FinTech

14 2 Remarks of Michael Murray, Acting Principal Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice (Oct. 14, 2020) (link). Press Release, Antitrust Division Seeks Additional Public Comments on Bank Merger Competitive Analysis, U.S. Department of Justice (Dec.. 17, 2021) (link); 3 As the financial services industry undergoes "massive transformation," the DOJ is taking on a "muscular" role for antitrust in FinTech.2 In October 2020, a senior DOJ official identified three areas where it is "leaning in." First, the DOJ will strictly enforce existing antitrust laws to police the financial markets. Second, the DOJ is updating its modes of analysis. Structurally, it reorganized its Antitrust Division by creating a new "Financial Services, FinTech, and Banking" section. Substantively, it is focusing on two trends: a greater number of transactions involving acquisitions of nascent competitors in emerging technologies and an increasing number of vertical mergers that involve various financial products and services, such as data platforms and infrastructure that are potentially inputs to the acquiring firms' products. The DOJ is also rethinking its bank merger competitive review guidelines, which have not been changed in almost two decades. 3 In particular, the DOJ is evaluating whether the 1800/200 Herfindahl-Hirschman Index screen, a common measure of market concentration, should be updated and how non-traditional banks (such as online lenders) should be incorporated into analyses of competitive effects involving bank mergers. The third component of the Antitrust Division's "lean in" agenda is to improve coordination with the U.S. Securities and Exchange Commission (SEC). The two agencies entered into a first-ever memorandum of understanding that sets forth information sharing and other protocols to better incorporate competition and securities law concerns in analyses of financial exchange and securities markets. Examples of how the DOJ exercises a muscular approach to FinTech antitrust issues will undoubtedly emerge as the FinTech industry rapidly consolidates, but the broader trends in antitrust (as well as the Visa / Plaid experience) suggest there will be particular scrutiny of transactions that involve a firm with market power buying a nascent competitor. In addition, vertical transactions (i.e., transactions involving firms that do not compete as horizontal competitors) traditionally have been considered pro-competitive and generally approved by the antitrust agencies. But there are calls for greater scrutiny of such deals, and the Federal Trade Commission (FTC) filed a high-profile lawsuit challenging a vertical transaction – the first such action by the FTC in many years. Particularly where a vertical transaction could enable the combined firm to deny data or other tools that competitors need to be viable, significant antitrust scrutiny is likely. The Biden Administration is poised to make a major mark in the evolution of FinTech. Based on early appointees in the antitrust space, including the designation of Lina Khan as FTC chair, the Biden Administration will take a tougher approach to antitrust enforcement, particularly in technology markets. On July 9, 2021, President Biden issued an Executive order on Promoting Competition in the American Economy calling for 72 actions aimed at improving competition, including in the financial services sector. Of course, the DOJ and FTC are not alone in setting the tone for how FinTech transactions are to be scrutinized. For example, the U.K. Competition and Markets Authority (CMA) will need to be carefully considered for FinTech transactions implicating the CMA's jurisdiction. In June 2019, the CMA cleared PayPal's acquisition of iZettle nearly a year after the transaction had formally closed. The companies were prevented from integrating their operations until the CMA had completed its review. ANTITRUST SCRUTINY OF FINTECH WILL BE INTENSE

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