Merger Enforcement Changes in 2022 under the Biden Administration

Mark Marks:                     For our next panel, we have a program put together by the Antitrust Section and Mergers Committee and the Corporate Counseling Section. Jonathan Justell and Todd Garcia are our antitrust folks and they put together merger enforcement changes under the Biden administration. We’d like our moderator to kick off.

Kaci Palleschi:                   Thanks, Mary. Before we begin, I wanted to say thank you to Mary Marks and also Todd Garcia for helping to organize this conference, and also our panel. It’s a pleasure to be here together after three years of COVID. We will focus today on merger enforcement in the Biden administration.

I’m pleased to introduce our panelists; first, we have Serahi. She is Senior Counsel at Warburg Pincus, where she manages antitrust, regulatory and litigation matters. Serahi was previously at Kirkland in the antitrust group, where she focused on mergers, and was also on the trial team for United Change.

We have Josh Tzuker. He is currently Chief of Staff at the Antitrust Division. Before going to DOJ, he was at Oracle, and before that, he was attorney advisor to Commissioner McSweeny at the FTC.

Matt Reilly is a partner at Kirkland, where he focuses on a wide range of antitrust matters. Prior to joining Kirkland, Matt was previously head of Mergers IV at the FTC.

And last but not least, we have Joanna Tsai. She is VP at Charles Rivers Associates. She has 20 years of experience in antitrust and IP, and she has held positions in private practice, academia and the government. She was at the FTC, where she was economic advisor to then Commissioner Josh Wright.

We’ll begin today with Josh. The first question; Jonathan Kanter, Tim Wu and President Biden’s Executive Order on Competition emphasized a whole of government approach to ensuring competitiveness in the American economy. Could you explain what that means, and how it may affect merger review?

Josh Tzuker:                      Thank you very much for having me. Looking back on 2020, and you might have had to go far up in the website of President Biden’s campaign website, but he actually ran on improving competition, reinforcing the antitrust laws and had a competition platform. Like I said, it probably wasn’t motivating most voters to the polls, but it was actually there.

When he got into government a few months, I think it was last July, the EO came out and it emphasized a whole of government approach to mergers and competition. What that has meant in practice when we say, “Whole of government,” it means that these reviews and the analysis and how government responds to competition problems, isn’t confined to just the FTC and DOJ, but we actually work across government, across [inaudible 03:51:09], but we work across government.

What the EO contemplates and has actually put into practice, there’s an inter-agency working group, I know this sounds very DC, but there is actually an inter-agency working group that meets a couple times a year, where there are designated people at each agency who deal with competition. Rather than just saying nice words about competition, there’s actually an Assistant Secretary of Defense, who will be competition, or there’s somebody at HSS, whose mandate is competition.

What that means when you look at how we’ve done merger enforcement, there’s the recent EverWatch PAH case that I think a lot of you are familiar with. In that instance, we actually worked with the National Security Administration, an agency that, for a long time, I don’t know if competition and antitrust was part of any of their concerns, but we actually worked with them on maintaining competition for an incredibly important contract that they were offering.

That gives you an idea of what that actually means, it’s that we are going out and looking and working with our colleagues across government on actual enforcement of the competition.

Kaci Palleschi:                   Got it. How do you think that has affected merger review, and what are the practical realities of that?

Josh Tzuker:                      Well, the practical reality is that we have folks at other agencies who are working with us on these reviews. I’m not sure I can actually go into many of the cases-

Kaci Palleschi:                   Understood.

Josh Tzuker:                      … that we have under review, but in some areas, and this is not merger review, but we had a packer and stockyards claim referred to us by the Department of Agriculture, which was groundbreaking. I don’t know the last time that that has happened.

So it’s really turning the screws and making sure that every agency has these equities in place and ensuring that when we have something that comes before us, it’s not just DOJ trying to learn a new industry, but actually going to the subject matter experts in order to get it done.

Kaci Palleschi:                   So without disclosing specific investigations or cases, can you tell us some of the other agencies that you’re working with today?

Josh Tzuker:                      It’s really a cross-cover, and I’m not just going to confine this discussion to just merger review.

Kaci Palleschi:                   Sure.

