Competition Quarterly - February 2025

We are pleased to bring you the fourth edition of Competition Quarterly, a concise summary of antitrust enforcers’ latest enforcement priorities and policy initiatives.

In the United States section, we review key antitrust appointments under the new Trump administration; cover the flurry of agency activity in the final days of the Biden administration; review the latest in merger enforcement (including the decision in the Kroger-Albertsons merger); provide updates on Big Tech and algorithmic pricing cases (including proposed remedies in the Google Search case); and more.

In the Europe section, we discuss important clarifications of the European Commission’s merger enforcement powers and new practices in going after acquisitions that fall below reporting thresholds; provide updates on “abuse of dominant position” enforcement, including novel cases involving commercial disparagement; and check in on antitrust football (the kind with the round ball) news.

In the China section, we cover the new Horizontal Merger Guidelines and check in on key merger enforcement actions; discuss new guidance on standard-essential patents; and summarize draft amendments to the Anti-Unfair Competition Law.

United States

Antitrust Enforcers in the Incoming Administration

FTC Nominations

Andrew Ferguson, Chair: On December 10, President Trump announced his decision to nominate current Commissioner Andrew Ferguson as FTC Chair, stating that “Andrew has a proven record of standing up to Big Tech censorship, and protecting Freedom of Speech.” As Commissioner, Ferguson authored a number of important dissents and concurrences, including a dissent stating his view that the FTC’s non-compete ban is unconstitutional, and a concurrence in the Welsh Carson settlement where he stated there is “no reason for the Commission to single out private equity for special treatment” in merger enforcement. Ferguson previously served as Solicitor General of Virginia, where he represented Virginia and other states in the Google Ad Tech case.

Upon becoming FTC Chair on January 20, Ferguson promised to “end the previous administration’s assault on the American way of life, and . . . usher in a new Golden Age for American businesses, workers, and consumers.”

Mark Meador, Commissioner: President Trump announced on December 10 that he intends to nominate Mark Meador to be a Commissioner. Mark Meador served as Deputy Chief Counsel for Antitrust and Competition Policy to Senator Mike Lee (R., Utah), has practiced at both the FTC and the Antitrust Division, and has extensive experience in private practice. In an interview with American Moment, Meador predicted more scrutiny “where you have a concentrated industry and high levels of consumer dissatisfaction.” In July 2024, Meador published a column praising the Biden Antitrust Division’s lawsuit against Live Nation and calling the decision to seek the company’s breakup “the only option for antitrust enforcers.”

DOJ Nominations

Pam Bondi, Attorney General: On November 21, President Trump announced his nomination of Pam Bondi, the former Attorney General of Florida, to lead the Justice Department. As Florida’s Attorney General, Bondi maintained an active docket of antitrust cases. Florida participated in DOJ’s suits to block the Anthem-Cigna, Aetna-Humana, and American Airlines-US Airways mergers. Under AG Bondi, Florida also joined DOJ’s suits challenging Apple’s e book pricing and Google’s position in internet search, and the FTC’s monopolization suit against Facebook. Florida, under Bondi’s leadership, joined 35 other states to pursue an antitrust action against a British drugmaker for allegedly engaging in anticompetitive business practices to keep generic drug alternatives off the market. Finally, as Florida AG, Bondi initiated an investigation into poultry price-fixing. As Attorney General, Bondi will inherit several high-profile pending antitrust cases, including the remedies phase of the Google Search case. At her confirmation hearing on January 15, Bondi pledged that antitrust enforcement would be a priority for her as Attorney General.

Abigail “Gail” Slater, Assistant Attorney General, Antitrust Division: On December 4, President Trump announced the nomination of former FTC staffer and Trump administration economic advisor Gail Slater to become the next Assistant Attorney General of the Antitrust Division. In his announcement, President Trump stated that, “Big Tech has run wild for years, stifling competition in our most innovative sector and, as we all know, using its market power to crack down on the rights of so many Americans, as well as those of Little Tech! I was proud to fight these abuses in my First Term, and our Department of Justice's antitrust team will continue that work under Gail's leadership.”

