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April 18, 2024

Antitrust Agency Insights: Developments at the U.S. Antitrust Enforcement Agencies — First Quarter 2024

Newsletter

Letter From the Editors

Successfully navigating antitrust agency investigations requires a familiarity with Department of Justice and Federal Trade Commission processes, as well as insight into those agencies and their leaderships’ current priorities for enforcement and competition policy. This newsletter will provide periodic updates on both, offering an analytical look at how the antitrust agencies are approaching important competition issues and what current investigations may mean for potential future enforcement. We hope our experience — both inside and outside these agencies — will provide insights that help you make more informed decisions for your business.

DOJ Warns That Artificial Intelligence and Algorithmic Information Sharing May Lead to Criminal Liability

On February 15, 2024, the Section Chief of the Washington Criminal I Section of the Department of Justice’s Antitrust Division (DOJ) warned companies that they could face criminal liability for improperly sharing information with competitors. According to DOJ leadership, the development of artificial intelligence (AI) and advanced algorithms has increased the danger that information that previously would not have raised concerns may be weaponized to decrease competition. The warning, which took place at an American Bar Association panel,1 provides insight into the antitrust agencies’ approach to antitrust enforcement as companies increasingly use new technologies to assist them in their businesses.

Comments on Risk of Criminal Liability for Companies Using AI or Algorithms To Exchange Information

On February 15, 2024, Ryan Tansey, the Section Chief for the DOJ’s Washington Criminal I Section, warned companies that the DOJ was closely investigating the use of AI and algorithms that previously escaped scrutiny (referring to the previously withdrawn joint DOJ/Federal Trade Commission policy statements providing safe harbors for information sharing in certain contexts).2 While the withdrawn policy statements indicated that the agencies were unlikely to challenge information exchanges that involved anonymized data from at least five firms that was at least three months old, Tansey suggested that the use of AI has now created a situation where companies can utilize a tremendous amount of what would have previously been considered stale and aggregated data for anticompetitive purposes. Given this development, he stated that the DOJ has expanded the scope of markets it is criminally investigating, emphasizing that small companies and members of decentralized markets now need to reassess their criminal antitrust exposure.

Tansey emphasized that, as in all criminal investigations, the DOJ is still focused on intent. In the AI or algorithmic pricing context, that means an agreement with a competitor to use the same algorithm and to share price or other sensitive information. Intent can also be shown where a company discovers that an algorithm it uses may allow it to collude with competitors. He revealed his section had opened quite a few grand jury investigations since he took over his role in July 2023, and the DOJ is using more covert methods of investigation, including wiretaps and undercover operations, to reveal evidence of intent.

The DOJ, Tansey noted, also identifies potential AI and algorithm investigations from a variety of sources. Tansey commented that the DOJ has opened inquiries based on facts learned during merger investigations and from citizen complaints, public information, and private cases. In at least one instance, an inquiry was opened because a DOJ economist identified parallel price movements in data that appeared contrary to natural market movements. Not all cases may amount to a per se unlawful agreement to fix prices, but companies and individuals could still face civil liability under a rule-of-reason analysis of the conduct at issue. He also warned that, historically, the DOJ has seen a number of information exchanges that may have started out innocuously, but eventually turned into a price-fixing arrangement as competitors’ conduct evolved.

Takeaways

Tansey’s statements are significant because they come at a time of increasing interest in AI and algorithms, with no formal agency guidance on how companies can share information without running afoul of the antitrust laws. In addition to DOJ enforcement against information exchanges, private plaintiffs have brought suits alleging algorithms have enabled price-fixing agreements in the real estate and hotel industries,3 and the DOJ has filed statements of interest supporting plaintiffs.4 The statements of interest argue the use of pricing algorithms and agreements with the algorithm provider to share confidential data are tacit agreements among the algorithm users sufficient to establish a conspiracy under Section 1 of the Sherman Act.5 While circumstantial evidence of a conspiracy often requires parallel conduct and certain “plus factors,” the statements take the position that an agreement can be inferred from an invitation proposing collective action followed by a course of conduct showing acceptance.6 The Federal Trade Commission (FTC) and DOJ contend these arrangements are per se violations as agreements to use the same pricing formula and that, even if competitors deviate from the suggested prices, “competitors cannot agree to fix the starting point for price,” just as they cannot fix the final price.7

