President Biden issues sweeping Executive Order to promote competition

Briefly, the order¹:

• Directs all federal agencies to consider competition in procurement decisions.
• Directs agencies to consider competition in developing and enforcing regulations and consider rescinding regulations that inhibit competition, such as certain occupational licensing requirements.
• Directs agencies with overlapping jurisdictions to cooperate to improve competition.
• Creates a White House Competition Council to facilitate inter-agency cooperation, identify legislative proposals and administrative actions to further competition policy, and implement agency actions identified in the order.
• Directs the Federal Trade Commission (FTC) and Department of Justice (DOJ) to consider whether to revise the Horizontal Merger Guidelines and the Vertical Merger Guidelines. Shortly after the issuance of the Executive Order, the agencies announced that they would soon launch a review of those guidelines.
• Directs the DOJ and Department of Commerce to reconsider the December 2019 Policy Statement on standard essential patents and F/RAND commitments (which expressed the view that all remedies, including injunctive relief, should be available to a standard-essential patent holder against alleged infringers, despite the patent holder’s prior commitment to F/RAND licensing).
• Outlines a number of competition and consumer protection initiatives for specific industries, as discussed below.

Executive Order outlines a "whole-of-government" approach to promote competition

While acknowledging that the Sherman, Clayton, and FTC Acts are a “first line of defense against the monopolization of the American economy,” the order also cites a series of industry-specific fair competition and anti-monopolization laws enacted by Congress² to support a “whole-of-government” approach to address perceived anticompetitive conduct across the economy. The order provides directives to more than a dozen federal agencies to address the administration’s concerns about the effects that increased consolidation is having on workers and consumers. In addition, the order creates a White House Competition Council within the Executive Office of the President that is charged with coordinating the Federal Government’s activities across the various agencies to “provide a coordinated response to overconcentration, monopolization, and unfair competition in or directly affecting the American economy.”³

Rule-making

The order encourages the FTC to consider rule-making to address unfair data collection and “surveillance practices,” restrictions on third-party or self-repair, agreements or other conduct that delays entry of generic drugs or biosimilars, unfair competition in internet marketplaces, unfair occupational licensing requirements, or exclusionary practices in real estate brokerage or listings. The FTC has previously announced an initiative to consider ways to reinvigorate its rule-making to enhance competition and protect consumers.⁴ The order also directs the Office of Management and Budget to consider whether competitive effects and barriers to entry should be incorporated into regulatory impact analyses of agency rulemakings.

Labor markets

The order highlights non-compete clauses, wage collusion, and “burdensome occupational licensing requirements” as practices contributing to depressed wages and decreased competition in the labor markets. The order directs the FTC to exercise its rulemaking authority to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility”⁵ and address unfair occupational licensing restrictions.  In addition, the FTC and the Attorney General are directed to better protect workers from “wage collusion” by considering revisions to the Antitrust Guidance for Human Resource Professionals published in October 2016.⁶ The Secretary of the Treasury is also ordered to submit a report to the Chair of the White House Competition Council assessing the effects of lack of competition on the labor markets.

Health care

The order contains a number of provisions that dovetail with the recent legislative package introduced by a bipartisan group of Senators and Representatives in April 2021 to promote competition in the health care industry.⁷ The order directs the Secretary of Health and Human Services (HHS Secretary) to submit a report to the White House Competition Council outlining a plan to “continue the effort to combat excessive pricing of prescription drugs . . . and to address the recurrent problem of price gouging.” This includes improving the approval framework for generic drugs and biosimilars and the standards for interchangeability of biological products so they are more transparent and predictable. The order also directs authorities to facilitate the development and approval of biosimilar and interchangeable products through updated Food and Drug Administration (FDA) biologics regulations – some  of the same goals outlined in the joint statement released by the FTC and the FDA to advance competition in the biologic marketplace in February 2020.⁸ The order also targets agreements between brand-name and generic companies, directing the HHS Secretary to prevent the “unjustifiabl[e] delay” of generic drug and biosimilar competition, and encouraging the FTC to issue a rule banning so-called “pay-for-delay” agreements.

