As federal regulatory agencies have scaled back staff, narrowed enforcement priorities and, in some cases, declined to challenge significant transactions, state attorneys general are stepping in to fill the void with enforcement actions under state consumer protection, antitrust and privacy statutes, often teaming up across party lines. Skadden partners Ann Beth Stebbins, Andrea Griswold and David Wales discuss the areas states are targeting and what it means for companies and deals.
Episode Summary
As federal regulatory agencies narrow their enforcement priorities and decline to challenge significant practices and transactions in areas such as consumer protections, Big Tech and antitrust, state attorneys general (AGs) are stepping into the void. The implications for corporations are discussed in this Informed Board podcast. The host, Ann Beth Stebbins, a partner in Skadden’s M&A group, is joined by Skadden partners Andrea Griswold, co-head of the firm’s White Collar Defense and Investigations Group in the Americas, and David Wales, head of the firm’s Global Antitrust Competition Group.
A Structural Shift, Not a Passing Trend
State AG enforcement activity is not new, but its scope and sophistication have changed dramatically. Leading AG offices now maintain specialized units focused on technology, privacy, healthcare, financial products, and complex consumer protection. As Griswold explained, “I wouldn’t say that federal retrenchment created this phenomenon, but I do think it has accelerated a structural trend that was already underway, as state AGs increasingly see themselves as important regulators in their own right.”
The breadth of state statutes now being applied to complex business practices — artificial intelligence (AI), algorithms, data use, pricing, children’s safety — is striking. The recent Meta settlement, involving a bipartisan coalition of 48 attorneys general, illustrates the scale: States secured not just a major financial settlement but prospective changes to how Meta operates its products for minors.
Notably, state AGs are also filling gaps left where Congress has been unable to legislate, moving with a swiftness that federal legislators have not matched.
Beyond Red vs. Blue
While Democratic AGs have tended to focus on privacy, AI, labor and environmental issues, and Republican AGs have focused more on Big Tech, the most consequential development for companies is the large area of bipartisan overlap. “I would not ask only is this a red state or blue state issue, but rather, could this become a compelling consumer or investor protection issue across the political spectrum?” Griswold said. “And once the answer to that question is yes, I think the potential scale of the risk changes significantly.”
M&A in the Crosshairs
For dealmakers, state AG involvement can no longer be treated as secondary. Wales noted that, while states have long had authority to challenge mergers, they historically piggybacked on federal actions. States are now intervening in DOJ consent decree proceedings, pressing federal enforcers for tougher remedies, and, in some cases, independently challenging transactions that federal regulators cleared. States are staffing up, with California and New York building antitrust teams that rival law-firm practice groups.
In the pending Paramount/Warner Brothers Discovery deal, for example, state AGs intervened after the DOJ closed its investigation, extending the timeline and creating significant deal uncertainty. “If you are contemplating a deal where you expect there to be state AG involvement, you have to think about the timeline potentially being extended,” Wales said.
Industries with inherently local markets such as hospitals and food distribution, and sectors attracting broad political interest, such as healthcare, energy, tech and media, face the highest risk of state AG scrutiny.
Deal Planning and Risk Allocation
Griswold and Wales identified several concrete considerations for deal planning:
- Extended timelines. Merger agreements may need longer outside dates or automatic extensions to account for state AG proceedings that run beyond the federal review period.
- Risk-shift provisions. Parties should consider whether states might press the feds for more onerous remedies or threaten independent actions that raise the cost of settlement or reduce the benefits of a transaction.
- Closing conditions. State AG’s can act after a deal is cleared by federal regulators, as the pending Paramount/Warner Brothers Discovery transaction demonstrate, creating deal uncertainty even after federal clearance.
- Diligence on the target. Acquirers’ diligence should go beyond traditional questions about pending subpoenas or whistleblower complaints. Griswold advised asking, “What is the company that’s being acquired doing that could become compelling to a state AG based on the priorities and the trends that we’re seeing?”