The statements of interest and public comments reflect a warning from agency leadership that any AI or algorithmic programs that incorporate sensitive data from competitors is suspect, regardless of the precautions taken to aggregate data or wait until the data becomes stale. Practices that may have been covered by a safe harbor under now-withdrawn guidance could now lead to criminal charges or civil enforcement. As a result, companies need to reassess their risk when using AI or algorithmic tools, especially when those tools incorporate information from competitors. Proper compliance and additional training for employees may be necessary in this area.

Additional Agency Updates

FTC Staffing Updates

  • FTC Hires a Second Administrative Law Judge. On March 12, 2024, the FTC appointed Jay Himes as its second administrative law judge (ALJ). Himes most recently served as special litigation counsel for the Office of the Attorney General for New York and previously held positions in private law firms, including as co-chair of the antitrust group at Labaton Sucharow LLP. The FTC said the hiring, which was approved in December 2023, was intended to help with the increased workload from new rulemakings and enforcement actions. This marks the first time the FTC will have multiple ALJs since 2008.
  • Commissioner Andrew N. Ferguson Is Confirmed as an FTC Commissioner. On March 8, 2024, Commissioner Ferguson was confirmed, following his July 11, 2023 nomination by President Biden. Most recently, Commissioner Ferguson served as Solicitor General of Virginia.
  • Commissioner Melissa Holyoak Is Confirmed as an FTC Commissioner. On March 8, 2024, Commissioner Holyoak was confirmed, following her July 11, 2023 nomination by President Biden. Most recently, Commissioner Holyoak served as Solicitor General of Utah.

FTC Cases and Proceedings

  • FTC Issues Statement Regarding the Termination of Qualcomm’s Proposed Acquisition of Autotalks. On March 25, 2024, the FTC released a statement regarding Qualcomm’s decision to abandon its proposed acquisition of Autotalks, which had raised concerns within the FTC regarding its impact on competition in markets for vehicle-to everything (V2X) chipsets and related products.
  • FTC Files Amicus Brief in Asthma Inhaler Patent Dispute. On March 22, 2024, the FTC filed an amicus brief arguing that Teva improperly listed patents in the FDA’s Orange Book, delaying the entry of generic products.
  • FTC Sues to Block Merger of Kroger and Albertsons. On February 26, 2024, the FTC, along with eight state attorneys general and the attorney general for the District of Columbia, filed an administrative complaint and a complaint and request for a preliminary injunction in the District of Oregon challenging Kroger’s proposed merger with Albertsons.
  • FTC Sues to Block Novant Health’s Acquisition of Two Hospitals From Community Health Systems. On January 25, 2024, the FTC filed an administrative complaint and a complaint and request for a preliminary injunction in the Western District of North Carolina, alleging the deal would allow Novant to control nearly 65% of the market for inpatient general acute care services in the Eastern Lake Norman Area of North Carolina, increasing the cost of care.
  • Commission Orders the Administrative Complaint Regarding IQVIA’s Proposed Acquisition of Propel Dismissed Without Prejudice. On February 2, 2024, the FTC dismissed its adjudicative complaint against IQVIA and Propel Media after the parties abandoned the transaction following the FTC’s December 29, 2023 win in the district court, which preliminarily enjoined the transaction.
  • Second Circuit Affirms Lifetime Ban Against Martin Shkreli’s Participation in the Pharmaceutical Industry. On January 23, 2024, the Second Circuit affirmed the district court ruling in the FTC’s case against Martin Shkreli, which banned him from participating in the pharmaceutical industry and ordered US$64.6 million in disgorgement for his role orchestrating an anticompetitive scheme.
  • The United States District Court for the Middle District of North Carolina Denies Defendant’s Motion To Dismiss Charges of Illegal Exclusive Dealing. On January 12, 2024, a district court rejected defendants’ arguments that the FTC failed to state a claim in its case challenging Syngenta’s and Corteva’s loyalty discount program. The court ruled that Section 3 of the Clayton Act, under which the FTC had challenged the loyalty program, required a lesser showing than would be required under the Sherman Act, but declined to elaborate as it found the complaint was sufficient under the higher standard required under the Sherman Act. The court also rejected the Corteva’s constitutional challenges to the FTC’s structure, holding that Article II of the Constitution does not require that FTC commissioners be removable by the president.

