US-EU Cooperation on Merger Review Raises Concerns Among Executives

U.S. executives say they are worried that U.S., U.K. and European Union regulators are scheming to block transactions they dislike, even if they do not strictly fall under their domain. The criticism stems from recent deals that are being subject to more antitrust scrutiny than initially anticipated, like Nvidia-Arm, Illumina-Grail or Facebook-Giphy.

But if you ask Margrethe Vestager, the European Union’s competition chief, the selection of Lina Khan as head of the U.S. Federal Trade Commission (FTC) has shepherded in a new period of cooperation between regulators on each side of the Atlantic.

In an interview with the Financial Times, Vestager said she saw “a lot of alignment” with her U.S. colleagues on policymaking and enforcement. The comments reflect a new friendship between competition regulators in the U.S., EU and U.K. as they examine proposed deals by Facebook, Nvidia and Illumina. Biden administration officials have said collaboration is essential if they are to toughen America’s approach to competition law, especially in the tech sector.

Last summer, Khan was sworn in as FTC chair. “I look forward to working with my colleagues to protect the public from corporate abuse,” she said in a statement at the time. At 32, she became the youngest chair in the agency’s history.

But not everyone is thrilled about Khan’s appointment. Executives have criticized Khan, who has transformed the Democratic party’s relatively hands-off approach to competition policy. By convincing the EU to undertake Biden’s priorities, critics say she has stretched the power of an agency that has sometimes been restrained by federal court rulings. Last summer for example, a federal judge dismissed the FTC’s antitrust suit against Facebook without prejudice. The agency has since refiled the lawsuit.

“We find it inspiring when we see the Facebook case that the FTC filed, and we follow their investigations,” Vestager told the FT about the commission’s case against the social media company. “I think it was really interesting that both Jonathan Kanter [the newly appointed chief of the US Department of Justice’s antitrust division], Lina Khan and I, we are different generations,” said Vestager, 53. “We have different years of experience … we have different educational backgrounds, but there’s a lot of alignment in the way that we think.”

Facebook is not the only giant corporation that is facing scrutiny at both sides of the Atlantic. In December, the FTC filed suit to block California-based chip supplier Nvidia Corp.’s $40 billion acquisition of U.K. chip design provider Arm Ltd. The companies are also facing significant scrutiny in the EU and the U.K and the chances of approval are slim.

Last summer, the FTC filed a complaint in federal court lawsuit to block Illumina’s $7.1 billion proposed acquisition of Grail, maker of an early detection, non-invasive, biopsy that can screen for cancer with the use of DNA sequencing. The deal is also under review by European Union antitrust authorities, and it is unlikely to get cleared given the current legal challenges that it is facing. This case is controversial because the European Commission used a new interpretation of the EU merger rules to review a deal that otherwise, it wouldn´t have had the authority to do it. Illumina had another bad experience with both regulators when in 2018 attempted to acquire Pacific Bioscience and it was blocked due to antitrust concerns.

“International commitments direct antitrust regulators to keep their hands off deals that have zero legitimate local nexus to their jurisdiction,” said Sean Heather, senior vice-president of international regulatory affairs and antitrust at the U.S. Chamber of Commerce. “‘Divide and conquer’ strategies among antitrust agencies to block mergers in order to evade a jurisdiction-based review on the merits would be itself cartel behavior.”