With the advent of messaging apps such as Slack, Microsoft Teams, and Signal, the ways in which employees are able to communicate and collaborate with each other are rapidly expanding. At the same time, companies have increased use of document collaboration platforms such as Microsoft SharePoint and eRooms to supplement or replace traditional closed-system document management systems. Message and document retention within these platforms is uneven and, in some cases (such as in the popular messaging app SnapChat), speedy message erasure is not a bug, but a feature. On Friday, January 26, the Federal Trade Commission (“FTC”) and Department of Justice Antitrust Division (“DOJ”) announced that the two agencies are updating the standard preservation obligation guidance to keep pace with the expanded use of collaboration tools that do not otherwise prioritize message retention.

Continue Reading FTC and DOJ Update Preservation Obligation Guidance

On January 22, the FTC announced updated dollar thresholds triggering the bar on interlocking officers and directors under Section 8 of the Clayton Act, 15 U.S.C. § 19. Section 8 of the Clayton Act prohibits one person from serving as a director or officer of two competing corporations if the corporations meet certain size and competitive sales thresholds.  For 2024, Section 8 applies if each corporation has capital, surplus, and undivided profits aggregating more than $45,257,000; however, no corporation is covered if the competitive sales of either corporation are less than $4,525,700.  These new thresholds took effect on January 22, 2024. 

The next day, the FTC announced updated dollar thresholds triggering the jurisdiction of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), 15 U.S.C. § 18a, to certain acquisitions.  The new HSR Act thresholds will take effect 30 days after publication in the Federal Register

Continue Reading FTC Increases HSR Thresholds and Clayton 8 Thresholds

On December 22, 2023, President Biden issued Executive Order (E.O.) 14114 further addressing the Russian Federation’s (Russia) continued use of its military-industrial base to support its aggression against Ukraine and to further counteract Russia’s continued evasion of U.S. sanctions. This latest round of sanctions targets foreign financial institutions (FFIs) that engage in certain transactions involving Russia’s military-industrial base. It is likely additional sanctions will be adopted as we approach the second anniversary of the war in Ukraine.

Specifically, E.O. 14114 amends E.O. 14024 to authorize sanctions against FFIs that have

  1. conducted or facilitated any significant transaction or transactions for or on behalf of any person designated pursuant to E.O. 14024 for operating or having operated in the technology, defense and related materiel, construction, aerospace or manufacturing sectors of the Russian economy or other sectors as may be determined to support Russia’s military industrial base; or
  2. conducted or facilitated any significant transaction or transactions, or provided any service, involving Russia’s military-industrial base, including the sale, supply or transfer, directly or indirectly, to Russia of any item or class of items as determined by the Secretary of the Treasury.
Continue Reading Latest Round of Russia Sanctions Targets Foreign Financial Institutions Supporting Russia’s Military-Industrial Base

On Monday December 18, the Federal Trade Commission (“FTC”) and the Department of Justice (“DOJ”) released the final version of their Merger Guidelines (“Guidelines”), capping a nearly two-year effort to implement a policy capturing the Biden Administration’s aggressive enforcement stance in merger reviews. The Guidelines are intended to provide transparency into how the agencies evaluate whether a merger or acquisition may lessen competition in violation of the Clayton Act. After the agencies released the draft merger guidelines in July (“Draft Guidelines”), the agencies received over 3,000 public comments, many of them criticizing the Draft Guidelines for being too aggressive and departing too radically from controlling case law and practice.  The final Guidelines reflect the agencies’ consideration of the comments received.

While the final Guidelines largely maintain the same aggressive positions of the draft, they introduce more nuanced language that signals more openness to rebuttal evidence than the Draft Guidelines. The most apparent change is an across-the-board shift away from a flat prohibition on certain effects and toward a more traditional warning about the possible consequences when those effects are present. This is an important change to the draft language, which had come under fire for appearing to set forth several rules of per se illegality. For example, in Guideline 2, the draft language stated that “mergers should not eliminate substantial competition between firms,” (emphasis added), signaling the possibility that the agencies would challenge any merger between rivals even when remaining competitors would discipline any post-merger attempt to raise prices or reduce output or quality. In contrast, the final language states that “mergers can violate the law when they eliminate substantial competition between firms” (emphasis added), affirming what has always been the case.

Continue Reading FTC and DOJ Publish 2023 Merger Guidelines

The Corporate Transparency Act (“CTA” or the “Act”) comes into effect on January 1, 2024. Enacted by Congress as part of the Anti-Money Laundering Act of 2020, the CTA requires certain entities, domestic and foreign, to report beneficial ownership to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”).

The CTA’s reporting obligations will apply to “Reporting Companies” (discussed below) currently in existence, and to those formed after January 1, 2024. However, while FinCEN estimates that the CTA will affect over 32 million entities, it will largely impact only smaller and unregulated companies. For example, companies that meet the CTA’s definition of a “large operating company,” are publicly traded or regulated, or are a subsidiary of certain exempt entities are not required to submit beneficial ownership information to FinCEN. Accordingly, while all companies should take note of the CTA and the significant change in the law for corporate reporting obligations, an equally vast number of entities will likely find themselves exempt from these requirements.

With the CTA’s effective date fast approaching, companies should consider its potential impact to their compliance obligations and, if appropriate, implement appropriate policies and procedures for handling reporting.

