Global Antitrust in 2024: 10 key themes

Policymakers are devising “run faster” strategies to invest in and expand domestic critical capabilities

Driven by historic high reliance on foreign actors – particularly for critical resources, infrastructure and technologies – governments are devising policies to develop (or restore) self-sufficiency and competitiveness in sensitive homegrown industries. The US Inflation Reduction Act and the CHIPS and Science Act have marked the way in improving capabilities in semiconductors and sustainable energy. The European Commission (EC) has introduced similar measures, including the European Chips Act and the Green Deal Industrial Plan, and looked to protect yet more sectors with the Critical Raw Materials Act. The UK’s National Semiconductor Strategy and Energy Security Plan are indicative of how more countries will follow the US’s and the EU’s lead. Subsidies for domestic companies in these sensitive areas are proliferating at the same time as public administrations are becoming more cautious of foreign investors. Detailed assessment of sources of financing is now crucial to ensure smooth execution of projects.

Governments are intensifying FDI screening across a broader set of investors and businesses to protect sensitive sectors

Trends in inbound foreign direct investment (FDI) screening have echoed the economic development priorities behind the expanding investment in domestic critical capabilities.

• Sectors: Many of the sectors facing intense scrutiny are comparable across the Western hemisphere. The Committee on Foreign Investment in the United States (CFIUS) annual report shows that in 2022 most notices were filed in the Finance, Information and Services and Manufacturing sectors. The EC’s 2023 EU FDI Screening Regulation report tells a similar story: transactions in the Manufacturing and Information and Communication Technologies sectors were most likely to be subject to an in-depth review. In the UK, the majority of 2022-2023 transactions resulting in blocks or remedies were in related sectors – Communications Technology, Computing Hardware and Advanced Materials – but also Energy, Defense and Military/Dual-use. In Japan, cybersecurity deals (including data processing, semiconductors and software transactions) accounted for 61 percent of notifiable stock acquisitions.

• Investors: Unsurprisingly, given geopolitical fault lines, investors linked either directly or indirectly to China are subject to the most rigorous examination when it comes to FDI reviews (Russian investment has been broadly blocked by sanctions). Under the UK FDI regime, Chinese investors made up approximately 4 percent of overall notifications but comprised 42 percent of those subject to in-depth reviews, and approximately 50 percent of those were subject to remedies. In Japan, the number of Chinese notifications doubled between 2021 and 2022, with the Japanese government reportedly in close dialogue with US authorities when reviewing some cases. Although the volume of Chinese notifications has decreased, investors in the EU and the US with links to China (even if distant) have faced increased scrutiny, including longer reviews and greater risk of remedies. For example, Japanese investors have become subject to intensifying scrutiny due to their links to China, including deep supply chains, revenue dependency and targeting by China of Japanese tech. Similarly, Singapore has become more of a focus because many Chinese companies have redomiciled to Singapore, in part to hedge against geopolitical risk.

Businesses must ensure that they analyze FDI risk as part of a holistic regulatory assessment. A synced approach between merger control and FDI is especially crucial. For example, the tension between offering domestic supply commitments in semiconductor mergers in China and respecting broader US export control rules limiting China’s chip access raises concerns about the ability of US firms to meet stipulated conditions in Chinese merger decisions.

New and amended regimes are being introduced to counter perceived threats to national security and fair competition

A decade ago, many jurisdictions did not have FDI regimes. Now, traditional FDI regimes are no longer deemed as sufficient protection from the new generation of perceived threats to national security. The European system of FDI screening will likely see a further tightening of the net. In December 2023, the EU Court of Auditors recommended that the EU screening system be reformed to avoid “blind spots” and called for increased cohesion of the system and cooperation between the EC and the member states’ FDI authorities. The number of interventions in Europe continues to be high, at least in certain key jurisdictions.

For example, of 325 FDI applications filed in France in 2022, 70 transactions were only authorized subject to conditions – a figure proportionally higher than in merger control under the competition regimes.

Omissions that were considered inconsequential have gained new significance with the evolution of the global geopolitical landscape, and governments are now introducing new regimes to fill the gaps.

• Outbound investment: Outbound investment screening (OIS) regimes are likely to become more widespread in the coming months as they (i) provide control over strategic investments abroad, particularly in hostile states; (ii) counter the risk that investors may aid the development of sensitive technologies in those hostile states; and (iii) address offshoring of critical capabilities and the resulting reliance on other countries. The US, the EU and the UK are following suit, since China, Japan, South Korea and Taiwan already have OIS regimes. In August 2023, President Biden issued Executive Order 14105 directing the Department of the Treasury to establish an outbound FDI regime regulating certain US investments in “countries of concern” – for now, only China – which is likely to come into force sometime in 2024. The EC is likely to issue its proposal, together with its suggested revisions to the EU FDI Screening Regulation, in 2024, together with its suggested revisions to the EU FDI Screening Regulation. The UK government is also currently reviewing whether, and if so how, it should strengthen its outbound investment controls.

• Foreign subsidies: There are growing perceptions that unfair competition exists between homegrown competition and foreign (subsidized) competition. In particular, governments are concerned that unfairly subsidized foreign competition could undermine (and potentially eliminate) domestic competitors, especially in sensitive sectors. The EU’s Foreign Subsidies Regulation (FSR) – which became fully effective in October 2023 – has been introduced to tackle this issue. The FSR establishes a mandatory and suspensory obligation on parties meeting certain thresholds to notify the EC of foreign subsidies received from non-EU states (including the US and the UK), which may impair competition within the internal market. Similarly, in the US, the Federal Trade Commission has proposed numerous amendments to the Hart-Scott-Rodino (HSR) Act notification form including an obligation on transaction parties to identify and describe subsidies received (or anticipated to be received) from a “foreign entity or government of concern” (i.e., countries or entities that are strategic or economic threats to the US). This amendment addresses congressional concerns that subsidies from such entities can distort the competitive process or otherwise change the business strategies of subsidized firms in ways that undermine competition following an acquisition.