What Every Multinational Company (Doing Business in Mexico) Should Know About … Mitigating Risks From ATA Scrutiny in a New Enforcement Regime
Mexican cartels dominate large swaths of the Mexico-United States border and the Bajío region (an area encompassing relevant parts of Queretaro, Guanajuato, Aguascalientes, San Luis Potosí, Jalisco, and Michoacán), and they control significant economic segments/activities in these territories. These are the same areas in which multinational companies maintain significant manufacturing operations.
In an Executive Order issued on January 20, 2025[1], the White House announced a shift toward increased enforcement of the Immigration and Nationality Act (INA) and International Emergency Economic Powers Act (IEEPA), which are key statutes in the United States’ fight against terrorism. Though these statutes are not new, the Trump Administration plans to broaden U.S. enforcement activity to cartels and transnational criminal organizations (TCOs) by allowing for the designation of cartels or TCOs as Foreign Terrorist Organizations and/or Specially Designated Global Terrorists. This new focus of enforcement resources, along with the expansive inclusion of cartels or TCOs within the purview of the INA and IEEPA, creates a heightened risk for multinational companies doing business in Mexico and other areas where cartels operate, as the companies can be perceived as — and then prosecuted for — engaging in terrorism or aiding terrorists, as explained below.
Under the INA, the Secretary of State can designate groups as Foreign Terrorist Organizations (FTOs)[2] based on an assessment of the State Department’s Bureau of Counterterrorism regarding the group’s terrorist activity. Once a group has received an FTO designation, multinationals subject to U.S. jurisdiction — which is interpreted very broadly by U.S. regulators — may face strict criminal and civil penalties under 18 U.S.C. § 2339B (the Antiterrorism Act or ATA) if they knowingly provide, or attempt or conspire to provide, “material support or resources” to the FTO.[3]
The State Department currently designates more than 60 organizations as FTOs. Trump’s January 20, 2025, Executive Order directs the State Department to scrutinize drug cartels — especially Mexico-based drug cartels and two cartels mentioned by name, Tren de Aragua (TdA) and La Mara Salvatrucha (MS-13) — for designation as FTOs. Since the order, Secretary of State Marco Rubio already has designated eight cartels as FTOs, most of which have operations in Mexico. We anticipate this number will sharply rise as the administration works together with OFAC to identify additional cartels and TCOs. This raises a number of concerns for companies that operate in areas known to have cartel or TCO activities, because the following types of regularly conducted business activities may be viewed through the lens of providing material support or resources to an FTO:
Making payments to secure employee safety or the ongoing operation of a physical plant;
Engaging in business dealings with local companies that themselves are in business with cartels or that are making such payments; and
Recording payments to said local companies or to cartels in the books and records of publicly traded companies.
The expansion of enforcement scrutiny also may expand the types of risks facing companies, including:
Combined OFAC and DOJ investigations of conduct that potentially violates both the INA and OFAC regulations;
Matters that formerly would have been dealt with as civil matters by OFAC can become criminal matters pursued by DOJ;
New designations can be combined with anti-money laundering laws to expand the potential violations of U.S. laws; and
The expansion of the reach of OFAC designations to non-U.S. companies, since the material support statute has extraterritorial effect.
The January 20 Executive Order also heightens the risk of private civil litigation for multinationals doing business in Mexico. The ATA creates a civil remedy for U.S. national victims and their estates or heirs against defendants alleged to have caused an “injury arising from an act of international terrorism committed, planned, or authorized by an organization that had been designated as a foreign terrorist organization under section 219 of the [INA]” where “liability may be asserted as to any person who aids and abets, by knowingly providing substantial assistance, or who conspires with the person who committed such an act of international terrorism” (emphasis added). Under the ATA, “[a]ny national of the United States injured in his or her person, property, or business by reason of an act of international terrorism, or his or her estate, survivors, or heirs, may sue therefor in any appropriate district court of the United States and shall recover threefold the damages he or she sustains and the cost of the suit, including attorney’s fees.” 18 U.S.C. § 2333(a). The line of culpability under this section remains unsettled, as lower courts attempt to apply recent Supreme Court precedent regarding the “knowing” provision of “substantial assistance” to FTOs.[4] But the designation of cartels and TCOs as FTOs exposes companies that operate in countries with heightened cartel activity to litigation under the ATA.
For several years, Mexican cartels have shifted revenue sources from drug smuggling into the United States to racketeering in Mexico. The latter typically consists of Mexican cartels extorting regular payments from small-to-medium-sized businesses, many of which provide goods or services to larger companies such as the multinationals operating in Mexico. In addition to direct extortion, cartels engage in behaviors such as forcing suppliers on companies that in turn do business with multinational companies, establishing “front” entities to provide miscellaneous services, selling protection against rival organizations, establishing prices for goods or services, and receiving payments for not carrying out threatened violence.
Multinational companies in Mexico are thus in constant risk of having indirect contacts with these cartel FTOs within their local supply chain and, even if they are unaware of such touch points, multinationals must guard against being seen as actively complicit or willfully blind if they fail to take reasonable precautions.
To safeguard against these risks, multinationals subject to U.S. jurisdiction that do business in Mexico should take precautions such as:
Conducting due diligence on all business counterparties, especially when onboarding new suppliers or other new business partners;
Updating due diligence and requiring certifications of compliance with the laws prohibiting conducting business activities with TCOs and FTOs;
Conducting routine OFAC and FTO screenings to assess the company’s risk profile with respect to potential touchpoints with cartels and TCOs;
Mapping supply chains, including for sub-suppliers, to confirm zero contact with cartel or TCO activities throughout the supply chain;
Based on risk assessments, following up and conducting audits to ensure the company’s supply chain is in compliance with the updated legal requirements;
Implementing and maintaining vendor management systems for payments to suppliers and other business partners;
Conducting financial audits on suppliers or other business partners to identify potential payments to cartels or TCOs;
Alerting suppliers or other business partners regarding their potential connections to cartels or TCOs and help monitor to avoid risk; and
Incorporating prohibitions on cartel and TCO connections, in addition to FTO restrictions, into agreements with third parties.
[1] “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists,” Executive Order (Jan. 20, 2025) available at https://www.whitehouse.gov/presidential-actions/2025/01/designating-cartels-and-other-organizations-as-foreign-terrorist-organizations-and-specially-designated-global-terrorists/.
[2] Though this article focuses on the FTO designation under the INA, the Specially Designated Global Terrorist designation under IEEPA creates a separate set of enforcement issues for multinationals, as well as additional sanctions under IEEPA for FTOs. IEEPA is the governing authority for most economic sanctions overseen by the Office of Foreign Assets Control (OFAC), which has long maintained robust restrictions on U.S. persons, or any other person subject to U.S. law, to the primary U.S. economic sanctions. OFAC has sanctioned numerous drug cartels, as well as companies and individuals, using its authorities under its Significant Narcotics Traffickers program pursuant to Executive Order 12978 and the Kingpin Act. Because OFAC uses an expansive definition of U.S. jurisdiction, restrictions under these designations include the activities of non-U.S. persons that take place on U.S. territory, use the U.S. financial system, or otherwise trigger U.S. jurisdiction. Proper compliance requires that any persons with a U.S. jurisdictional nexus take into account all the potential ways U.S. law can apply to them, including both the new emphasis on the INA/IEEPA and the longstanding OFAC regulations.
