State AGs Step Up: Antitrust Enforcement Beyond the Federal Level

Episode Summary

Antitrust/competition attorneys Evan R. Kreiner, Joseph M. Rancour and Justine M. Haimi discuss the rise of state attorneys general as independent antitrust enforcers. The conversation covers new mini-Hart-Scott-Rodino (HSR) filing regimes spreading across the country, California's aggressive legislative push, recent high-profile cases and how states are investing in enforcement resources — from new hires and dedicated units to outside counsel and expanded budgets. The episode also explores what this increased state activism means for deal makers navigating merger review and conduct litigation, including why companies can no longer assume that settling with federal enforcers will resolve state-level exposure.

Voiceover (00:00):
Welcome to “Fierce Competition,” a podcast from Skadden’s global antitrust and competition group that explores antitrust policy and enforcement around the world. Join our colleagues from across the continents as we discuss the latest developments and what they mean to you in an increasingly complex legal and regulatory landscape.

Joseph M. Rancour (00:20):
Hello everybody and welcome to the latest episode of “Fierce Competition,” Skadden’s podcast covering the latest and greatest in competition law developments. I’m Joe Rancour, an antitrust partner in Skadden’s Washington, D.C. office, and I am very privileged today to be joined by Evan Kreiner, a partner in our New York office, and Justine Haimi, a counsel in our New York office.

(00:39):
On today’s pod, we’ll be focusing on the evolving antitrust enforcement dynamics among state attorney general offices across the country. We’re going to dive into recent state-driven initiatives to expand AG toolkits to enforce the antitrust laws, examine some recent cases where state competition enforcers have either taken the pole position on enforcement actions or diverged in notable ways from their federal antitrust counterparts, discuss key sectors where state enforcers appear to be prioritizing and some practical implications for deal makers and companies navigating what’s becoming an increasingly complex regulatory landscape.

(01:13):
Just to set the stage a little bit, state AG offices have long investigated mergers and other activities under state law as well as parallel investigations under the federal antitrust laws and have sued to block mergers or take other enforcement actions, both with and without federal antitrust enforcers involved in those actions. However, in the last year or so, we’ve seen an increased activism by state enforcers in high profile mergers and other investigations that have hit the press in various ways. And a practical effect of this is that companies increasingly need to be prepared to engage with state AG offices as part of a regulatory process and competition investigations.

(01:52):
So just to kind of kick things off, Evan, why do you think states are taking this more active role in antitrust enforcement in some of these high-profile cases?

Evan R. Kreiner (02:00):
So not being in the head of a state attorney general, we can of course only speculate as to why that is, but there are a few apparent reasons. One of them is this perception that there’s been this federal pullback in antitrust enforcement during the Trump administration, and we’ll talk about a few of these cases, but there’s been some high-profile cases where the DOJ is either settled on terms that state AGs have deemed insufficient or where they didn’t bring a case at all.

(02:29):
There are also some instances where you have local interests at play where state attorneys general are going to be a little more motivated to bring a case, either a conduct case or a merger litigation, than the Federal Department of Justice.

(02:47):
And then there’s also an increased political focus on antitrust law. So whereas in the past, antitrust law and interest in it was the province of some true political nerds, like your Joe Rancours or your Evan Kreiners, that’s not really the case anymore. It seems like antitrust law and competition law have become more in focus in the political discussion. And because state AGs are oftentimes politically elected, those political concerns might come to the fore and you could see some increased activity by state attorneys general who ran on a more robust antitrust enforcement.

(03:28):
Justine, what are some tools that state attorneys general can use including some newer tools that are in their toolbox?

Justine M. Haimi (03:36):
Thanks, Evan. So several states have implemented or are implementing so-called mini-HSR statutes. The ones that are in place now are fairly low burden, filings are based on revenues of the companies involved in the relevant state, and importantly, the statutes in place right now are not bars on closing. The goal of these statutes is really to get state regulators the same information federal antitrust regulators are receiving early on in a transaction’s lifetime to help inform enforcement priorities and flag deals that may have an outsized impact on certain states.

(04:12):
Colorado and Washington are the two states with active mini-HSR statutes and, as of this spring, each has received over 200 filings since their respective mini-HSR statutes have been enacted. California recently passed the Uniform Antitrust Pre-Merger Notification Act, which will require parties to submit HSR filings in California starting in 2027.

Evan R. Kreiner (04:34):
Is this a harbinger of what we could see in other states enforcing their own mini-HSR regimes?

