Category: Administrative & Regulatory

DOJ Limits Application of Computer Fraud and Abuse Act, Providing Clarity for Ethical Hackers and Employees Paying Bills at Work Alike

On May 19, 2022, the Department of Justice announced it would not charge good-faith hackers who expose weaknesses in computer systems with violating the Computer Fraud and Abuse Act (CFAA or Act), 18 U.S.C. § 1030. Congress enacted the CFAA in 1986 to promote computer privacy and cybersecurity and amended the Act several times, most recently in 2008. However, the evolving cybersecurity landscape has left courts and commentators troubled by potential applications of the CFAA to circumstances unrelated to the CFAA’s original purpose, including prosecution of so-called “white hat” hackers. The new charging policy, which became effective immediately, seeks to advance the CFAA’s original purpose by clarifying when and how federal prosecutors are authorized to bring charges under the Act.

DOJ to Decline Prosecution of Good-Faith Security Research

The new policy exempts activity of white-hat hackers and states that “the government should decline prosecution if available evidence shows the defendant’s conduct consisted of, and the defendant intended, good-faith security research.” The policy defines “good-faith security research” as “accessing a computer solely for purposes of good-faith testing, investigation, and/or correction of a security flaw or vulnerability, where such activity is carried out in a manner designed to avoid any harm to individuals or the public, and where the information derived from the activity is used primarily to promote the security or safety of the class of devices, machines, or online services to which the accessed computer belongs, or those who use such devices, machines, or online services.”

In practice, this policy appears to provide, for example, protection from federal charges for the type of ethical hacking a St. Louis Post-Dispatch reporter performed in 2021. The reporter uncovered security flaws in a Missouri state website that exposed the Social Security numbers of over 100,000 teachers and other school employees. The Missouri governor’s office initiated an investigation into the reporter’s conduct for unauthorized computer access. While the DOJ’s policy would not affect prosecutions under state law, it would preclude federal prosecution for the conduct if determined to be good-faith security research.

The new policy also promises protection from prosecution for certain arguably common but contractually prohibited online conduct, including “[e]mbellishing an online dating profile contrary to the terms of service of the dating website; creating fictional accounts on hiring, housing, or rental websites; using a pseudonym on a social networking site that prohibits them; checking sports scores at work; paying bills at work; or violating an access restriction contained in a term of service.” Such activities resemble the facts of Van Buren v. United States, No. 19-783, which the Supreme Court decided in June 2021. In Van Buren, the 6-3 majority rejected the government’s broad interpretation of the CFAA’s prohibition on “unauthorized access” and held that a police officer who looked up license plate information on a law-enforcement database for personal use—in violation of his employer’s policy but without circumventing any access controls—did not violate the CFAA. The DOJ did not cite Van Buren as the basis for the new policy. Nor did the DOJ identify any another impetus for the change.

To Achieve More Consistent Application of Policy, All Federal Prosecutors Must Consult with Main Justice Before Bringing CFAA Charges

In addition to exempting good-faith security research from prosecution, the new policy specifies the steps for charging violations of the CFAA. To help distinguish between actual good-faith security research and pretextual claims of such research that mask a hacker’s malintent, federal prosecutors must consult with the Computer Crime and Intellectual Property Section (CCIPS) before bringing any charges. If CCIPS recommends declining charges, prosecutors must inform the Office of the Deputy Attorney General (DAG) and may need to obtain approval from the DAG before initiating charges.

Article By Kyle R. Freeny, Linda Ricci, Jena M. Valdetero, and Brittany M. Fisher of Greenberg Traurig, LLP

For more data privacy and cybersecurity legal news, click here to visit the National Law Review.

©2022 Greenberg Traurig, LLP. All rights reserved.

Biden Revisions to the NEPA Regulations Now in Effect

The Biden Administration is amending the federal regulations for implementing the National Environmental Policy Act (NEPA) to reverse certain changes made by the Trump Administration. The first set of amendments took effect last Friday on May 20, 2022.

As background, the Council for Environmental Quality (CEQ) first issued the NEPA implementing regulations in 1978. They remained unchanged for more than 40 years until the Trump Administration published its 2020 rule updating the regulations to facilitate “more efficient, effective, timely NEPA reviews.” Developers, construction companies, and other businesses generally supported these changes with the hope they would streamline a lengthy process that often significantly delays projects. However, environmentalists opposed the changes, fearing they would weaken important protections, including those aimed at reducing climate change impacts and protecting natural resources. Upon taking office, the Biden Administration immediately began an effort to reverse parts of the 2020 rule.