[3] 18 U.S.C. § 2339A defines “material support or resources” to include “any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safehouses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel . . . and transportation, except medicine or religious materials.”
[4] See Twitter, Inc. v. Taamneh 598 U.S. 471 (2023).
What Every Multinational Company Should Know About … The Rising Risk of Customs False Claims Act Actions in the Trump Administration
On February 20, 2025, the Deputy Assistant Attorney General for the Commercial Litigation Branch at the U.S. Department of Justice (DOJ), Michael Granston, emphasized using the False Claims Act (FCA) to address U.S. Customs & Border Protection (Customs) violations at the Federal Bar Association’s annual qui tam conference. According to Granston, the Trump administration will seek to “aggressively” deploy the FCA as a “powerful” enforcement mechanism against importers that take steps to evade customs duties, including all the new tariffs being imposed by the Trump administration.
The application of the FCA for underpayments of customs tariffs is already a growing trend. The increased tariffs and attention will combine to increase the number of FCA actions targeting tariff underpayments and the potential amount of recoveries. The U.S. government has unparalleled access to detailed import data covering nearly all imports, giving it the ability to run algorithms to see discrepancies and anomalies that might indicate the underpayment of tariffs. The FCA also can be enforced by whistleblowers who file qui tam suits in the government’s name, in hopes of receiving a share of the recovery in successful cases. Taken together, these factors mean the scene is set for a vast expansion of the use of the FCA as a tool to combat tariff underpayments.
Against this scrutiny, importers should ensure they accurately determine and pay all tariffs, including the new Trump tariffs. The remainder of this article summarizes the heightened risks that the FCA poses in the Trump administration, as well as some practical steps companies can take to minimize the risk of an FCA action.
The Application of the False Claims Act to Customs Violations
The False Claims Act, 31 U.S.C. § 3729 et seq., is a special form of civil remedy used by the government to recover funds the government paid as a result of fraud — typically, a false statement or document that supports a demand for government monies. The FCA allows the government to recover treble damages plus penalties up to $28,619 for each violation. Thus, the FCA authorizes the government to seek not only any tariff underpayments but also three times the amount of the underpayment and penalties for each instance of underpayment. Needless to say, the FCA poses enormous financial risk to importers.
The statute also enables private individuals to act as whistleblowers (or “relators”) by filing qui tam actions on behalf of the government. If the action is successful, the relator can receive up to 30% of the money recovered in the litigation, plus attorney’s fees, with the rest going to the government. This potential for recovery has spawned an active plaintiffs bar that encourages the filing of qui tam actions.
Indeed, the 979 qui tam actions filed by relators in the fiscal year ending in September 2024 constituted a 37% increase over the prior year and a 60% increase over 2019 filings. In addition, the government also originated 423 investigations on its own — almost triple the number the government originated five years ago. Further, the government reported that it recovered almost $3 billion in settlements and judgments in 2024, which followed a nearly-as-high recovery of $2.8 billion recovered in 2023.
In his speech, Granston explained the FCA could be a powerful tool in recovering under-reported tariffs. With the Trump administration announcing a dizzying array of new tariffs, the amount of tariffs imposed — and the risk of FCA actions — are both certain to increase. The emphasis on tariffs and trade continued at the conference. Jamie Ann Yavelberg, director of the Fraud Section of the Civil Division, identified tariff evasion as a “key area” for enforcement, with a focus on false statements about country of origin, declared value of goods, and the number of goods involved.
The following are examples of the Department of Justice’s use of the FCA to address underpayment of customs duties and show the broad range of customs issues that can support an FCA action:
One importer paid almost $22.8 million to settle FCA allegations that it misclassified its vitamin products to avoid paying the full amount of customs duties due, as well as its failure to pay back duties owed after correcting certain misclassifications.
Another importer paid $22.2 million to settle FCA allegations that it misrepresented the nature, classification, and valuation of its imported construction products to evade antidumping and countervailing duties, as well as improperly claiming preferential treatment under free trade agreements, with the relator receiving $3.7 million.
A third importer paid $45 million to resolve allegations that it misrepresented the country of origin on goods that should have been declared to be of Chinese or Indian origin, thereby evading high antidumping and countervailing duties imposed on the entries from those countries.
A fourth importer paid $5.2 million for allegedly evading antidumping and other duties by falsely describing wooden bedroom furniture imported from China as “metal” or “non-bedroom” furniture on documents submitted to CBP while also manipulating images of their products in packing lists and invoices, directing their Chinese manufacturers to ship furniture in mislabeled boxes and falsifying invoices to try to evade detection.
Finally, another importer paid $4.3 million for allegedly failing to include assists (customer-provided production aids) in the declared value of its entries.
Key areas where FCA cases are most likely to arise include:
The misclassification of goods, to move them from a higher to a lower tariff classification.
The misclassification of goods, to move them out of the coverage of the new Trump tariffs such as those imposed on aluminum and steel derivative products.
Incorrectly declaring the wrong country of origin, to avoid the Section 301 tariffs imposed on China or on countries subject to the new tariff proclamations such as China, Canada, or Mexico.
Failing to pay antidumping or countervailing duties, which often have very high tariff rates.
Failing to accurately declare the correct value of goods.
Failing to include assists (production aids provided by the customer) or royalties within the declared value.
Failing to have a customs transfer pricing study in place, if this results in the undervaluation of goods imported from an affiliated company.
Failing to correct past entry information if Customs notifies the importer of a change that impacts the duty rate, such as by issuing a Form 28 Request for Information or Form 29 Notice of Action. When this occurs, Customs expects that importers will use the Post-Summary Corrections Process to correct all analogous prior entries and to pay back duties on those prior entries.
Another factor that increases FCA risk is that Customs maintains two additional whistleblower programs of its own — one under the Enforcement and Protect Act (EAPA), for reporting of antidumping and countervailing duty evasion, and an eAllegations portal for all other claims of tariff evasion. It remains to be seen whether the new administration will mine these sources for FCA enforcement purposes.
Practical Steps Importers Can Take to Minimize Potential FCA Actions
Given the likelihood of increased enforcement, as well as the sharply rising levels and types of tariffs, importers should prioritize customs compliance, as any underpayments raise the specter not only of customs penalties but also potential FCA damages and penalties.
Customs-Related Steps
In a high-tariff environment, the stakes for compliance miscues are substantial and include potential penalties and interest for underpayments as well as FCA risks. Some key areas to consider for ongoing customs compliance include the following:
Inaccurate classifications can result in incorrect duties or penalties, so confirm your company has procedures to correctly classify goods using the correct Harmonized Tariff Schedule (HTS) codes and maintains a regularly updated import classification index to reflect new products or changes in tariff codes.