Responding to State AG Engagement
When it comes to antitrust challenges, politics doesn’t typically dictate the outcome. “In the end, the merits probably matter the most,” Wales said. States face the same burden of proof in court as the federal government and, while they may be willing to be more aggressive, “it’s harder for them to justify spending literally tens of millions of dollars on a case if they think they’re going to lose.”
Outside the antitrust context, Griswold highlighted that many AG investigations never reach trial. The reputational pressure of a public investigation can itself be a powerful tool. She urged companies to consider how AGs think about public narratives: “They may actually be more interested in a press release that indicates that they got certain concessions than in getting a certain dollar amount or ultimately prevailing in court.”
Clear-Day Preparedness
Both panelists cautioned against reflexive outreach to state AGs. Proactive engagement can backfire if a company inadvertently triggers scrutiny in an area where the AG was not already looking. Instead, Griswold recommended that companies prepare as if an inquiry were imminent: “Put yourself in a position that, if the phone rang, you could say, ‘You know what? I’m coming in on Friday, and I’m ready to talk about this.’”
Companies should also audit their public messaging — websites, press coverage, marketing — to ensure consistency with how they would defend their practices under scrutiny.
[T]he new normal is that you're seeing increased activity and inquiry by many states across many different areas rather than one particularly ambitious AG who's deciding that this is going to be their issue. You're seeing that in more states and in more areas.” — Andrea Griswold
Voiceover (00:00):
From Skadden, you’re listening to The Informed Board, a podcast for directors facing the rapidly evolving challenges of a global market. A complement to our newsletter for directors, our aim with this podcast is to help flag potential problems that may not be fully appreciated, explain trends, share our observations, and give directors practical guidance without a lot of legal jargon. Join Skadden partners who draw on years of frontline experience inside boardrooms to explore the complex issues facing directors today.
Ann Beth Stebbins (00:33):
Federal regulatory agencies have narrowed enforcement priorities and, in some cases, declined to challenge significant transactions. The combination of these factors has prompted state attorneys general to fill the void with enforcement actions under consumer protection and privacy statutes and increased scrutiny of M&A transactions. How should boards be thinking about this evolving landscape?
(00:58):
I’m Ann Beth Stebbins, a partner in Skadden’s M&A group and your host of the Informed Board podcast. Today I’m joined by my partners, Andrea Griswold, co-head of Skadden’s White Collar Defense and Investigations Group in the Americas, and David Wales, head of Skadden’s Global Antitrust/Competition Group.
(01:18):
Dave, Andrea, welcome to The Informed Board.
Andrea Griswold (01:21):
Thank you for having us.
David Wales (01:22):
Great to be here.
Ann Beth Stebbins (01:24):
A state attorney general is the state’s head lawyer. Their job is to enforce the laws of their state. But with many corporations operating in multiple states, we’ve seen an increase in multistate litigation where AGs join together to investigate and sue companies.
(01:42):
Andrea, is this a new phenomena? And how has this evolved in recent years?
Andrea Griswold (01:47):
I would say is it’s not entirely new. State AGs have coordinated for decades in areas like tobacco, pharmaceuticals, consumer fraud and financial services. But what has changed is the breadth, sophistication, and independence of the activity. The leading AG offices now often have specialized lawyers and units focused on areas like technology, privacy, financial products, healthcare and complex consumer protection. They’re increasingly capable of developing sophisticated investigations themselves rather than simply joining a federal matter.
(02:20):
And we are also seeing broad state statutes applied to increasingly complex business practices — AI, algorithms, data use, pricing practices, children’s safety and investment products. And multistate coordination gives the AGs enormous scale. The recent Meta settlement involving a bipartisan coalition of 48 AGs is a good illustration. And what is striking is not just the size of the financial settlement but that the states obtain perspective changes to how Meta operates its products for minors.
