(l-r) Logan Breed, Jon Dubrow, and Joel Grosberg.

Regulatory antitrust hurdles to mergers and acquisitions are increasing globally, and more so for some technology companies. Companies that are considering a tie-up with others across jurisdictions need to consider antitrust issues very early in the transaction now, attorneys said. Here are six big obstacles that lawyers discussed recently in interviews:

1. Antitrust regulators worldwide are heavily scrutinizing tech companies.

Technology companies such as Facebook, Alphabet and Amazon have come under the microscope of antitrust regulators lately, and especially in Germany, Australia and the European Commission, in addition to the United States.

Logan Breed, an antitrust partner at Hogan Lovells in Washington, D.C., said, "When I am working with clients in the tech sector on transactions that would require antitrust approvals in multiple jurisdictions, I am focused on the likelihood of scrutiny based on the current political climate that disfavors big tech companies in general, and M&A activity among those companies in particular, which has implications both for the big tech companies and for the targets they intend to acquire." 

Breed said he expects the trend to continue. "It carries more antitrust risk and uncertainty today than it did 10 years ago." He said counsel should focus on the risk at the front end of the negotiation process and discuss early how to allocate it between the parties in the transaction documents, the merger or stock purchase agreements.

2. Vertical merger enforcement changes at the U.S. Department of Justice are a big deal.

Jon Dubrow, co-head of McDermott Will & Emery antitrust mergers focus group, said the U.S.  Department of Justice's policy under Makan Delrahim, U.S. assistant attorney general for the antitrust division, has been not to accept conduct or behavioral remedies to resolve concerns in vertical transactions.

"Historically, most vertical mergers that raised competitive issues were investigated by the DOJ or the Federal Trade Commission and were resolved with a consent order imposing some kind of behavioral restriction on the merged party," he said. "The DOJ has said it is not going to do that going forward, and we saw that with the AT&T merger challenge that was litigated in court. At the FTC, they still appear to be more willing to accept behavioral remedies for vertical competitive issues at mergers. We see that with the Northrop Grumman-Orbital ATK transaction. This can make a big difference depending upon which agency is going to review a given transaction that raises vertical issues," Dubrow said. 

Asked if there is anything that counsel can do to influence which regulator reviews a transaction if a company preferred a behavioral remedy over a structural one, such as divestiture, Dubrow said which agency regulates a given industry such as wine versus beer is generally a matter of historical precedent. If a company produces more than one type of product, counsel could highlight that product before obtaining a review of a transaction.

3. U.S. state attorneys general are aggressively enforcing antitrust laws.

"In the last two years we have seen state attorneys general challenging reportable transactions even after the FTC and DOJ have approved it, like the T-Mobile/Sprint transaction," said Joel Grosberg, an antitrust partner and co-chair of the mergers focus group at McDermott in Washington, D.C. That is despite the fact states often work with those two regulators when there are local issues and historically often have gone along with whatever the federal agencies decided.

For instance, this summer 14 attorneys general led by New York Attorney General Letitia James and California Attorney general Xavier Becerra filed an antitrust lawsuit in federal court in the Southern District of New York seeking an injunction to stop T-Mobile's $26.5 billion acquisition of Sprint, arguing that it is anti-competitive and hurts consumers because it reduces the major cellular carriers from four to three. The states argue that the merging parties' sale of assets to Dish Network Corp. are not sufficient to make it a viable competitor to replace the loss of Sprint in the marketplace. But T-Mobile and Sprint contend that the sale of Dish Network fixes the problem. The litigation is expected to last until early next year "so it is a significant delay in a transaction that already has been delayed over a year now," Grosberg said.

Other recent instances where AGs have intervened include the Valero Energy Corp.'s attempted purchase of terminals from Plains All American Pipeline LP, which was abandoned by both parties after the FTC decided not to pursue action against the merger, but the California attorney general sued to block it; and a lawsuit filed by the Colorado attorney general against a $4.3 billion acquisition by United Health Group of DaVita Inc.'s physician group, which had been approved by the FTC, Grosberg said.

The Colorado matter was settled with a consent judgment. "Recent developments show that you have to actively engage with the states during the merger review process, even as you try to receive clearance from federal antitrust regulators," he said.

4. The U.K.'s Competition and Markets Authority is asserting jurisdiction over global transactions.

"The filing is voluntary and not required, but what we have seen is the UK asserting jurisdiction over global transactions where it is questionable that the transaction is reportable, delaying the transaction," Grosberg said.

"Where neither company has a significant presence in the U.K. we have seen the Competition and Markets Authority request the filing and thus delay the closing of the transaction," he added. "The CMA is being more aggressive and we are seeing it in more transactions and we don't know if it is because of Brexit.

"It is complicated, and it is important for companies to know that in countries where there may be a small number of sales, do they approach the CMA, or wait and hope they don't contact you? It is a decision that you have to make because it can impact the deal and closing timelines. It is an interesting trend that not everyone might know is something they have to evaluate."

5. Uncertainty around Brexit could have a big impact on merger reviews in Europe.

Brexit could have a significant impact on merger reviews in Europe because in addition to the European Commission filing, there could be a separate notification process at the U.K.'s Competition and Markets Authority that would increase the cost and burden on the merging parties to get their deals approved, Breed said. 

"Brexit likely would end the EC one-stop shop for merger control," Grosberg said. "If your transaction meets the EC filing thresholds, you currently don't have to make additional antitrust filings in EU countries such as Germany or the U.K. However, if the U.K. leaves the EU, in addition to a EC filing, you may have to make an additional filing with the U.K., especially with a no-deal Brexit."

6. Sensitive deals in China are taking a really long time to get reviewed.

"We haven't seen them block any global deals, but if your transaction meets the filing threshold [for sufficient revenue in China] and involves sensitive industries like semiconductors we have seen China engage in long reviews for those transactions, and sometimes impose behavioral remedies," Grosberg said. But he also said the lengthy reviews—as long as 11 months—were going on before the current U.S.-China trade war.

"If China started to block transactions. you could make that connection but before that happens, it is hard to make a connection," he said.

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