Josh Tzuker:                      I mean, I understand that that’s where we are, but we have signed multiple MOUs within the last year; HHS, Department of Energy, Veterans, that all are to work together on competition matters, within the last year between the Inflation Reduction Act, the Bipartisan Infrastructure Act and the CHIPS Act, there are billions and billions of dollars going out to various agencies that, for a long time, didn’t have… Competition is one of the equities that they wanted to protect, and they were learning with us, or were helping to enhance their skillset to identify when there are competition problems that they see.

So as these billions of dollars in CHIPS Act money goes out to states and local governments, or to different agencies to help attract high tech investment, you’re going to see a lot more in the way of DOJ cooperation to help them identify problems within competition or bid rigging and things like that.

I realize it’s not just merger enforcement, but that, I think, is what’s contemplated in the Biden EO.

Kaci Palleschi:                   Very helpful. I wanted to say that while we will save a couple of minutes at the end for questions, you’re very welcome to ask us questions during the panel, so feel to raise your hand or interrupt.

My next question is for Matt; Matt, you were litigating cases at the FTC. You’re now in private practice, a lot of experience there. How should DOJ’s reluctance to settle affect how the parties evaluate remedies? And do you think parties in tough deals should pivot to a fix it first philosophy?

Matt Reilly:                       Well, first of all, thank you for inviting me. I was hoping to get a question about the Act on that. I was going to move straightforward with one joke [inaudible 03:55:51]. I’ll get to the New York Parks Association, the New York State Parks Association Three, this is my third time. The first time was in 2007 by Whole Foods. I was at the FTC. The second time was 2014, Office Depot, Office Max. I was SOT in that. Now in 2023, I’m at Kirkland.

I detected a pattern. Every time you guys invite me, you realize, “God, he’s terrible. We’re never going to invite him again.” I’ve been at the state, and then I get invited back here, as long as I switch employers. So thank you for to the board, until 2031, and I’ll come in and start.

What I’m leading to is, yes, just to cut right to the chase, there’s not a deal that I’d get I’ve been advising on and signed on, I’m not saying, “We’re going to litigate,” fail to litigate, and I’m sure you’ve heard it enough times in the purchase agreement. You can always extend it, we extended it on a recent deal, but make sure you put enough time in.

I always say the best way to avoid litigation is to be ready. Look, I get that FTC won’t get any credit. I think they’re bringing tough cases. I think they’re bringing litigation cases that I was never averse to the FTC, but they’re not guaranteed slam dunks.

Even if you’re really prepared, and you think there’s a high amount of litigation risk to the agency, they still could bring it. That’s their prerogative and that’s what they want to do, but being prepared for litigation, I’m always saying you have a six month walkaway date or you’re not ready or you don’t take it serious, I’m like, “Pencils down, don’t even try it.” I’ve said that to many clients, “Don’t even try, because if you’re going to do six months, then this will lead to further to other issues, so don’t even try.” That’s not even saying for a couple of years.

In terms of a divestiture, obviously the game of divestiture is a hot topic. I’m limited to what I can say about UHD change, but Serahi, she’s no longer here, that case is on appeal. I just wanted to pick up on that. But the ASSA ABLOY case, that’s a big issue there, eliminate the revenue, the divestiture, whatever you want to call it, that was a big one when the UHD changed.

We need to figure out a remedy in the boardroom where we try to advise mainly to carve out assets, leave behind assets, or just get ready to… If you think that the agency has a valid overlap concern, you then, should be prepared to litigate that as well.

Obviously, there’s CE gets that point. It’s a big point in federal court discovery, a key pivot related to the DOJ and FTC will ask for this discovery to make sure that they can vet the proposed divestiture, if so.

You’ve got to have change, meaning going in and saying, “Hey, let’s take a shot and even after five months, and if there’s no concern, then pivot to remedy.” I think those days are over when you still get divestitures through the FTC offered to you.

Some of the DOJ ones are done, I will say, off the books, but Josh is going to kick me, the proceedings. So yeah, you can still do it, but I don’t know if it especially fields into the significant competitive concern. Just get ready to litigate, I hope you don’t have to, but if you do, you do. The client is going to court.

