The Legal Department

What The Legal Department Needs To Know About Antitrust: Leigh Oliver Of Clifford Chance

The Legal Department | Leigh Oliver | Antitrust

Antitrust is a highly technical area, but with increasing scrutiny from state and federal agencies, it’s an area that in-house counsel needs to know. In this in-depth episode, Antitrust expert Leigh Oliver of Clifford Chance breaks down four key areas for in-house counsel. Tune in and find out what should be on the “worry wall” in The Legal Department.

Listen to the podcast here

What The Legal Department Needs To Know About Antitrust: Leigh Oliver Of Clifford Chance

My name is Leigh Oliver. I’m a partner in the Washington, DC office at Clifford Chance, where I work on the Antitrust and Competition Team. I work on all sorts of antitrust issues facing companies before both state and federal agencies. A fun fact about myself is that I have two kids, a son and a daughter. I spend a lot of time with my daughter because I help coach her club lacrosse team and she plays in a very competitive market.

In this episode, I am excited to welcome Leigh Oliver, who’s a partner in the Clifford Chance Antitrust and Competition team. Leigh and I are going to dive into all matters antitrust that in-house counsel needs to have on their radar screen. Leigh, how are you?

I’m doing great. Thanks for having me.

It’s great to see you. I think this antitrust, when we have talked before, is something that I worried about when I was in a much larger market, even doing deals, but not really. In the past few years, the regulators have become much more active. I thought this was a good conversation for in-house lawyers to have on their radar screen. It is a very technical area, so I wondered if we could break it down into what are the top 3 or 4 issues that folks should have on their worry wall.

If I had to identify the three things that people should be aware of right now in antitrust as it applies to all sorts of entities, I would say that they should be aware of that the FTC and DOJ released the end of December 2023, before the holidays, new merger guidelines. It applies to how the agencies are going to look at mergers and acquisitions and to guide their analysis of whether they think there are competitive effects that might arise from transactions. These are a real shift from the prior 2010 guidelines and revise the way agencies think about issues in mergers and acquisitions. That would be number one.

Number two is the agencies are focused on how markets and competition are impacting labor and the workforce. That’s something that came out of the executive order from the Biden administration when they came into place. There have been a number of issues in the labor analysis and enforcement that the agencies have brought. People need to be aware that competition exists in labor markets and that the antitrust laws apply to those markets.

The third issue that people should be thinking about is information sharing. In 2023, the agencies withdrew guidelines that they had put out some time ago about safeguards for when competitors and other entities could exchange and share information. Those were tried and true practices and guardrails that people then adopted throughout industries. They withdrew those guidelines. The aftermath of withdrawing those guidelines brought a number of enforcement actions that changed how they thought information sharing was affecting competition. People need to be aware of how they’re exchanging information and how it might affect competition.

Those are three substantive topics. The fourth thing is that everything you do, good document creation practices across your business are critical because that is the evidence that the agencies use when bringing an enforcement action when looking to see what the business’s contemporaneous intentions or actions were. The way you go about and educate your teams on what they put in documents is important because that will be the foundation of evidence agencies are looking at when bringing antitrust enforcement actions.

We’ve got about four areas to dive into. On a macro level, what are the situations in which in-house counsel will encounter antitrust? I always think of it in certainly in any transaction, but are there other situations where antitrust issues come up?

You can basically break it down into two areas. One would be transactions or collaborations that aren’t quite a change of control. Anytime you’re doing a transaction, you may have to report that transaction to the federal agencies if it reaches a certain value threshold. In certain industries like healthcare, for example, more and more states have notification requirements for transactions in that space.

The Legal Department | Leigh Oliver | Antitrust
Antitrust: Anytime you’re doing a transaction, if it reaches a certain value threshold, you may have to report that transaction to the federal agencies.

If you’re doing a transaction, you should be going down the list of your checklist of things to look at. One is whether you have a notification or a substantive issue in terms of antitrust. On the substantive issue side of that, you would obviously need to look at whether you are doing a deal or a collaboration with a competitor. Nowadays, it’s not just competitors, but it is a supplier that’s an important input into your product market. Is it an adjacent entity? In a different market, but related to the market you’re in. Those are the sorts of things you should be looking at in a transaction context.