Confirm that your organization maintains a detailed customs compliance manual that outlines procedures for classification, valuation, origin determination, recordkeeping, interactions with brokers and Customs, and other relevant matters that impact the accuracy of information reported to Customs and can create underpayments.
Review and ensure there are procedures to track and properly report assists, royalties, or other non-invoice costs that might affect the declared value of imported goods. Misreporting these costs could lead to underpayments of duties and penalties.
Ensure that there are procedures to regularly review entries after entry to identify potential errors in valuation, origin declarations, classification, or other entry-specific items that impact how much duties are owed.
Regularly use post-summary corrections as a means of correcting error, as most entry-related information can be corrected until liquidation without penalty (generally, around 314 days after entry).
In addition to post-entry checks, more detailed customs audits can uncover underlying issues that can lead to customs penalties. Major importers should consider conducting regular customs audits, pulling a judgmental sample of entries for thorough examination to determine if there are areas that contain errors.
Ensure your company maintains procedures for overseeing customs brokers and freight forwarders, including written protocols that are consistently followed to ensure there is proper oversight of customs brokers and freight forwarders.
Customs traditionally has not imposed penalties if an importer initiates a voluntary self-disclosure before the government begins its investigation. Importers should be aggressive in using voluntary self-disclosures to minimize the likelihood of customs penalties and related FCA liability risks.
Request confidential treatment for your company’s import data. Much of the information filed as part of the entry process is available for review by companies, such as PIERS and Panjiva, which aggregate import data and sell it to the public. By filing a government confidentiality request and keeping it up to date, your company can limit the ability of third parties (including competitors and whistleblower law firms) to analyze import data to discern trading patterns, supply chains, and exposure to high-risk regions or high-tariff products.
Compliance and Whistleblower Steps
In addition to the customs-related steps listed above, maintaining a robust corporate compliance program that addresses customs issues and general whistleblowing concerns can help prevent an internal complaint from turning into a qui tam suit. Some measures to consider include the following:
Maintain an Effective Compliance Program. Maintain a corporate compliance program that meets DOJ’s expectations for effectiveness, and ensure the program is coordinated with a well-tailored customs compliance program. Effective compliance programs are marked by senior leadership support, adequate resources, use of risk assessments, well-developed policies and procedures, tailored trainings, encouragement of internal reporting, and meaningful responses to complaints. Given the heightened risk environment, make sure your company has a compliance officer or team that understands customs issues and can follow up on reports of potential customs violations.
Encourage Internal Reporting & Whistleblower Protection. Establish a confidential internal reporting mechanism (e.g., hotline). Protect employees from retaliation to encourage internal reporting over external whistleblower actions. Investigate and address complaints promptly and transparently.
Conduct Regular Training & Education.Train employees on Customs and FCA requirements and the risks of false claims. Effective training is tailored to the roles and responsibilities of given groups of employees.
Strengthen Internal Controls & Audits. Perform regular post-entry checks and internal audits to identify and correct potential customs violations and underpayments.
Respond Proactively to Potential Violations.Act quickly if an issue is detected to correct errors, and consider self-reporting to Customs when necessary, both to lock in a no-penalty situation with Customs and to reduce the likelihood of qui tam suits.
Respond Promptly and Fully to All Customs Forms 28 (Requests for Information), Form 29s (Notices of Action), and Informal Inquiries. Importers should designate an internal employee to be an ACE contact so that your company receives Customs notices at the same time as the customs broker, instead of relying on the broker to forward any notices. Any requests for information or Customs actions should be investigated thoroughly and have a well-supported response (generally required within 30 days).
Follow Through on Customs Notices. If Customs makes a determination, such as reclassifying a product, then Customs requires that the importer search through its recent imports and reflect the Customs decision for all identical or analogous entries. In some cases, substantial customs penalties or FCA liability have arisen from the failure to do so. Ensure that the full implications of any Customs action are thoroughly understood and that your company uses the Post-Summary Corrections process to reflect any changes mandated by Customs. Consider using a voluntary self-disclosure to reflect changes to older entries.
Follow Up Thoroughly on Any Civil Investigative Demand (CID) from DOJ or Any Qui Tam Complaint.The receipt of a CID or qui tam complaint always requires the highest level of attention, given the draconian penalties the FCA authorizes. Follow up on the receipt of these items to take swift action to investigate and defend against those claims, using outside counsel with experience in the FCA and customs issues.
By proactively addressing customs compliance, importers can help minimize the risk not only of customs penalties but also the risk of qui tam lawsuits. Especially in a high-tariff environment, customs compliance and taking all available steps to ensure the proper payment of all tariffs lawfully due is essential and needs to be at the top of the list for any risk-based compliance program.
Antitrust Under Trump: Initial Policies and Actions
As the Trump administration’s approach to antitrust takes shape through political appointments, policy statements, speeches, and enforcement actions, our team is tracking new developments and will provide important updates on issues pertinent to clients. This client alert is not intended to be a comprehensive review of specific actions or cases, but rather an at-a-glance review of relevant policies as they are being created.
In Depth
NOMINATIONS AND CONFIRMATIONS
Appointment of Federal Trade Commission (FTC) Chairman
President Donald Trump appointed FTC Commissioner Andrew Ferguson as the new chairman of the FTC on January 20, 2025.
Ferguson views antitrust enforcement as a facilitator of innovation and believes that because markets are not self-correcting, government intervention on behalf of human flourishing and the protection of workers is necessary.
Despite his intention to “reverse” former Chair Lina Khan’s war on mergers and anti-business agenda, Ferguson has expressed concern with the market power of Big Tech and other large companies being leveraged to gain social or political control.
Confirmation Hearing for AAG Nominee Gail Slater
President Donald Trump nominated Gail Slater as the Assistant Attorney General (AAG) of the US Department of Justice’s (DOJ) Antitrust Division on December 4, 2024.
On February 12, 2025, Slater appeared before the Senate Judiciary Committee for her nomination hearing. The committee advanced her nomination on February 27 with a vote of 20-2.
Slater has expressed a desire to continue enforcement actions against Big Tech and to return to using merger remedies in the form of consent decrees and settlements to address competitive harm.
Confirmation Hearing for FTC Commissioner Nominee Mark Meador
President Trump appointed Mark Meador to the FTC on December 10, 2024.
On February 25, 2025, Meador appeared before the Senate Committee on Commerce, Science, and Transportation for his confirmation hearing.
He echoes Slater’s view that pursuit of Big Tech should remain a priority for the agencies, as should combatting noncompete agreements that overly burden workers and prevent employees from leaving to work for a competitor.
GENERAL UPDATES
Musk Supports Consolidating Antitrust Enforcement Agencies
Responding to a comment by Sen. Mike Lee (R-Utah), who expressed hope that the new administration would consider consolidating the FTC and DOJ, Elon Musk said, “Sounds logical,” appearing to agree with the idea.
Lee referenced the One Agency Act, a bill he proposed in 2021 that would strip the FTC of its antitrust authority and transfer it to the DOJ. When discussing the bill, Lee has compared the current two-agency system to having two presidents.