Continue Reading The Corporate Transparency Act December 2023 Update

On November 13, 2023, the DOJ Antitrust Division moved to dismiss its last remaining no-poach indictment.  In 2021, a Texas grand jury indicted Surgical Care Affiliates (“SCA”) and a related company for conspiring with competitors not to solicit each other’s senior-level employees.  While a motion to dismiss was pending in that case, a district court in Connecticut entered a judgment of acquittal (“JOA”) on labor market allocation charges brought against several engineering firms, ruling in United States v. Patel that, among other things, ample evidence of employees moving between the defendant companies meant that any conspiracy to restrict such movement could have had no “meaningful” effect on competition and was not illegal per se.    

Continue Reading An Uncertain Future for DOJ’s No-Poach Prosecutions

On November 14, 2023, the Securities and Exchange Commission (the “SEC” or the “Commission”) announced its enforcement results for fiscal year (“FY”) 2023, which ended on September 30, 2023.  The SEC’s FY 2023 results continued to reflect an aggressive approach to enforcement, reaching record highs in multiple enforcement metrics.  Specifically, the SEC announced that it brought 784 total enforcement actions, obtained orders totaling nearly $5 billion in financial remedies, and distributed nearly $1 billion to harmed investors.

SEC Chair Gary Gensler referred to the SEC’s Division of Enforcement as a “cop on the beat” that provided benefits to the investing public, while applauding the Division of Enforcement’s “effectiveness” during FY 2023.  Director of the Division of Enforcement Gurbir Grewal noted that the Division achieved results by “leveraging risk-based initiatives, seeking robust remedies, rewarding cooperation, protecting whistleblowers, or returning nearly a billion dollars to harmed investors.” 

Continue Reading SEC Releases Enforcement Highlights for Fiscal Year 2023

President Biden issued an Executive Order on October 30, 2023 designed to place the United States at the forefront of law and regulation of Artificial Intelligence (AI). The Executive Order on the “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence” creates binding disclosure requirements for companies that are either developing certain large language AI models or acquiring or possess sufficient computing power to run such AI implementations (as described below). The Order also establishes, and directs several federal agencies to establish, industry benchmarks for ensuring robust, reliable, repeatable and standardized testing and evaluations of AI systems, create new standards for AI safety and security.

The Order contains a lot of detailed provisions and initiatives involving nearly every government agency and calling for wide-ranging studies and recommendations on nearly every facet of AI, significant provisions of which are described below.

Of particular note, however, the President invoked the Defense Production Act to impose certain requirements that will go into effect 90 days after the issuance of the Order. There are two significant requirements going into effect affecting companies that employ AI models and companies that employ or provide large computing capacity that can be used for AI.

Continue Reading President Biden Issues Far-Reaching Executive Order on Artificial Intelligence

On October 26, 2023, the National Labor Relations Board (“NLRB” or “Board”) issued its long-awaited final rule establishing a new standard for determining when two employers are joint employers under the National Labor Relations Act. If any two entities are deemed joint employers, both are obligated to bargain with a union that represents the employees. Moreover, each entity is responsible for any unfair labor practice committed by the other and both are subject to demands for recognition and/or an NLRB election.

The final rule, set to take effect December 26, 2023, rescinds and replaces the Board’s previous joint employer rule issued in April 2020. The most significant change under the new rule is the manner in which it alters what is needed to show that two entities share or codetermine employees’ essential terms of employment. The 2020 rule required an entity to possess and actually exercise “substantial direct and immediate control” over one or more of the essential terms. Under the new standard, an entity can be deemed a joint employer if it has authority to control at least one essential term, “whether or not such control is exercised, and without regard to whether any such exercise of control is direct or indirect, such as through an intermediary.”

Although similar to a previous standard announced in the NLRB’s 2015 decision in Browning-Ferris Industries, 362 NLRB No. 186, the new rule goes considerably further by establishing that mere possession of such authority, alone, is sufficient to find joint employer status.

Continue Reading NLRB’s New Joint Employer Test Significantly Expands Circumstances Under Which Separate Entities Will Be Deemed Joint Employers

On September 11, 2023, the SEC announced the settlement of administrative proceedings brought against nine registered investment advisers for disseminating hypothetical performance returns on their public websites without adopting required policies and procedures required by Rule 206(4)-1 under the Investment Advisers Act of 1940, known as the Marketing Rule.

Among other things, the Marketing Rule prohibits advisers from using hypothetical performance information in advertising material unless they have adopted and implemented policies and procedures to ensure that the information is relevant to the likely financial situation and investment objectives of the advertisement’s intended audience. Hypothetical performance information includes the performance of model portfolios and backtested performance returns derived from applying a strategy to historical data from periods when the strategy was not actually employed. In addition, Rule 204-2(a)(11) under the Advisers Act requires advisers to maintain copies of all advertising material disseminated directly or indirectly. The SEC alleged that all nine advisers failed to adopt and implement the requisite policies and procedures, resulting in the dissemination of hypothetical performance information to mass audiences through their websites. In addition, the SEC alleged that two of the advisers failed to maintain the required copies of their advertising material.

Continue Reading SEC Settles Enforcement Proceedings Against Nine Advisers for Alleged Marketing Rule Violations