Gail Slater has held numerous roles in both government and the private sector. Most recently, Slater served as an economic policy advisor to JD Vance when he was in the Senate. Previously, she served as a senior tech policy advisor on President Trump’s first-term National Economic Council. Earlier in her career, she spent a decade at the FTC, including as an attorney advisor to Democratic Commissioner Julie Brill. She also worked in the private sector as general counsel of the Internet Association (a trade association representing leading internet companies), senior vice president at Fox Corporation, and vice president at Roku. Slater has written several opinion pieces on topics related to antitrust implications of ‘standard essential patent’ import bans, net neutrality, Google search monopoly case, DOJ’s Apple E-Books case, FCC antitrust authority, and more.

While Slater awaits confirmation, Omeed Assefi will act as the interim head of the Antitrust Division. Before taking on this new role, Assefi was a criminal prosecutor in the Antitrust Division and was previously in the White House Counsel’s office and DOJ’s Civil Rights Division during the first Trump administration. According to published reports, Assefi made a brief video address to Antitrust Division staff and promised that there would be “no relaxation” of antitrust enforcement on his watch.

Policy Statements by the Outgoing Administration

The FTC issued several new guidance documents and policy changes in the final days of the Biden administration, though with Republican Commissioners Ferguson and Melissa Holyoak (who will stay on in the new Trump administration) dissenting, there are serious questions about the future of these actions and initiatives. DOJ was also busy in the final days of the Biden administration.

Guidance and Policy Statements

On December 11, the FTC and DOJ jointly withdrew their Antitrust Guidelines for Collaborations Among Competitors, stating that the Guidelines do not reflect the evolution in antitrust jurisprudence, risk creating safe harbors that have no basis in law, and “fail to address the competitive implications of modern business combinations and rapidly changing technologies such as artificial intelligence, algorithmic pricing models, vertical integration, and roll ups.” Both Republican Commissioners, Ferguson and Holyoak, dissented from the withdrawal, arguing that this policy should not be changed on the eve of a new administration. Holyoak noted that withdrawing the guidelines without providing any replacement “leaves businesses grasping in the dark.”

On January 14, the FTC issued a policy statement opining that for independent contractors and gig workers, “organizing and collective bargaining activity, may be protected from antitrust liability when what is at issue is the compensation for their labor or their working conditions.” Ferguson issued a dissenting statement stating that an action taken by the Biden-Harris Commission a few days before the inauguration of President Trump “has no future.”

DOJ put out new guidance as well, revising its statement on the Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations. This guidance is intended to aid prosecutors in evaluating the strength of a company’s antitrust compliance program when making charging decisions and sentencing recommendations. The changes emphasized the potential for new technologies, like artificial intelligence and algorithmic pricing, to both undermine and empower antitrust compliance programs; the importance of a “culture of compliance” at all levels of the management structure; and the need for access to confidential reporting structures within companies.

PBM Study

On January 14, the FTC published a second interim staff report on its PBM study, entitled “Specialty Generic Drugs: A Growing Profit Center for Vertically Integrated Pharmacy Benefit Managers.” This report expands on the July 2024 staff report to include “all specialty generic drugs dispensed from 2017 to 2022 for members of commercial health plans and Medicare Part D prescription drug plans managed by the Big 3 PBMs.” The FTC report alleges that three large PBMs “marked up numerous specialty generic drugs by hundreds and thousands of percent, with the majority of the most highly marked-up drugs dispensed by the PBMs' own affiliated pharmacies.” Commissioners Ferguson and Holyoak issued a concurring statement, arguing that the FTC should have taken “the time needed to complete its work and issue a final report when it [was] ready to do so” rather than issuing multiple interim reports, and that “resource-allocation decisions made by the Chair [Lina Khan], not PBM obstinance, has been the primary cause of the delay in the final report’s completion.”

Price Discrimination Litigation

On December 12, the FTC sued Southern Glazer’s Wine and Spirits, an alcohol distributor, alleging that it charged small businesses higher prices than large chain stores in violation of the Robinson-Patman Act’s ban on price discrimination. While the FTC had not filed a Robinson-Patman Act case in nearly 25 years, private plaintiffs have brought price-discrimination suits, albeit with limited success. Both Commissioner Ferguson and Commissioner Holyoak dissented from the decision to file the Complaint. While Ferguson notes in his dissent that the Robinson-Patman Act has been criticized as “difficult to reconcile with the consumer-welfare-maximizing interpretation of ‘competition’ that the courts began applying to the other antitrust laws in the 1970s,” he focuses more on the application of the Act to this particular case, concluding: “We ought to enforce the Act where it will serve the broad public interest, and bring only those cases we are likely to win. This case checks neither box.”