We talk about returns, even in the best case scenario, comply quickly, better get an efficiency letter, I’m quite sure of that, and then you’re going to have go in that time, so even if you push the judge to move this very quickly, you’re talking about a commitment. If the deal is worth doing, then it’s probably worth fighting for. That’s what I say.

Kaci Palleschi:                   So just a follow up, Matt; what advice do you have for lawyers with respect to putting together a persuasive divestiture package in light of all that?

Matt Reilly:                       Yeah. Nothing’s changed on that front, I don’t think. I mean, it’s been the same as long as I’ve been practicing, and no jokes, for 45 years, I was not involved in the best deal or whatever, but I think it’s going to be finding a buyer, a good package of assets, and demonstrate that the TSAs are hopefully limited, and they have an EE, and that most important, from my perspective, making sure the buyer is right by your side on the divestiture, right by your side, to convince the agency, whether in front of the conference rooms or in front of another audience, that they are a good buyer.

I like to say, and don’t steal this line, the merging party is going to rue the day, so I said that. The only way we’re going to replicate our mission is going to be shot out of a cannon on day one and it could lead to that. That’s always it; the right package, the right buyer and having a divestiture buyer by your side making sure that this is going to be a department in front of audiences.

Kaci Palleschi:                   Okay. Then just one follow up before we move on to Serahi, you referenced off the books divestitures or off the books remedies, are you seeing that much today, Matt?

Matt Reilly:                       Much at the FTC, no, at the DOJ, [inaudible 04:01:25]. They gave me feedback. You try to fix the problem that’s been identified and so whether it’s, again, I hate to sound to focus on it like it’s something actually happened, but I have seen some corporations working with the staff to get a deal done that, I assume that may be moving in a spot.

Kaci Palleschi:                   Okay. One thing I’ve seen is a willingness to approve an off the books remedy, where you’ve got, perhaps, a consent in another jurisdiction. That is a pattern that seems to be emerging at DOJ. I don’t know if others have experience with that. All right.

So following up on the discussion of United Change, Serahi, and interesting point of dispute in that matter was how to think about the burden of proof in merger litigation when merging parties propose a divestiture, how does one litigate the fix? Can you explain the dispute there and how lawyers should advise parties, where there is a wide debate in the courts about how to analyze the harm to competition?

Serahi:                                Yeah. I mean, I think in United Change, the issue was sort of a who, what, when? Who has the burden of showing what standard of competition will remain and when does each party have to show that burden in litigation? So you’re going to divest this asset, and who’s proving that there’s a substantial lessening of competition, and then who’s shifting the burden back?

That’s really what the issue was in United Change, and I think the DOJ approach when they came in was that it was on United to have to prove that the divestiture was going to replace the competitive intensity that was going to be lost in the first class claims editing.

I think, sort of, United, we went in and the argument was that’s internally inconsistent with how we’re reading Section 7, and so instead, we’re just going to have to show that the government met their prima facie case, yes, first class claims editing. We didn’t dispute the market shares that were there, but now we’re divesting this asset and now it’s back to the government to show that this divestiture is sort of not… Is going to still allow for that substantial lessening of competition, even with the divestiture in that market.

It was sort of figuring out who was going to prove what and when we were each going to prove that. It was essentially whether you were going to treat that divestiture as a separate transaction that’s being reviewed, so you have the main deal, which was United acquired Change, and then you have the divestiture, which was Change divesting first class claims editing to TPG, or if you’re going to read that all as one deal. I think the United argument was, “This is all one deal.” The divestiture agreement is contingent on the merger going through, TPG isn’t buying this asset if United doesn’t acquire Change.

You couldn’t read them. There was no universe, maybe there was a millisecond where you were going to have some daylight between United owning Change’s first class claims editing, but that’s in the amount of time it takes for the ink to dry on the purchase agreement.