The order also directs the FTC and DOJ to review and revise merger guidelines to ensure, among other things, that hospital consolidation does not harm patients by leaving rural communities with “inadequate or more expensive health care options.” In addition, it directs HHS to support the existing price transparency laws and new transparency initiatives applicable to hospitals, health care providers, and insurers.

The order calls on the FDA to “work with States and Indian Tribes” that propose drug importation programs under implementing regulations that would allow for commercial importation of certain drug products. So far, six states have passed laws to enable such programs, but only Florida and New Mexico have publicly announced that they have submitted importation proposals to the FDA. The language is the strongest so far in demonstrating the Biden administration’s support for the drug importation regulations developed under the Trump administration, predicated on the Trump-era HHS Secretary’s certification that the implementation of the regulations (1) would result in significant cost savings for American consumers and (2) would pose no additional risk to public health and safety.

Just a few weeks earlier, in litigation challenging the drug importation implementing regulations, the U.S. Department of Health and Human Services (HHS) filed a motion to dismiss stating that approval of any State importation plan was not imminent and identifying numerous barriers to the approval and execution of any State plans. The brief filed in support of the government’s motion stated that the “period for FDA to review” an importation proposal is “indeterminate” and that “the willingness and ability of Canadian wholesalers to serve as Foreign Sellers may be limited by the Canadian government’s recent prohibition on exporting drugs based on Canada’s domestic drug supply and imposition of additional reporting obligations.”⁹ Contrary to the language in this court filing, the order indicates that the FDA will face pressure from the White House and HHS to collaborate with States to develop importation proposals that conform with the drug importation regulations issued under the Trump administration. Whether a state importation proposal can both conform with all aspects of the drug importation regulations and also achieve significant cost savings for American consumers remains to be seen.

Agriculture

The order addresses decreased competition stemming from consolidation in the agriculture industry, a trend the administration sees as threatening the survival of small family farmers. The Secretary of Agriculture is directed to consider initiating rulemaking under the agency’s statutory authority to strengthen regulations concerning unfair, unjustly discriminatory, or deceptive practices. The Agriculture Secretary is also encouraged to interpret the Packers and Stockyard Act as not requiring a showing of industry-wide harm to establish a violation of the law, which would make it easier for farmers to bring and win claims. The order also encourages the FTC to use its rulemaking authority to limit the ability of large farming equipment manufacturers to prohibit farmers from repairing their own equipment. 

Transportation

The order issues a series of directives and recommendations addressing consumer protection and competition in the aviation, rail, and shipping industries.

Aviation: The order directs the Department of Transportation (DOT) to propose a rule requiring airlines to refund fees when baggage is substantially delayed or when an ancillary service such as Wi-Fi is not provided after a passenger pays for it. DOT shortly after released that proposed rule. The order also directs DOT to start developing amendments to its definitions of “unfair” and “deceptive” practices prohibited under 49 U.S.C. 41712; report on its investigatory and enforcement activity related to refunds for flight cancellations caused by the COVID-19 pandemic; and consider a rulemaking ensuring consumers are informed of baggage, change, and cancellation fees when purchasing tickets. Other directives include reconstituting the membership of the Advisory Committee for Aviation Consumer Protection; convening a DOT working group to evaluate the effectiveness of existing commercial aviation programs, consumer protections, and rules; considering measures to improve the implementation of airport competition plans and slot administration; and enhancing coordination between DOJ and DOT to ensure competition in air transportation and market access for new entrants. With respect to emerging aviation technologies such as unmanned aircraft systems, advanced air mobility, and high-altitude long endurance operations, the order directs DOT to facilitate innovation that fosters U.S. market leadership and market entry while providing oversight of market participants.

