Antitrust

2 6 Between 2005 and 2015 (the only years for which reported data is available), the President blocked only three transactions based on national security concerns, although additional transactions were abandoned before the President formally blocked them. In the last two years, however, Presidents Obama and Trump have exercised their authority with increasing frequency, blocking four transactions involving Chinese foreign investors between December 2016 and March 2018. Responding to increasing foreign investments in U.S. companies that, in Congress's view, could degrade the United States' technological advantage and imperil national security, Congress enacted the Foreign Investment Risk Review Modernization Act (FIRRMA) in August 2018. FIRRMA and the related implementing regulations affect many changes to CFIUS's review of foreign investments in U.S. companies, but among the most important are the expansion of CFIUS's jurisdiction and the new obligations imposed on foreign investors. FIRRMA EXTENDS CFIUS'S JURISDICTION Prior to FIRRMA, CFIUS's national security review extended to 'covered transactions,' which were defined as any transaction that would result in foreign control of a U.S. business. 'Control' was not defined strictly by the size of its ownership stake but was construed broadly to encompass a foreign investor's ability to direct important matters of the U.S. company, such as selling the company, entering or terminating contracts, or closing production facilities. Even with this broad definition, U.S. regulators became concerned that a foreign investor's purchase of a noncontrolling interest could pose a national security threat in some contexts and that such transactions were evading CFIUS review. FIRRMA retains the functional definition of control, but expands CFIUS's jurisdiction to permit the review of transactions in which a foreign investor acquires a noncontrolling interest in a U.S. company involved with 'critical technologies,' 'critical infrastructure' or 'sensitive personal data of U.S. citizens' and will, among other things, have access to 'material nonpublic technical information.' Although FIRRMA expands CFIUS's jurisdiction in many ways, it also provides a new exemption for passive investors. In particular, FIRRMA clarifies that a foreign investor who participates in a committee or advisory board of an investment fund may be deemed to be a passive investor outside of CFIUS's jurisdiction. To qualify for this exemption, the investment fund and the foreign investor must meet several requirements. First, the investment fund must be managed exclusively by a general partner who is not a foreign person. Second, the fund's advisory board or committee in which the foreign investor participates cannot have the authority to control investment decisions of the fund or investment decisions of the general manager. Third, the foreign investor cannot otherwise have the ability to control the investment fund by influencing important functions. Lastly, the foreign investor will not gain access to material nonpublic technical information through its involvement with the advisory board or committee. MERGER CONTROL 04 C F I U S H A S S T E P P E D I N T O T H E L I M E L I G H T W I T H A M O R E A G G R E S S I V E P O S T U R E CFIUS Reform: A New Concern for Foreign Investors

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