Legal Business

Antitrust renaissance: navigating deals amid agency crackdowns

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‘The UK competition practice has been transformed by Brexit’ observes Nick Levy, a partner in Cleary Gottlieb’s London antitrust team.

It’s well documented that since the UK’s exit from the EU, the Competition and Markets Authority (CMA) has embraced a position of intensified scrutiny, leading to parallel investigations and outcomes with the European Commission (EC).

As Levy notes: ‘The CMA used the opportunity of Brexit to become a more vigorous and muscular enforcer. The agency has intervened in more cases than before and has been ready to diverge from other agencies, including the European Commission.’

In addition to the impact of Brexit, geopolitical tensions and macroeconomic challenges are continuing to expand the scope of antitrust law and policy in 2024. Authorities are adopting a more interventionist approach, as new regulations and frameworks take hold worldwide.

Meanwhile, the UK’s growing role as a major actor on the regulatory world stage has sparked a fierce battle for talent in London, with a booming trend for lateral hires from magic circle firms to US counterparts. As Nicole Kar, global co-chair of antitrust at Paul Weiss explains, ‘there’s a lot of activity from the agencies, as a result the private sector has been comparably busy, and you can see that with the hiring activity.’

As antitrust laws rapidly evolve, businesses must stay alert and brace for a wave of new rules and change.

Nicole Kar

‘There’s a lot of activity from the agencies, as a result the private sector has been comparably busy, and you can see that with the hiring activity.’
Nicole Kar, Paul Weiss

Power to the people

Authorities worldwide are increasingly prioritising consumer protection in their enforcement actions. ‘There’s going to be a doubling down or redoubling of efforts to help support consumers and their purchasing power in times of inflation but also some of the issues they face buying goods and services – it’ll redouble agencies’ efforts post-election’ comments Kar.

On a national level, the Digital Markets, Competition and Consumers Act (DMCCA) received royal assent on 4 May 2024, which promises to give the CMA powers to enforce a new ex-ante regulatory regime for digital markets through its established Digital Markets Unit (DMU). It also includes a number of provisions that will transform the consumer protection regime in the UK which would allow the CMA to impose fines of up to 10% of a company‘s global annual turnover for breaches of consumer law. This will generate a surge of new work for law firms and create fresh challenges for businesses to tackle. As Levy explains: ‘The DMCC Act introduces a new regulatory regime for leading digital platforms and enhances the CMA’s consumer protection powers, enabling the CMA for the first time to fine companies for infringing consumer protection law. Both changes will create new work.’ James Aitken, London antitrust head at Freshfields echoes this sentiment asserting, ‘The DMA has already created a huge amount of work for antitrust lawyers, and we expect that the DMCC is going to do the same – it’s almost like adding a whole extra discipline on top of our existing workstreams.’

This impetus on consumer-led enforcement is also escalating litigation risks for companies that breach consumer law. The UK’s collective proceedings regime continues to evolve, and lawyers warn that claimants are poised to use future CMA enforcement action, empowered by the DMCCA, to support private litigation against businesses, with Aitken noting: ‘I do think we’ll see DMCC litigation including parties trying to use the DMCC as a tool in a litigation strategy.’

Kar adds: ‘Year-on-year there’s been an exponential increase since the Consumer Rights Act was passed in 2015 in terms of the number of large collective claims.’ She continues: ‘An important complement to agency enforcement is private enforcement of these rights. Quite a few of these claims look to be competition claims that are really at their heart consumer claims, so allegations of excessive pricing, or not paying for data. These are really I would say classically consumer issues, but they’ve been presented as competition law issues.’

Class actions, typically a hallmark of the US, are gaining traction in the UK, which saw one if its busiest years on record for such cases. ‘Competition litigation has been on an exponential growth trajectory in the last few years. The UK class action regime, in particular, has really taken off with a vengeance’ stresses Aitken. At the start of 2024, the Competition Appeal Tribunal (CAT) had over 40 collective action cases on its docket, with this figure anticipated to grow.

But the competition litigation market isn’t being driven entirely by group actions – litigation more broadly is also very much alive in the UK. As Kar observes, ‘some people predicted the demise of the UK litigation market after Brexit but I don’t think you see any evidence at all and it’s one of the significant European hubs along with Germany and the Netherlands.’

And partners warn corporates should brace for a further rise in litigation. CMA actions may prompt consumers to file their own claims, and new legislative powers amplify the risks of falling foul of UK consumer protection laws.