The second area that you should think about antitrust is like conduct. That’s wide-ranging, but if you happen to be a particularly large player in your market and there are always questions about how to define the market, then the way you interact, certain types of contracting practices, you may have limitations about what you can do if you are a dominant player in a particular market. That’s one type of conduct.

What’s an example of that?

If you created a new medical device and it was you were first to market because you invented the device, you had IP protections around that device and therefore, there were no other alternatives to that device for a very long time, you essentially may have had a natural monopoly in that market. Maybe some competition comes in or is coming in and because you want to protect that position in the market, you want to have an exclusive relationship with all the distributors that distribute medical devices. That would be problematic because you would basically take your dominant monopoly position and protect that monopoly by making it impossible for other device manufacturers to compete with you and distribute their products.

An issue like that, a situation like that, might create friction between the legal department and the sales team or the business development people.

It’s up to the business team to make their business profitable and their product desirable. That obviously creates some tension. Obviously, it’s for the legal team to know the business well enough to give them the guardrails and empower them to do things in a way that doesn’t run afoul of the antitrust laws.

We don’t want the deal or conduct to become a feature of scrutiny for one of the agencies. Let’s go to the three big topics. The impact of transactions on labor, I feel, is a somewhat newer trend and you, I think you said the Biden administration put that in the cross hairs. What’s the public policy there? Why do they care about how a deal impacts labor?

There is a sentiment that certain segments of the workforce in this country have not benefited from the robust competition among employers. There is the desire to protect the workforce, make sure that they’re getting optimal wages, optimal benefits, and that there’s that competition existing for workers, which are a, in some place, sometimes scarce resource.

That’s the point. In healthcare, as a healthcare provider, it’s impossible. It’s so hard to find workers. I feel like the market is already regulating that because we have to offer rich benefits and wages to attract workers.

I hear that concern a lot from healthcare employers. When we look at labor issues and the enforcement actions that have been brought in labor, there are actually a few different types that have been brought. One example would be allegations and enforcement actions brought against companies where the allegation is that companies who are competitors for workers have agreed not to raise wages or not to hire each other’s workers.

Obviously, The concern is that it has stifled competition for those workers, reduced their wages and benefits, and impacted the market. That’s the one type of enforcement action we’ve seen this administration bring. Another one would be in the context of mergers. Healthcare is a great example of this. In healthcare transactions, they’re looking at what your workforce is now, what are your hiring practices, and whether you are competing with that entity or the target you’re trying to acquire for the same workforce.

Yes, of course we are.

If you’re doing a deal with an entity that you’re competing for the same workers because maybe you’re in the same geographic market and that market is fairly narrow, for example, and the workers all live within that geography, they’re asking the question in their investigatory process. What’s going to be the impact of those workers if now they don’t have an alternative to the two merging parties for employment? Are they going to be less able to compete against each other, obviously, for wages and benefit increases and things of that nature?

If you are doing a deal with a competitor, what does the legal department need to know about the labor? You always look at what are your wages, benefits, costs, and what’s it going to be once they come here. You’re looking at projections, so anyone will see what are their pay practices. Are those compliant pay practices? It feels like there’s a little bit of tension there.

There are a couple of things the legal department should keep in mind. If you are doing a deal with someone who could be considered a competitor for the same type of workforce, then you need to get some advice, like, “How should I look at that workforce market?” Oftentimes, the market for workers is going to be larger maybe than the market downstream for the products and services you sell, geographically speaking. You may also have a more robust competitive set of players in a market for workers than you are for the downstream products you’re selling. That’s an important thing that you should take into account. You may need to get some advice on that if you’re doing a deal with an in-market competitor.

The other thing you should take into account is the diligence process. That information about the target worker’s wages and benefit levels could be considered competitively sensitive information that you should be dealing with appropriately. You shouldn’t necessarily be allowing your internal HR team, who sets those comp and benefits, to always do that analysis of the target. You may need to set up a clean team for labor information. If you think about it, those are competitive terms that you are setting for your own workforce and for those that you may be trying to recruit and hire if you know what your competitors are offering.

The Legal Department | Leigh Oliver | Antitrust
Antitrust: Information about the target’s worker wages and benefit levels could be considered competitively sensitive information that you should be dealing with appropriately.