On January 17, the FTC brought a similar suit against PepsiCo, arguing that it gave one favored big-box retailer better terms than other retailers. Commissioners Holyoak and Ferguson each issued strongly worded dissents from the complaint. Holyoak called it the “worst case [she has] seen in [her] time at the Commission.” Ferguson wrote that the complaint was brought “without evidence” to satisfy “sectors of [the Democratic] party that have demanded that the [Robinson-Patman] Act be revived,” calling the complaint a “betrayal . . . of the American people.”

HSR Act Enforcement

Gun Jumping: On January 7, the FTC ordered oil producers XCL, Verdun, and EP to pay US$5.6 million to settle allegations that the companies violated the Hart-Scott-Rodino (HSR) Act through illegal pre-merger coordination, the largest fine ever imposed for gun-jumping by U.S. antitrust agencies. The allegations stem from Verdun and XCL’s proposed acquisition of EP. The FTC alleges that the purchase agreement “allowed XCL and Verdun to assume operational and decision-making control over significant aspects of EP’s day-to-day business operations prior to the transaction closing,” including stopping EP’s planned drilling and development activities, managing EP’s customer contracts, and setting prices to EP’s customers.

Failure to Comply With HSR Filing Requirements: On January 14, the Antitrust Division sued KKR for allegedly violating the HSR Act by failing to comply with pre-merger filing requirements in at least 16 transactions. The alleged violations include altering HSR filing documents, omitting required documents from filings, and failing to make HSR filings altogether. According to DOJ, the maximum penalty for KKR’s alleged violations exceeds US$650 million.

Merger Enforcement

Health Care: On November 12, DOJ sued to block UnitedHealth’s proposed US$3.3 billion acquisition of home health provider Amedisys. The complaint—which the attorneys general of Maryland, Illinois, New Jersey, and New York joined—alleges that the merger would combine two of the three largest home health and hospice service providers in the country, eliminating competition that benefits millions of the “most vulnerable” patients that choose to spend their final days at home. According to the complaint, UnitedHealth would acquire the second largest home health and hospice provider, adding it to the third largest home health and hospice provider, LHC Group, which UnitedHealth acquired for US$5.4 billion in 2023. DOJ alleges the merger is presumptively unlawful in hundreds of local markets across the United States. In addition, the complaint asserts that the merger would eliminate competition in the labor market for skilled nurses who provide home health and hospice services—DOJ contends that they receive better wages and other employment terms as a result of the rivalry between Amedisys and UnitedHealth. The complaint also takes on UnitedHealth’s proposed remedy—a divestiture of assets in hundreds of separate markets to VitalCaring—claiming that selling this “hodgepodge of assets” to VitalCaring, which has faced both financial and quality challenges, would not “replace the competitive intensity lost by the merger” and would not address loss of competition in 100 local markets or the labor markets for skilled nurses. DOJ also claims that Amedisys violated the HSR Act by failing to comply with DOJ’s Second Request for documents and information during the investigation.

Supermarkets: In a widely anticipated decision, the District Court for the District of Oregon granted the FTC’s request for a preliminary injunction on December 10, blocking Kroger’s US$24.6 billion merger with Albertsons. Rejecting the parties’ proposed remedy (a divestiture of certain stores to C&S), the Court noted “[t]here is ample evidence that the divestiture is not sufficient in scale to adequately compete with the merged firm and is structured in a way that will significantly disadvantage C&S as a competitor.” As we covered in a previous edition of Competition Quarterly, the FTC sued the companies in February 2024, seeking to block the proposed merger on the grounds that it would reduce competition in the supermarket and large format store markets, as well as for union grocery workers.

Business Travel Management: On January 10, DOJ sued to block Amex proposed US$570 million acquisition of CWT Holdings. According to Acting Assistant Attorney General Doha Mekki, the merger would “further consolidate an already consolidated market with only a handful of competitive options capable of serving customers with the most need for travel management services.”

Mattresses: On January 31, the District Court for the Southern District of Texas denied the FTC’s motion for a preliminary injunction to block mattress manufacturer Tempur Sealy’s merger with specialty mattress retailer Mattress Firm. The court rejected the FTC’s proposed market for premium mattresses priced $2,000 and above, stating that “a definitional approach by mere price-band classifications is arbitrary.” The court found “there was no clear industry recognition of a ‘premium’ market that should be defined as mattresses priced $2,000 and above,” and there were also no “peculiar characteristics and uses,” distinct customers, or specialized vendors associated with the proposed premium mattress market. And while the court credited the FTC’s contention that the merged firm would have the ability and incentive to foreclose competitors by not selling rival mattress brands in Mattress Firm stores, it concluded that the risk of foreclosure was insubstantial because there were so many other distribution channels available to Tempur Sealy’s competitors. The case continues a string of losses by the Government in vertical merger challenges in district court—a subject covered in O’Melveny Partner Sergei Zaslavsky’s 2023 article, “Vertical Merger Enforcement: Where Do We Go From Here?”

