(42:42):
competitors or trusts, Even ifthey're very large.
Even if they're very large.
It looks at the reasonablenessof the practice.
And what does reasonablenessmean?
It means is it commerciallyreasonable?
It is.
In my view, the law is closerto what Bork sees it than the
way that others in the currentadministration may see it.
(43:06):
Now, legislative history isalways dangerous.
Right, We've had numerousSupreme Court justices that have
cautioned against the overuseof it.
But here we see we have morethan a century of case law which
, on balance, favors areasonableness analysis of a
business practice or a merger,and I don't think you can ignore
(43:26):
that much case law.
Speaker 1 (43:27):
Let me ask you both something else, which is not
just predicting what couldhappen after the election, but
instead between now and then.
You're a large corporation.
You've got a bunch of cashsitting in your balance sheet.
You'd like to go buy somebodyelse and grow your business
through acquisitions, or you'rea private equity fund manager
and you're trying to decide howto deploy all this capital in a
(43:47):
world where, finally, inflationseems to be tamed and maybe
interest rates have stoppedgoing up.
They may even come down two orthree times this year.
So you're looking to deploythat capital and between now and
the election, you might be alittle concerned about the
uncertainty of where that'sgoing to go.
So how should you approachantitrust, cfius, pre-merger
(44:08):
notices, the types ofinvestments you might consider
making, so that you're a littleinsulated from that uncertainty?
Speaker 2 (44:14):
Sure.
So we think about this quite abit, and the way that we would
approach a merger now, goinginto an election, is assuming
that there's going to be achange, because if you assume
continuity, it's a little biteasier.
Now you can have a contract thatallows one or both parties it
out At point in time that mightapproximate when the changeover
(44:37):
happens.
That's an obvious way to do.
It is look, we're going to stopand pause and decide whether we
want to keep going with thismerger and this alludes to how I
was talking about the changingadministrations before is that
antitrust enforcement is goingto be quite tough in the future
(44:59):
years.
I think there are some policiesthat have staying power.
It's unclear to me thatsettlements will return, for
example.
It's unclear to me, and franklyI don't think a new
administration under Trump wouldback away from going after
vertical mergers, so mergersbetween competitor I'm sorry
(45:22):
suppliers and their customers, atrend which started under the
first Trump administration.
I'm not so sure that they'regoing to throw away the new
merger guidelines just becausethey were drafted under a Biden
administration.
Speaker 1 (45:35):
We'll be pausing on that for a second.
If a new administration isfocused on an ideologically
coherent approach to this as amatter of economic theory,
that's one thing.
If they're looking for tools ofexecutive power, john, to your
point about politics in thenational security side if you're
looking at that, then the Bidenadministration has just given
them a nice gift of all thesenew tools that they can use.
Speaker 2 (45:58):
Exactly.
I think what's happened overthe last four years is
enforcement is down.
There are fewer cases beingbrought, but the building blocks
of much more robust enforcementare in place and if you're a
new administration and you'rewanting to make your mark, you
can pick and choose the casesyou bring, but you have a bigger
toolbox to work with.
Speaker 3 (46:18):
Yeah, on the CVS side it's interesting to hear Adam
talk about a hundred years ofprecedent and things.
Obviously CVS is much more inits infancy.
But the thing that we worryabout more is not necessarily
the change in administration.
There will be a slight changein tech.
It's geopolitical developments.
Geopolitical developments canheavily influence the way an
administration views atransaction or a transaction
(46:41):
party and, given the way theworld is today and the
never-ending changes that arehappening almost on a monthly
basis, if there's a transaction,the longer it is unsigned, the
longer it's not being reviewed,the more likely it is, the
greater the likelihood thatthere could be some sort of
geopolitical development thatinfluences the way a new
administration could addressthat or handle it or want to
(47:03):
deal with it.
So and again, particularly withthe Trump administration, there
was never a hesitancy to usethe CFIUS process as leverage or
as a tool to achieve other kindof objectives, particularly
those geopolitically.
So to the extent that there's atransaction that is being
contemplated, sooner, probablythe better.
Again, just likely because ofthose geopolitical developments.