California, and I know New York also, have wage transparency, where jobs they post, every job has to have a salary range. Does that at all desensitize some of that wage and benefit information?

It’s a matter of the level of detail that you could get in the diligence process versus what’s available publicly. Obviously, to the extent that information is publicly available and disclosed, it helps before the state for regulatory reasons. That certainly helps. You need to be careful about whether that’s truly the same level of detail that you’re going to get on the unemployment schedule.

I’m sure my HR people would love to hear in the deal that they’re doing that they can’t know what the workers make or the benefits package. They’re going to love that.

It’s about that level of detail. There are ways to manage that internally as well.

Labor is a new frontier, I feel like it bleeds in with the information-sharing topic that you mentioned too.

It’s a great segue, actually. Oftentimes, you’re exchanging information in the context of diligence, but this information sharing goes, so it’s important to have best practices in the legal department around how you conduct diligence, who can conduct it on what topics and whether you need to deploy a clean team.

Pause on that. Let’s talk real granularly about that process. What would be best practices for a diligence process? I know in the healthcare space, we don’t share rate information. Even though there’s price transparency, even though I could pull that off of websites, etc., we don’t share payer contracts, for example. If we have those reviewed, they’re done in a clean team that nobody in our company would have access to. Now, I’ll be much more careful with the wage and benefit information. What do you recommend from a diligence plan or best practices standpoint?

You’ve highlighted two of the key areas that we always want to focus on for conducting diligence and that can contain compelling sensitive information. The basic steps are to go through the diligence checklist, identify in that diligence checklist, and this is something that I do as outside counsel because I’m sensitive to what is considered competitively sensitive information of a target.

The Legal Department | Leigh Oliver | Antitrust
Antitrust: Go through the diligence checklist and identify the areas that would be considered competitively sensitive information.

Go through the checklist and identify the areas of items and diligence you’re looking for that would be considered competitively sensitive information. Prices, contract terms that are competitive, contract terms, labor and compensation and benefits are specific to individuals. Anything around the non-public strategy of the target, new product introductions or things of that nature that is publicly disclosed is going to be competitively sensitive.

Let me think about that because when you’re looking at a target, you want to see like what is this business? What could they do? They’re going to say, “We’re so valuable, we’ve got this plan. Our plan is to grow these product lines,” or whatever the company needs to do their diligence and make sure this is the right value for the company, that it makes sense financially. Can an acquirer know their strategies and plans, or are there certain people who can know?

On the strategy point, so usually, the way you would handle that is first of all you need to identify whether you are all competing in the same product and geographies. Let’s do the medical device company again. You have two medical device companies that are going to do a deal and the buyer is going to look at the seller and they’re going to want to know what’s their pipeline of product development. We want to know. How certain is that product development? What are their launch plans? What’s the timing of the new products they may be developing? When are they going to get them to market?

All of that’s important for valuation, for making a business decision about whether to go forward. The buyer doesn’t compete in those product areas. We have much less concern and sensitivity around some of that information. To the extent that they are head-to-head competitors in those product areas, we have a lot more concern about and there’s a lot more sensitivity.

The first step is to evaluate what degree of competition do we have.

Exactly. Typically, you can identify a team within the buyer who is not making the strategic day-to-day decisions about product development of maybe that competing area. You identify a clean team overlap, if you do have an overlap, to do that evaluation. You may have to have less information or detail on the target’s development plans in order to do that or you may have to hire a third party to give you an assessment of that information and do it in a way that’s sufficiently high-level, bringing it back to the management team of the buyer to make an ultimate decision on that piece of the analysis.

It sounds like I need good antitrust counsel to navigate all the nuances there.

What’s important to remember is it’s all in the context of starting with the idea that you’re doing a deal with a competitor.

Many times, you are, to one extent or another. We’re talking about diligence and best practices. Scan the diligence list and figure out what the sensitive categories are. Figure out if you do have sensitive categories, what needs to be segregated. Which others?

In order to do diligence in those sensitive areas, I would say forming a clean team or using an outside third party to do that part of the sensitive diligence and then ultimately preparing that diligence report. Sometimes you have to have certain areas of that report that are only for those clean team individuals to see or that need to be further scrubbed. Sometimes, I’d say anonymized or desensitized before they can go up for the decision-makers to see.