Justine M. Haimi (04:42):
Yes. Several states have adopted versions of California’s Act, including Indiana, Hawaii, West Virginia and Washington, D.C. And New York is developing a much more expansive Twenty-First Century Anti-Trust Act, which will require filings from any person doing business in the state, regardless of in-state revenue.

Joseph M. Rancour (05:00):
Yeah. I think the handwriting’s kind of on the walls in terms of where the trends are headed and how many states may be adopting these kinds of mini-HSR acts. As Justine said, it really gets information into the hands of state AG offices more efficiently than before where they would have to reach out affirmatively to parties if they had an interest and perhaps issue a subpoena to get access to some of that information. But Justine, these sort of mini-HSR acts seem like they’re kind of like a broad brush, if you hit the triggers you have to file along with your HSR Act. Are there any specific industry focuses that are coming into the fore as states consider expanding their toolkits here?

Justine M. Haimi (05:36):
Absolutely. And one of those key industries is health care. As we’ll discuss later, there are certain key industries and areas where both federal and state antitrust regulators have specific interests. But at the state level, 14 states have implemented health care statutes, which are applicable to transactions involving largely health care providers, with certain states requiring filings if insurers or other health-related entities are involved. Those are very specific to the statute at issue, unlike the mini-HSR rules, which are a little more uniform across states, but these are bars on closing, so something that merging parties definitely have to pay attention to if they’re in the health care space.

(06:16):
So Joe, do you think there are any states in particular whose legislative efforts are worth flagging?

Joseph M. Rancour (06:22):
I think California is probably one worth spending a minute or two on a little bit of a zoom-in just because they’re at the forefront of looking at adopting, not just sort of procedural tools to get the same access to HSR information that the federal enforcers get, but also looking very seriously at expanding their state laws on antitrust law.

(06:41):
So California has the Cartwright Act, which is their antitrust statute. They’re looking at expansions to that. They’re also looking at some expansions that would apply to merger investigations. And there’s actually several options that they’ve been kicking around. This is sort of at the stage of looking at different potential ways the legislation could get written and then potentially adopted, but they kind of run a range right now in terms of what’s being considered.

(07:06):
So just to give kind of the polls on this, one option they’re considering would basically take the Clayton Act, which is the federal statute, but then also make an express acknowledgement that it also would prohibit mergers that tend to create a monopsony, which would be a concentration of buyer power as opposed to supplier power. Also add potentially a presumption that mergers that exceed a specific market share threshold are inherently anticompetitive, and also recognize the federal 2023 merger guidelines as persuasive authority. And so this is a little bit different than how the reviews work at the federal level, which, there’s merger guidelines, but the merger guidelines are not law. And so to the extent that California would be adopting something that is consistent with the merger guidelines with kind of putting it into the statute, that’s sort of a step farther.

(07:53):
And then there’s some other options kind of in the middle, but then at the kind of more aggressive side of the spectrum, there is an option that would basically change the substantive standard for merger review compared to what is reviewed under the Clayton Act. California’s considering as one of these options to adopt a standard that basically would be to say prohibit mergers that may create an appreciable lessening of competition more than a de minimis amount, which is written to be a more permissive standard in terms of enforcement, more difficult standard in terms of getting a deal through than the Clayton Act. Of course, the question then becomes like, well, what does that standard actually mean? And that is something that the courts would have to grapple with. I’m sure there would be guidance put out around it. But that would be a very intentional way to expand the California law compared to the federal law on mergers.

(08:42):
The other thing California is considering that’s fairly far advanced is what’s called the Compete Act, which would basically apply to unilateral conduct. So we’re not talking about mergers anymore, but basically the Cartwright Act’s coverage of conduct that would be kind of analogous to what gets looked at under the monopoly laws under the federal law. But again, here they’re considering legislation that is designed to be covering a broader range than what’s in scope of the federal laws and make it basically easier to get past the pleading stage, whether you’re talking about a state AG or even a private plaintiff.

(09:15):
It’s gone through several changes, but really the practical implication is that California is looking very seriously at these legislative tools to make it easier to bring antitrust cases based on California law, whether we’re talking mergers or conduct cases.

(09:31):
So Justine, you mentioned a little bit before how health care is one of the areas that some of these state laws are designed to look at in terms of reporting on transactions. What other industries come to mind when you think about state AG enforcements and what their priorities are?

Justine M. Haimi (09:47):
Health care and tech are key priorities at both the state level and the federal government level, as are industries affecting the American consumer’s pocketbook. So those would be consumer-facing industries where people like you and me may be buying products or services, also transactions where there may be effects on labor markets or effects on wages such as wage suppression. And this is evidenced by recent state enforcement actions, some of which were done in conjunction with the federal government and some of which involved transactions that were cleared by the federal government.