(47:24):
Those are kind of the we don'tknow what can happen in the
world and those can greatlyinfluence our defense, can we?
Speaker 1 (47:29):
get more granular, though, on that for a second,
Because from a CFIUS standpointwe're looking at foreign
investment.
That's what's being regulated,if you will, Geopolitics say,
with Russia and Ukraine.
Maybe not that big a deal,because Russia's not investing
in the United States very much.
In fact, the economy is toosmall really to do that anyway,
For sure Less than 10% of theworld's GDP.
China, totally different story.
(47:49):
Now, if we're on-shoringmanufacturing look at, say, the
CHIPS Act, which was passed on abipartisan basis under the
Biden administration, meant tocause reinvestment in
manufacturing capacity and isvery successfully doing that.
Now, If we're less dependent,say, on Taiwan in four years
than we are today for criticalchips that are needed across
industry as well as tech, maybewe don't care as much about
(48:11):
Chinese capital coming in.
And, by the way, the Chineseeconomy is having some
challenges as well, which islimiting its both ability and
willingness to invest in theUnited States.
So if the geopolitics arehappening Middle East, another
good example if they'rehappening in places where
they're not sources of foreigninvestment in a big material way
to the US, it doesn't matter,just from a CFIA standpoint.
Speaker 3 (48:30):
It can from a CFIA standpoint, because a lot of the
investors that are active inthe US are state-affiliated
investors and our government,particularly a new
administration, would want tounderstand are those investors
(48:50):
and this is a question that'salways focused on in
transactions is the investorpursuing a commercial investment
?
Are they trying to pursue somesort of state-affiliated
objective by acquiring an asset,by acquiring a technology,
investing in a certain industry?
So it's very keen, depending onwhat's happening and the way
you position a transaction forCFIUS is to highlight the
commercial benefits and thereason why, particularly a state
investor is undertaking aninvestment, to reduce the
(49:10):
concern from an administrationthat wait a minute, this is a
foreign state actor trying topursue some other objective
rather than commercial benefitsand commercial profits.
So they can and the way Russiais a very good example.
China is a very good examplecertain Mideast countries that
there can be an evolution in theway that the US government
approaches these transactionsbased on geopolitical
(49:31):
developments.
Speaker 1 (49:32):
Okay, Adam, just kind of to wrap up.
So what do you think actuallymight change then?
Speaker 2 (49:36):
Sure, so they're not completely one and the same,
although there'll be somecontinuity.
One thing that we're seeing alot of on the Republican side,
especially from Republicanattorneys general, is a focus on
ESG, and why would that be anantitrust concern?
Esg is good for the world.
(50:00):
The concern that has beenvoiced is that ESG involves
companies, sometimes competitorsgetting together and
cooperating to do things thatmight otherwise be viewed as
anti-competitive.
So take climate change, forexample.
What some in Congress and atthe state level have said is
that the push to address climatechange has amounted to, in part
(50:20):
, an agreement between investors, between companies, to stop
investing in coal, oil and gasdevelopment Far from the truth,
based on what we see in themarket.
But I think when it goes to ESGpractices, we've seen this movie
before with the Trumpadministration when the
antitrust division investigatedthe major car manufacturers for
(50:44):
agreeing allegedly to go to thestate of California together and
negotiate emissionsrestrictions.
Now we can debate about theantitrust merits of that, but I
think we're going to see a lotmore of that.
There are congressionalinvestigations, there are state
investigations.
It's a hot topic withinantitrust, but those types of
(51:05):
practices will be looked at.
We don't see.
We've seen some rhetoric fromthe current administration, but
not a lot of action.
Speaker 1 (51:11):
It's funny about four years ago there was a letter
written by Senate RepublicansMarco Rubio and others on just
that point and it was addressedto whoever nominally they
thought was the head of ESG atvarious law firms.
I got ours and it's a littlechilly, you see this letter with
Senate letterhead, signed byall these people you've heard of
, and it basically says that itsays well, gee, if you're
(51:32):
advising clients and you'readvising them with respect to
ESG and you're counseling themto do things that are
anti-competitive, we might liketo talk to you about that, right
.