Once we get through diligence, because the diligence also informs like, “Do we think we can run this business after we own it or do we think we can make it successful?” Diligence is both, in my experience, identifying risks and how you want to plan around those as you’re doing the deal. Go, no go decisions. Also, it’s useful for your strategic planning when you have a new asset. This has gotten on my radar screen more recently. To what extent can you look at a before and after? I’m the buyer. Before the transaction, we had X level of volume or sales or whatever. After the deal, we’re going to have this. Is that a permissible analysis to see what your pro forma looks like after you own the target?

I think most businesses in that planning process, pre-closing, want to try and project that out. What does our business look like now and what will it look like in the future? This gets into the question about document creation. It’s important to think about what’s driving. If you’re projecting growth, what’s driving that growth? I’ll give an example of something that would probably be pretty unfortunate to put in your documents.

If you're projecting growth, it’s important to think about what's driving that growth. Share on X

 If you’re doing a deal with a competitor and say you’re a hospital system and you have X revenue today and you’re buying a competitor and that competitor has Y revenue. You’re projecting post-transaction, not to have X plus Y, but to have X plus Y plus some increase because you think you’re going to be able to increase prices because you’re going to have less competition. That’s not a helpful document to have created.

Can I pause for a second? What if it’s not that you’re going to raise prices but that you’re going to be able to grow, you’re going to be able to serve more people, sell more widgets because now you have another factory or your wingspan is broader?

That’s a very different assumption. The business is projecting then versus a price increase. The problematic portion of that first document is the price increase that you’re anticipating because you no longer have competition. If I don’t have competition, I can raise my price and we’ll make more revenue. This is where it goes to its somewhat nuanced state. It’s the assumptions that are going into that that are important. I would counsel people to make sure you’re documenting what those assumptions are and house counsel, make sure you’re looking at what those assumptions are being built into that pro forma model.

When I’ve done deals, a consultant is usually engaged because when you’re going to the board, you want to make sure you have professionals. You have a good branded firm, people with expertise that you may not have in-house. Those consultants, in my experience, often take on a posture that they’re trying to sell the deal. Those documents that are often created are things that even I, as a non-antitrust lawyer, raise an eyebrow at. Do you have some tips for best practices around document creation? You’ve seen it all, I’m sure.

When I talk about document creation, I think you’re raising a great point, Stacy. It can’t be the best practices you teach to your business team, but it has to be anyone you’re inviting into the process with you. Inevitably, if you’re hiring consultants, they will be preparing drafts of materials that will hopefully eventually go to your management teams and the board for approval and a potential transaction. It’s important that they also be educated on the best practices and what things you don’t want to see in those documents from the outset.

Another very practical approach, which I somewhat insist upon in a deal context, is that the consultants first let the legal team review their materials in draft before they go to the business team. That is a very helpful tool so that at the beginning of a deal, as materials get prepared, there’s a common dialogue and a common vocabulary deployed in the organization in the context of that deal. The consultants are aware of it, the business team is aware of it, and the legal team is helping to shape it. I think that’s an important first step when you bring on a consultant to say, “Our process includes a legal team review before it goes to the business.”

Getting off on the right foot is crucial, especially if it’s a firm you haven’t worked with before. We talked about this earlier. I’ve been shocked at big-name firms whose teams are a little casual with language, and it makes sense. We’re all excited about doing a deal and what it could mean and all that, but being not as buttoned up with your language can cause problems going forward. To that point, when you’re reviewing a document, what things do you want to X out?

There are a number of words that are particularly sensitive, I would say, and oftentimes can be misunderstood or mischaracterized as what’s actually going on in a transaction. We want to avoid putting those types of words and phrases and documents. One thing is everything antitrust turns on the market definition. The market is a noun. It’s something you want to be sensitive to. It’s used in business all the time.

The Legal Department | Leigh Oliver | Antitrust
Antitrust: Everything in antitrust turns on the market definition.

I don’t think it needs to be struck out every time, but you need to know when it would be helpful to say industry or space or use an alternative to using market as a noun. That’s the number one thing. Once you define the market, you have put yourself in a box for a lot of other purposes. Another thing I see all the time is that references to the transaction will create barriers to entry for competition. That’s a real problem, frankly.

