Antitrust and AI Issues Continue to Mold Corporate Landscape

AI-Enhanced Algorithms

Since generative AI hit mainstream public consciousness, regulators have suggested that using it could raise antitrust concerns, and AI-enhanced algorithms have drawn an outsize share of that attention. These algorithms can parse massive, complex datasets at speeds well beyond the ability of people, identifying patterns and trends that provide highly useful insights for the companies that use them.

Companies that use AI-enhanced algorithms should take caution to stay within the bounds of federal antitrust laws.

AI has many pro-competitive benefits, such as providing better information to the market and enhancing efficiency. Nevertheless, the past few months have seen the emergence of lawsuits and government investigations on whether AI tools in a variety of industries are being used to coordinate prices.

The pro-competitive value of AI depends on the data used and the design of the model. Before moving to an AI model, companies should understand these two factors to evaluate potential risks.

New Merger Guidelines

The Biden administration’s approach to merger enforcement has been as aggressive as any in recent memory, and new merger guidelines—issued in December by the Federal Trade Commission and Department of Justice—signal that this approach will continue this year and beyond.

The new guidelines, which outline the agencies’ methods for analyzing transactions and markets, don’t have the force of law in court. But the 2010 guidelines for horizonal mergers have had a significant impact on how courts adjudicate merger challenges for more than a decade, so prospective dealmakers will want to be well versed in the substance of the new ones.

The near-term impact is clear: In taking a stricter view of what constitutes a highly concentrated market and embracing novel theories of harm, among numerous other substantive updates, the new guidelines broaden the agencies’ latitude to find anticompetitive conduct and will likely encourage the agencies to bring more enforcement actions in 2024.

Yet the long-term impact—whether federal courts will apply the guidelines and use more favorable standards for the government—remains to be seen. Considering that courts have relied heavily on the earlier guidelines, the agencies will likely push hard to have courts use the new ones when evaluating future merger challenges.

Rethinking Trial Risk

Antitrust penalties can be harsh on defendants. The government can block deals and demand massive divestitures. Private plaintiffs can obtain huge awards of damages. These penalties drive many defendants to the settlement table.

Failing to settle, a defendant could find itself joint and severally liable, and thus responsible for the full value of a money judgment in the tens or hundreds of millions of dollars. And that’s before applying automatic treble damages, which obligate a liable party to pay triple the amount of the judgment.

These dynamics explain why very few antitrust cases went to trial in the past. But recently, these cases have been going to trial more frequently. Instead of settling on some percentage of their sales—and thus insuring themselves against the possibility of having to pay out a massive judgement—defendants are taking their chances in court.

Results of the trials have been mixed so far. Although it could seem counterintuitive, defendants may continue to accept more risk in 2024, depending on the facts and circumstances surrounding their cases.

One reason is the view that theories of harm in antitrust complaints are becoming grayer and more difficult to substantiate—and thus easier to defend in court. Another is the view that proposed settlement terms—having to alter a lucrative business model, for example—can be so onerous that trial seems to be the only viable option. Defendants will want to work closely with counsel in deciding their most strategic path.

Outlook

No one can be certain how the antitrust environment will evolve this year. But we can be confident in this: Technology will continue to advance, regulators will seek to broaden their remit, and litigation activity will ramp up.

Each of these developments will have implications for competition, and companies would be wise to follow them closely as they navigate a busy 2024.

Read the full Bloomberg Law article in full here.

Reproduced with permission. Published March 4, 2024. Copyright 2024 Bloomberg Industry Group 800-372-1033. For further use please visit https://www.bloombergindustry.com/copyright-and-usage-guidelines-copyright/