Rail: The order encourages the Surface Transportation Board (STB), an independent agency, to consider a number of actions. First, in what is referred to in the industry as competitive access or reciprocal switching, the order asks STB to move forward with a pending rulemaking to allow a second carrier commercial access to shippers captive to a single railroad. The order also asks STB to explore shipper remedies in the closely related context of bottleneck rates (also referred to as first mile/last mile service). The order encourages the STB to preserve all existing interchange (routing) options, including in railroad mergers and acquisitions, and to explore ways to reduce entry barriers in rate challenges, including for captive shippers. Finally, the order urges STB to enforce Amtrak’s statutory access preference and on-time performance standards, including in the context of railroad mergers and acquisitions.

Shipping: The order encourages the Federal Maritime Commission to vigorously enforce the prohibition of “unjust and unreasonable” practices relating to detention and demurrage to avoid excessive charges on American exporters.

Technology

The order adds to the ever-increasing efforts by legislators and antitrust enforcers to curb the market power of large tech firms. Echoing much of the content included in a recent series of bills introduced in the House of Representatives¹⁰ targeting alleged anticompetitive conduct by the largest tech firms, the order signals the administration’s support for this legislation and a commitment to combatting consolidation in the tech industry. 

Noting that “a small number of dominant Internet platforms use their power to exclude market entrants,” the order encourages greater scrutiny of  mergers, especially with respect to “serial mergers and the acquisition of nascent competitors.” The FTC is also asked to establish rules barring unfair methods of competition with respect to internet marketplaces to prevent dominant platforms from self-preferencing their own products on their platforms. 

The order also directs the FCC to consider “Net Neutrality” rules similar to those previously adopted.

Financial services

Citing the need to ensure that Americans “have choices among financial institutions,” and to limit market power of large banks, the order directs the Attorney General to adopt a plan to revitalize merger oversight in the financial services industry to provide more robust scrutiny of mergers to curb increasing costs for consumers and restrictive lending to small businesses. To increase consumer choice, the order directs the Consumer Financial Protection Bureau (CFPB) to use its rulemaking authority under the Dodd-Frank Act to facilitate the transfer of consumer financial data among financial institutions. In addition, the Secretary of the Treasury is directed to submit a report “assessing the effects on competition of large technology firms’ and other non-bank companies’ entry into consumer finance markets.” 

Other industry-specific practices

The order targets additional conduct across a variety of economic sectors, including:

• Regulations that unnecessarily inhibit competition in the beer, wine, and spirits industry.

• Excessive cell phone termination fees leading to increased switching costs for consumers.

• Agreements between internet service providers and landlords limiting tenants’ choices for internet service.

Conclusion

The breadth and scope of this order indicates that the Administration considers robust competition across a variety of industries to be integral to a thriving economy. The order lends support to the various Congressional efforts to revise the antitrust laws, and to the reform-minded agenda of new FTC Chair Lina Khan. Shortly after the order was signed by the President, FTC Chair Lina Khan and Antitrust Division Acting Assistant Attorney General Richard Powers released a joint statement expressing the need to review the current merger guidelines, announcing that the agencies will launch a joint review of the guidelines with the goal of updating them to “reflect a rigorous analytical approach consistent with applicable law.”¹¹ It remains to be seen how the FTC, DOJ, and numerous other federal agencies identified in the order will interpret their mandate. It also remains to be seen, of course, how courts react to any proposed changes.

Hogan Lovells attorneys will be closely monitoring the federal agencies’ responses to these directives, and are well-positioned to provide expert guidance to help clients across the various sectors implicated in the order navigate a rapidly changing regulatory landscape.

References

1 See White House Statements and Releases, Fact Sheet: Executive Order on Promoting Competition in the American Economy (9 July 2011) available at https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/.

2 See Packers and Stockyards Act, the Federal Alcohol Administration Act (Public Law 74-401, 49 Stat. 977, 27 U.S.C. 201 et seq.), the Bank Merger Act, the Drug Price Competition and Patent Term Restoration Act of 1984 (Public Law 98-417, 98 Stat. 1585), the Shipping Act of 1984 (Public Law 98-237, 98 Stat. 67, 46 U.S.C. 40101 et seq.) (Shipping Act), the ICC Termination Act of 1995 (Public Law 104-88, 109 Stat. 803), the Telecommunications Act of 1996, the Fairness to Contact Lens Consumers Act (Public Law 108-164, 117 Stat. 2024, 15 U.S.C. 7601 et seq.), and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203, 124 Stat. 1376) (Dodd-Frank Act).