That seems like a softball. I feel like even I could spot that.

However, it’s interesting because I do think you see it time and time again in consultant materials. A deal is more attractive if, all of a sudden, it creates some barrier to somebody else being able to compete more aggressively in a market. I would put that one on my list. As we said, I actually think there are lots of other types of more nuanced things that you need to be looking for.

The assumptions in a pro forma model, making sure that are all what I would characterize as pro-competitive assumptions, like expanding access, expanding your output, growing the community you’re serving or the population you’re serving or customer demand for a particular product. All of those things are going to be pro-competitive and you want to hopefully highlight those but also make sure that they’re included as if those are the types of assumptions you want in your pro forma.

When we talked before, I think you said watch out for sports metaphors, too.

That’s a great one. I will say that I see less and less of this nowadays, but war analogies or sports analogies never end well in a document about a transaction. Frankly, I’ve seen it, like the naming of a transaction can be code naming a transaction can be harmful. I would flag that and flag anything that looks like that in the documents. I recall seeing, at one point, a sales team deck that had two sumo wrestlers on it and they were talking and that was like the metaphor for the wrestling of their competitor to the ground to dominate them. We obviously want to avoid those ordinary court documents and certainly a deal document.

That seems like a softball, but dominate those kinds of words. Barriers to entry, that kind of thing. What about the L word, leverage? In the context of leverage, better pricing or better negotiating positions are those sorts of things. I always X that out.

I think there can be negative uses of the word leverage, so a safe thing to do is take it out. I don’t think leverage is one of those words that’s always bad. Sometimes, it can be used to explain how the deal makes a lot of sense because maybe the target has customers that the buyer does not have, and they want to increase what they’re selling to those customers. Maybe leveraging their customer base to expand the product offering would be a perfectly pro-competitive thing to put in a document. Oftentimes, the use of leverage can be less helpful. If you don’t want to parse all of that and it’s too nuanced, then it’s a good one to take out.

I took you down a winding road because of the new merger guidelines. The first topic you mentioned was on the top 3 or 4 for in-house counsel. That felt technical. I thought we’d start with that. Start with labor first, but obviously there’s a lot of publicity out there about those. Could you boil down a couple of points for our in-house audience on that?

Everything we’ve been talking about, labor is a component of these, as well as some of the other points we’ve been talking about. The merger guidelines are the guidebook that federal antitrust agencies follow when analyzing whether a merger will result in anti-competitive effects. Trying to predict. It’s a prediction exercise. Will prices go up? Will competition be reduced? Will the quality of products be affected negatively by a potential transaction? The guidelines are what the agencies use to follow. They follow them and analyze deals using those guidelines.

What is different and interesting about the new merger guidelines is that it covers issues and instruct the agencies essentially to look at issues that weren’t previously being looked at by the prior guidelines that were in place for years. I think that’s important because things like looking at the effects on the labor market that are covered now in the new guidelines and were not previously covered in the old ones.

Look at not just the current deal but also whether there has been a series of deals in a particular market that has led to the current positioning of that market, the current concentration in the market, the current competitive dynamics, and will this deal further entrench maybe the lead player or the dominant player. There are issues called out in the new guidelines that people need to be aware of. Times have changed. Things have changed, and they’re not looking at things the way they used to be looked at. There have been some shifts and if you’re not aware of those shifts, I think the impact is that business people think, “I got away with that deal ten years ago. Why can’t I do this one?” It’s because times have changed.

To that point, your firm puts out an antitrust newsletter, which I parsed through the fourteen pages. I noticed there was a write-up around the antitrust anesthesia partners case in Texas. I don’t want to give you a curbside consult here, but it was interesting that the case was that there wasn’t behavior between competitors that violated antitrust laws but activities that “tend to bring about anti-competitive harm.” That was the legal theory was that it wasn’t like a straight Sherman Act violation or something.

I think they are alleging that it violates the Sherman Act, but they’re alleging that there wasn’t a per se unlawful agreement necessarily between the different entities that were separate between competitors that necessarily violated the law. There was conduct and enough there between competitors that was problematic. The other thing from that case is, again, what we were talking about was the series of acquisitions that led to the current market position of the entities involved there and that being problematic from the standpoint of the agencies.