(10:18):
This is a pretty good segue to discussing those enforcement actions that were actually instigated by state AGs. Evan, what are some of the key litigated cases where we’ve observed state AGs at the forefront?

Evan R. Kreiner (10:28):
So there have been quite a few in the last year, year and a half, and they’ve had different alignments both in terms of which state attorneys general are bringing them, at what stage of the case the attorneys general can come to the fore and jump the Federal Department of Justice in pursuing those litigations, and some other items.

(10:49):
So one of the more high-profile cases is the Live Nation trial where you had initially the Department of Justice in a very broad coalition of 40 states suing Live Nation and Ticketmaster over what they contended were of a variety of unlawful, monopolistic, unreasonable conduct. The thing that kind of set this case apart is that in the middle of trial, the DOJ reached a settlement with Live Nation that seemed to have come as a surprise to the state attorneys general that were prosecuting the case alongside them. That’s not something that you would typically see, particularly in the middle of trial.

(11:31):
And then what happened after that is something that actually might be a harbinger of things to come as state attorneys general increase their level of antitrust enforcement, which is that after the DOJ backed off of the case, they wound up bringing a private law firm to be the lead trial counsel in litigating the case to conclusion. And so one of the things that’s kind of percolating in the back of everybody’s mind as state attorneys general step to the floor, both in terms of merger enforcement and then also conduct investigations, is how they’re going to do that with their resource constraints. And the Live Nation trial might be one way that they do that, which is by bringing in private firms to prosecute the case.

(12:15):
Another high profile litigation challenge is in the merger enforcement realm, which is the Nexstar-Tegna transaction. There you actually had both a coalition of states and a private party sue post closing to block the merger of Nexstar and Tegna even after the FCC cleared the deal and the DOJ declined to challenge it. That’s kind of another alignment of the state attorneys general and how we’ve seen these cases unroll.

(12:48):
And then the last example of one of these high profile conduct litigations involves RealPage revenue management software. There you had a whole slew of different cases brought against RealPage and property managers and owners across the country, including a nationwide private class action, a suit brought by the Department of Justice and eight different states in federal court, and then a number of suits brought by independent state attorneys general in their own state forums under their own state laws.

(13:24):
And that case is also proceeding kind of similar to the way Live Nation proceeded after trial, which is that the Department of Justice and some state attorneys general have settled their cases or settled their cases against certain defendants. The private class has settled their case against certain defendants and then there are separate litigations proceeding that are being brought by other state attorneys general in their own state forums.

(13:51):
Justine, the three cases that I discussed are all quite recent and high profile examples, but this recent wave of state antitrust enforcement isn’t limited to the last year, right? Can you talk quickly about the Kroger and Albertsons litigations?

Justine M. Haimi (14:08):
Absolutely. So in 2024, the FTC and several states successfully sued to block the merger of Kroger and Albertsons, two grocery store chains. The FTC and the states alleged both traditional theories of harm in the form of increased prices for groceries for consumers, as well as harms to unionized grocery store workers who would have had fewer choices for employment post transaction. This highlighted a focus on labor markets that persists at the agencies even today. Prior to the FTC suit, the attorneys general of Colorado and Washington, which as you may recall, are the two states with active mini-HSR statutes, each also sued to block the transaction. And both states alleged very similar theories of harm to the federal government, but also made claims about the transaction’s impact in their states specifically, not only on labor markets, but in the case of Colorado, allegations of harm to Colorado-based food suppliers.

(15:00):
Joe, can you give some examples of when states have gotten involved later on in the process where they’ve argued the federal government’s outcomes are insufficient to cure anticompetitive harms?

Joseph M. Rancour (15:11):
Yeah, certainly in the last year or so, one key example of that would be the HPE-Juniper transaction. A deal that had been investigated during the last administration, during the Biden administration, and carried over into the second Trump administration. The DOJ early on in the Trump administration decided to file a complaint against that transaction and the parties proceeded apace towards litigation, which was set to go to trial in the summer of last year. And the states, by the way, were not involved in that litigation nor really playing a part of that transaction.

(15:48):
There was a late settlement in that case that has been very highly publicized, but there’s also a lot of public reporting and criticism around the process to that settlement, including the participation of political appointees that are above the DOJ antitrust division who involved themselves in the settlement, which is evident from the names appearing on the settlement papers.

(16:14):
So the parties settled that case, the merger closed, but under the federal law, when there’s a settlement like this between the parties and the DOJ, the proposed settlement has to go through what’s called a Tunney Act proceeding where the judge looks at the terms of the settlement and has to determine whether or not the settlement’s in the public interest. So it’s not the same as kind of looking at the merits of an antitrust case, because after all, this is a settlement, right?