(02:50):
So, I wouldn’t say that federal retrenchment created this phenomenon, but I do think it has accelerated a structural trend that was already underway, as state AGs increasingly see themselves as important regulators in their own right.
Ann Beth Stebbins (03:04):
The other thing that struck me about that situation is that the state AGs were able to act in an area where Congress has not been able to act. The state AGs have stepped in to fill that void. It’s not just lack of enforcement activity. It’s also just how difficult it is to get anything through Congress.
(03:24):
Is that a fair observation?
Andrea Griswold (03:26):
Absolutely. I think that they’re seeing an opportunity, and there’s an ability to act with the swiftness, and other areas of the government are not able to act in the same way right now. So, I do think they see that as an opportunity.
Ann Beth Stebbins (03:40):
In 43 states and in D.C., the attorney general is an elected official. State AGs often get tagged with acting in a politically motivated manner, and we’ve all heard the jab that AG stands for “almost governor.” But some recent situations, including the one you just described, Andrea, have involved bipartisan coalitions of state AGs.
(04:04):
Are there differences in approaches of red states and blue states, generally?
Andrea Griswold (04:08):
I’d be careful about reducing state AG enforcement to a red state/blue state divide. I do think it’s fair to say that Democratic AGs have tended to place more emphasis on areas like privacy, AI, labor, consumer financial protection, climate and environmental issues. Republican AGs have tended to focus more heavily on certain other areas, including Big Tech. But for companies, I think the most important development is the large area of bipartisan overlap. Meta is the obvious recent example.
(04:38):
So, I would not ask only is this a red state or blue state issue, but rather, could this become a compelling consumer or investor protection issue across the political spectrum? And once the answer to that question is yes, I think the potential scale of the risk changes significantly, and the risk of having interest from both blue state and red state AGs increases. And that’s how you can end up with a situation where you almost have every state AG interested in certain conduct.
Ann Beth Stebbins (05:09):
And particularly if it’s consumer facing, and the state AGs are appealing to that constituency, their own voters ...
Andrea Griswold (05:18):
And they do see themselves as acting for their constituents. They’re focused on what’s going to appeal to the constituents.
Ann Beth Stebbins (05:25):
As an M&A practitioner, I have been following with great interest the stepped-up involvement of state AGs in the review and scrutiny of M&A transactions. Dave, one thing that’s striking to me is the AG’s willingness to challenge transactions that federal regulators have already approved.
(05:44):
Is this the new normal? And how should we be planning for parallel reviews?
David Wales (05:49):
In some ways, it’s kind of old wine in new bottles, right. It’s not new. The states can bring their own actions. They investigate deals. They can challenge deals in federal court just like the Federal Trade Commission and the Department of Justice, and they certainly have done that historically.
(06:02):
What’s interesting, though, is that normally they piggyback on the federal actions. Sometimes if it’s a very local issue, like a hospital merger case, the feds will actually look for the local state AGs to join them in the case. And so, sometimes the states and the feds work together, but they do sometimes diverge, and we have seen that over time. It has been historically rare because one thing that is a constant constraint on the state AGs is they have scarce resources, and they still have to litigate and bring cases before federal courts or state courts under the same antitrust laws. They can’t just come in and make it up. It’s lots of precedent and similar statutes that they have to apply. And so, it was pretty rare that they would break from the feds.
(06:40):
There definitely have been in the past, over the past 20 or 30 years, instances where the states have stepped in, where the feds have investigated, maybe brought a settlement that they did not agree with. But even there, they were piggybacking on the feds’ actions. It was always pretty rare for the states to go it alone because that requires massive resources.
And so, I think the difference today is you are seeing more of it. The states are actually intervening. When you see an FTC or DOJ merger settlement, they will actually intervene in the process by which the FTC or DOJ has to get a court to approve a settlement. It’s kind of a low-cost intervention. They didn’t bring a separate action to challenge the deal or challenge the remedy in a separate proceeding, but they went after the Department of Justice and said that the process was too political and didn’t achieve the ends of the goals of antitrust, which is protect consumers.