I think that’s where, really, the issue is. I think going back to the question you asked Matt on whether you’re going to fix it first or you’re going to prepare to litigate, from the commercial sense, it’s really hard to fix it first because if you’re the buyer, you’re going to go into a target company and say, “Hey, I want to buy your company. Can you please sell off that business unit over there, and then I’ll come in and buy the rest.” Especially if you’re in a competitive environment, that’s not necessarily a competitive position to take if you’re in a bid process. Then, if you’re the target and you’re receiving that, you’re like, “Well, but this other party over here will give me more money to buy all of it, so why can’t I just…

PART 7 OF 12 ENDS [04:05:04]

Nancy:                                Over here will give me more money to buy all of it. So why can’t I just sell to them? So from a commercial standpoint, the sort of fix it first is really hard. It’s not contingent on the deal going through, so you’re going to sell off an asset and you’re going to hope that the rest of the deal goes through and there’s no guarantee that that deal’s going to go through anyway. So I think commercially, just preparing to litigate is the firmer ground. You can sort of account for that, you can discount that. You can add whatever value you need to add to entice the buyer to stick along with you in the litigation process, but you have those tools as opposed to just a prayer and a chance that that divestiture will be sufficient in the first place.

Matt:                                   Nancy, it’s really been remarkable how the litigation divestiture has evolved, even since the last couple years. I remember I was at the [inaudible 04:06:04] whether the judge basically would consider [inaudible 04:06:04] and then what he said in his pretrial order, that [inaudible 04:06:08] was like wow. I mean that’s really earth shattering and now it’s [inaudible 04:06:14] most recent cases are looking at [inaudible 04:06:18] verification, competition [inaudible 04:06:23] so just maybe for the younger folks in the room, the evolution over 20 years [inaudible 04:06:29].

Kate:                                   So what are the different options then, Matt, for parties today, who are trying to get through a tough merger? I know we spoke in our prep about the Reynold’s [inaudible 04:06:41] proposed structure, fix it first, fixing it in the boardroom. What are the different permutations that you’re seeing in your practice?

Matt:                                   So based on how this is going so far, I’m sure you guys … I didn’t actually prepare for this so I don’t want [inaudible 04:06:58]. So my view is, if you think [inaudible 04:07:04] for a close, go for it. See if it prevails. See if you can get it through. And if not, pivot quickly like a [inaudible 04:07:11] it’s 2014?

Nancy:                                Yeah.

Matt:                                   We just knew we had to sell some assets, we had a buyer upfront. We worked with the FTC really from day one, and said, “Hey, this is what we’re going to do.” We had to sell some [inaudible 04:07:30] brands because it’s really important to keep prices and and rents low for our teams in America, so we really want to [inaudible 04:07:35] we still need to be going to take a shot. Unless you know it’s a screaming problem, like a [inaudible 04:07:47]. Find the buyer sooner, collect the deal, litigate it, is a sweet spot, right? You don’t want to give those [inaudible 04:07:57] the issues. See the sweet spot is figuring out what you have to do, introducing it preferably before the lead agency files a complaint and then go from there. You’re going to assume some [inaudible 04:08:18] but if you think of a great buyer and a great class of assets [inaudible 04:08:25] but I do think there’s a risk of letting the agency have unfettered, one sided discovery if you’re not [inaudible 04:08:32].

Nancy:                                I think on top of that, you get the … You have to prepare for it in a sense of, if you know you’re going to have to divest a part of the business, are you really going to spend all of your time trying to battle what the market shares are for the part that you know you’re willing to divest? So when you’re looking at a discrete amount of time for your second request, you have to pick, what are you really going to be battling over and what’s worth fighting for? And if you know you’re going to divest something, are you really going to fight the market shares on it?

Kate:                                   Josh, what do you have to say about all this?

Josh:                                    [inaudible 04:09:03]. So a lot of [inaudible 04:09:12] again in court today. So from our point of view, I’ll just say a little part of my professional background, same professional background. But years ago, I must have done something wrong because I had to spend five years as the chairman of the planning and zoning board of my county. And every Tuesday night for a few hours, it was some business comes in and they want to add two dumpsters and I had my code book of the local zoning code and, were the dumpsters properly screened? Was there a setback? If there was over the setback, what are we doing to remedy it? Is it evergreen fence versus … And the professional staff, because I was a volunteer but I had a bunch of meetings, the head of the professional staff said to me on my first or second week, that everything was basically an exercise in saying yes very slowly. And that no was basically doing … So you had people come back week after week and no was just a very slow way of saying yes.