DOJ Cases and Proceedings

  • DOJ Issues Statement Regarding Fresh Express’ Decision To Abandon Its Proposed Acquisition of Dole’s Packaged Salad Business in Response to Antitrust Concerns. On March 28, 2024, the parties decided to abandon the deal after DOJ expressed concerns that the deal would reduce the number of competitors in a market for packaged salad from three to two.
  • DOJ Files Lawsuit Against Apple, Inc. On March 21, 2024, the DOJ, 15 state attorneys general, and the Attorney General for the District of Columbia filed a lawsuit alleging that Apple engages in exclusionary conduct to make it harder for consumers to switch to competing smartphones. The complaint, filed in the District of New Jersey, alleges Apple illegally maintained its monopoly power in the smartphone market.
  • Additional Contractors Indicted for Rigging Bids and Defrauding U.S. Military in South Korea. On March 6, 2024, a federal grand jury in the Western District of Texas indicted a third South Korean national and a South Korean company for their roles in a bid-rigging conspiracy that sought to defraud the Department of Defense of millions of dollars through subcontract work. The conspiracy is alleged to have started at least as early as November 2018 and resulted in previous indictments for individuals in March 2022.
  • Jetblue Announces It Will Not Appeal Trial Loss to DOJ Over Spirit Acquisition. On March 4, 2024, JetBlue announced it had abandoned its US$3.8 billion proposed acquisition of Spirit Airlines. The deal was blocked by a federal judge in the District of Massachusetts following a 17 day trial in October 2023.
  • Four Individuals Plead Guilty To Bid Rigging and Price Fixing. On February 27, 2024, four individuals pleaded guilty to bid rigging and price fixing in an ongoing investigation of Oklahoma transportation construction contractors. According to documents filed in the District of Oklahoma, the four individuals conspired to rig bids, fix prices, and allocate contracts for erosion control products and services starting in 2017.
  • Four Additional Defendants Plead Guilty To Bid Rigging in Michigan Asphalt Industry. On January 21, 2024, two individuals and two companies pleaded guilty to bid rigging charges that they had entered into a series of separate conspiracies spanning from 2013 through 2021 in which the agreed-upon losing company would place an intentionally noncompetitive bid so as to give the illusion of a competitive process.
  • DOJ Joins Lawsuit Challenging NCAA Transfer Eligibility Rule. On January 18, 2024, the DOJ joined 10 states and the District of Columbia in a lawsuit alleging that the NCAA unlawfully restricts the movement of college athletes by imposing eligibility restrictions on participation if they transfer more than once during their collegiate careers. The case was originally filed in December 2023 in the Northern District of West Virginia.