Ann Beth Stebbins (07:28):
Dave, did you say they went after the government? Can you expand on that?
David Wales (07:33):
Yeah, it’s interesting. So, obviously federal and state overlapping jurisdiction here, and when they decide to implement a remedy or a consent decree, that proceeding before the Department of Justice in a settlement has to go pursuant to a Tunney Act review. This was a statute that was passed years ago with the idea of trying to prevent sweetheart deals between the executive branch and parties that are settling. And so, the states, believe it or not, can come in and actually intervene in that process. The judge in that proceeding is limited to deciding whether or not the settlement is in the public interest. It’s not coming in to substitute his or her judgment for DOJ, but really to make sure there was not something very untoward or something here that really doesn’t add up in terms of a settlement. That’s just one example of where states have been coming in kind of low cost to take shots at the federal enforcers.
(08:17):
Another area they do that people may not realize is that because they can bring their own actions and in some ways want to second guess there might be some political divisions or some idea here where the states feel like they have to fill the gap in terms of enforcement, they can also, during an investigation, push the federal authorities to take a more onerous approach and take a tougher settlement and basically with the threat of, “If you don’t do that, I may bring my own action and make you look bad.”
If there’s a gap, you would hope the feds would do what they’re going to do, and the states do what they do, but sometimes the states behind the scenes will try to influence the feds to get them to impose a more onerous remedy or to challenge a case and try to convince the feds that if they don’t do that, that they will intervene on their own and potentially make them look bad by second-guessing them.
Ann Beth Stebbins (08:58):
Are they pursuing the same theories? Or are some of the state AGs actually pursuing more novel theories similar to what we saw in the last administration? So, labor theories or impacts beyond consumer harm?
David Wales (09:15):
So far, we have not seen a dramatic change. There are a couple of recent examples where the states did challenge a deal that the Department of Justice did not challenge and actually got a court to block it, I think on fairly traditional antitrust theories.
(09:27):
The other example is the Department of Justice’s investigation of the Paramount-Warner Bros. deal. After the Department of Justice closed its investigation to let the deal proceed, the states intervened. What’s interesting is that if you look at the cases that the states have been willing to bring generally, they really are more traditional. I think the constraint on the states is, even if they may be more pro-enforcement and want to push the envelope when it comes to cases, they still have to go before a federal judge and convince him or her under the current law and the current precedent that the deal violates the law.
(09:59):
We certainly saw during the previous administration that they were willing to push the envelope on behalf of FTC and DOJ, and I think they lost a lot in court because of the difficulty in really bringing those envelope-pushing cases.
Andrea Griswold (10:11):
Before we leave this topic, what I’m seeing is the presumption that certain spaces are going to be covered by DOJ versus state AG versus other regulators. That really has gone away. And in a lot of cases, you’re seeing what might have traditionally been a case that you would’ve expected to be prosecuted or investigated only by DOJ, you’re seeing the involvement of state AGs who are not just hanging back and deferring. Or you’re seeing a case where DOJ is going alone, and you don’t have a regulator that might normally be there.
(10:42):
And so, there’s been a disruption in the non-antitrust space. And what that means from a practical perspective is that you don’t know who’s going to reach out on what and where it might lead. It might start out as something that gets the interest of the feds, and then state AGs might get involved, or you could have the inverse. Planning for how you’re going to map out responding to that I think has become increasingly complex.
Ann Beth Stebbins (11:06):
How do we assess upfront, and again going back to an M&A context, whether a transaction involves issues that will get the attention of a state AG?
David Wales (11:17):
From an antitrust perspective, there are certain telltale signs that a deal might do that. One is inherently local markets. So, think about hospital deals or food distribution deals, where states may feel like they have an expertise in deciding the nature of competition within local markets.