Agencies Keep 2023 Merger Guidelines
FTC Chairman Ferguson and Omeed Assefi, Acting Assistant Attorney General of the DOJ’s Antitrust Division, announced on February 18, 2025, that the FTC and DOJ will continue to use the 2023 Merger Guidelines as the framework for their merger review process.
Ferguson cited the time and expense associated with creating new guidelines, as well as his desire to create stability for the parties and the agencies, as the rationale for adhering to the 2023 Guidelines. He did note that “no Guidelines are perfect” and indicated portions could be revisited later.
Ferguson Supports New Hart-Scott-Rodino (HSR) Rules
FTC Chairman Ferguson expressed his support for the new HSR rules, stating that “updates were long overdue” and would “prevent unlawful deals from slipping through the cracks.”
He has previously stated his approval of the new rules, calling them a “lawful improvement over the status quo” in his concurring statement accompanying the rules’ announcement.
Holyoak Sets Out FTC Goals for New Administration
In remarks at the GCR Live conference on January 30, 2025, FTC Commissioner Melissa Holyoak outlined three areas of focus for antitrust under the Trump administration. She explained that the FTC will focus on (i) making the merger review process better and more predictable, (ii) ensuring that antitrust concerns will not impede artificial intelligence innovation, and (iii) fighting against Big Tech censorship.
In later remarks, Holyoak said that she expects the return of early termination, improving staff communication and transparency with the parties in the merger review process, bringing back remedies as a method of resolving merger issues – as well as continuing enforcement actions against Big Tech – and abandoning FTC rulemaking authority.
Meador Targets Anticompetitive Effects of Vertical Mergers
At his confirmation hearing on February 25, 2025, FTC Commissioner nominee Meador indicated that he would address the consumer welfare issues raised by vertical mergers. He noted that vertical integration can allow for increased prices, a reduction in quality, and market foreclosure. He went onto say that he would address these concerns where they arise.
FTC Will Continue to Fight Anticompetitive Behavior in Labor Markets
FTC Chairman Ferguson has emphasized a continuing priority of protecting workers using antitrust laws.
He cited no-poach, wage-fixing, and noncompete agreements, as well as deceptive or misleading hiring practices, as examples of conduct the FTC will fight against to combat labor monopsonies and general harm to workers.
The FTC will approach these issues based on individual cases, not rulemaking (like the Biden administration’s noncompete ban).
Agencies Indicate Return of Merger Remedies
Statements from FTC Commissioner Holyoak and AAG nominee Slater indicate that both the FTC and DOJ will become more open to evaluating merger remedies under the new administration.
Holyoak has stated that the agencies should consider remedies like divestitures when such remedies can successfully preserve competition lost by a merger. Similarly, Slater has stated that when merger remedies are “done right,” they can remove competitive harm from a merger.
FTC Issues Policy to Avoid Staff Participation in the American Bar Association (ABA) Antitrust Section Activities
In response to the ABA’s criticism of the new Trump administration’s recent actions, on February 14, 2025, FTC Chairman Ferguson prohibited FTC political appointees from holding leadership positions in the ABA, participating in or attending ABA events, and renewing ABA memberships.
Ferguson pointed to several historical examples of what he asserts have been ABA political partisanship and leftist advocacy to support his decision, as well as views on the ABA’s loyalty to the interests of Big Tech.
Ferguson Intends to Pursue Diversity, Equity, and Inclusion (DEI), Environmental, Social, and Governance (ESG) Collaborations as Section One Violations
In a document laying out his policy priorities created prior to his appointment to chairman, FTC Chairman Ferguson explained he intends the FTC to “investigate and prosecute collusion on DEI, ESG, advertiser boycotts, etc.,” suggesting the agency may focus its investigations on companies participating in industry groups or other collaborative ventures intended to address social issues or manage industry risks associated with environmental, labor, or diversity issues.
Uncertainty Prevails Over Future FTC Enforcement of the Robinson-Patman Act
FTC Commissioner nominee Meador has written favorably of federal enforcement of the Robinson-Patman Act, a statute prohibiting discriminatory pricing which was largely ignored until the last years of the Biden administration.
Meador suggested that the law should be enforced, particularly in the grocery and consumer packaged goods industries. Ferguson and Holyoak have written in recent FTC dissents that the FTC’s resources would be better served by enforcing the law in appropriate cases where the alleged price discrimination harms competition (e.g., involving actors with market power using price discrimination to monopolize).
Until Meador is confirmed, it is uncertain whether and how Robinson-Patman will be enforced.
FTC Calls for Public Feedback on Tech Censorship
The Federal Trade Commission (FTC or Commission) is asking members of the public to weigh in on whether tech platforms restricted or blocked their access because of content they posted on those platforms. The FTC issued a Request for Information (RFI) on February 20, 2025, to “better understand how technology platforms deny or degrade (such as by “demonetizing” and “shadow banning”) users’ access to services based on the content of the users’ speech or their affiliations, including activities that take place outside the platform” and how such actions may violate federal law. FTC Chairman Andrew Ferguson commented in the press release accompanying the RFI that “tech firms should not be bullying their users …This inquiry will help the FTC better understand how these firms may have violated the law by silencing and intimidating Americans for speaking their minds.”
In issuing the RFI, the Commission is following a long-held FTC tradition of carrying out investigative groundwork on an issue before it issues a potential regulatory rule, and the RFI is simply an initial investigation. But the inquiry raises questions about the scope of First Amendment rights of platforms and the reach of the FTC Act.
The RFI has thus far received over 1,000 comments. Stakeholders interested in submitting feedback have until May 21, 2025.
Revised HSR Thresholds Now in Effect
Each year, the minimum jurisdictional thresholds associated with the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) are adjusted by the Federal Trade Commission (FTC). The 2025 adjustments went into effect on February 21, 2025.
The size-of-transaction threshold increased to $126.4 million, which is up from $119.5 million in 2024. Any transaction valued at $126.4 million or above is reportable if the size-of-party thresholds are met. Those size-of-party thresholds increased to $25.3 million (from $23.9 million) and $252.9 million (from $239 million). Finally, in 2025, any transaction that is valued at more than $505.8 million will be reportable regardless of the size of the parties.
In addition to the increases in the HSR reporting thresholds described above, the FTC adjusted its tier-based HSR filing fee structure. The lowest filing fee remains $30,000 and applies to all transactions valued at less than $179.4 million. The filing fees associated with the remaining five tiers increased, now ranging from $105,000 (applicable to transactions valued at $179.4 million but less than $555.5 million) to $2,390,000 (applicable to transactions valued at $5.555 billion or more).
Tariffs: Force Majeure and Surcharges — FAQs
As we navigate a turbulent tariff landscape for manufacturers, we want to help you with some of the most frequently asked questions we are encountering right now as they relate to force majeure and price increases:
1. What are the key doctrines to excuse performance under a contract?
There are three primary defenses to performance under a contract. Importantly, these defenses do not provide a direct mechanism for obtaining price increases. Rather, these defenses (if successful) excuse the invoking party from the obligation to perform under a contract. Nevertheless, these defenses can be used as leverage during negotiations.