Antitrust should not be zoning law. And that’s how we’re approaching it in the Jonathan Kanter, assistant attorney general shift. And no, the problems of a remedy should not be borne by the American [inaudible 04:10:39]. If the remedy does not work, the American people are on the hook. It’s not that we’re against remedies. It’s not that we are going to not negotiate. It’s that we want to ensure the American people have a marketplace that is just as robust and just as dynamic as the one that the transaction is occurring.

The asset cases [inaudible 04:11:12] things that they have brought up, whether it’s one transaction or two, we see it one way that if you file an HSR, we’re going to litigate what’s on the HSR, not necessarily what comes afterwards. But our role is that antitrust has to have fidelity of the law, fidelity of the competition, and the cost of any remedy is not borne by the American people if it doesn’t work out.

Kate:                                   Thank you. So I think that’s a nice segue, Joanna, to the question on the EO that we prepared for. So President Biden’s executive order on competition, as well as numerous comments by Chair Kahn, and Kanter and other officials, have referenced an overall increase in concentration in the economy. But that’s an empirical question and it may be subject to dispute. What are your views on whether we’re really seeing a rise in concentration?

Joanna:                               Thank you for the question, Kate. [inaudible 04:12:15] a fair question. And there have been many [inaudible 04:12:15] on this topic over the last several years. And some of them are [inaudible 04:12:15]. As all antitrust practitioners know, [inaudible 04:12:15]. How you define the market and what the market [inaudible 04:12:15] market participants that [inaudible 04:12:15] or whether the concentration is [inaudible 04:13:01]. And therefore there lies the potential issue in some of the studies and [inaudible 04:13:10] concentration in the United States over the last few decades.

Some studies, and just for full disclosure, I haven’t conducted these empirical studies myself but I have been a consumer of these studies and I want to share [inaudible 04:13:35] see the evidence on concentration trends, it’s strong. So some studies [inaudible 04:13:55] have shown that corporate [inaudible 04:13:59] for example, put all business services in the United States as [inaudible 04:14:15]. I don’t know how many antitrust [inaudible 04:14:15].

Other studies do look at industry levels and some of them do [inaudible 04:14:22] level. NACE, how many people know NACE? Okay. [inaudible 04:14:27] to classify our country’s productive capacity [inaudible 04:14:52]. And then you get up more [inaudible 04:14:59] more levels, then there’s more [inaudible 04:15:04]. So the three digit main level [inaudible 04:15:11] four, five, four in a [inaudible 04:15:17] study. I’m referring to the markets, and what [inaudible 04:15:20] four, five, four is first to the category [inaudible 04:15:24] for retailers. Which includes Amazon and every other online retailer, so your Zappos might get lumped into Amazon, as well as [inaudible 04:15:39].

Another relevant factor, I think that’s important when looking at whether that change in concentration is real or not, and whether it goes up and down, is that businesses have been increasing their scope. So over time, over the last few decades, we see that businesses don’t just do work in one industry or have products and services in one industry. They tend to [inaudible 04:16:23]. So they might have businesses in separate industries.

So again as an example, Amazon [inaudible 04:16:23] is a significant part of its business but it is in the marketplace, part of their business, but that also then comes to [inaudible 04:16:35]. So this makes Amazon look larger than it is in the market [inaudible 04:16:47]. So as you can [inaudible 04:16:53] appreciate at this point that it’s very complicated [inaudible 04:16:59]. And we need our research from [inaudible 04:17:09] finds that after corrections for businesses’ increase in scope, [inaudible 04:17:16] average concentration has actually [inaudible 04:17:20] over the last [inaudible 04:17:22].

So all in all, last caveat, there’s [inaudible 04:17:27] looking at global which is global markets, [inaudible 04:17:31] imports or exports or not. If anyone’s interested on this, [inaudible 04:17:41] very nice job, literature review on this by Brian [inaudible 04:17:47]. And then finally, I want to say it’s really important to note that whether the concentration has been high or has been increasing on its own is not necessarily a bad thing. I hope someone [inaudible 04:18:28].

Matt:                                   [inaudible 04:18:28].