The Biden amendments will be issued in two phases. The “Phase One” rule was published on April 20, 2022, and is in effect as of May 20, 2022. The “Phase Two” rule, which is expected to include more comprehensive revisions, will be issued “over the coming months”.

 The Phase One rule reinstates the following three key provisions of the NEPA regulations:

1.  Statement of Purpose and Need, and Scope of Reasonable Alternatives (40 CFR 1502.13)

Under NEPA, an agency’s statement of purpose and need informs the range of alternative actions analyzed in an environmental assessment (EA) or environmental impact statement (EIS). The NEPA regulations historically required agencies to consider “reasonable alternatives not within the jurisdiction of the lead agency.” The 2020 rule updates, however, instructed agencies to limit the statement of purpose and need, and therefore the range of alternatives, to only those that are consistent with the applicant’s goals and the agency’s statutory authority.

The Phase One rule removes these limitations to re-establish federal agencies’ discretion to consider a variety of factors, including a range of reasonable alternatives that are not entirely consistent with the goals of the project applicant. Accordingly, federal agencies may again coordinate with communities and project proponents to evaluate alternatives that could minimize environmental and public health costs, but extend beyond the scope of the agency’s authority or do not serve the applicant’s goals.

2.  Agency Implementing Regulations (40 CFR 1507.3)

The Phase One rule also removes language that could limit agencies’ standards and procedures for implementing NEPA rules that extend beyond CEQ regulatory requirements. This update reestablishes CEQ regulations as the “floor” for NEPA environmental review, and restores the agency’s discretion and flexibility to tailor NEPA procedures to align with specific agency and public needs. In contrast, the 2020 rule would have made the CEQ regulations a “ceiling” for NEPA requirements, effectively restricting agencies’ discretion to develop and implement procedures beyond requisite CEQ regulations.

3.  Scope of Effects (40 CFR 1508.1(g))

Finally, the Phase One rule restores the definition of “effects” that requires agencies to consider the historic categories of “reasonably foreseeable” direct, indirect, and cumulative effects. The 2020 rule, in contrast, limited the scope of this analysis to effects with a “reasonably close causal relationship,” and included language indicating that agencies were only required to consider direct effects, had discretion to consider indirect effects, and should not consider cumulative effects in NEPA review. The Phase One rule change thus ensures that agencies’ NEPA documents will evaluate all relevant environmental impacts resulting from the agency decision.

Here, the Phase One rule reversal is particularly impactful in terms of an agency’s consideration of climate change, where cumulative effects tend to be substantially greater than the effects of the individual project. The Phase One update confirms CEQ’s view that climate change impacts are adequately considered in evaluating direct, indirect and cumulative effects.

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Except for reinstating these three key provisions, the Phase One rule does not affect other changes made by the 2020 rule.  The Biden Administration plans to introduce more comprehensive changes as part of the forthcoming Phase Two rule. These changes, which are anticipated to be more controversial and draw additional public attention, are expected to address environmental justice, public participation, and streamlining provisions, including the use of plain language, deadlines, page limits, and inter-agency coordination.

Article By Alexander L. Merritt and Kathryn C. Kafka of Sheppard, Mullin, Richter & Hampton LLP

For more environmental legal news, click here to visit the National Law Review.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

Beware OFAC in a Time of Sanctions

On Monday, April 25, 2022, the U.S. Treasury Department’s Office of Foreign Asset Control (“OFAC”) announced a settlement with Toll Holdings Limited (“Toll”), an Australian freight forwarding and logistics company, with respect to Toll’s originations and/or receipt “of payments through the U.S. financial system involving sanctioned jurisdictions and persons.” Toll, which is not an American entity, and is neither owned by Americans nor located in the U.S. or any of its territories, was involved in almost 3000 transactions where payments were made in connection with sea, air, and rail shipments to, from, or through North Korea, Iran, or Syria, AND/OR involving the property of a person on OFAC’s Specially Designated Nationals and Blocked Persons List. OFAC did not have direct jurisdiction over Toll, BUT because the payments for Toll’s freight forwarding and logistics services flowed through U.S. financial institutions, Toll “caused the U.S. financial institutions to be engaged in prohibited activities with … sanctioned persons or jurisdictions.”