(16:37):
So the Tunney Act proceedings are very common. They happen whenever there’s a formal settlement between the DOJ and merging parties. But in this case, given the publicity around the settlement and also the fact that following the settlement, two high-ranking DOJ officials were dismissed from the administration, one of whom then went on to kind of criticize the settlement and the process involved, created more interest in this. And a group of state AGs got involved in the Tunney Act proceeding intervening, essentially challenging both the kind of adequacy of the settlement, but also the process.

(17:12):
That is still ongoing on the Tunney Act proceeding in federal court, but this is just an example of how states are looking at opportunities to get involved where they perceive there to be some sort of issue with an outcome in some of these cases.

(17:27):
The other thing I’ll say is not just what’s happened in the last little while in some of these high profile cases, but we’re seeing states continuing to investigate transactions where there’s an obvious state connection or high-profile transactions that are undergoing significant scrutiny. One key example that’s going on right now is the pending proposed acquisition of Warner Bros. Discovery by Paramount Skydance where the California AG, Rob Bonta, has pointed out the importance of filmmaking and entertainment to California’s local economy and has noted that California enforcers are reviewing the transaction and also pointed out what he has called “red flags” while noting a decision has not been made.

(18:05):
So this is just another example of a very state-specific interest in a high profile merger, and I think it’s another data point that state AGs are going to continue to really advance their interests and take a more aggressive role in investigating mergers.

Justine M. Haimi (18:21):
And another interesting element here is investment by the states in antitrust resources. We know from experience around the world, when antitrust authorities are under-resourced, enforcement can be really hit or miss. But we are seeing signals that state AG offices are hiring, increasing budgets focused on antitrust enforcement, and as Evan mentioned in the case of Live Nation, hiring outside counsel for specific matters.

(18:45):
So some states are in fact hiring additional personnel like Oregon and Washington, while others prefer to rely on outside counsel like Texas. New Jersey has actually created a new antitrust litigation and competition enforcement section within the New Jersey Division of Law. And in California, Governor Gavin Newsom just announced a budget revision to $14.3 million in special funds in 2026 through 2027 declining to $10.5 million in 2029 through 2030 to fund anticipated antitrust enforcement efforts.

(19:16):
Joe, from an M&A perspective, with this increase in state activism and investment in antitrust enforcement resources, what are the risks the clients should be conscious of going forward?

Joseph M. Rancour (19:27):
Well, I think the first thing to acknowledge is that this isn’t really a new thing, right? State AGs, as I said at the beginning, have always taken interest in merger enforcement and we’ve seen a number of examples in years past where they’ve taken investigations very seriously and have challenged transactions, sometimes right alongside the DOJ or the FTC and sometimes on their own. The Sprint/T-Mobile merger was one example of the state AGs taking a different path, where the parties had settled with the DOJ, had gone through an FCC process that included a defined remedy and nevertheless decided to challenge that merger as a group of states without the support of the federal enforcers.

(20:10):
So this is not a new phenomenon. I think that the uptick in recent activities is something that deal makers just need to be cognizant of and that it’s not all about what’s the federal strategy to get the deal done. You need to be cognizant of these other regulators who are trying to advance their prowess in the enforcement realm.

(20:30):
And so really when you think about it, there’s a certain category of transactions. Some of them are going to be those high profile ones, particularly ones that have to do with very consumer facing industries, pocketbook issues, kitchen table issues, health care, things that are very much important to the constituencies of the states, but also just keep in mind that certain states have very specific interests at play. So thinking about things like, is there going to be an outsized impact on a particular state because of output or what’s going to happen in the integration planning piece of it, what’s going to happen to production — things like that that could have a very specific interest in states could be a marker for things to keep track of in terms of whether you can expect a state investigation. Impacts on labor markets in particular is something that the state AGs are sensitive to. And so really kind of taking that view of are there particular issues with respect to this industry or these parties that really should be thinking about that?

(21:25):
But overall, the point remains is when you’re thinking about a transaction and how to get it done, it’s always important to have a very coherent transaction rationale to be able to articulate why the deal is going to be good for consumers, good for the industry. That’s always going to be one of the North Stars to just having a very good plan to get through both the federal process, but as well as any state investigations that might occur. So it’s really a matter of understanding from the jump, how does this deal interest the states and what is their angle in terms of the impact to their state? Are they asking different questions or are they sort of rowing in the same direction as the DOJ or the FTC as the case may be?

