Increased scrutiny from state regulators has emerged as a consistent theme that will continue to play a larger role in the technology, media and telecommunications industry's antitrust landscape, experts said. The resolution of some high-profile investigations into big tech is also expected in the new year.
More than a dozen state attorneys general are engaged in a trial in federal district court in New York contesting the Sprint Corp./T-Mobile US Inc. merger, alleging the deal would harm innovation and lead to higher prices for consumers. The state-led effort is ongoing, despite the fact that both federal regulators reviewing the deal — the U.S. Federal Communications Commission and U.S. Department of Justice — have approved the deal with conditions.
This type of state-led challenge is "entirely unprecedented," according to Jonathan Chaplin, who leads the U.S. communications services research team for New Street Research, a telecommunications and technology-focused research firm.
Logan Breed, a partner at the law firm Hogan Lovells, who focuses on antitrust and has experience in the telecommunications, media and hardware sectors, noted state-level antitrust enforcers are getting "increasingly aggressive." "We've seen state AGs join the FCC or the DOJ in suits before," Chaplin said in an interview. "We've never seen a state AG or a group of state AGs sue to block a deal that's been approved by the DOJ and the FCC."
"If the state AGs decide they are going to conduct independent merger reviews of significant transactions, rather than coordinating with the DOJ or FTC and letting the federal agency take the lead on most investigations, that would have a significant impact on the merger review process and the risk of M&A activity in the United States," he said in an interview.
According to Chaplin, the state-led challenge to the Sprint/T-Mobile deal, in fact, could reshape how the wireless industry pursues and structures mergers.
"There's a completely different calculus going forward, whether this deal is successful or not, where one has to consider not just what would be required from the federal regulatory agencies in order to get a deal approved, but how individual states may react, what it might take to get their support for a deal," he said.
One antitrust area where both state regulators and federal regulators are actively involved is in investigations into large technology companies. State regulators are engaged in antitrust probes of Alphabet Inc.'s Google LLC and Facebook Inc., while federal antitrust regulators at the DOJ and the U.S. Federal Trade Commission are also engaged in probes of large technology companies.
On Dec. 12, The Wall Street Journal reported that the FTC, which has an open antitrust probe into Facebook, is contemplating pursuing a preliminary injunction against Facebook due to competition concerns related to its practices for integrating apps and how that impacts competitors. In January, Facebook confirmed plans to unify the messaging infrastructure of WhatsApp, Instagram and Facebook. Executives said the move was intended to improve security and privacy.
The resolution of some of these probes, according to one antitrust attorney who works on tech, media and telecom issues, are likely to be a key development in 2020.
"The fact that the FTC on Facebook is far enough along to potentially be seeking a preliminary injunction regarding integrating some of those apps ... that must mean it's pretty far along in its analysis," said the attorney. "I would expect that, if it's actually going to sue to unwind those transactions, I would think that would be next year."
The attorney noted it would be much more difficult for the FTC to attempt to sue to unwind previous Facebook acquisitions after the social media company already has integrated its operations and activities.
Breed said it also is likely that the administration's approach to "behavioral remedies" will continue and that it could complicate future vertical transactions.
The DOJ's litigation in the AT&T Inc./Time Warner merger served as a high-profile example in 2019. In that case, Breed noted the DOJ "refused to enter into the kind of behavioral remedy that has typified previous vertical transactions," such as the Comcast Corp./NBCUniversal Media LLC deal.
Makan Delrahim, the head of the DOJ's antitrust division, has said he prefers to focus on "structural relief" to remedy mergers that are viewed as harmful for consumers and in violation of the law. While structural remedies typically involve a tangible change to an organization such as a divestiture, behavioral remedies rely on stipulations that regulate a company's future conduct.
"The DOJ's policy on behavioral remedies has changed from the previous administration and the administrations before that," Breed said. "The effect of that change could be felt most acutely in industries where those kinds of vertical transactions are more likely, which include the tech industry and the media industry."
According to Charles Naftalin, who leads the communications practice at the law firm Holland & Knight LLP, the DOJ also has been more active in looking at radio and television transactions that do not necessarily meet the threshold under a law, known as the Hart-Scott-Rodino Antitrust Improvements Act of 1976, that requires parties in certain large transactions to file detailed information related to the proposed deal with federal antitrust regulators.
"My sense is there's more interest in looking at smaller transactions and examining them for local market concentration than there used to be," he said.