Each OFAC violation can be the basis of civil sanctions. Here the 2853 violation would have supported the imposition of civil sanctions totaling over $826 million. Toll was “happy” to settle OFAC’s enforcement action for $6 million. OFAC found that the Toll violations were “non-egregious,” in part due to the rapid growth of Toll after 2007 through acquisitions of smaller freight forwarding companies. OFAC noted that by 2017 Toll had almost 600 invoicing, data, payment, and other systems spread across its various units. OFAC also noted that Toll did not have adequate compliance procedures and procedures in place and did not attend to those issues until an unnamed bank threatened to cease doing business with Toll because Toll was using its U.S. dollar account to transact business with sanctioned jurisdictions and/or persons. OFAC took note of Toll’s voluntary self-disclosure, well-organized internal investigation, and extensive remedial measures.

OFAC traces its origins to the War of 1812, when the then Secretary of the Treasury imposed sanctions on the United Kingdom in retaliation for the impressment of American sailors. The Treasury Department has had a special office dealing with foreign assets since 1940 (and the outbreak of World War II), with statutory authority found in the Trading With The Enemy Act of 1917 (as World War I raged), and a series of federal laws involving embargoes and economic sanctions. OFAC received its current name as part of a Treasury Department order on October 15, 1962 (contemporaneous with the Cuban missile crisis).

The Toll settlement reflects the growing use by OFAC of public enforcement against foreign businesses for “causing” violations by involving U.S. payment systems. The use of U.S. dollars in any part of a transaction will typically involve the U.S. financial system, directly or indirectly – that subjects the entirety of the transaction to U.S regulatory jurisdiction, including that of OFAC. The Toll settlement evidences OFAC’s increasing willingness to exercise its expansive jurisdiction over foreign businesses, even those involving primarily extraterritorial transactions — for example, the increase in OFAC sanctions of foreign businesses seen as facilitating the Russian invasion of Ukraine.

Foreign businesses must give serious and continuing attention to having substantial policies and procedures in place to insure compliance with U.S. sanctions and, thereby, to avoid OFAC enforcement actions. Companies can start by reviewing OFAC’s Framework for Compliance Commitments and implementing the recommendations there. In addition, all parties to a transaction should be screened against sanction lists (OFAC’s, and also those of the U.K. and E.U.). Companies should consider adopting preventive measures, not only to deter violations, but also to demonstrate a vigorous compliance program.  Similarly, these issues MUST be considered as part of any merger or acquisition (as the Toll experience suggests).Finally, all counterparties, including financial intermediaries, should be evaluated for potential sanction list issues. Otherwise, a foreign business may have to “pay the Toll” for its shortcomings.

Experienced American business lawyers may prove helpful in designing and/or evaluating the compliance programs of non-U.S. companies.

Article By Peter D. Hutcheon of Norris McLaughlin P.A.

For more financial legal news, click here to visit the National Law Review.

©2022 Norris McLaughlin P.A., All Rights Reserved

Afghanistan Temporary Protected Status Application Instructions To Be Issued

The Temporary Protected Status (TPS) grant for Afghanistan will go into effect on May 20, 2022, with publication of the notice in the Federal Register with instructions on how to apply for TPS and for Employment Authorization.

In March 2022, Department of Homeland Security (DHS) Secretary Alejandro Mayorkas announced that Afghanistan was added to the list of countries eligible for TPS. This would benefit approximately 75,000 individuals and provide temporary employment authorization. The 18-month initial grant and registration period became effective on March 20, 2022, and runs through November 20, 2023.

To be eligible, individuals must demonstrate their continuous residence in the United States since March 15, 2022, and their continuous physical presence in the United States since March 20, 2022. Any nationals or residents of Afghanistan who are not currently residing in the United States or who arrived after March 15, 2022, will not be eligible for this TPS designation.

Eligible individuals must submit Form I-821, Application for Temporary Protected Status, during the 18-month initial registration period. They may also submit a request for an Employment Authorization Document using Form I-765, Application for Employment Authorization. The applications may be submitted together and may be submitted online.

Afghan nationals who arrived in the United States through the evacuation effort, Operation Allies Welcome, received humanitarian parole and work authorization for a period of two years. Those individuals may also be eligible for TPS.