(22:04):
And it’s also important to know that the mini-HSR acts that Justine referred to earlier are not bars on closing. So oftentimes the states are going to be very focused in terms of how they’re timing their investigation on where are you at in the process with the DOJ or the FTC. Are there issues that prevent you from closing, whether it’s the timing of the second request compliance or if you have a timing agreement with the DOJ or the FTC? And also what’s going on in other jurisdictions? So if it’s a global deal, they’re going to be very interested in what is the timing for other jurisdictions that are bars to closing.

Justine M. Haimi (22:36):
Thanks, Joe. Turning to you, Evan, on the litigation side, what should companies begin thinking about either in the context of a potentially contested merger or other kinds of conduct litigation brought by the states? Could we see, for example, forum shopping by state attorneys general?

Evan R. Kreiner (22:52):
Yeah. So I think there are a couple of interrelated lessons that companies should take away and really keep in mind when they’ve got a merger investigation or a conduct investigation going on by both federal DOJ or FTC and states. In a world where you’ve got a lot more state attorneys general who are interested in stepping up antitrust enforcement, you’re going to have a much higher likelihood that there’s going to be one or two or three or some number of state attorneys general who might be willing to push both to litigation and then to trial regardless of whatever settlement efforts the companies may want to pursue along the way. And so from the jump in a merger investigation or a conduct investigation, you want to think about the strengths and the weaknesses of whatever evidence you think you’re going to be able to put forward and how you might be able to put that forward to trial.

(23:49):
Now relatedly, from the start you’re also going to want to think about how you can have a settlement that applies to the widest possible number of potential antitrust enforcers. In the old days, you might have been able to settle with DOJ or the FTC a merger challenge or a conduct investigation and largely be able to assume that state attorneys general would more or less go along with whatever settlement the federal enforcer has reached, but that is clearly not the case anymore. And so if you are considering settlement during an investigation or during a litigation with DOJ or FTC or any number of state attorneys general, you’re going to want to think about how you can make it as broadly applicable as possible.

(24:36):
So you’re going to want to talk to the DOJ and the FTC as well as the state attorneys general individually or as a group to get a sense of what they might consider to be a reasonable settlement. And if you can strike one with all of the enforcers involved, that’s great. If not, then you’ve got to consider whether it’s worthwhile to strike a deal with any of the other enforcers and on what terms, given that those initial settlements might have some precedential value for states or the federal government that are holding out.

Joseph M. Rancour (25:10):
So Justine, just kind of thinking of summing up this conversation, I mean, what should companies be doing now? I mean, is there anything in particular that they should be doing to prepare for the emergence of more of these filings or just the fact that state AGs seem to be looking for more opportunities to get involved and in fact challenging both mergers and conduct in litigation?

Justine M. Haimi (25:32):
So every deal that’s HSR reportable will likely require a state-by-state analysis as more states begin to adopt their own mini-HSR approaches. So this analysis could happen early on in a transaction’s lifetime, potentially at the same time as parties are conducting multi-jurisdictional filing analyses or analyses for HSR reportability. As we mentioned earlier, so far these mini-HSR statutes have not added substantial incremental burden, but they are easy to miss if not actively looked out for and will become more important as additional states opt into this system and increase their focus on state-level enforcement.

Joseph M. Rancour (26:13):
I think I’ll just add on that for many deals, it really shouldn’t be an incremental burden either from the process point of view or the substance point of view. Getting access to those HSR materials without affirmative outreach or some sort of subpoena means that there could be more instances where states raise their hand or ask questions. But again, as we’ve said, certain transactions are going to be inherently more high profile and attractive to enforcers of all types. They could be politically charged, and we’ve seen that, or it could just intersect with some specific local markets.

(26:45):
Again, in most cases, it’s probably still going to be efficient to treat the DOJ or FTC investigation as kind of this is the data and documents that I need to produce, but also be mindful that you need to give information to states who show up and issue subpoenas, but also be mindful of those state-specific issues that they may be asking about. Because at the end of the day, states of course can challenge your merger. There may not be a bar to closing on these mini-HSR statutes, but we’ve seen because of recent history, the states are looking for more opportunities to bring cases, including with mergers. So it can’t be something that you just sort of push off to the side.

(27:20):
And with that, I think this wraps our podcast for today, but I want to thank you all for listening in and thank you Evan and Justine for a lively discussion.

Evan R. Kreiner (27:29):
Thanks everybody.

Justine M. Haimi (27:30):
Anytime.

Voiceover (27:36):
Thank you for joining us for today’s episode of “Fierce Competition.” If you like what you’re hearing, be sure to subscribe in your favorite podcast app so you don’t miss any future conversations. Additional information about Skadden can be found at skadden.com.