(11:32):
There’s also certain industries where the states have been predominantly more active. Health care. Energy. Tech. Media. And so, if you have a deal in those spaces, there’s a good chance that you will have the states that are also involved. It’s not a kind of black-and-white rule. And it comes back to the point you made before, Ann Beth, that it also kind of aligns with the politics, right. A lot of times, if you’re looking at state AGs that may be elected officials, they may be looking to make a bigger splash in spending their scarce resources on a merger investigation, and they tend to do that in those that are higher-profile ones that really cater to their local constituents.
Ann Beth Stebbins (12:08):
So, how should companies be incorporating state AG engagement into their deal-planning timelines, for example? They’re not necessarily in parallel. We see that in the Warner Bros. Discovery situation where the federal process had run its course, the deal was cleared, and you have a timeline that’s greatly extended because of the state AG action and the court calendar.
(12:34):
So, how do we plan for that when we’re negotiating deals, drafting closing conditions, allocating risk between parties, and setting timelines and outside needs?
David Wales (12:47):
It’s something we have to think about more and more on transactions these days. I think, for the vast majority of deals, if there are going to be state and federal investigations, they will likely be done in parallel. And so, the timing may actually work out.
(12:58):
What makes it more complicated, and this is definitely the case in the Warner Bros. case, is that there was also an outside-U.S. review. The European Commission was investigating the deal, which prevented the parties from closing, which then gave the states more maneuverability in terms of when and how to bring their own action, which is now pending before the courts.
If you step back, and if you are contemplating a deal where you expect there to be state AG involvement, I think you have to think about the timeline potentially being extended. I think that’s a real threat. If you look at the Warner Brothers case, they had agreed to some pretty onerous timing ticking fees, for example, that will now kick in potentially because of the state involvement.
(13:38):
You have to think about the risk-shift provisions. If you’re thinking about what the feds may want to happen on a deal, if there’s a certain divestiture that you think the federal authorities would accept, you have to ask yourself, is it possible the states would, number one, as I said before, press the feds to demand more because the feds don’t want the states looking over their shoulder? Or, number two, will the states threaten to bring their own action to impose more strict remedies? And so, I think you have to think about how that might play in terms of the leverage and the timing.
(14:05):
As Andrea was saying, sometimes you have to think about multiple states that might have different stakes. It’s not like the states necessarily act with one voice. Certain states have been more proactive in enforcement — California, New York, Washington, Oregon. In terms of closing conditions, as well to your point with the Hart-Scott-Rodino timing, it may be that the states, like they did in Warner Brothers, act outside of that timing because they’re able to.
Ann Beth Stebbins (14:28):
What if you do encounter state AG opposition? What’s the best way to deal with it? Is it effective to court public opinion? Is it effective to offer up remedies? Is it effective to seek the support of other constituencies? What works here?
David Wales (14:47):
There’s no doubt in the antitrust world politics matter, Ann Beth, but in the end, the merits probably matter the most out of all of this. If you have state AG involvement, it really is advocating on the merits. You want to convince them that on the merits the transaction does not violate the law or that the transaction does not violate the law as remedied. Even though you may not win them over, you want to convince them that they’re going to lose in court because, while states may be willing to be more aggressive, it’s harder for them to justify spending literally tens of millions of dollars on a case if they think they’re going to lose.
(15:19):
There’s also a way of working with the feds to coordinate your advocacy as well. The feds and the states will cooperate and share evidence. There are ways to try and convince the federal authorities to work on the state AGs and try to convince them that on the merits the deal should be approved. We have seen recent deals when there has been more of a political overture to try and get the states to settle. Obviously, in the Warner Bros. case, that did not work, and the states decided to litigate against the parties. I think in the end you have many states, they have different political considerations. They may be blue. They may be red. In the end, I think you have to focus on the merits.
Ann Beth Stebbins (15:53):
And the ultimate constituency is the court.
David Wales (15:56):
Correct.