Joanna:                               And it’s not necessarily [inaudible 04:18:28] competition or under-enforcement of antitrust law. So high concentration can be a result of [inaudible 04:18:43]. And not necessarily bad behavior or anticompetitive markets. In and of itself, there is nothing wrong to being paid and to being paid [inaudible 04:19:00]. That said, personally I am not at macro level concentrations because as of late, I have been [inaudible 04:19:13]. There are a lot of reasons why [inaudible 04:19:17]. I think it’s more informative to look at the [inaudible 04:19:29] measures on a [inaudible 04:19:34] or innovations.

Matt:                                   So to follow up on [inaudible 04:19:45] support what Joanna was just talking about. Josh said it, and actually I was at the [inaudible 04:19:53] exact same approach on remedies. You should take risk [inaudible 04:19:58] and did you think there was an illegal [inaudible 04:20:00] the FTC process. But what I actually get [inaudible 04:20:11] which is really helpful and I enjoy [inaudible 04:20:13]. So we all know high profile loans. I think [inaudible 04:20:22] work quite well. And if they don’t figure out what went wrong, then we can’t learn from them.

So what I’m sensing today isn’t so much that I know [inaudible 04:20:43] divestiture and we said some kind of private equity [inaudible 04:20:50] something else would go in its place, but the point is, it’s really important if we’re learning to say okay, [inaudible 04:20:59] do work. When they don’t, what can we learn from that? So that’s the approach I think sometimes gets frustrating, that I think you might think you have a really good [inaudible 04:21:10] I’m not surprised at all that antitrust agency is saying [inaudible 04:21:18] parties, not by consumers. Not surprised by that at all. Just what I don’t understand sometimes is why divestiture has to happen [inaudible 04:21:29].

Kate:                                   Josh? Sorry.

Josh:                                    Yeah. It’s easy. It’s a rhetorical point to say that remedies do work. Some remedies do work, many remedies fail. And we can have a ton of postmortems and we can look at all the econometric models out there, but when the government has to be right 100% of the time, and the transacting parties don’t, it’s a risk that we are incumbent that it has to be an incredibly good remedy that we can actually say preserves competition or enhances competition in the way that otherwise we’re are going to [inaudible 04:22:19]. And that’s just the simple fact of the matter. We’re going to be taking a harder line. As I said before, it’s not just a slow process of getting to yes. We want to see if a remedy, or are convinced the remedy could work, that’s part of the discussion. But it’s not something where we take being wrong lightly, and say oh well, we’ll just get it better the next time. That’s a risk that we can’t let be borne by the American people without actually really being sure of it.

Kate:                                   And just to follow up on something Matt said, do you think that it increases the risk for divestiture failure if PE is involved, if PE is the buyer? There seems to be an aversion to-

Josh:                                    I think there’s an aversion. We’re skeptical of some PE, and some PE transactions, because of how it presents in the marketplace. If it’s a roll up, or if it’s a way of strategic purchases to avoid scrutiny, PE as an entity isn’t necessarily always in the wrong. And I think some of [inaudible 04:23:44] that I’ve seen [inaudible 04:23:52].

Kate:                                   Sure.

Josh:                                    But it’s oftentimes, I think really what we’re concerned about is how competition can [inaudible 04:24:01] because of the nature of some of the institutional buyers.

Nancy:                                I guess I would say, obviously I cannot speak for every PE firm out there, but in general, I don’t know people who are making investments to run companies into the ground. So I think as Joanna was saying, you can … It’s more of a case by case study, and I agree, I’m sure there’s very extreme statements on Twitter, which is the purpose of Twitter at this point, that will take it all the way and say all PE is evil, or all government is evil. It’s always going to be a case by case basis. That’s the point of the margin review process. We’re looking at these transactions, what markets are involved with what … If I’m dealing in, I don’t know, women’s shoes, I’m not really looking at a market for swimsuits or something. You have to take consideration of what’s relevant and what’s not relevant and try to make sure that you’re focusing on the right thing there.

Kate:                                   Yeah. Absolutely. Okay. Let’s pivot for a minute, and Josh, would you mind if I ask you about the foreign subsidy questions?

Josh:                                    Sure.

Kate:                                   So let’s take a moment to talk about this new foreign subsidies rule, which seems to be tracking the EU state aid rules, but also has a flavor of national security. So Josh, what is this? What’s the intent, and how will it change merger review in the US?

