Regulatory and legislative focus on antitrust compliance is growing

Regulatory and legislative focus on antitrust compliance is growing

Key points

  • Regulatory and legislative focus on antitrust compliance is growing, as evidenced by new units at the DOJ and FTC, high profile enforcement actions, coordinated investigations at the federal and state levels, and Congressional hearings.
  • Attention is focused in particular on the technology sector and digital markets, especially the potential to derive market power through the data made available from large online platforms and user networks and efforts to control innovation/competition through acquisitions of nascent companies or future competitors.
  • The collection, aggregation, and use of customer data in digital markets spans multiple sectors beyond technology, including financial services, healthcare, and retail, and raises issues of privacy. Although privacy is often viewed principally as a consumer protection issue, it also plays a role in antitrust analysis in digital markets as a measure of quality.

Trends throughout 2019 in regulatory investigations, initiatives, standards, and actions imply an increasing level of scrutiny and credible challenge in the technology sector and beyond. It is a suitable time for organizations to evaluate any potential antitrust issues and risk in their pending or anticipated acquisitions and third party relationships, as well as in how new products and services are structured and operationalized. Related due diligence and market analytics in support of these decisions should be well-documented. KPMG is prepared to assist clients in proactively designing and/or evaluating an antitrust compliance program in light of the articulated regulatory expectations, including development of supporting data analytics, natural language processing, and AI tools.

Heightened regulatory and legislative attention is directed toward compliance with antitrust laws, especially in the technology sector. Antitrust regulators, including the Department of Justice (DOJ) and the Federal Trade Commission (FTC), have coordinated efforts to review the activities of the four largest technology firms with an eye toward market power and whether these firms’ collection, aggregation, and commercial use of consumer data in digital markets harms competition. An outline of recent developments follows.

Regulatory initiatives

The DOJ and FTC, as well as state regulatory authorities, have individually and jointly taken antitrust-related actions aimed specifically at the technology sector:

  • The FTC:
    • Has allegedly initiated a preliminary inquiry into two electronic payment processors and other large debit card issuers for policies that may restrict or block retailers from routing some mobile wallet payments and tap-to-pay transactions over alternative debit networks.
    • Is conducting an investigation into whether a large technology firm/social media company acquired certain technology-based startups in order to eliminate potential rivals before they could become a threat to the company.
  • The DOJ Antitrust Division:
    • Is reviewing how “market-leading online platforms,” which include technology companies that dominate internet search, social media, and some retail services, have achieved market power and whether they are engaging in practices that may have “reduced competition, stifled innovation, and otherwise harmed consumers.”
  • The FTC and DOJ:
    • Are each reviewing antitrust enforcement related to common ownership and potentially implementing new approaches, including consideration of consumer harm. At issue is whether holdings of multiple companies in a single sector impairs competition.
    • Have agreed to share jurisdiction for the four largest technology firms.
    • Announced an agreement with a large technology firm settling allegations of data privacy violations, including allegedly misleading the digital platforms’ users about the extent to which certain third-parties could access users’ personal information, and further, to have violated the FTC Act by deceiving users about their use of this data and additional sensitive information. The agreement included a $5 billion fine.
  • State attorneys general:
    • Announced an investigation (by 47 states) into an online platform/social media firm to determine whether the company’s dominance in the industry led to actions that “may have endangered consumer data, reduced the quality of consumers’ choices, or increased the price of advertising”
    • Announced an investigation (by 50 states) into another technology firm’s advertising business and use of consumer data.

In addition, the DOJ and FTC have each enhanced the structure and focus of their antitrust investigation and enforcement units:

  • The Antitrust Division of the DOJ recently published a guidance document revising its approach for assessing antitrust violations. The guidance directs antitrust prosecutors to evaluate companies’ corporate compliance programs, at both the charging and sentencing stage, for potential credits pursuant to the U.S. Sentencing Guidelines. The change is intended to incentivize antitrust compliance, help deter antitrust violations, and reward good corporate citizenship. (See KPMG Regulatory Alert).
  • The DOJ also announced the formation of a new Procurement Collusion Strike Force (PCSF) focused on deterring, detecting, investigating, and prosecuting antitrust crimes such as bid-rigging conspiracies and related fraudulent schemes. The interagency partnership will consist of prosecutors from DOJ’s Antitrust Division, prosecutors from 13 U.S. Attorneys’ Offices, and investigators from the FBI, the Department of Defense Office of Inspector General, the U.S. Postal Service Office of Inspector General, and other partner federal Offices of Inspector General.
  • The FTC established a Technology Task Force, to monitor competition in the U.S. technology markets and recommend enforcement actions. The group is comprised of attorneys with prior experience in complex markets, including markets for online advertising, social networking, mobile devices, and technology platforms.
  • As part of a broader hearings initiative on competition and consumer protection, the FTC conducted hearings on Concentration and Competitiveness; U.S. Antitrust Law, Mergers, and Monopsony or Buyer Power; Identification and Analysis of Conduct by Digital and Technology-Based Platform Businesses; and Innovation and Intellectual Property Policy.

Legislative initiatives

Antitrust subcommittees in both the U.S. House and Senate have conducted hearings directed toward the technology sector and digital markets. The hearings respond, in part, to some industry concerns about whether the antitrust laws are sufficient to detect and challenge anticompetitive conduct and transactions in emerging and fast-paced markets.

  • The House conducted a series of hearings targeting “Online Platforms and Market Power,” covering “perspectives of the antitrust agencies,” “the role of data and privacy in competition,” innovation and entrepreneurship,” and “the free and diverse press.” The DOJ statement outlined efforts to protect customers from collusion in online markets, including a price fixing case involving algorithmic pricing and another on customized promotions carried out through social media platforms and encrypted messaging applications.
  • In testimony before the Senate, the FTC outlined the portions of the Clayton and Sherman Acts that govern its antitrust analysis. In the FTC’s view, the law bars a firm from gaining or maintaining a monopoly position through anticompetitive conduct, including acquisitions that exclude nascent and potential threats to its dominance. As such, the agency plans to closely review mergers in dynamic markets when:
    • An industry leader seeks to acquire an up and coming competitor that is changing customer expectations and gaining sales.
    • An industry participant seeks to acquire another firm committed to entering the same market in the near future—eliminating potential competition.
    • Two firms with innovative products in development propose to merge, potentially delaying competition in a future market.