Andrea Griswold (15:57):
On that point, outside the antitrust context, they have to be ready to litigate, but in a lot of the investigations that we see with state AG, if they serve a cease-and-desist letter, or they open an investigation by serving a subpoena, it may ultimately be that it never reaches court, and they know that. The pain that — especially if that investigation becomes public — it can inflict on the company is so great just from the public narrative that they’re being scrutinized by a regulator. From that perspective, the fact that state AGs are public officials, and their audiences include the press as well, I do think that the public narrative can be part of your enforcement strategy in a way that companies sometimes underestimate insofar as you can think about, how can we bring this to a close short of litigation and end that pain for the company in a way that makes sense all around?
(16:52):
And what do I mean by that? So, I think you have to look at what is the AG’s concern, and what do they want that public narrative to mean? They may actually be more interested in a press release that indicates that they got certain concessions than in getting a certain dollar amount or ultimately prevailing in court, thinking about the public narrative and how that feeds into the strategy of dealing with state AGs. I think it’s less common in consumer protection cases and investigations and things outside the antitrust world that they go all the way through to a trial and that that’s how it’s resolved.
David Wales (17:29):
State AGs are opportunistic, right. They can look to find a way of getting the biggest bang for their buck delivering results for their constituents. I do think the consumer protection side of the house is an easier target for them. I certainly saw that at the FTC when I was there. It was very rare that they litigated consumer protection cases. It just was the nature of the beast, and maybe it was because that they were monetary settlements.
It’s different when it comes to merger defense. You have very sophisticated parties that are defending the deal, and there are high stakes involved. If you do think states are involved, the best constraint is really putting them to their proof and forcing them to litigate against you. And so, back to the question about how does this impact merger counseling, one thing for sure you need to do in your merger agreements is have enough time to litigate.
(18:15):
What we see and what we could see more of is where the states know that if the feds do not intervene on a deal, and the parties are close to their outside date, they might be able to file a lawsuit that runs the clock out on the deal. If you’re planning your deal, you will need to think about maybe a longer outside date.
Ann Beth Stebbins (18:31):
Or automatic extensions. We had seen this with global regulators. They would play out the clock without ever having to shut down a deal, effectively killing the deal with time. That could be another tool for state AGs. They get the press release. They get the benefit with their constituency at home but then never actually have to bring it to court.
David Wales (18:55):
I think one other phenomenon is that in the past, it was hard for the states to come in and intervene on a merger where the feds had already taken an action. The states would have to go to a judge and say, “Your Honor, the FTC or DOJ settled on the cheap. They implemented a remedy here that is insufficient.” If you look over time when states have tried to make those arguments, they failed. I think federal courts and judges prefer settlements. I think they also, too, to some degree, saw the feds as wearing a white hat when they came into court to say, “Hey, here’s why we made this settlement. Here’s why this settlement is the best interest of consumers.”
(19:32):
I think that’s changing. The states and courts have been able to play that narrative that the feds may be settling on more political terms, or more in political ways, and maybe the FTC and DOJ doesn’t have the same white hat they used to have. That’s also emboldened the states who have said, “If we go to a court, and we explain that we think this was political or did not go far enough, judges might be more willing to hear those arguments.” That’s another thing we may see down the line with additional state enforcement actions.
Ann Beth Stebbins (20:01):
Another angle I wanted to look at state AG activity from is diligence and looking at a company as a target. Andrea and I were involved in a situation a few months back where there was an investigation of the target company and some of its practices. One thing, Andrea, that you and I both concluded is that an M&A transaction had the potential to really focus AG attention on the business practices of the target company.
(20:35):
How would you advise clients in the diligence process to thoroughly investigate what’s going on at the target company and how state AGs might get interested in the business of the target, or even the business of the acquirer, once a transaction is announced?