DHS has also announced that F-1 students from Afghanistan experiencing severe economic hardship due to the situation in Afghanistan will be eligible for work authorization, increased permittable work hours, and a reduction in their course load as an accommodation.

Article By Rashmi K. Shah of Jackson Lewis P.C.

For more immigration legal news, click here to visit the National Law Review.

Jackson Lewis P.C. © 2022

Implications of the Use of the Defense Production Act in the U.S. Supply Chain

What owners, operators and investors need to know before accepting funds under the DPA

There has been an expansion of regulations related to Foreign Direct Investment (FDI) in both the United States and abroad. Current economic and geopolitical tensions are driving further expansion of FDI in the U.S. and elsewhere.

Whether by intent or coincidence, the Foreign Investment Risk Review Modernization Act (FIRRMA) regulations that took effect February 13, 2020, included provisions that expanded the Committee on Foreign Investment in the U.S. (CFIUS) and FIRRMA based upon the invocation of the Defense Production Act (DPA) – such as with President Biden’s recent Executive Order evoking the DPA to help alleviate the U.S. shortage of baby formula.

As background, the U.S. regulation of foreign investment in the U.S. began in 1975 with the creation of CFIUS. The 2007 Foreign Investment and National Security Act refined CFIUS and broadened the definition of national security. Historically, CFIUS was limited to technology, industries and infrastructure directly involving national security. It was also a voluntary filing. Foreign investors began structuring investments to avoid national security reviews. As a result, FIRRMA, a CFIUS reform act, was signed into law in August 2018. FIRRMA’s regulations took effect in February 2020.

It is not surprising that there are national security implications to U.S. food production and supply, particularly based upon various shortages in the near past and projections of further shortages in the future. What is surprising is that the 2020 FIRRMA regulations provided for the application of CFIUS to food production (and medical supplies) based upon Executive Orders that bring such under the DPA.

The Impact of Presidential DPA Executive Orders

The 2020 FIRMMA regulations included an exhaustive list of “critical infrastructure” that fall within CFIUS’s jurisdiction. Appendix A to the regulations details “Covered Investment Critical Infrastructure and Functions Related to Covered Investment Critical Infrastructure” and includes the following language:

“manufacture any industrial resource other than commercially available off-the-shelf items …. or operate any industrial resource that is a facility, in each case, that has been funded, in whole or in part, by […] (a) Defense Production Act of 1950 Title III program …..”

Title III of the DPA “allows the President to provide economic incentives to secure domestic industrial capabilities essential to meet national defense and homeland security requirements.” This was arguably invoked by President Trump’s COVID-19 related DPA Executive Orders regarding medical supplies (such as PPEs, tests and ventilators, etc.) and now President Biden’s Executive Order related to baby formula (and other food production).

Based on the intent of FIRRMA to close gaps in prior CFIUS coverage, the FIRRMA definition of “covered transactions” includes the following language:

“(d) Any other transaction, transfer, agreement, or arrangement, the structure of which is designed or intended to evade or circumvent the application of section 721.”

Taken together, the foregoing provision potentially gives CFIUS jurisdiction to review non-U.S. investments in U.S. companies covered by DPA Executive Orders that are outside of traditional M&A structures. This means that even non-controlling foreign investments in U.S. companies (such as food or medical producers) who receive DPA funding are subject to CFIUS review. More significantly, such U.S. companies can be subject to CFIUS review for a period of 60 months following the receipt of any DPA funding.

As a result of DPA-related FDI implications, owners, operators, and investors should carefully assess the implications of accepting funding under the DPA and the resulting restrictions on non-U.S. investors in businesses and industries not historically within the jurisdiction of CFIUS.

Article By David Vance Lucas of Bradley Arant Boult Cummings LLP

For more administrative and regulatory legal news, click here to visit the National Law Review.

© 2022 Bradley Arant Boult Cummings LLP

EEOC and the DOJ Issue Guidance for Employers Using AI Tools to Assess Job Applicants and Employees

Employers are more frequently relying on the use of Artificial Intelligence (“AI”) tools to automate employment decision-making, such as software that can review resumes and “chatbots” that interview and screen job applicants. We have previously blogged about the legal risks attendant to the use of such technologies, including here and here.