Technology and Platforms

Google Search: After the August 2024 ruling that Google illegally maintained monopoly power in general search services and general search text ad markets, the Search case moved into the remedies phase. DOJ filed its Proposed Judgment on November 20, 2024. The headline-grabbing remedy was a requirement that Google divest the Chrome browser, but DOJ also requested several additional remedies such as enjoining Google from paying third parties to make Google the search default, prohibiting bundling or comingling Google’s search engine with other Google products, preventing the use of any Google-owned or operated assets to preference Google search products over rival offerings, and requiring Google to help rival search engines by making certain data and information available to them, among other remedies.

Google has indicated it will appeal the monopolization decision, but in the meantime has proposed a narrower remedy (providing Android partners more flexibility to not license Google Search, Chrome, and Gemini Assistant and to preload rival search engines, browsers, generative AI chatbots; and making any agreements with browser developers to set Google as the default browser terminable on an annual basis). Google also warned that drastic remedies may chill innovation and competition, and would be particularly inappropriate in the absence of proof that the challenged conduct was responsible for Google’s market share.

At a status conference, Judge Mehta indicated that changes in the search market brought on by advancement in AI technologies will play an important role in the court’s assessment of potential remedies. An evidentiary hearing on the proposed remedies is scheduled to begin on April 22.

Google Ad Tech Stack: Closing arguments were held in DOJ’s monopolization case before Judge Leonie Brinkema of the Eastern District of Virginia on November 25. As we covered in the previous edition of Competition Quarterly, the crux of the case is whether Google monopolized a series of technologies used to connect online advertisers and website publishers (the ad tech stack) using acquisitions and alleged self-preferencing. One key point of dispute in closing arguments was over market definition. DOJ took the position that even if ad exchanges were two-sided platforms, tools used by online advertisers and website publishers were distinct markets; whereas Google argued that the various technologies that help facilitate a match between advertisers and publishers are part of a single two-sided market. Judge Brinkema’s decision is expected to shed light on the application of the Ohio v. American Express Co. (Amex) case—requiring plaintiffs in multi-sided transaction platform cases to show net anticompetitive effects taking all sides of the platform into account—to tools that help facilitate matches between platform participants.

Meta: On November 13, Judge James Boasberg denied Meta’s motion for summary judgment in a case brought by the FTC challenging Meta’s long-consummated acquisitions of Instagram and WhatsApp. Judge Boasberg found that the FTC has presented enough evidence that there is a distinct market for personal social networking services and that Meta illegally maintained a monopoly in that market to survive summary judgment, but warned that “the Commission faces hard questions about whether its claims can hold up in the crucible of trial.” Importantly (and some may say controversially), the court held in a monopolization case involving the acquisition of a potential competitor, it is not necessary for the plaintiff to show anticompetitive effects in the form of higher prices, lower output, or diminished quality. “When a monopolist acquires a rival, even a nascent one, a rebuttable presumption… arises that the merger is anticompetitive.” It remains to be seen whether the holding will lead to more challenges of acquisitions of nascent competitors under the monopolization statute, as opposed to merger laws. The trial is set to begin on April 14.

Algorithmic Pricing: On December 4, 2024, the US District Court for the Western District of Washington denied defendants’ motion to dismiss in Duffy v. Yardi, a lawsuit brought by a class of renters accusing ten owners or operators of multi-family residential units of using Yardi System’s property management software tool to coordinate on rental prices. As we reported in an earlier Competition Quarterly, DOJ and the FTC have filed statements of interest in this and other cases, asserting that it can be per se illegal for competitors to delegate key aspects of pricing to a common algorithm, even if competitors retain some authority to deviate from algorithmic recommendations. The Yardi court followed the antitrust agencies’ position, holding that different landlords’ “acceptance” of the “advertised invitation to trade their commercially sensitive information for the ability to charge increased rental rates” was sufficient to state a per se price fixing claim even in the absence of perfect adherence to the algorithm’s recommended prices. The Yardi decision stands in sharp contrast to the Gibson court’s dismissal of algorithmic price-fixing allegations involving Las Vegas Strip hotels and the RealPage court’s dismissal of the student housing complaint (which O’Melveny argued) and the decision to allow the multi-family housing claims to proceed only under the rule of reason (which involves weighing of procompetitive and anticompetitive effects) and not the more plaintiff-friendly per se rule. This divergence in outcomes underscores the novelty of these cases (as well as some factual differences); clearly, the judiciary is yet to coalesce on a consistent approach.