Andrea Griswold (20:55):
I think there’s a couple of different things that could draw the attention of a state AG. And one that we have talked about, Ann Beth, is if it’s a private equity roll-up, or there’s some scrutiny over who the acquirer is, and that can in and of itself bring attention. The regulators read the press, and the press coverage alone can pique interest. You have to go beyond perhaps the traditional ordinary diligence questions of, “Have there been any whistleblower complaints? Have they received a subpoena or a regulatory inquiry?” and ask, “What is the company that’s being acquired doing that could become compelling to a state AG based on the priorities and the trends that we’re seeing with state AG investigations?”
(21:35):
So, starting with, what is the industry? Dave spoke about this before, some of the industries that are getting particular focus now — healthcare, technology, AI — anything that is consumer-facing. And I wouldn’t just look at what generally do we think the trends are, but what have the state AGs in the states where that target company is operating, where have they actually been focused over the course of the last 10, 12, 18, 24 months? And then have those state AGs turned over in that time period? So, is that even a relevant data point? Because if 18 months ago it was a different state AG, that’s not going to be useful. But the New York attorney general has been in that seat for quite some time, and so you have a little bit more of a sense based on precedent, if you’re operating in New York, about what sort of things have drawn the attention of that state AG. So, I think it’s a combination of industry practices, which state you’re operating in, the acquirer, whether that’s going to get attention.
(22:37):
In addition, what I think is important for this audience is also assessing the actual business model. The way that the company that you’re acquiring makes money is going to be the thing that draws the attention of the regulators. If you come up in your diligence with a market practice that you think may draw the attention of a state AG for all the reasons that we just talked about because it checks some of these boxes, then you have to really think about whether you want to acquire that business at all. If it’s existential to the profitability, and that is the thing that you think the state AGs are going to focus on, I think that’s something that is really relevant in the analysis.
Ann Beth Stebbins (23:18):
Should companies be proactive in their engagement with state AGs? And is it worthwhile for companies to engage on a clear day with state AGs in states where they’re active and have significant business and operations?
Andrea Griswold (23:39):
You need to know the facts and what you think the issue may be before you pick up the phone or walk into an office. I think there’s reflexively sometimes a desire to have engagement so that you can proactively feel like you’re in a dialogue and not be surprised, but you have to ask yourself the question, what am I going to say when I have this clear-day engagement? Whatever you say in that meeting could then end up triggering inquiry or scrutiny in an area where they’re not looking. Are you defending a practice that you think is highly defensible and has gotten some press that you think is misguided? That’s a very different analysis from a situation where you think that you might want to lean back and wait for them to come to you.
(24:28):
If you’re operating in multiple states, who do you reach out to? That’s a difficult question because you could reach out to the California AG and think that you’re having a productive dialogue around certain practices that you might think be of interest to them, but then could turn out that actually it’s New York who is interested.
While there are instances of these consortiums working together, that isn’t always the way that it works. So, as you’re analyzing the question of whether you should proactively reach out on a clear day, I think it’s a very complicated question because it involves, who are you going to reach out to? What are you going to say?
Ann Beth Stebbins (25:08):
And back to your earlier statement, these are elected officials in most states, and the who you reach out to today might not be who’s around when and if a problem emerges.
Andrea Griswold (25:23):
Absolutely. If you think you’re going to get a subpoena next week because of what you’re reading in the papers, then maybe you do want to get in front of it. There are situations where I would advise engagement, especially if you think you’ve identified which state AG may be looking. But in the meantime, you want to be preparing yourself. For example, if you got a subpoena, if you’re concerned about this potential practice that you think is defensible but that you think may get scrutiny, you must make sure that you — assume you got that subpoena — put yourself in a position that if the phone rang, you could say, “You know what? I’m coming in on Friday, and I’m ready to talk about this.” And I think that is extremely important because the reflexive desire [is] to pick up the phone when you haven’t done that preparatory work, you’re not going to be ready. You’re not going to have clear, coherent messaging.
(26:09):
You can make sure in the meantime, not only are you prepared to respond to any requests you might get, and you know where, if you do have blind spots or you do have issues, problematic policies that you can fix. On a clear day, that’s the time to do that, before you get that scrutiny.
