ANALYSIS: Will Antitrust Enforcers Wield a Scalpel or a Sword?

Some accuse modern antitrust enforcers of being on a crusade. The enforcers probably wouldn’t disagree with that assessment.

We’re in the middle of an enforcement shift that is based on reassessing the risks and rewards of mergers and on struggling to regulate digital markets. For many enforcing jurisdictions, that’s meant new legislation that will be coming into force in 2024. It’s also meant new policies and enforcement agendas.

Accordingly, companies face heightened enforcement, uncertainty, and diverging conditions across (and within) jurisdictions. It’s still unknown how these new laws will be enforced, how effective they will be at deterrence, and whether enforcers will wind up wielding a scalpel or a sword in markets they intend to reshape.

So big things are afoot. But, in my assessment, three issues stand out for 2024: Fragmentation and divergence, the rise of new market theories, and the ongoing sumo match between digital giants and regulators.

New Laws, Big Battles

2024 will likely be a pivotal year when competition initiatives begun in the past few years reach fruition. Will we settle into a new competition regime built for the digital era? Or will enforcement buckle as political will and technology shift?

In particular, the EU’s Digital Markets Act has begun to bite: The Commission has designated the digital gatekeepers subject to heightened regulation, and they must begin complying with the new law in 2024. The new law represents current wisdom about how to bring online giants to heel and potentially revitalize digital competition: 2024 will reveal whether these changes have the desired impact.

The problem regulators face isn’t new: A few companies have gotten so large and so ingrained in consumer life that they wield outsized power, with deeper pockets and wider popular reach than most governments. In other words, we’re living through a recurrence of the fundamental power struggle that birthed the Sherman Act.

But this time, the linchpin role of “price” in the battle between governments and corporate giants may be gone. As generative artificial intelligence blows up, the shifting value of data as a currency—and chimeric shifts in pricing algorithms—pose enormous challenges to traditional antitrust analysis and enforcement.

It’s still unclear which side will prevail in this battle between industry and government. It’s clear 2024 will see escalations on both sides.

Things Fall Apart

Each year, geopolitical risk and financial headwinds seem to grow. 2024 isn’t looking more stable.

For many years, world antitrust regulators talked about convergence—the goal of having companies face similar standards and procedural rights with enforcers worldwide. The idea seems quaint now. Not only is divergence in competition regulation among jurisdictions rising, but divergence within jurisdictions is also on the rise.

For example, the UK and the EU didn’t agree on the risks posed (or even the markets primarily impacted) by the $69 billion merger of Microsoft Corp. and Activision Blizzard Inc. And Brexit, it now seems clear, made merger clearance more complex. Regulators within the EU also take differing positions on deals, or impose different remedies.

In the US, states and federal antitrust enforcers don’t always agree, and courts are profoundly out of sync with antitrust enforcers, increasingly imposing remedies in merger cases, for example, that the FTC or DOJ rejected. And most competition regulators are more likely than the US to accept a remedy in merger enforcement these days (a growing schism). International merger clearance can feel like a roller coaster, and negotiating leniency for antitrust violations comes with substantial risk that not all relevant authorities will agree on an enforcement approach.

The political climate in the US remains very volatile. Presidential elections in 2024 could once again upend federal enforcement priorities, and at the increasingly important state level, every election cycle could bring big changes. This term, the US Supreme Court will decide on the fate of agency rulemaking deference, and continues to erode federal administrative power. As that happens, divergent laws and enforcement priorities among states come to the fore and complicate life for companies operating across state lines.

These divisions drag on commerce, raise the cost of mergers, and complicate consumer protection. While companies may face weakened enforcers as fracturing progresses, there will be more and competing agendas at play—and compliance nightmares.

Where’s the Harm?

It’s not only getting harder to predict where a deal will face scrutiny, but also to predict what aspects of the deal are problematic. Enforcers are more skeptical of potential tie ups than in the past, and are looking at risks beyond direct competition.

They’re scrutinizing vertical mergers closely for certain, and increasingly asserting conglomerate and “ecosystem” theories of harm. The idea is that, for some large companies, the whole constellation of assets a company owns is relevant in assessing the market impact of that firm acquiring a seemingly unrelated asset. With digital conglomerates, for example, a relatively small acquisition can set off a chain of effects that upends multiple markets.

In September, the EU blocked online hotel site Booking Holdings Inc. from buying Flugo Group Holdings AB, a flight booking site. The Competition Commission said the transaction would allow Booking to “expand its travel services ecosystem,” strengthening its dominance in online hotel booking and, through network effects, raising barriers to entry and prices.

In 2023, the FTC also cited the conglomerate theory of harm in challenging the merger of Amgen Inc. and Horizon Therapeutics plc. Look for these theories to feature more prominently in enforcer discussions, and even in antitrust enforcement, in the coming year.

Access additional analyses from our Bloomberg Law 2024 series here, covering trends in Litigation, Transactions & Contracts, Artificial Intelligence, Regulatory & Compliance, and the Practice of Law.

Bloomberg Law subscribers can find related content on our Antitrust Practice Page and our antitrust analysis.

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