Investment in the U.S. is shaped not only by valuation and expected returns but also by the regulatory policies that impact and, in some cases, restrict the deployment of capital to U.S. businesses. With the upcoming United States presidential election, the future of antitrust enforcement and foreign investment national security reviews hangs in the balance. In this article, we examine what the outcome of the election could mean for the U.S. and its trading partners, including Canada.
Competition and antitrust
In the run-up to the 2020 presidential election, then-candidate Joe Biden made antitrust enforcement a key plank of his platform. With that in mind, we observed in September 2020 that "it is conceivable that [a Biden administration] will bring a new level of empowerment for regulators in managing the economy—particularly in traditional areas of Democratic concern such as environmental regulation, healthcare and labor"1.
At that time, Biden's views on competition did not appear wildly different from the approach of the incumbent administration, with President Trump frequently vocalizing calls to get tough on monopolies, especially social media giants like Facebook (now Meta) and Google. History has shown, however, that the Trump Administration was hardly an outlier from prior administrations. Under President Trump's watch, for example, the Federal Trade Commission (FTC) sought to block mergers at a rate only slightly above his two predecessors, Obama and Bush. Trump's antitrust priorities appeared to pursue perceived enemies more than reflect a comprehensive strategy to enhance competition.
An election win for the Democratic nominee would renew the mandate to impose meaningful and lasting changes to enforcement of the country's antitrust laws and the promotion of free competition.
The Biden Administration, on the other hand, has taken on competition and antitrust matters with a fervor not seen in decades. Trump's successor kicked off by appointing several progressive proponents of antitrust reform, including Lina Khan to Chair the FTC and Jonathan Kanter to run the Antitrust Division of the Department of Justice (DOJ). In unprecedented fashion, in July 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy, premised on the view that "over the last several decades, as industries have consolidated, competition has weakened in too many markets, denying Americans the benefits of an open economy and widening racial, income, and wealth inequality". At the express direction of the President, the agencies tasked with enforcing the antitrust laws revised their merger guidelines for the first time in more than ten years; they refused to negotiate with merging parties, resulting in the abandonment of more deals and more cases going to court, including the likes of Microsoft-Activision, JetBlue-Spirit and Kroger-Albertsons, and, in September 2024, the FTC's ban on nearly all employee non-competition restrictions will come into effect. In many respects, our prediction four years ago has materialized.
The election outlook for competition and antitrust
The election outlook for competition and antitrust": An election win for the Democratic nominee would renew the mandate to impose meaningful and lasting changes to enforcement of the country's antitrust laws and the promotion of free competition. A second Trump administration, on the other hand, would likely move in a different direction, if only because his appointees to the FTC and DOJ would undoubtedly bring a distinct worldview from those currently in charge. Interestingly, however, Trump running mate J.D. Vance has called for the breakup of Google and lauded FTC Chair Khan as "doing a pretty good job" and the "best person" in the Biden Administration. Nonetheless, for whatever Trump conveys to the contrary, he can be expected to listen to business interests.
Foreign investment reviews
In September 2020, we noted that President Trump had leveraged the Committee on Foreign Investment in the United States (CFIUS) during his term to restrict Chinese investment in technological applications, particularly those who collected personal information of Americans. To date, seven proposed transactions have been blocked by a President following a CFIUS investigation, three by Trump alone. He also ordered the divestiture of TikTok by its Chinese parent. "While it remains to be seen whether CFIUS will continue to play an outsized, and politicized, role in the event the upcoming U.S. election results in a change of administration," we surmised that "scrutiny of Chinese investment in the U.S. accelerated under former President Obama and, therefore, can be expected to remain a bipartisan priority well into the future"2.
States are increasingly enacting their own legislation to restrict property ownership by citizens from countries perceived as adversaries, such as China and Russia.
As it has turned out, President Biden has not been as aggressive in formally blocking deals, having done so only once just recently to thwart the acquisition of land in Nevada by a Chinese company. That said, CFIUS has purposefully increased its efforts to review non-notified transactions and impose conditions on foreign ownership after transactions have closed at a pace exceeding the Trump Administration. And, long-awaited outbound investment rules have been published under Biden's watch to limit the deployment of U.S. capital to develop sensitive technologies by "countries of concern", currently defined to include only China. It remains to be seen, in the wake of President Biden's withdrawal, what the incoming Democratic candidate's position will be when it comes to foreign investment.
The election outlook for foreign investment reviews
Whatever the outcome in November, we expect continued scrutiny of Chinese investment into the U.S. and increased attention on outbound investment to China. Additionally, states are increasingly enacting their own legislation to restrict property ownership by citizens from countries perceived as adversaries, such as China and Russia.
What comes next?
The divergent policies on the table will likely alter the regulatory direction of merger approvals, affecting transaction strategies and partnership structures. As in any contentious election year, the business community will want to consider how to adapt their strategies, especially cross-border dealings, according to the outcome of this historic election.
Footnotes
1. Torys LLP, "The 2020 U.S. election: what's at stake?".
2. Ibid.
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