David Wales (26:27):
On the antitrust side, it’s more defense than offense when it comes to thinking about how state AGs may intervene on a deal.
There’s also a leverage component where, if you have a merger, the states feel like they have some leverage over you. And if there are some maybe non-merger things that they want to try to have you change your behavior, you know, even the feds sometimes but also the states would see it as an opportunity to hold up the deal or interfere with the deal in a way to try to get the companies to do something outside of the deal in terms of their behavior.
You have to always think about that quid pro when it comes to engaging with the AGs who are inherently political. You would never tell a client not to have a good relationship with their state AG.
(27:05):
Generally, I think it’s different, though, than reaching out to them proactively when you have a deal. But as I mentioned before, sometimes having the AG on your side can be helpful. It’s not a silver bullet when it comes to federal enforcement. And as Andrea said, too, it’s not a silver bullet in the sense of there are 49 other states that could intervene on a big deal. You may have your AG in your corner, but there might be 49 others that are opposed. So, I think you have to keep that in mind, and it really is case by case.
Andrea Griswold (27:31):
And one more thing I would just add on this point about what should you do on a clear day, if it’s short of picking up the phone, you’re always speaking as a company. Make sure that what you’re saying on your website, the press that you’re getting, is this consistent with how you want to be messaging yourself and your practices? Make sure that the story and the messaging and the narrative that is out there about the company is consistent with how, if you had to go in on Friday and talk to the state AG, do you feel that is buttoned up in the best way?
Ann Beth Stebbins (28:03):
Do you think more active state AGs are the new normal?
David Wales (28:08):
I think it is the new normal. There’s been a push for more aggressive antitrust enforcement by both Republicans and Democrats. And what we’re seeing is real change in that they’re staffing up. If you look at the number of antitrust lawyers that California and New York have, they’re starting to look like law-firm-size practice areas. They’re doubling down on personnel.
(28:27):
Also, too, there’s a number of states that are pursuing their own mini HSR statutes. So, currently, California, Washington and Oregon have their own HSR reporting requirements that go beyond the federal requirements. There’s also a number of states, and there’s 12 states today, that have requirements to notify the state if you’re doing a healthcare deal. And so, there’s no doubt that they are angling.
(28:49):
One thing that also really incentivizes them to do more is that they’re winning. That one case that the states brought where DOJ had declined to intervene, they win it alone, they litigated it, and they won. And I think that gives them a sense that they don’t have to worry about having the feds with them in court, or they don’t worry as much about having to convince a judge to do something beyond what the feds have done in the current environment.
Andrea Griswold (29:13):
I have a slightly different answer to the question of, is this a new normal? I think that these things tend to go in cycles, and I do think there have been periods of time where you had very active state AGs. There were periods of time under AG Spitzer and AG Cuomo where the New York AG in the financial space, in particular, was very active. And in fact, my former office, the Southern District of New York, in some ways during certain periods of time was not out front on some of those cases, but the New York AG was and then shifted back in another direction.
(29:51):
What I think is the new normal is that you’re seeing increased activity and inquiry by many states across many different areas rather than one particularly ambitious AG who’s deciding that this is going to be their issue. You’re seeing that in more states and in more areas.
Ann Beth Stebbins (30:11):
Well, Andrea, Dave, this has been extremely insightful. Definitely an area for us to keep our eye on. And thank you for being my guests today on The Informed Board.
David Wales (30:23):
Thank you.
Andrea Griswold (30:24):
Thank you for having us.
Voiceover (30:25):
Thank you for joining us for today’s episode of The Informed Board. 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.
(30:39):
The Informed Board is a podcast by Skadden, Arps, Slate, Meagher, and Flom LLP and affiliates. This podcast is provided for educational and informational purposes only and is not intended and should not be construed as legal advice. This podcast is considered advertising under applicable state laws.
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