3 The White House Competition Council will consist of the following members: the Secretary of the Treasury; the Secretary of Defense; the Attorney General; the Secretary of Agriculture; the Secretary of Commerce; the Secretary of Labor; the Secretary of Health and Human Services; the Secretary of Transportation; and the Administrator of the Office of Information and Regulatory Affairs.  The Council will be chaired by the Assistant to the President for Economic Policy and Director of the National Economic Council.

4 Federal Trade Commission press release, FTC Acting Chairwoman Slaughter announces new rulemaking group (25 March 2021) available at https://www.ftc.gov/news-events/press-releases/2021/03/ftc-acting-chairwoman-slaughter-announces-new-rulemaking-group.

5 With respect to non-compete agreements, the FTC has already been actively considering using its rulemaking authority to restrict the use of non-compete clauses in employment contracts, holding a workshop in January 2020 to “examine whether there is a sufficient legal basis and empirical economic support to promulgate a Commission Rule that would restrict the use of non-compete clauses in employer-employee employment contracts.”  See Federal Trade Commission news and events, Non-Competes in the Workplace: Examining Antitrust and Consumer Protection Issues (9 January 2020) available at https://www.ftc.gov/news-events/events-calendar/non-competes-workplace-examining-antitrust-consumer-protection-issues.

6 Department of Justice and Federal Trade Commission, Antitrust Guidance for Human Resources Professionals (October 2016) available at https://www.justice.gov/atr/file/903511/download.

7 See House Committee on the Judiciary Press Release, Bipartisan Legislative package Introduced to Lower Prescription Drug Costs (29 April 2021) available at https://judiciary.house.gov/news/documentsingle.aspx?DocumentID=4536; see also Office of United States Senator Amy Klobuchar News Release, Klobuchar, Grassley Introduce Bipartisan Bills to Reduce Drug Costs by Promoting Competition (29 April 2021) available at https://www.klobuchar.senate.gov/public/index.cfm/2021/4/klobuchar-grassley-introduce-bipartisan-bills-to-reduce-drug-costs-by-promoting-competition.

8 See Federal Trade Commission press release, Joint FDA-FTC Statement Regarding Collaboration to Advance Competition in the Biologic Marketplace (3 February 2020) available at https://www.ftc.gov/system/files/documents/public_statements/1565273/v190003fdaftcbiologicsstatement.pdf.; see also Hogan Lovells Publications, FTC and FDA intensify efforts to promote biologics competition (13 March 2020) available at https://www.hoganlovells.com/~/media/hogan-lovells/pdf/2020-pdfs/2020_03_13_ftc_and_fda_intensify_efforts_to_promote_biologics_competition.pdf.

9 Pharmaceutical Research & Manufacturers of America, et al. v. U.S. Department of Health and Human Services, et al., Memorandum in Support of Defendants’ Motion to Dismiss for Lack of Subject Matter Jurisdiction and, Alternatively, for Failure to State  Claim upon which Relief can be Granted, Case No. 1:20-cv-03402 (D.D.C).

10 Office of Congressman David Cicilline, Cicilline Statement on Big Tech Markup (24 June 2021) available at https://cicilline.house.gov/press-release/cicilline-statement-big-tech-markup.

11 Federal Trade Commission Press Release, Statement of FTC Chair Lina Khan and Antitrust Division Acting Assistant Attorney General Richard A. Powers on Competition Executive Order’s Call to Consider Revisions to Merger Guidelines (9 July 2021) available at https://www.ftc.gov/news-events/press-releases/2021/07/statement-ftc-chair-lina-khan-antitrust-division-acting-assistant?utm_source=govdelivery. 

Authored by Chuck Loughlin, Edith Ramirez, Logan Breed, Leigh Oliver, Arjun Garg, Kevin Sheys, and David Horowitz.