Josh:                                    So I think what’s interesting and distilled from this foreign subsidy rule is that there is an increased bipartisan consensus about how merger review has been done in the past, and a bipartisan consensus on how to improve the process. So this foreign subsidy rule was part of a three goal package that made it into the omnibus spending at the end of 2022. It was much more deep than passed through the senate but it still got in there.

But what it does is, it will … Ultimately, it’s going to add information to HSR filings about whether or not there are state owned enterprises or state investment from certain adversarial countries into transactions. And I think we had a transaction that we were going to take [inaudible 04:26:32] the parties abandoned in CMC [inaudible 04:26:36] where we would’ve seen a large percentage of refrigerated shipping containers being controlled by a Chinese state owned enterprise, essentially at the height of some of the logistical backlogs that we were seeing in some of the clogging of our ports.

So it really highlighted, I think for a bipartisan coalition of members that something has to be done in this area. So I’m not exactly clear on when we’re going to roll out the rules on this. I believe it starts at the FTC and there’ll be [inaudible 04:27:15] but in the coming weeks, there will be a change to HSR filings where this will have to be disclosed, whether there’s investment from China, Iran, some other adversaries. I think Venezuela might be in there-

Kate:                                   Known terrorist organizations.

Josh:                                    Known terrorist organizations.

Kate:                                   Can’t forget that one.

Josh:                                    But really, I think there have been transactions in the past where I think it would’ve raised national security eyebrows had those transactions [inaudible 04:27:40] in the last couple of years. I don’t know if that answers your question-

Kate:                                   Very interesting. It does.

Josh:                                    Is there something else [inaudible 04:27:46].

Kate:                                   No. It does. Does anyone have any questions on this? This is a very new development so we’re very happy to answer questions on this or anything else. Okay. Matt, did you have a [inaudible 04:27:59].

Matt:                                   Yeah. I was just listening to Josh speak. It just made me think [inaudible 04:28:07] not surprisingly, but I’ve been doing this a long time, many, many years and on both sides of [inaudible 04:28:17]. And every time a new administration comes in, [inaudible 04:28:17] all in the private sector and say [inaudible 04:28:20]. And I’m not saying at all I agree with the DOJ and FTC approach, I want some clients. But if you actually dig inside it, if your goal was, as Jonathan [inaudible 04:28:36] Jonathan says that you want to kind of [inaudible 04:28:41]. So how many folks [inaudible 04:28:42] talk more about section eight last year than they have in probably their entire career? How many folks here focused on [inaudible 04:28:51]. And entire approval stopped, and maybe [inaudible 04:29:03] not being litigated for.

So in many ways, the discussion of [inaudible 04:29:11] reason with investiture, you take my account [inaudible 04:29:18] the competition. The DOJ has considered a different view, but it’s being debated and it’s decided in court. So it’s really heavy times in terms of antitrust on the front page of the Wall Street Journal, much more discussion. Oftentimes not exactly positive press, but it truly is, the goal is to make people more aware, make clients more aware, companies more aware, ask questions [inaudible 04:29:45]. And that has worked. Whether you believe it’s appropriate or not, it is no doubt for the first time in many years, someone has come into the FTC and DOJ who really changed the dialogue, changed the [inaudible 04:30:00], changed the focus and changed really their voice.

I can tell you, I think DOJ [inaudible 04:30:05] and again, whether they should take those cases or not is not for me to decide, but I do have to give some credit on what Jonathan and my friends [inaudible 04:30:20]. To say look, that was a goal and we did it. We made it. So I think most people would agree [inaudible 04:30:27] can tell you what section eight of the [inaudible 04:30:29].

Nancy:                                He hasn’t thought about it since [inaudible 04:30:36]. It’s been awhile.