Force Majeure
Force majeure is a defense to performance that is created by contract. As a result, each scenario must be analyzed on a case-by-case basis depending on the language of the applicable force majeure provision. Nevertheless, the basic structure generally remains the same: (a) a listed event occurs; (b) the event was not within the reasonable control of the party invoking force majeure; and (c) the event prevented performance.
Commercial impracticability (Goods)
For goods, commercial impracticability is codified under UCC § 2-615 (which governs the sale of goods and has been adopted in some form by almost every state). UCC § 2-615 excuses performance when: (a) delay in delivery or non-delivery was the result of the occurrence of a contingency, of which non-occurrence was a basic assumption of the contract; and (b) the party invoking commercial impracticability provided seasonable notice. Common law (applied to non-goods, e.g., services) has a similar concept known as the doctrine of impossibility or impracticability that has a higher bar to clear. Under the UCC and common law, the burden is quite high. Unprofitability or even serious economic loss is typically insufficient to prove impracticability, absent other factors.
Frustration of Purpose
Under common law, performance under a contract may be excused when there is a material change in circumstances that is so fundamental and essential to the contract that the parties would never have entered into the transaction if they had known such change would occur. To establish frustration of purpose, a party must prove: (a) the event or combination of events was unforeseeable at the time the contract was entered into; (b) the circumstances have created a fundamental and essential change, and (c) the parties would not have entered into the agreement under the current terms had they known the circumstance(s) would occur.
2. Can we rely on force majeure (including if the provision includes change in laws), commercial impracticability, or frustration of purpose to get out of performing under a contract?
In court, most likely not. These doctrines are meant to apply to circumstances that prevent performance. Also, courts typically view cost increases as foreseeable risks. Official comment of Section 2-615 on commercial impracticability under UCC Article 2, which governs the sale of goods in most states, says:
“Increased cost alone does not excuse performance unless the rise in cost is due to some unforeseen contingency which alters the essential nature of the performance. Neither is a rise or a collapse in the market in itself a justification, for that is exactly the type of business risk which business contracts made at fixed prices are intended to cover. But a severe shortage of raw materials or of supplies due to a contingency such as war, embargo, local crop failure, unforeseen shutdown of major sources of supply or the like, which either causes a marked increase in cost or altogether prevents the seller from securing supplies necessary to his performance, is within the contemplation of this section. (See Ford & Sons, Ltd., v. Henry Leetham & Sons, Ltd., 21 Com.Cas. 55 (1915, K.B.D.).)” (emphasis added).
That said, during COVID and Trump Tariffs 1.0, we did see companies use force majeure/commercial impracticability doctrines as a way to bring the other party to the negotiating table, to share costs.
3. May we increase price as a result of force majeure?
No, force majeure typically does not allow for price increases. Force majeure only applies in circumstances where performance is prevented by specified events. Force majeure is an excuse for performance, not a justification to pass along the burden of cost increases. Nevertheless, the assertion of force majeure can be used as leverage in negotiations.
4. Is a tariff a tax?
Yes, a tariff is a tax.
5. Is a surcharge a price increase?
Yes, a surcharge is a price increase. If you have a fixed-price contract, applying a surcharge is a breach of the agreement.
That said, during COVID and Trump Tariffs 1.0, we saw many companies do it anyway. Customers typically paid the surcharges under protest. We expected a big wave of litigation by those customers afterward, but we never saw it, suggesting either the disputes were resolved commercially or the customers just ate the surcharges and moved on.
6. Can I pass along the cost of the tariffs to the customer?
To determine if you can pass on the cost, the analysis needs to be conducted on a contract-by-contract basis.
7. If you increase the price without a contractual justification, what are customers’ options?
The customer has five primary options:
1. Accept the price increase:
An unequivocal acceptance of the price increase is rare but the best outcome from the seller’s perspective.
2. Accept the price increase under protest (reservation of rights):
The customer will agree to make payments under protest and with a reservation of rights. This allows the customer to seek to recover the excess amount paid at a later date. Ideally, the parties continue to conduct business and the customer never seeks recovery prior to the expiration of the statute of limitations (typically six years, depending on the governing law).
3. Reject the price increase:
The customer will reject the price increase. Note that customers may initially reject the price increase but agree to pay after further discussion. In the event a customer stands firm on rejecting the price increase, the supplier can then decide whether it wants to take more aggressive action (e.g., threaten to stop shipping) after carefully weighing the potential damages against the benefits.
4. Seek a declaratory judgment and/or injunction:
The customer can seek a declaratory judgment and/or injunction requiring the seller to ship/perform at the current price.
5. Terminate the contract:
The customer may terminate part or all of the contract, depending on contractual terms
For additional information, here is a comprehensive white paper we have written on the tariffs.
Federal Circuit Broadens ITC Economic Prong
In the recent decision of Lashify, Inc. v. International Trade Commission, the United States Court of Appeals for the Federal Circuit rejected the long-standing approach concerning the interpretation of the domestic-industry requirement under Section 337 of the Tariff Act of 1930. The complainant, an American company importing eyelash extensions from international manufacturers, which alleged that certain other importers were infringing on its patents.
The central legal issue in this case revolved around the interpretation of the “economic prong” of the domestic-industry requirement under 19 U.S.C. § 1337(a)(3)(B). Specifically, the panel examined whether significant employment of labor or capital related to sales, marketing, warehousing, quality control, and distribution could satisfy the economic prong, even in the absence of domestic manufacturing.
The Federal Circuit vacated the Commission’s split decision regarding the economic prong, finding that the Commission’s interpretation was contrary to the statutory text. Notably, the Court cited the Loper Bright Supreme Court decision that allows the Court to “exercise [] ‘independent judgment’ about the correctness of [the Commission’s] interpretation.”
The Court ultimately held that significant employment of labor or capital should be considered sufficient to satisfy the economic prong, regardless of whether the labor or capital is used for sales, marketing, warehousing, quality control, or distribution. The Court emphasized that the statutory language does not impose a domestic-manufacturing requirement or limit the economic prong to technical development. Rather the panel held that so long as the human activity is related to “aspects of providing [patented] goods or services,” the cost of that investment in human capital should be accounted for. This decision has significant implications for future cases involving the domestic-industry requirement under Section 337. The Federal Circuit’s interpretation broadens the scope of what can be considered significant employment of labor or capital, potentially allowing more companies to satisfy the economic prong without engaging in domestic manufacturing. This could lead to increased access to Section 337 relief for companies that focus on sales, marketing, and distribution activities within the United States.
While FTC Non-Compete Appeals Linger, Ohio Poses Ban on Non-Competes, Forum Selection, and Other Restrictive Covenants
The Federal Trade Commission (FTC) implemented its 2024 rule banning non-compete agreements on April 23, 2024. The rule gained some life at first as a U.S. District Court in Pennsylvania ruled in its favor and denied a request to implement a permanent injunction. Since then, however, employers have won multiple arguments supporting the enforcement of non-compete agreements in front of the National Labor Relations Board and U.S. District Courts in Texas and Florida. The rule was vacated by a permanent injunction from the court in Texas on Aug. 20, 2024.
