Linklaters partners Antonia Sherman, Head of the U.S. Antitrust & Foreign Investment Group, based in Washington, DC, and Pierre-Emmanuel Perais, M&A Partner based in New York, spoke at The Luxury Law Summit London on "Fashion M&A in the U.S.: Updates on Key Regulatory Trends" on June 13, 2023.
The top three key insights from the discussion include:
1. Strategize protection of proprietary information or trade secrets in face of potential non-compete ban - The fashion/luxury industry relies heavily on non-competes. However, the U.S. Federal Trade Commission (the "FTC") proposed a very broad ban on non-compete provisions, which would generally prohibit the use of non-competes with employees and independent contractors and in the context of M&A transactions. The vast majority of the nearly 27,000 comments received during the public comment period seem to support the proposed ban of non-competes, but hundreds of business groups, including the U.S. Chamber of Commerce and the National Retail Federation, penned a letter calling on the FTC to withdraw the rule. We discussed strategies such as NDAs, assignments and roll-overs.
2. Be aware of the developments in ESG regulations and the tension with antitrust - ESG is being governed much more significantly by hard law at the federal and U.S. state level. Not only the luxury industry, but also the financial players in the business will be subject to stricter compliance requirements. However, there is a tension between antitrust and ESG as many ESG policies would have the effect of raising prices and reducing quantity. The politicization and polarization of ESG in the various U.S. states makes it complicated for businesses to navigate.
3. Prepare for scrutiny by the Committee on Foreign Investment in the U.S. ("CFIUS") - Fashion/luxury houses have increasing recourse to data and technology. Transactions involving U.S. critical technology businesses, which is by CFIUS standards a U.S. business involved in critical technology, critical infrastructure or sensitive personal data (collectively known as "TID U.S. Businesses"), are reviewed by CFIUS. U.S. companies involved in the collection, storage or sharing of personal data may be designated by CFIUS as a TID U.S. Business dependent on the nature of the personal data and the volume set with which they deal. CFIUS is equally concerned with "emerging technologies" as they are with sensitive technologies tied to existing U.S. export controls, and that is a list continually growing as new products and capabilities are evaluated.
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