On December 6, pricing software maker RealPage announced that DOJ “closed its criminal investigation into pricing practices in the multifamily rental housing industry.” The DOJ civil lawsuit we reported on in our last edition remains ongoing, with DOJ amending the complaint on January 7 to add counts against several large landlords for allegedly participating in a “scheme to set their rents using each other’s competitively sensitive information through common pricing algorithms.”

Antitrust Activities in Congress and by State Enforcers

Advertising Boycotts: On November 21, Texas Attorney General Ken Paxton announced an investigation into the World Federation of Advertisers (WFA) as a part of an inquiry into whether advertisers coordinated to withhold advertising spend from certain social media platforms. Paxton’s announcement noted that while “companies are free to choose when and where they want to advertise, a conspiracy among companies along these lines can result in harm to competition and may violate the Texas Free Enterprise and Antitrust Act of 1983.”

ESG Initiatives: On December 20, the House Committee on the Judiciary sent a letter to over 60 asset managers stating that it “uncovered evidence that financial institutions are colluding with climate activists… to collectively adopt and impose left-wing environmental, social, and governance (ESG)-related goals” in violation of U.S. antitrust laws.

Advertising boycotts and agreements pertaining to ESG and DEI initiatives are expected to be areas of focus for antitrust enforcers in the incoming administration.

Europe

Merger Enforcement

Mergers that are “more likely than not” to harm competition without creating or strengthening a dominant position: On October 4, the EU’s highest court upheld the June 2019 decision by the European Commission (EC) to prohibit the creation of a joint venture between thyssenkrupp and Tata Steel. The judgment confirms two important measures for the EC’s merger enforcement powers that had already been at the center of the Court’s 2023 CK Telecom judgment: first, the EC has discretion to prohibit a transaction if it considers it “more likely than not” to result in a significant impediment to effective competition. There is no requirement to show “strong probability.” Second, in so-called “gap cases” where a transaction neither creates nor strengthens a dominant position nor increases the likelihood of coordination, the EC can prohibit a transaction if it eliminates an important competitive force. To this end, it is sufficient to show that one of the transaction parties has more of an influence on the competitive process than its market share or similar measures would suggest. The EC does not have to show that the transaction parties are particularly close competitors.

Article 22 referrals after Illumina/GRAIL: Article 22 allows EU Member States to request EC to examine mergers that do not meet the EU Merger Regulation’s revenue thresholds. Following the Court’s September judgment to annul the EC’s decision to block the Illumina/GRAIL acquisition because of the EC’s improper use of the referral mechanism under Article 22 to capture transactions that do not meet jurisdictional thresholds at the national EU Member State level, the EC withdrew its March 2021 Guidance on Article 22 in early December. As anticipated in our last edition, however, Article 22 referrals are by no means off the table since several Member States recently introduced their own special call-in powers (i.e., powers to review mergers that fall below reporting thresholds) to capture and refer under Article 22 transactions that had previously not been notifiable under traditional revenue-based threshold rules. One prominent example is Italy’s late-October referral of NVIDIA’s proposed acquisition of Run:ai to the EC after the Italian competition authority had first used its novel call-in powers to assert jurisdiction over the deal. While the EC accepted the referral on the basis that it deemed the transaction to significantly affect competition in the markets where NVIDIA and Run:ai are active, the case ultimately obtained unconditional Phase I clearance on December 20.

Abuses of Market Power

The use of the “as efficient competitor test” to show exclusionary market power abuses: In late October, the EU Court rendered final judgment in the long-running Intel saga, annulling the EC’s 2009 decision to fine the chip maker EUR 1 billion for abusing its dominant position. The case ended up centering around the question of whether or not the EC had properly applied the “as efficient competitor” (AEC) test to show that Intel’s loyalty rebates were abusive and illegal. The test is easily influenced by small changes to the underlying parameters (such as the contestable share of demand and cost benchmarks), which in the eyes of the Court means that the EC needs to be particularly diligent when applying the test, especially if a defendant provides detailed analysis to counter the abuse charge. While the EC had argued for a presumption that exclusivity rebates are inherently anticompetitive, the Court rejected that view. Rather, it held that the Commission did not sufficiently demonstrate that its assessment was well founded, noting instead that the use of all the available data could have led to a different outcome of the AEC test.