Here in California, there’s a new note transaction notice statute for healthcare deals and they want to know a disclosure of every deal you’ve done within the last ten years, which is exactly that point, they’re looking at you as, are you trying to dominate the market and extinguish competition?

I think agencies have realized that at least at the federal level, the reporting requirement is tied to the deal value and dollar threshold deal value. In an area like healthcare, a lot of transactions have fallen below that threshold as people have done smaller acquisitions, perhaps. Those are things that the agencies have not been tracking. They’re interested in understanding how the current dynamics have gotten to where they are. Looking back now, was it a series of acquisitions or was it some other dynamic in that marketplace that led to the market’s current structure?

One of the things I wonder is how robust the talent pool in these government agencies is. This is super technical. I’ve been thinking about California. Do they have the manpower? Do they even know how much information they’re going to get, how many deals they’re going to have to review, and do they have the manpower and the expertise to do it? That’s something I think about.

I would say I think resources at government agencies, both state and federal, the agencies will tell you are insufficient for their mandate in terms of competition enforcement, antitrust enforcement. They have, at the federal level, been pushing for more budget allocation to do their jobs. I think they actually did get it from Congress. They got some additional budget so they could hire more people.

Resources at government agencies, both state and federal, are insufficient for their mandate in terms of competition enforcement. Share on X

I hear they hired a chief competition officer at HHS. I don’t know if you heard that.

I haven’t heard that, but that’s possible. What’s interesting is DOJ and FTC, the antitrust agencies at the Fed level, are hiring right now someone who’s an expert and to work between them on healthcare issues. Obviously, it’s a focus there in this industry. They’ve also done the same by hiring specific resources and experts in the technology sector. That’s another priority of the competition agencies, and they need that expertise, people who understand AI and the technical ins and outs of platforms. They are definitely arming themselves and have armed themselves with those technical experts. On the labor front, they now have labor economists who specialize in that area.

I feel like we could do several episodes on any of these antitrust topics and more, but I mentioned to you earlier that I think one of the things my audience enjoys learning about is how lawyers have pursued their own professional development. I talk a lot about executive coaching. I’m in some networking groups with other GCs. This show has been a real source of professional development for me. I was curious. Obviously, your technical expertise is off the charts, but how to develop some of those other skills?

I would give a plug for two things. One is I was fortunate to participate in the Women’s Leadership Forum, a peer coaching program directed by women lawyers. I was part of a cohort as a junior partner of peers in the industry from different law firms. I think the program ran for a year, and so I got to have that professional coaching, as well as peer coaching. That was awesome. I highly recommend it.

Is that an organization, the Women’s Leadership Forum?

Yes. It’s run by a woman named Susan Dunlap. That was one thing that was pretty awesome in terms of, and it came at the right time for me, in terms of where I was in my career. The second thing I would say is I have been active in the American Bar Association’s Antitrust section and the AHLA for American Health Lawyers. Both of those have been avenues for networking and building a cohort of peers I can share ideas with and learn from, but also a way to raise profile and network and things of that nature. Getting involved in those organizations, but not being involved, signing up, raising my hand, and taking leadership opportunities when offered to me. Both of those have been tremendously valuable.

I always plug Bar Associations. I was active in Women Lawyers of Los Angeles. I am active in the American Health Lawyers Association as you are, and then I’m dipping my toe into some BA stuff, which feels very East Coast to me, which is my limitation on that. Leigh, thank you so much for the conversation. I feel like this is one I’m going to go back to repeatedly if I’m not calling you, but as you may know, we end all episodes with a conversation about music, something lighter, and I ask all guests what their pump-up song is.

I have to go with a Taylor Swift song. This one gets me excited and it’s called The Man. As a woman in the professional world, I can’t help but love that song.

I love that song, too, but if you listen to the words, it doesn’t necessarily pump me up. It bums me out a little.

It pumps me up.

I love it, though. When we talked last, we watched the Eras tour, so I’m a huge fan as well. Thanks for being on the show. I enjoyed having you.

Thanks again for having me, Stacy.

Important Links

Share this blog: