Senior Vice President, International Regulatory Affairs & Antitrust, U.S. Chamber of Commerce
October 19, 2022
Recent decisions call into question the ability of U.S. companies to obtain due process from foreign competition agencies. Across the Atlantic, agencies in Europe and the U.K. have withheld critical evidence from American defendants, improperly reviewed purely American transactions, and apparently collaborated with other regulators to deny U.S. companies their day in court.
To avoid these errors, responsible competition officials must ensure that they afford companies full and fair procedural due process, consistent with the International Competition Network’s (ICN’s) Framework for Competition Agency Procedures. At the same time, Congress and the White House must demand that U.S. companies receive impartial treatment abroad. As the Founding Fathers might have said - if they were antitrust lawyers - there can be no competition violation without fair procedural consideration.
Indeed, the ICN’s procedures protect “fundamental due process norms.” These norms include the principles of non-discrimination, transparency, notice of investigations, timely resolution, confidentiality protections, avoiding conflicts of interest, opportunity to defend, representation, written decisions, and judicial review. In terms of non-discrimination, for example, a competition agency must afford “Persons of another jurisdiction treatment no less favorable than Persons of its jurisdiction in like circumstances.” In terms of transparency, competition agencies must provide defendants with access to all relevant material, including exculpatory information:
In the same vein, the framework mandates that, “To allow for the preparation of an adequate defense, parties should be informed of facts and relevant legal and economic reasoning relied upon by the Participant to support such allegations or claims.”
In several notable cases, however, procedural processes fell far short of these minimum standards.
The most recent example comes from Britain’s Competition and Markets Authority (CMA), which was found by the British court to have violated procedural rights during the review of a merger transaction. In 2020, Facebook (now Meta) purchased GIPHY, a much smaller company that produces GIFs, the static and animated images found online. Facebook wanted to upgrade and expand GIPHY’s products. The CMA, however, ordered Facebook to unwind the purchase on the speculative grounds that GIPHY might one day compete with Facebook in the market for digital advertising, or that Facebook might limit its competitors’ access to GIPHY’s products.
On appeal, the Competition Appeal Tribunal found that the CMA had violated Meta’s procedural rights. The CMA improperly redacted material and failed to disclose that Meta’s competitor, Snap, had turned down a chance to buy GIPHY and considered its ad business worthless. In other words, Facebook’s competitor saw no competitive problems with Facebook’s acquisition, a pertinent fact that the CMA should have disclosed. Nevertheless, Meta ultimately abandoned the deal after the CMA issued a final decision against the company.
Of course, the process failures beg the question of whether foreign regulators should review purely American mergers at all. Facebook’s transaction involved American companies, employees, and shareholders, with an established American legal framework to address any competitive concerns. GIPHY earned no revenue in the U.K and had no physical presence or employees there. This is a growing problem as the European Commission has intervened in Illumina’s proposed purchase of Grail, a biotech company, even though Grail had no activities in Europe. In this case, it appears that the Europe collaborated with the U.S. Federal Trade Commission in ways that denied the companies their day in court.
These actions raise troubling questions of fairness. The ICN, for instance, has adopted a series of recommended practices for merger notification. One recommendation states:
The need for a transaction to have a legitimate local nexus to the jurisdiction that is conducting a review is critical to ensuring that mergers and acquisitions can be efficiently reviewed only by those jurisdictions where the transaction presents a material impact on competition. The United States has been a leader globally in the establishment of these and many other international best practices. Most recently, the U.S. has advanced world-class commitments to due process and procedural fairness in competition investigations through the competition chapter of the US- Mexico-Canada Agreement.
U.S. companies have a responsibility to comply with the competition regimes in which they operate, but foreign regulators also have a responsibility to ensure that they afford those companies fair and due process, consistent with the international best practices. A failure to do so could lead to less investment, strained bilateral relations, and calls from elected officials to move these topics into the political realm and away from the responsible competition framework that agencies have spent decades working to establish.