Data collection and tying practices: In November, following a five-year investigation, the EC imposed a fine of EUR 793 million on Meta for practices related to its classified ads business. Specifically, EC claims that Meta tied the use of its Facebook Marketplace service to its personal social network, Facebook, thereby giving Facebook Marketplace a distribution advantage over competitors. In addition, EC claims that Meta imposed certain trading conditions on competing providers of classified ad services who wanted to advertise on Meta’s platforms, allowing Meta to use ads-related data generated by other advertisers to benefit Facebook Marketplace. The EC considered these trading conditions unfair and abuses of market power. This case recalls German Bundeskartellamt’s 2019 decision to restrict Facebook in the processing of user data based on the Bundeskartellamt’s finding that the extent to which Facebook was at the time collecting, merging, and using data in user accounts constituted an abuse of a dominant position. That case was closed in October after Meta withdrew its pending appeal before the Düsseldorf Higher Regional Court.

Misuse of the patent system and disparagement tactics: Another case involving alleged market power abuses was the EC’s October decision to fine pharmaceutical company, Teva, EUR 463 million for misusing the patent system and for implementing a systematic disparagement campaign against a competitor in order to delay the market entry of a cheaper rival multiple sclerosis product. On the patent side, Teva was found to artificially extend the protection of its soon-to-expire patent for glatiramer acetate, the active pharmaceutical ingredient of Teva’s blockbuster medicine, Copaxone, by filing multiple staggered patent applications, creating a web of secondary patents around Copaxone by focusing on the manufacturing process and the dosing regimen. The EC claims that Teva enforced these patents to obtain interim injunctions but strategically withdrew them as soon as the patents seemed likely to be revoked. This avoided formal invalidity rulings that challengers could have relied on as precedents for invalidating other patents. Instead, Teva’s competitors were forced to challenge each of the patents separately. The EC also asserts that Teva engaged in a disparagement campaign, contacting key stakeholders (such as doctors and decision-makers for medical reimbursements) to spread false and misleading information about a competing medicine’s safety, efficacy, and therapeutic equivalence with Copaxone. The decision marks the first time that the EC has fined a company for disparaging a rival although it follows the recent conclusion of a similar case against Vifor, that the EC closed following legally binding commitments by the company to rectify and undo the effects of the potentially misleading messages previously disseminated by Vifor.

Antitrust and Football

The beautiful game and its anticompetitive transfer system: Less than a year after FIFA suffered defeat before the EU Court in its attempt to prevent the establishment of a rival European Super League, the international football association conceded another loss in October when the Court found the FIFA transfer system to infringe the EU’s right of free movement of workers (Article 45 TFEU) and competition law (Article 101). The Court identified a number of provisions in FIFA’s Regulations on the Status and Transfer of Players that impose disproportionate financial and licensing penalties to effectively restrict football players’ ability to change football clubs mid-contract, and football clubs’ ability to compete for players that are already under contract. The Court likened these restrictions to no-poaching agreements between football clubs that deviate from “the classic mechanisms of contract law” (such as the right to compensation in case of a breach of contract) that potentially could have been sufficient to protect the interests of football clubs without unduly interfering with competition to recruit players.

China

Merger Control

Horizontal Merger Guidelines: On December 10, SAMR published its guidelines for the review of horizontal mergers. The guidelines are aimed at improving transparency and predictability in SAMR’s merger reviews and are largely consistent with international best practice. O’Melveny reviewed the guidelines in detail when they were published in draft form in its Client Alert of July 9, 2024. The finalized guidelines largely reflect the draft. Key points are summarized below.