While the FTC rule goes through the appeals process, non-compete agreements remain a state law issue. To date, 33 states have implemented restrictions requiring the agreements to be reasonable in relation to the time, scope, and geographical area of the restriction. In January 2025, New York’s legislature reintroduced a bill that would make it the 34th state to restrict non-compete agreements.
Ohio introduced a bill in February 2025 that would make it the fifth state to ban non-compete agreements. Currently, California, Oklahoma, Minnesota, and North Dakota have outright bans on non-compete agreements. That said, Ohio’s proposed legislation would go beyond non-compete agreements for all employees, volunteers, and independent contractors.
Specifically, the Ohio law would prohibit any agreement that contains a forum selection clause requiring an Ohio employee to litigate a claim outside the state. The potential law would also prohibit an “agreement that imposes a fee or cost” on an employee “for terminating the work relationship” for various scenarios. Further, it would prohibit any agreement requiring “a worker who terminates the work relationship to reimburse the employer for an expense incurred” during the relationship for “training, orientation, evaluation, or other service intended to provide the worker with skills to perform the work or to improve performance.” Finally, the law would give courts the option to award punitive damages when an employer violates the law.
While state law determines whether agreements with restrictive covenants are enforceable, the laws are constantly changing. Based on this, employers should consider reviewing agreements with counsel to ensure they comply with various state laws.
Foley Automotive Update 06 March 2025
Foley is here to help you through all aspects of rethinking your long-term business strategies, investments, partnerships, and technology. Contact the authors, your Foley relationship partner, or our Automotive Team to discuss and learn more.
Special Update — Trump Administration and Tariff Policies
Foley & Lardner provided an update on the potential ramifications of steel and aluminum tariffs on multinational companies.
Foley & Lardner partner Gregory Husisian described sentiment among Chief Financial Officers on the Trump administration’s approach to trade policy in The Wall Street Journal article, “The Latest Dilemma Facing Finance Chiefs: What to Tell Investors About Tariffs.”
Key tariff announcements include:
USMCA-compliant automakers have a one-month exemption from the 25% tariffs on U.S. imports from Canada and Mexico that were announced on March 4. The Trump administration announced the decision on March 5, following discussions with Ford, GM, and Stellantis.
In a March 5 MEMA update regarding the temporary pause of auto tariffs on Canada and Mexico, President and CEO Bill Long stated “Conversations held today indicate positive results that USMCA-compliant parts are included, but we are awaiting official confirmation from the Administration.” In breaking news on March 6, Commerce Secretary Howard Lutnick stated to CNBC: “It’s likely that it will cover all USMCA compliant goods and services, so that which is part of President Trump’s deal with Canada and Mexico are likely to get an exemption from these tariffs. The reprieve is for one month.”
On March 4, U.S. duties on Chinese imports were doubled to 20%. China intends to implement new tariffs on U.S. imports on March 10, and the nation added over two dozen U.S. companies to export control and corporate blacklists.
The Canadian government does not plan to repeal the 25% retaliatory tariffs on approximately C$30 billion worth of goods from U.S. exporters, announced on March 4. Canada could also implement a second round of 25% tariffs in three weeks on C$125 billion of products that include cars, trucks, steel, and aluminum. Mexico plans to announce tariffs on U.S. imports on March 9.
25% levies on U.S. imports of steel and aluminum could be implemented March 12.
Announcements could follow on April 2 regarding 25% sector-specific tariffs that would include automobile and semiconductor imports, along with broader “reciprocal tariffs” on countries that tax U.S. imports. Details have not been provided regarding the recent threat for 25% duties on European imports.
A February 25 executive order directed the government to consider possible tariffs on copper.
Automotive Key Developments
U.S. new light-vehicle sales are estimated to have reached a SAAR between 16.1 and 16.3 million units in February 2025, according to preliminary analysis from J.D. Power and Haver Analytics.
Annual U.S. auto sales could decline by 500,000 units, and up to 2 million units, if the Trump administration were to implement 25% tariffs on automotive imports from Mexico and Canada, according to automotive analysts featured in the Detroit Free Press and Bloomberg. In addition, a recession could begin “within a year” if certain tariffs “persist for any length of time.”
The Alliance for Automotive Innovation and Anderson Economic Group estimate tariffs on Mexican and Canadian imports could raise the cost of a new vehicle by up to 25%, or by a range of $4,000 to $12,000, depending on the model.
Crain’s Detroit reports product launch delays are impacting suppliers as automakers postpone investment decisions until there is more stability in areas that include “federal tariffs, regulatory policy and electric vehicle incentives.”
A number of large auto suppliers are taking steps to reduce expenses in order to support profitability amid market uncertainty, according to a report in Automotive News.
The Wall Street Journal provided overviews of the potential impact of tariffs on automakers and vehicle components, stating that “no sector is as exposed to possible Trump tariffs as the auto industry.”
The benchmark price for domestic steel has increased 25% this year to $900 a ton, ahead of a possible 25% import tariff on the metal.
The Wall Street Journal reports the potential for tariffs on aluminum have already raised costs for buyers, as there are few U.S. suppliers capable of meeting supply needs after years of declining domestic production.
The National Highway Traffic Safety Administration laid off 4% of its staff as part of a government-wide reduction of federal employees. NHTSA had expanded its workforce by roughly 30% under the Biden administration, and it was estimated to have a staff of approximately 800 prior to the job cuts.
At the annual MEMA Original Equipment Suppliers event on February 27, the North American purchasing chief of Stellantis indicated the automaker will consider supplier requests for pricing relief. This represents a reversal of a “no more claims” policy announced in 2024.
OEMs/Suppliers
Stellantis reported a full-year 2024 net profit of $5.8 billion on net revenue of $156.9 billion, representing year-over-year declines of roughly 70% and 17%, respectively.
GM will temporarily halt production for a number of weeks at its Corvette plant in Bowling Green, Kentucky, for undisclosed reasons.
Mercedes plans to reduce capacity in Germany as part of an initiative to reduce expenses by 10% through 2027 amid heightened competition, uneven demand, and high material costs. The automaker may also reduce its sales and finance workforce in China, according to unidentified sources in Reuters.
China’s top-selling automaker, BYD, could decide on a third plant location in Europe within the next two years. The automaker has plants underway in Szeged, Hungary, and Izmir, Türkiye.
Detroit Manufacturing Systems, LLC will acquire Android Industries, LLC and Avancez, LLC. The combined entity, Voltava LLC, will be headquartered in Auburn Hills, Michigan, and it is expected to reach over $1.5 billion in annual revenue.
Market Trends and Regulatory
J.D. Power estimates the average monthly payment for a new vehicle reached $738 in February, up 2.4% year-over-year. The analysis noted “vehicle affordability remains a challenge for the industry and is the primary reason why the sales pace, while strengthening, has not returned to pre-pandemic levels.”