Joint FTC and DOJ Policy

  • DOJ and FTC File Joint Statement of Interest in Karen Cornish-Adebiyi v. Caesars Entertainment, Inc. On March 28, 2024, the agencies submitted a joint statement of interest supporting plaintiffs and arguing that the complaint adequately alleged that the defendants’ use of algorithms to set prices is a per se price fixing arrangement under the antitrust laws.
  • Joint Comment of the DOJ and FTC Regarding Exemptions To Permit Circumvention of Access Control on Copyrighted Works. On March 14, 2024, the agencies submitted a comment to the U.S. Copyright Office to advocate for regulations that would facilitate consumers’ and businesses’ right to repair their own product.
  • DOJ and FTC Update Guidance That Reinforces Parties’ Preservation Obligations for Collaboration Tools and Ephemeral Messaging. On January 26, 2024, the agencies announced they are updating standard language in preservation letters, second requests, and all other compulsory legal process documents to reinforce the longstanding obligations companies have to preserve materials during the pendency of investigations and litigation. The agencies said that the use of tools designed to hide evidence may result in obstruction of justice charges.
  • DOJ and FTC Hold Trilateral Meeting With Competition Enforcers From Mexico and Canada. On January 23, 2024, the antitrust and competition agencies from the U.S., Canada, and Mexico met in Mexico City to discuss issues such as competition in the technology and platform sectors and the impact of competition in labor markets. The annual meeting is intended to allow for the sharing of expertise and learnings.

FTC Policy

  • FTC Releases Staff Report on Agency’s Technology Expertise. On March 26, 2024, the FTC released a report titled, “Building Tech Capacity in Law Enforcement Agencies” that details the agency’s work to expand its expertise and the role of the Office of Technology.
  • FTC Hosts Virtual Workshop on Private Equity in Health Care. On March 5, 2024, the FTC hosted a workshop with several panels and featured remarks to discuss the effects of private equity investment in health care markets.
  • FTC Submits Comment on March-In Rights To Promote Efforts to Lower Drug Prices. On February 6, 2024, the FTC issued a comment in response to the National Institute of Standards and Technology’s request for information regarding “march-in” rights, whereby the federal government may require the patent holder of an invention created using taxpayer funds to license the patent to other applicants.
  • FTC Hosts Tech Summit. On January 25, 2024, the FTC hosted a tech summit with the goal of facilitating a dialogue as markets are evolving and to ensure the FTC’s knowledge and skillset keeps pace with the changing marketplace.

DOJ Policy

  • DOJ Hosts Procurement Collusion Strike Force Summits in Atlanta and Los Angeles. On March 28, 2024, the DOJ Antitrust Division, the U.S. Attorney’s Office for the Northern District of Georgia, and the Procurement Collusion Strike Force (Strike Force) hosted a summit to discuss emerging threats and to raise awareness of the Strike Force’s mission. This summit followed a similar event that included the U.S. Attorney’s Office for the Central District of California on February 8, 2024. The Strike Force, which was founded in 2019, reported on its work, which includes having opened more than 100 criminal investigations.

Inter-Agency Initiatives

  • The FTC and 23 Other Members of the International Competition Network Jointly Issue a Statement on Building Agency Digital Capacity. Following a technology forum hosted by the FTC on March 25-26, 2024 in Washington, D.C., 24 member agencies of the International Competition Network jointly issued a statement recognizing the need and high level considerations to strengthen capacity, enforcement capabilities, and international agency cooperation in the digital space.
  • DOJ, FTC, and HHS Issue Request for Public Input as Part of Inquiry Into Impacts of Corporate Ownership Trends in Health Care. On March 5, 2024, the DOJ, FTC, and Department of Health and Human Services (HHS) issued a request for information requesting public comment on deals conducted by health systems, private payors, private equity, and other asset managers that acquire health care assets, including deals that may not have been Hart-Scott-Rodino reportable to the antitrust agencies.

FTC Speeches

  • Chair Khan Delivers Remarks for White House Roundtable on PBMs. On March 4, 2024, Chair Khan addressed a White House roundtable on pharmacy benefit managers (PBMs) to discuss the FTC’s efforts to date regarding its investigations and actions.
  • Chair Khan Delivers Remarks at American Medical Association (AMA) National Advocacy Conference. On February 14, 2024, Chair Khan delivered remarks at the AMA National Advocacy Conference regarding competition in health care markets, addressing PBMs, hospital acquisitions, and labor market concerns.
  • Commissioner Bedoya Delivers Remarks at the Global Competition Review: Law Leaders Global Summit 2024. On February 2, 2024, Commissioner Bedoya delivered remarks regarding the FTC’s ability to use “unfair methods of competition” under the FTC Act to combat the issue of misclassification of employees as independent contractors.