• Market definition. The guidelines allow SAMR to leave open the question of market definition where there are a number of plausible alternative relevant markets. This is a practical correction to prior practice where SAMR sought to reach a definitive position on the precise scope of the relevant markets and required the filing parties to propose a clearly defined market in their initial submission. This change brings SAMR into line with the approach long taken in the EU.
• Market shares. The guidelines shed light on when a horizontal merger may be considered anticompetitive in view of the merging parties’ market shares. In particular, a merger resulting in a combined market share of 50 percent or greater is rebuttably presumed anticompetitive. SAMR is likely to consider a merger resulting in a combined market share between 35 and 50 percent are anticompetitive.
• Concentration levels. The guidelines also provide that if the post-merger Herfindahl–Hirschman Index (HHI) is above 1800 and the delta (change in HHI due to the merger) is above 200, the merger is rebuttably presumed anticompetitive. These thresholds are similar to the current U.S. FTC and DOJ merger guidelines, which rebuttably presume mergers resulting in a post-merger HHI above 1800 and delta above 100 to be anticompetitive.
• Coordinated effects. The guidelines provide that SAMR would be inclined to find coordinated effects in three scenarios—where the combined entity and one other player collectively hold 2/3 of the market, the combined entity and two other players collectively hold 3/4 of the market, or the merger eliminates a maverick or substantially eliminates the incentives of a maverick to disrupt coordination. This lowers the bar for a finding of coordinated effects.

Keysight/Spirent Called-in: On November 25, Keysight filed its proposed acquisition of Spirent for clearance by SAMR. Spirent reported a 2023 China revenue of US$76.3 million, which falls below the RMB 800 million (approx. US$113.5 million) threshold as revised in January 2024. The November filing marks the second known instance that SAMR has called in a below-threshold merger since the revision of the filing thresholds—the first example being the Synopsys/Ansys transaction. O’Melveny discussed SAMR’s call-in of Synopsys/Ansys in its Client Alert of June 5, 2024.

While Keysight/Spirent did not require a mandatory notification in China, the combined company would reportedly have a notable market share in high-speed ethernet testing. Moreover, both companies are reportedly active in testing software for advanced 5G and 6G applications. These factors may have provided SAMR with an incentive to intervene.

Nvidia Probed for Suspected Breach of Merger Remedy: On December 9, 2024, SAMR announced that it has opened an investigation into Nvidia’s potential violation of China’s Anti-Monopoly Law (AML) and SAMR’s 2020 conditional decision approving Nvidia’s acquisition of Mellanox.

While the regulator did not detail which condition or conditions Nvidia may have violated, US export controls limiting China’s access to advanced AI chips will have impacted Nvidia’s ability to supply GPU accelerators to China. The US imposed a series of export control measures in October 2022 aimed at restricting China’s access to advanced AI chips made with US inputs. These measures were updated and expanded on December 2, 2024, just one week before SAMR’s announcement of its decision to investigate Nvidia.

The investigation serves as a warning to companies subject to ongoing SAMR remedies that they will face heightened scrutiny over compliance, in particular if they have made commitments regarding semiconductor-related products. At its December 2024 meeting, SAMR discussed its intention to step up foreign-related antitrust enforcement in 2025 in key strategic sectors, including semiconductors. SAMR expressed its view that any failure to comply with a commitment to supply is, as a matter of Chinese law, contrary to the AML notwithstanding that the failure may result from the parties’ obligation to comply with a foreign law.

Standard Essential Patents

SEP Antitrust Guidelines: On November 8, SAMR released its Antitrust Guidelines on Standard Essential Patents (SEPs). The guidelines are aimed at clarifying antitrust enforcement concerning SEPs and to guide the behavior of SEP holders. Key highlights of the guidelines are as follows:

• The guidelines encourage certain practices by SEP holders, including the timely and full disclosure of relevant information during the standard setting or revision process, FRAND licensing commitments, and good-faith negotiations with implementers. While a failure to adhere to these recommended practices will not necessarily result in a violation of the AML, compliance with them is a factor the regulator would consider when investigating any alleged abuse of dominance by the SEP holder.
• The guidelines address SEP-related anticompetitive agreements and abusive conduct and the relevant factors for assessing such conduct.
  • SEP-related anticompetitive agreements include agreements that restrict particular firms from participating in standard setting; agreements not to implement competing standards; use of a patent pool to exchange competitively sensitive information; patent pools prohibiting participating firms from licensing patents to third parties or facilitating collusion among the participating firms; and vertical restraints on standard implementers relating to price, volume, quality, and sales territories, or restricting implementers from developing competing technologies.
  • SEP-related abuses of dominance include charging an unfairly high licensing fee; refusal to license SEPs; bundling SEPS with non-SEPs or other products; requiring free grant back or grant back without adequate consideration as a condition for licensing SEPs; requiring cross-licensing without adequate consideration; prohibiting or restricting implementers from challenging the essentiality or validity of SEPs; restricting implementers from developing competing technologies; requiring the implementers to disclose operational and technical information unrelated to the licensing of the SEPs or the implementation of the relevant standard; discriminatory licensing practices; and abuse of injunctive relief to coerce implementers into accepting unfairly high licensing fees or other unreasonable terms.