The new vehicle average transaction price reached $48,118 in January 2025, according to analysis from Edmunds.
The International Longshoremen’s Association (ILA) ratified a six-year labor contract with the United States Maritime Alliance (USMX), ending months of uncertainty over the potential for a follow-up strike at U.S. East and Gulf Coast ports.
National “right to repair” legislation was introduced in Congress last month by a bipartisan group of lawmakers. The Right to Equitable and Professional Auto Industry Repair Act (H.R. 906) follows multiple recent attempts by Congress to pass similar legislation.
The 2026 Detroit Auto Show will take place January 14–25, 2026, at Huntington Place.
In response to concerns over the compliance costs associated with 2025 carbon dioxide emissions standards in the European Union, the European Commission announced automakers will now have a three-year window to meet emissions targets in the bloc.
Autonomous Technologies and Vehicle Software
Automotive News provided an update on the outlook for artificial intelligence (AI) adoption in certain automotive applications.
A number of automakers are pursuing software and AI-based technology to differentiate their vehicles’ self-driving features, according to a report in The Wall Street Journal.
Stellantis debuted a Level 3 automated driving system, STLA AutoDrive 1.0, that is expected to facilitate hands-free and eyes-off functionality at speeds of up to 37 mph. The automaker did not provide a launch date for the technology. The Society of Automotive Engineers (SAE) defines Level 3 as autonomous technology that can drive the vehicle under limited conditions without human supervision.
Mercedes is currently the only automaker with a Level 3 system approved for use in the U.S., and the automaker’s Drive Pilot is only available in Nevada and California. Honda plans to launch Level 3 automated driving system in 2026, in the 0 Series in North America.
Uber began offering its customers driverless Waymo rides in Austin, Texas.
Electric Vehicles and Low Emissions Technology
China’s Xiaomi has a goal to deliver over 300,000 EVs in 2025, and this would more than double its deliveries last year. The consumer electronics giant sells nearly all its EVs within China.
China announced new export restrictions on tungsten and other specialty metals used in applications that include EV batteries.
TechCrunch analysis indicates there are currently 34 battery factories either planned, under construction, or operational in the U.S., up from two in 2019.
Stellantis’ Brampton Assembly plant in Ontario has been temporarily shut down as the automaker reevaluates plans for the next-generation electric Jeep Compass SUV that was scheduled to begin production in early 2026. This follows a decision by Ford to delay the launch of its next-generation gas and hybrid F-150 pickup trucks.
Canada’s zero-emission vehicle sales declined by nearly 30% in January 2025 from December 2024. This follows a halt in the federal rebate program, when funding was exhausted ahead of the original termination date of March 31, 2025.
The Trump administration directed federal buildings across the U.S. to shut off EV chargers, according to communications from the General Services Administration described by unidentified sources in Bloomberg.
Upstream’s 2025 Automotive and Smart Mobility Global Cybersecurity Report found that attacks involving EV chargers increased to 6% in 2024, from 4% in 2023. According to the report, 59% of the EV charging attacks in 2024 had the potential to impact millions of devices, including chargers, mobile apps, and vehicles.
Among the top 10 battery electric vehicle (BEV) models with the fewest reported problems in the J.D. Power 2025 U.S. Electric Vehicle Experience (EVX) Ownership Study, seven were in the mass market segment. BMW iX was rated highest overall and highest in the premium BEV segment, and the Hyundai IONIQ 6 ranked highest in the mass market BEV segment.
Consumer Reports’ Best Cars of the Year for 2025 includes six models with hybrid options and one fully electric model.
BEV sales in Europe increased 34% year-over-year in January 2025, while overall new-vehicle registrations fell by 2.5%, according to data from the European Automobile Manufacturers’ Association (ACEA). BEVs achieved a 15% market share in Europe, compared to 10.9% in January 2024.
Analysis by Julie Dautermann, Competitive Intelligence Analyst
Nonprofit Health Care Mergers – Introduction: With Complexity Comes Opportunity
In the evolving health care landscape, mergers between nonprofit health care organizations are becoming increasingly common. Mergers are often driven by a combination of economic factors, the need to improve quality and efficiency of care, and the desire to create value for patients and communities. As the first post in our nonprofit merger series, we will explore why nonprofit health care entities may consider a merger, analyze the economic pressures influencing such decisions, and discuss the structures of nonprofit transactions, including the differences between member substitutions and true mergers. Forthcoming posts in this series will examine the unique due diligence concerns, regulatory approvals, and financing arrangements involved in nonprofit health care mergers.
The Economic Drivers of Nonprofit Health Care Mergers
1. Cost Efficiency and Scale Economies
It is not unusual to find multiple nonprofit health care organizations serving the same or similar patient community in a given market or region. Although competition within a for-profit industry may be seen as beneficial for consumers, most nonprofit health care organizations are competing for the same sources of government funding and/or charitable donations for their capital needs, which can weaken or inhibit the impact of their work both individually and in the aggregate.
As a result, overlapping nonprofits may realize significant economies of scale and make a substantially greater impact by joining forces and centralizing their efforts through a merger. By combining their operations, two organizations can reduce duplicative costs in areas such as administration, technology, and supply chain management. For example, by consolidating back-office functions such as human resources, billing, and procurement, a merged entity can lower its operational expenses and redirect those savings into improving patient care and expanding services. For smaller entities in particular, the cost of implementing advanced medical technology or transitioning to new electronic health record (EHR) systems can be prohibitive. By merging, organizations may be better equipped to absorb these costs and ensure their long-term financial sustainability.
2. Increased Bargaining Power with Payers and Third Parties
Another economic factor is the increased leverage that a larger health care organization has when negotiating with insurance companies and other payors. Together, a merged organization can exercise more market power and negotiate better reimbursement rates than any of the parties could on their own. Higher reimbursement can significantly improve the financial outlook for a nonprofit health care organization, which must carefully balance its mission with its financial health. Before proceeding with a merger, the parties will often engage a third-party consultant to analyze their current payor arrangements and identify opportunities for improvement.
3. Access to Capital
Nonprofit health care organizations, unlike their for-profit counterparts, do not have access to equity markets to raise capital. Mergers can offer a solution to this challenge. By merging, two organizations can improve their creditworthiness, making it easier to obtain loans and other forms of debt financing for future expansion, facility improvements, or technology upgrades. This is particularly important as health care organizations seek to invest in value-based care models that require significant upfront investment in care coordination, population health management, and IT infrastructure. Lending arrangements for nonprofits are typically quite challenging due to concerns about maintaining tax status, use of funds, and restrictions associated with both. It is not uncommon for organizations to restructure their lending arrangements and partners during a merger process or immediately thereafter.
Improving Delivery of Care
1. Enhancing Quality of Care
One of the key motivations for a nonprofit merger is to improve quality and continuity of care. Smaller health care organizations, particularly those in rural areas, may struggle to provide specialized services or maintain high clinical practice standards due to more limited resources. A merger allows the parties to pool their resources and share best practices to build a more efficient and effective care delivery system, thereby improving patient outcomes and practitioner recruitment efforts.