On May 12, 2022, the Equal Employment Opportunity Commission (“EEOC”) issued long-awaited guidance on the use of such AI tools (the “Guidance”), examining how employers can seek to prevent AI-related disability discrimination. More specifically, the Guidance identifies a number of ways in which employment-related use of AI can, even unintentionally, violate the Americans with Disabilities Act (“ADA”), including if:

  • (i) “[t]he employer does not provide a ‘reasonable accommodation’ that is necessary for a job applicant or employee to be rated fairly and accurately by” the AI;
  • (ii) “[t]he employer relies on an algorithmic decision-making tool that intentionally or unintentionally ‘screens out’ an individual with a disability, even though that individual is able to do the job with a reasonable accommodation”; or
  • (iii) “[t]he employer adopts an [AI] tool for use with its job applicants or employees that violates the ADA’s restrictions on disability-related inquiries and medical examinations.”

The Guidance further states that “[i]n many cases” employers are liable under the ADA for use of AI even if the tools are designed and administered by a separate vendor, noting that “employers may be held responsible for the actions of their agents . . . if the employer has given them authority to act on [its] behalf.”

The Guidance also identifies various best practices for employers, including:

  • Announcing generally that employees and applicants subject to an AI tool may request reasonable accommodations and providing instructions as to how to ask for accommodations.
  • Providing information about the AI tool, how it works, and what it is used for to the employees and applicants subjected to it. For example, an employer that uses keystroke-monitoring software may choose to disclose this software as part of new employees’ onboarding and explain that it is intended to measure employee productivity.
  • If the software was developed by a third party, asking the vendor whether: (i) the AI software was developed to accommodate people with disabilities, and if so, how; (ii) there are alternative formats available for disabled individuals; and (iii) the AI software asks questions likely to elicit medical or disability-related information.
  • If an employer is developing its own software, engaging experts to analyze the algorithm for potential biases at different steps of the development process, such as a psychologist if the tool is intended to test cognitive traits.
  • Only using AI tools that measure, directly, traits that are actually necessary for performing the job’s duties.
  • Additionally, it is always a best practice to train staff, especially supervisors and managers, how to recognize requests for reasonable accommodations and to respond promptly and effectively to those requests. If the AI tool is used by a third party on the employer’s behalf, that third party’s staff should also be trained to recognize requests for reasonable accommodation and forward them promptly to the employer.

Finally, also on May 12th, the U.S. Department of Justice (“DOJ”) released its own guidance on AI tools’ potential for inadvertent disability discrimination in the employment context. The DOJ guidance is largely in accord with the EEOC Guidance.

Employers utilizing AI tools should carefully audit them to ensure that this technology is not creating discriminatory outcomes.  Likewise, employers must remain closely apprised of any new developments from the EEOC and local, state, and federal legislatures and agencies as the trend toward regulation continues.

Article By Joseph C O’Keefe and Edward C. Young of Proskauer Rose LLP

For more labor and employment legal news, click here to visit the National Law Review.

© 2022 Proskauer Rose LLP.

IRS Announces New Director of Whistleblower Office

On May 12, the U.S. Internal Revenue Service (IRS) announced that John W. Hinman will serve as the Director of the IRS Whistleblower Office. Hinman will oversee the agency’s highly successful whistleblower award program. Since 2007, the IRS has awarded whistleblowers over $1 billion based on the collection of over $6 billion in back taxes, interest, penalties, and criminal fines and sanctions.

“We hope that as the director Mr. Hinman will have an open door policy for whistleblowers and their advocates,” said leading whistleblower attorney Stephen M. Kohn of Kohn, Kohn & Colapinto. “We look forward to working with the new director to ensure that the incredibly important tax whistleblower program properly deters fraudsters and incentivizes whistleblowers to step forward. We hope that processes are put into place that speed-up the final determinations in reward cases,” added Kohn, who also serves as the Board of Directors of the National Whistleblower Center.

The IRS Whistleblower Program has been an immense success since it was established in 2006. For example, the program incentivized the whistleblowing of Bradley Birkenfeld, the UBS banker turned whistleblower whose disclosures helped lead to the dismantling of the Swiss banking system as it existed. However, the program has recently been plagued by a number of issues, including massive delays in the issuance of whistleblower awards. According to the IRS Whistleblower Office’s most recent annual report to Congress, the IRS currently takes 10.79 years to process a whistleblower case, leading to a backlog of over 23,000 cases.