Unfair Competition

Draft Amendments to Anti-Unfair Competition Law: On November 25, China’s legislature, the National People’s Congress, released Draft Amendments to the Anti-Unfair Competition Law (AUCL) for consultation. In contrast with the AML, which prohibits conduct that harms competition, the AUCL is more concerned with trade practices in violation of the principle of good faith and with deceptive or fraudulent business practices, such as trade mark infringements, commercial bribery, false and misleading advertising, and trade libel.

Key aspects of the Draft Amendments are outlined below.

• Unfair Trade Practices in the Digital Economy. The Draft Amendments impose a general requirement that platforms must incorporate fair competition rules in service agreements and transaction rules. The current version of the AUCL already prohibits “traffic hijacking” (where a firm redirects a user to its own website when the user is browsing another firm’s website) and “malicious incompatibility” (where a firm uses technical means to degrade the compatibility of the products or services of another firm) in the internet sector. The Draft Amendments would expand the list of prohibited conduct to cover obtaining and using the data of other firms by deception, coercion, or electronic intrusion; exploiting platform rules; and forcing in-platform vendors to sell goods at prices below cost.
• Abuse of an Advantageous Position. The Draft Amendments introduce rules prohibiting large firms from abusing an “advantageous position” concerning capital, technology, transaction channels, or industry influence; establishing unreasonable payment conditions, payment methods, or payment periods; or breaching terms of contract with small and medium-sized firms, forcing them to sign exclusive agreements or otherwise taking steps to disrupt the competitive order of fair competition. Similar rules controlling abuses of a superior bargaining position exist in Germany, France, Japan, Korea, Taiwan, and other jurisdictions. These rules generally prohibit firms from exploiting their bargaining power in relationships with trading partners to extract unfair concessions. A recent trend globally has been the use of these rules to address concerns in the digital sector involving platform operators. The rules may allow regulators and plaintiffs to circumvent the requirement to establish market dominance.
• Harsher Penalties. The Draft Amendments provide for stiff penalties for unfair trade practices in the digital sector and for abuses of an “advantageous position,” including the disgorgement of profits and a fine of up to RMB 1 million (approx. US$140,000). In “serious circumstances,” the maximum fine can be increased to RMB 5 million (approx. US$700,000).
• Extraterritorial Jurisdiction. The Draft Amendments also seek to expand the jurisdictional reach of the AUCL beyond the country’s borders, sweeping in activities that take place outside of China but which disrupt market order or harm the legitimate rights and interests of operators in China. This would align the AUCL with the jurisdictional scope of the AML although the case for the extraterritorial application of an unfair competition law seems less compelling.

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Stay tuned for continued global coverage of key developments in antitrust enforcement in our next edition of the Competition Quarterly, coming this Spring.

If you have any questions related to the topics in this Competition Quarterly, please reach out to your usual O’Melveny contact or a member of our Antitrust & Competition team.

This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Sergei Zaslavsky, an O’Melveny partner licensed to practice law in the District of Columbia and Maryland; Julia Schiller, an O’Melveny partner licensed to practice law in the District of Columbia, New Jersey, and New York; Pete Herrick, an O’Melveny partner licensed to practice law in New York and the District of Columbia; Adam Walker, an O’Melveny associate licensed to practice law in the District of Columbia; Sheya I. Jabouin, an O’Melveny associate licensed to practice law in New York; Ryan J. Fennell, an O’Melveny associate licensed to practice law in New York; Riccardo Celli, an O’Melveny partner licensed to practice law in Brussels-Capital Region, England and Wales, and Italy; Rebecca C. Evans, an O’Melveny associate licensed to practice law in England and Wales; Mateusz Ryś, an O’Melveny associate licensed to practice law in Brussels-Capital Region; Philip Monaghan, an O’Melveny partner licensed to practice law in Hong Kong, England and Wales, and Ireland; Lining Shan, an O’Melveny senior legal consultant in the firm’s Beijing office; and Vivian Wang, an O’Melveny associate licensed to practice law in New York and the District of Columbia, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.

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