And I will tell you that, in mypersonal experience, looking at
the business world for the lastthree decades and looking at
government interface, whetherthat's regulations or what have
you the level of coordinationthat conspiracy theories require
just isn't there, right, evenif you had intellectual merit
(51:55):
around that the theory thatsomehow antitrust and ESG are
conflated.
But I think your point is welltaken that political trends
happen because they happen, andI think you are foolish to turn
a blind eye to wherever thosetrends might go.
Speaker 2 (52:11):
Yeah, I think it's be ready for the investigations.
Investigations have power, evenif they ultimately don't wind
up in court, sure.
Speaker 3 (52:20):
Yeah and Sylvius, I think, as I said at the top,
we're going to see a lot ofcontinuation on the substance,
particularly as it relates toChina and other kind of economic
protectionism approach from theadministration, a much more
populist view of acquisitions ofhigh-profile US assets,
(52:41):
well-known brands.
The Trump administration wouldbe much less keen on approving
those than maybe the Bidenadministration has.
I think, unlike in NHS, you'llprobably see less enforcement.
The Biden administration hasbeen very keen on enhancing its
enforcement of the CFIUSregulations.
I think you'll see the Trumpadministration would back off in
that area and then the onething you would probably see
(53:03):
much more of is unevenness anduncertainty in the way that no
administration would handle kindof the CFIUS authorities and
again using them for leverageand geopolitical disputes, right
.
So more politicized Morepoliticized is very likely, yes,
interesting.
Speaker 1 (53:19):
So, nonetheless, it's really interesting If you look
at what's happening in themarket right now.
Despite all this uncertainty,deals are getting done.
Is that your experience too?
Speaker 2 (53:27):
It is, and in fact, when you look at the track
record of the Bidenadministration some numbers came
out earlier this yearreflecting on the first few
years of the administrationenforcement is actually down by
most metrics.
There are fewer court casesbeing brought, there are fewer
deals being abandoned, there arefewer significant
investigations of mergers and alot of the rhetoric has not yet
(53:50):
panned out into that, into themore enforcement.
And part of the reason is theagencies are resource
constrained.
Bringing a court case takes alot of resources.
You have to pay economists, youhave to have dozens of
attorneys involved in court timeand the agencies don't have the
resources to bring them all andCongress hasn't given them more
money.
Speaker 1 (54:09):
It could also be self-regulation, where people
know that they don't want to beon the private sector side.
You don't want litigationeither, so you might be bringing
deals to maturity that arelikely to pass muster.
True, because there is actuallyconsistency in how the rules
are being interpreted.
At least it's articulated.
Speaker 2 (54:24):
Yeah, and there certainly has been more
self-selection among clients asto what deals they bring forward
.
But I can tell you that dealsare getting done, including
deals that raise antitrustissues lots of them and a lot of
it happens behind the scenes,where you present something to
the regulator and the regulatorblesses that.
There's no press release,there's no court case.
We don't know the details, butit happens.
(54:45):
And I think, as a last word,what we would tell clients who
are worried about the fear,uncertainty and doubt that is
coming out of the rhetoric isthat your deals are still
getting done and havingexperienced counsel at hand is
pretty important.
Speaker 3 (54:59):
I would say the same thing on CVS that under either
administration and or bothadministrations, looking back,
the overwhelming majority oftransactions presented to CVS
cleared CVS without much hassle.
So in our experience, if thereare issues there's ways to.
You can still move forward withthe deal.
You would just have to maybestructure the deal slightly
differently to kind ofanticipate the concerns that the
(55:19):
regulators or an administrationwould bring.
So knowing exactly how theadministration, what the
administration cares about andthe issues that they are
concerned with allows you toanticipate those concerns.
You can address them in thestructuring of the transactions,
the assets that may be in themix, so that when you go to the
regulator with the transactionit's best positioned for success
(55:40):
.
And I think counsel likeourselves are very well
positioned to help clients withthat.
Speaker 1 (55:45):
Well, I want to thank you both.
This has been an absolutelyfabulous conversation and I've
learned a lot, so thank you,thank you.
Thank you.
Thank you for joining us onanother episode of Law Policy
Markets Milbank Conversations.
Follow us on your favoritepodcast platform and learn more
at milbankcom.
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