Prior to his new appointment, Hinman served as Director of Field Operations for Transfer Pricing Practice in the IRS’s LB&I Division. According to the IRS, in this position, he “oversaw field operations of the Transfer Pricing Practice economists, revenue agents, and tax law specialists who focus on complex transfer pricing issues of multinational business enterprises.” Hinman will take over as Director of the IRS Whistleblower Office from Lee D. Martin, who left the agency on April 9 to serve as the Director of the Directorate of Whistleblower Protection Programs at the Occupational Safety and Health Administration (OSHA).

Geoff Schweller also contributed to this article.

Copyright Kohn, Kohn & Colapinto, LLP 2022. All Rights Reserved.
For more articles about whistleblowers, visit the NLR White Collar Crime & Consumer Rights section.

Environmental Enforcement, Suspension and Debarment With Robert Wagman, Jason Hutt and Kevin Collins [PODCAST]

On this episode of the Bracewell Environmental Law Monitor, host Daniel Pope talks with Kevin Collins, Jason Hutt and Robert Wagman about current trends and environmental and federal enforcement.

Kevin Collins is a partner in our Austin office.  He is a former Assistant U.S. Attorney from the Eastern District of Texas, and he helps manage the problems that arise during government investigations.

Jason Hutt is a partner in our DC office and chair of the firm’s environmental department.  He advises and defends clients on the complex environmental and energy issues of our day.

Robert Wagman is a partner in our DC office and heads up the government contracts practice.  He does a lot of government enforcement work.

What are you seeing generally these days from DOJ in the criminal enforcement context? What is the EPA doing on the civil side?

There’s been a resurgence and activity at DOJ. I think they feel invigorated under the new administration. The stats support that feeling. The United States attorney’s offices across the country are up about 10 percent in their charges. They’ve charged roughly 5,500 individuals for white-collar related crimes. Environment Natural Resources Division, in particular, at DOJ has already indicted 11 companies and 34 individuals. Many of those individuals are senior executives. Budget wise, they’re asking for a lot more money. So, there’s definitely interest in going after bad actors, particularly individuals at companies to a certain extent.

We’re still enforcing the same environmental laws, but the leniency factor or the posture factor is different. Part of the settlement expectations is increasingly a focus on protection of the community in which a facility or a violator operates. We are seeing increased expectations related to fence line monitoring demands and reparations or mitigation under a resolution that involves making things right, but in the community where the violation occurs or where the environmental damage associated with that violation occurs. Those are pieces that are seen as a posture shift in the government.

One of the terms that has come up a few times on this podcast already is the term suspension and debarment.  Can you give us your quickest suspension and debarment for dummies course so that we can all be on the same page?

A lot of companies don’t realize suspension debarment will impact them. It’s not just for government contractors. A lot of times it’ll apply to both procurement actions and what’s called non-procurement actions. The term that’s used in the regulations is cover transactions, which is essentially anything that’s not exempted out. When government money is involved, chances are it’s a covered transaction. This comes up a lot with federal leases. If you are a federal lessee, or if you are an oil field services company servicing federal lessees, suspension debarment can have a tremendous impact on your business. A lot of times this is companies, individuals. They don’t think about suspension and debarment and the administrative remedy that could be associated with it. So, in broad strokes, suspension and debarment means you’re excluded from doing business with the federal government for some period of time, usually three years. But it can vary. It usually follows criminal or civil enforcement, but it doesn’t have to follow civil or criminal enforcement. It can come from any referrals.

What are some areas where suspension and debarment issues might be a higher risk than others?

Environmental because of the statutory debarment provisions. It’s much more likely to hit the radar of the suspension and debarment official than other types of enforcement activities. If you are doing a lot of business with the government, you’re more likely to end up on somebody’s radar. Again, every agency has their own suspension and debarment official, so you could be facing debarment. It’s not just an EPA thing or not just one particular agency. Any agency in theory could debar you. If you end up being debarred, it applies company-wide.

There’s also a statutory debarment under several of the environmental statutes, but also there’s an ability to find yourself in the criminal culpability realm based upon mere negligence. That’s very different than most of these other statutes that we’re talking about. It’s the coupling those two things that gives rise to this being a heightened risk in the environmental world. In particular, when you have an incident or an accident, the notion of negligence is almost in the minds of enforcement folks because there was some significant amount of environmental damage or loss of human life that in their minds, and perhaps appropriately, that shouldn’t happen.

What best practices can companies implement into their accountability systems to make sure they’re looking at these kinds of issues and where their exposures are?