Agencies cracking down

Agencies are showing no signs of easing their aggressive stance against anti-competitive behaviour in 2024. Heightened regulatory scrutiny, marked by earlier and more forceful interventions, contributed to last year’s downturn in M&A activity.

Indeed, authorities worldwide continued to enforce stricter merger controls, leading to higher intervention rates and more transactions being blocked, requiring remedies, or being abandoned altogether. A notable example is the $20bn Figma/Adobe merger, which was scrapped due to intense pressure from the CMA and EC.

With M&A activity bouncing back, agencies are set for a busy year. ‘It’s a busy time in the market, the agencies have been busy with increased M&A flows so, after a quieter couple of years on the M&A front, every day the markets are picking up and you can see that in the number of notifications we’re making, and agencies are having to handle’, says Kar.

Businesses should also prepare for authorities to enhance their investigatory powers this year. Under the DMCCA, the CMA is set to expedite investigations, and gather more information from parties. As Aitken explains: ‘We’ve seen an uptick in investigations. After Brexit, a lot of the investigations that were being done on a pan-European basis by the European Commission suddenly got a UK equivalent element added on either in parallel or with a slightly different scope, which duplicated the amount of work that needs to be done for some of those investigations.’

Strategy games

Beyond legal developments and agency strategies, significant lateral movements are reshaping the London competition market. ‘Antitrust law has become one of the most important gating items for boards and general counsel,’ observes Levy. ‘Until five years ago, few US firms in London had competition practices. Now, pretty much every US firm in London has or is trying to build a competition practice, often attracting lawyers from the Magic Circle to launch their practices’ he notes.

Paul Weiss has made headlines for its rapid recruitment in London across all legal practice areas, and competition is no exception, with the firm bringing in Kar from Linklaters. US heavyweight Latham & Watkins also turned to Linklaters, bringing Simon Pritchard into its ranks.

So, why this hiring spree? Paul Weiss’ Kar offers some insights: ‘The geopolitics have shifted a little, making the UK much more in the fore because of Brexit. That’s made the UK a particular focus for many global investors because if a global deal is going to be scuppered as a result of a CMA investigation, you very much want to make sure that you’ve got the best team on your side for the CMA angle as well as other major agencies like the FTC/DOJ and Commission.’

Cleary’s Levy adds; ‘A few years ago, the Magic Circle firms had the lock on major UK competition law matters. That’s now changed, as firms like ours, Skadden, Gibson Dunn, Latham, Weil Gotshal and others are routinely retained on significant matters. It’s a much more competitive market.’ Indeed, many top antitrust deals have been handled by US firms. For instance, the high-profile Microsoft/Activision merger work went to Weil, Gotshal, while the antitrust work for the Broadcom/VMware merger went to Cleary.

However, partners maintain that this doesn’t create an existential crisis for Magic Circle firms. As Levy notes: ‘The magic circle continue to be well-placed to advise on transactions and behavioural matters that involve blue chip FTSE 100 companies with longstanding relationships with UK law firms.’

Over at Freshfields, Aitken comments: ‘I think the reason we have not lost talent in the way that some others have is because, first of all, we are already winning a high proportion of notable and cutting-edge work.’ He continues: ‘We have something that’s relatively unique in the market as a selling point because we already bring that joined-up approach globally to antitrust that our competitors are trying to catch up with but haven’t yet. That’s a very strong proposition for our clients. That is also why I think partners stay at Freshfields because they know that they can serve their clients better on our platform while working collaboratively with colleagues round the globe that they already know well.’

‘A few years ago, the Magic Circle firms had the lock on major UK competition law matters. That’s now changed.’
Nick Levy, Cleary Gottlieb

Looking ahead

With a new Labour government in power, it’s possible there could be a shift in approach. ‘It’s going to be extremely interesting to see whether the new government takes a more expansive view of the foreign direct investment rules,’ says Levy. ‘You could begin to see more cases where the government is requiring commitments from companies to maintain jobs and investment in the UK.’

A leadership shift is also set to happen in Europe, as Levy notes: ‘There’s been a lot of debate in Europe over last few years about whether competition enforcement should take account of industrial policy and be relaxed to allow the creation of European champions. It will be very interesting to see the position of the next EU Competition Commissioner.’

With the coming years set to be busy for antitrust in London and beyond, companies will need to navigate a rapidly evolving landscape, with the sector remaining dynamic and demanding as it tackles new challenges and opportunities.  LB