DOJ Speeches

  • Assistant Attorney General Jonathan Kanter Delivers Remarks at the 22nd International Conference on Competition. On February 29, 2024, AAG Kanter delivered introductory remarks commenting on the successes of antitrust enforcement under the Biden administration, as well as current points of focus. His remarks highlighted the importance of President Biden’s 2021 Executive Order on Promoting Competition in the American Economy.
  • Deputy Assistant Attorney General Michael Kades Delivers Remarks at GCR Live: Law Leaders Global 2024. On February 1, 2024, DAAG Kades delivered remarks focused on the text of Section 7 of the Clayton Act, emphasizing how it prevents mergers that “may” harm competition, as well as discussing modern economic theoretical and empirical work that supports the structural presumption that certain mergers are anticompetitive based on post-merger market share.
  • Assistant Attorney General Jonathan Kanter Speaks at Mexico’s Federal Economic Competition Commission 10th Anniversary Celebration. AAG Kanter delivered remarks focusing on three primary themes: the importance of competition in transportation; the need to protect competition in housing; and the fight to ensure concentrated corporate power does not suppress wages and working conditions in labor markets.
  • Deputy Assistant Attorney General Manish Kumar Delivers Introductory Remarks on the Evolution of International Cartel Enforcement Coordination to the New York State Bar Association. On January 16, 2024, DAAG Kumar delivered introductory remarks commenting on the importance of international cooperation and collaboration in antitrust, addressing both cross-border and domestic conduct.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

  1. Information Exchanges: What is Safe?,” American Bar Association: Antitrust Law Section, Feb. 14, 2024. 

  2. Id. See “No Safe Harbors: DOJ Signals Increased Scrutiny of Information Exchanges,” Arnold & Porter, Feb. 14, 2023. See also “Federal Trade Commission Withdraws Health Care Enforcement Policy Statements,” Fed. Trade Comm’n, July 14, 2023).

  3. See Gibson et al. v. MGM Resorts International et al., No. 2:23-cv-00140 (D. Nev.); Altman et al. v. Caesars Entertainment, Inc. et al., No. 2:23-cv-02536 (D.N.J. Jan. 25, 2023); In re: Realpage, Inc., Rental Software Antitrust Litigation (No. II), No. 3:23-MD-03071 (M.D. Tenn. Nov. 16, 2023).

  4. Statement of Interest of the United States, Karen Cornish-Adebiyi v. Caesars Entertainment, Inc., No. 1:23-cv-02536-KMW-EAP (D.N.J. Mar. 28, 2024); Statement of Interest of the United States, Duffy v. Yardi, No. 2:23-cv-01391 (W.D. Wa. Mar. 1, 2024); Memorandum of Law in Support of the Statement of Interest of the United States, In re: Realpage, Inc., Rental Software Antitrust Litigation (No. II), No. 3:23-MD-03071 (M.D. Tenn Nov. 15, 2023).

  5. Statement of Interest of the United States at 4, Karen Cornish-Adebiyi v. Caesars Entertainment, Inc., No. 1:23-cv-02536-KMW-EAP (D.N.J. Mar. 28, 2024).

  6. Id. at 5.

  7. Statement of Interest of the United States at 6-7, Karen Cornish-Adebiyi v. Caesars Entertainment, Inc., No. 1:23-cv-02536-KMW-EAP (D.N.J. Mar. 28, 2024); Statement of Interest of the United States, Duffy v. Yardi, No. 2:23-cv-01391 (W.D. Wa. Mar. 1, 2024).