Josh:                                    But I’ll say, I don’t think it’s just John. There is a bipartisan consensus on this. Some of our biggest fans on the hill are Ted Cruz, Mike Lee, Josh Hawley, [inaudible 04:30:55]. They’re all [inaudible 04:30:58] republicans. You had in the waning days of, I’m not sure how much this got out, but in the waning days of the congress, you had Ron DeSantis write letters to the senate about some of the antitrust bills that were under consideration. So I don’t think this is going away. If it’s a one term Biden administration, obviously I hope it’s not, but I don’t think a future president DeSantis or a future republican president backs down on this. I think there’s a consensus across the aisle, and it’s heartening to see from my perspective but I think corporate concentration and trying to renew economic dynamism through competition is going to be [inaudible 04:31:47].

Kate:                                   So let’s follow up on section eight then, since we raised it. Back in October 2022, the DOJ announced open investigations regarding interlocking directorates under section eight. What prompted, Josh, the decision to revise section eight, and how if at all do you expect section eight to focus on merger enforcement going forward?

Josh:                                    What prompted us is that it’s in the law, and we’re the department of justice, and enforce the law. I know Richard Powers is here, and he actually brought a section eight case when he was acting assistant attorney general. So it wasn’t like it wasn’t being done. It just wasn’t being done in a systemic way that would change policy.

So it’s a per se violation. We send out those notices and the interlock was broken. How it plays into merger enforcement, it’s just part of the general review. Whether or not there’s … We have thoughts about how we might look at this but if there’s a section eight violation and it’s [inaudible 04:33:07] section one violation, and we can actually prove that up, it’s something we might look at. But I think in the end, just the fact that the interlock exists and breaking that interlock is a way to de-concentrate. Section eight is kind of the gateway drug to coordination in a way. It’s a very easy thing to do that suddenly you have information sharing in ways that are just not obvious to the public.

Kate:                                   Right. So these section eight investigations aren’t necessarily stopping with board directors stepping down. They may turn into section one investigations.

Josh:                                    If there’s [inaudible 04:33:45] section one problem.

Kate:                                   Any views on section eight [inaudible 04:33:50] from the PE perspective, or Matt or Julian?

Nancy:                                I think it’s definitely what people are talking about. I agree with Matt. I’ve never heard so many people in private equity talk about section eight. And I think there’s two points to it, because there is the merger side of, you can review it when you do an acquisition but there’s also the potential of, if you make an investment, investments can enter new markets, so then you get surprised that something that wasn’t an overlap becomes an overlap and I think how you address those and how you monitor those are topics of conversation and what people are trying to figure out now, how to make sure that you stay on top of it. Since it is a per se violation. So I think from the business side, you hear a lot of those people who always say, but they don’t really compete. This theoretically maybe but not really and when you’re dealing with per se violations that’s not a helpful answer.

Kate:                                   All right. So we are coming to the end of the program. I wanted to just leave a couple minutes for questions, if anyone has any questions? And if not, you’re dismissed early. Yes, in the back.

Speaker 20:                       So I just had a question about the initial discussion about [inaudible 04:35:04]. Is there any authority you can appeal to, competition approach is different from what other agencies seem [inaudible 04:35:15]. For example in the United Sugar merger recently, someone from the department of agriculture [inaudible 04:35:22] obviously thought that DOJ’s [inaudible 04:35:26] was wrong there. You can have [inaudible 04:35:31] but how do you resolve [inaudible 04:35:32].

Josh:                                    Yeah. That’s under Peel, so I really want to [inaudible 04:35:38].

Kate:                                   That’s a whole government approach [inaudible 04:35:39].

Josh:                                    In general, we’re working incredibly well with partners across government. In the case you mentioned, she was actually subpoenaed by [inaudible 04:35:57]. There’s that overlay to that. But we’re working incredibly well. There have been agencies that I think might have not had competition at the forefront of what they’ve been doing, but I think with this new approach, there’s a revival. You’re seeing it at just different agencies. The cases I’m thinking of aren’t why it matters so I’m not going to bring them up, but they are happening and there are these discussions. And there’s going to be fits and starts certainly but I think more and more, it’s becoming an equity that each agency that has in front of them some of these transactions, are really taking [inaudible 04:36:47].

Nancy:                                I think in particular, there is a lot of coordination right now between the DOJ and the FCC. I’ve seen that.

Kate:                                   Any other questions? All right. Thank you all for joining us. Thanks to the panelists, especially Josh for coming up. I know this isn’t easy. We appreciate it. Thank you.