There really is no substitute for good corporate governance — all the types of things that say this is a trustworthy company the government can feel comfortable doing business with. It’s going to help in your criminal enforcement, your civil enforcement and everything else that you’re doing.

© 2022 Bracewell LLP
For more articles about climate change regulations, visit the NLR Environmental & Energy section.

Antitrust Enforcers’ “Second Listening” Forum On Merger Reform Highlights Issues In The Healthcare Industry

In March of this year the Antitrust Division of the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) jointly announced a series of “listening forums” that would help gather real world input from participants in key industry segments on possible reforms to the antitrust regulations pertaining to mergers and acquisitions.1 Co-led by DOJ Deputy Assistant Attorney General (“DAAG”) Doha Mekke and FTC Chairperson Lina Khan, the second of the four announced forums, focusing on healthcare, was held on April 14, 2022. 2  In addition to DAAG Mekki and Chairperson Khan, the program included eight panelists that provided perspectives from nurses, doctors, patients, pharmacists and small businesses. 3

DAAG Mekki started off the discussion by reaffirming the antitrust enforcement agencies’ collective commitment that “healthcare markets remain competitive” because it “is essential to our livelihood or the livelihood of the nation.” Mekki referenced ongoing work by the agencies in the healthcare field, including recent DOJ enforcement actions. 4

The healthcare panelists highlighted several ongoing issues in the industry, such as the adverse impact of care due to post-merger hospital staff downsizing that was tied to merger-specific efficiencies, reduced options to tertiary care, higher healthcare costs for patients, and unfair competition in the pharmaceutical and small business markets, and other impacts in the research and labor markets.

Chairperson Khan indicated that the comments resonated with the concerns that the FTC had in the hospital, pharmacy benefits management, and pharmacy industries. Ms. Khan also suggested a renewed interest in examining the potential anticompetitive effects of vertical integration in addition to horizontal mergers and acquisitions, which is consistent with the FTC’s position when it indicated that it wanted to revisit this issue while withdrawing the Vertical Merger Guidelines in 2021. Khan also reaffirmed the importance of examining anticompetitive effects in the labor market. All of these issues, according to Khan, are important in assessing how the antitrust laws can be used to improve the quality of healthcare for patients.

The forum ended with some of the more than two hundred public comments, most of which echoed similar concerns raised by the panelists in addition to concerns such as disparities in hospital-physician group contracting situations and racial disparities in access to healthcare as a result of healthcare system mergers.

Once again, all signs point toward an unprecedented time in antitrust enforcement in the healthcare industry. Accordingly, it is important that healthcare companies revisit, revise, and implement best practices with regard to their respective antitrust compliance programs. A proactive, as opposed to a reactive, approach would provide companies the best risk management strategy. It is also important to engage antitrust counsel early in potential transactions to assess how the antitrust agencies may view the deal.

The DOJ and FTC Listening Forums continue with Media and Entertainment, which was held on April 27, 2022, and the final one on Technology, which will be held on May 12, 2022. Click here to download the alert. 

FOOTNOTES

1    “Forums to focus on markets commonly impacted by mergers: food and agriculture, health care, media and entertainment, and technology,” March 17, 2022, available at: https://www.ftc.gov/news-events/news/press-releases/2022/03/ftc-justice-department-launch-listening-forums-firsthand-effects-mergers-acquisitions

2   See “Antitrust Enforcers’ First ‘Listening Forum’ On Merger Reform Highlights Ongoing Concerns in the Food and Agriculture Industry” May 9, 2022, available at: https://www.polsinelli.com/intelligence/antitrust-forum-highlights-concerns-in-food-and-ag

3 Full transcript of forum available at: https://www.ftc.gov/system/files/ftc_gov/pdf/FTC-DOJ-Listening-Forum-%20Health-Care-Transcript.pdf. It should be noted that Assistant Attorney General Jonathan Kanter did make an appearance at the end of the session, reiterating the importance of this forum.

4    See “DOJ Faces Two Strikeouts in First Health Care Wage-Fixing and ‘No Poach’ Prosecutions,” April 20, 2022, available at: https://www.polsinelli.com/intelligence/doj-faces-two-strikeouts-in-first-health-care

© Polsinelli PC, Polsinelli LLP in California
Article By Arindam Kar with Polsinelli PC.
For more articles about antitrust law, visit the NLR Antitrust law section.