Additionally, mergers can help organizations streamline care pathways. For instance, a health care system with multiple facilities may create better-integrated care models, improving coordination between primary care, specialty care, and hospital services. This enhances patient outcomes by reducing duplication of services, minimizing delays in care, and ensuring that patients receive the appropriate care in the most efficient setting.
2. Expanding Access to Care
For many nonprofit health care organizations, expanding access to care — especially for underserved populations — is a central part of their mission. Mergers can help organizations achieve this goal by expanding their geographic reach and the range of services that they can provide. For example, a small community hospital may merge with a larger regional health system to provide its patients with access to specialized services that were previously unavailable locally, such as oncology or cardiology.
Furthermore, mergers may enable organizations to better address social determinants of health, which is increasingly recognized as critical to improving population health. For example, a Federally Qualified Health Center (FQHC) with a strong primary care practice may consider merging with a nonprofit community-based behavior health clinic to create an integrated preventative care network specific to the medical and behavioral health needs of its community. The larger, more financially stable merged organization may then be able to invest additional resources in community health initiatives, such as housing support and food security programs.
3. Investing in Innovation
Health care providers, and particularly nonprofits, may find it difficult to keep up with the rapid pace of innovation in the health care sector. Merged organizations are often better positioned to invest in these innovations, particularly in areas like telemedicine, data analytics, precision medicine, and value-based care models. By combining resources and patient base data, nonprofit health care organizations can become more responsive to the health care needs of their patient community, contributing to improved clinical outcomes and, in turn, a more financially stable future.
Value Creation Beyond Economics and Care Delivery
1. Mission Alignment
Nonprofit health care organizations are mission-driven, with the goal of serving their communities and improving health outcomes. When two nonprofit organizations merge, they typically seek to align their missions and values. This alignment is essential for ensuring the new entity remains focused on its core objective — whether that is serving a particular patient population, improving community health, or promoting medical research and education.
This often creates a situation where the two parties to the proposed merger are forced to negotiate a revised set of bylaws better suited for the combined entity post-closing. Important in this negotiation is understanding the terms around board structure, committees, executive officers, and general governance post-closing. It is not uncommon to see an expanded board or some combination of the two boards along with a realignment in officer positions. This is often an area of significant negotiation during the merger process.
2. Organizational Culture and Leadership Stability
In the nonprofit health care sector, where mission and values are paramount, ensuring that the two organizations’ cultures are compatible is essential. A well-executed merger offers a unique opportunity to bring fresh perspectives into leadership while preserving and building upon the parties’ existing strengths. By integrating their boards and leadership teams, merged organizations may foster the environment for more innovative and effective strategies for fulfilling a unified mission.
Structures of Nonprofit Health Care Transactions
Nonprofit health care mergers utilize unique transaction structures, primarily because they do not have shareholders and are organized for charitable purposes. Two common structures for combining nonprofit health care organizations include a member substitution and a true merger per state law.
1. Member Substitution
In a member substitution transaction, one nonprofit organization becomes the controlling member of another nonprofit without the two organizations dissolving or fully integrating into a single entity. The sole member (usually the parent organization) gains the authority to appoint the board members of the other organization and effectively controls its governance and operations. Note that a member substitution may not be viable in some states where nonprofit entities are not required or permitted to have members.
Benefits: Member substitution is often viewed as a less disruptive approach compared to a true merger. With a member substitution, the controlled entity retains its legal identity, which can help preserve relationships with donors, the community, and key stakeholders. This structure can also be advantageous for organizations wanting to maintain some degree of autonomy, particularly if they have a strong local presence or identity. Also important is that this structure still maintains separation of liabilities between each entity, i.e., liabilities of the nonprofit relinquishing control do not become the liabilities of the controlling member. A merger between a large health system and a smaller, local hospital may elect this structure in order to minimize disruption to the controlled entity’s local operations.
Challenges: The drawback of a member substitution is that it may not achieve the full benefits of integration, such as cost savings or streamlined operations. There may also be governance challenges if the controlled entity’s leadership or board resists the level of oversight imposed by the parent organization. Administratively, a member substitution can also be challenging because of the multiple levels of board governance.
2. True Merger
In a true merger, two or more nonprofit health care organizations combine into a single legal entity. The merged organization typically has a unified governance structure, leadership team, and operational model. This type of merger represents full integration and can provide the most significant opportunities for cost savings, operational efficiencies, and strategic growth.
Benefits: A true merger allows for complete consolidation of assets, liabilities, and operations. The merged organization can realize the maximum potential for economies of scale, enhanced bargaining power, and operational integration. Additionally, a true merger simplifies governance by creating a single board of directors and a unified executive leadership team.
Challenges: A true merger is more complex and may require regulatory approvals, including from the state attorney general or other regulatory bodies overseeing nonprofit or health care entities. The process can be time-consuming and may involve significant costs associated with legal, financial, and operational integration. A true merger also means that the surviving entity inherits the liabilities of the merged entity, which can result in unforeseen liability and risks for the surviving entity.
Conclusion
Mergers among nonprofit health care organizations are driven by a combination of economic pressures, the need to improve care delivery, and the desire to create long-term value for patients and communities. Whether through a member substitution or a true merger, these transactions can help organizations achieve financial stability, enhance quality of care, and expand access to services. However, nonprofit mergers require careful planning, particularly around governance, cultural integration, and mission alignment, to ensure that the merged organization remains focused on its charitable objectives and continues to serve its community effectively.
For nonprofit health care organizations considering a merger, it is essential to weigh both the financial and operational benefits, as well as the impact on the mission, before moving forward. With the right strategic approach, a merger can both strengthen the financial position of the parties and enhance their ability to serve their patients and communities.
Copper Crisis? The Economic Impacts of a Copper Import Tariff
On February 25, 2025, President Trump signed an executive order directing the Secretary of Commerce to investigate an alleged national security threat to the copper supply chain under Section 232 of the Trade Expansion Act and to report his findings and remediation recommendations.[1]
Why Copper?
Copper is crucial for defense, infrastructure, electronics, and emerging technologies, making it the U.S. Defense Department’s second-most used material. While the United States maintains significant copper reserves, it only produces half of the refined copper it consumes, making it heavily reliant on foreign suppliers. China controls approximately 50% of global smelting and refining capacity, although the United States sources the majority of its foreign copper from Canada, Chile, and Mexico.[svc2] This reliance, along with potential foreign market manipulation, is believed to pose a national security risk to America’s supply of raw copper, copper concentrates, refined copper, copper alloys, scrap copper, and copper derivative products.[3] Currently, no tariffs or quotas exist on copper imports.
What is Section 232?
Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. § 1862) specifically allows the President of the United States to impose import restrictions if certain imports are found to threaten national security. The U.S. Government relies on the Section 232 investigation process to evaluate the threat posed by imports. An application from an interested party or a request from a government department or agency or the Secretary of Commerce can initiate 232 investigations.
Investigative Process
The 232 investigation will evaluate several key aspects of the U.S. copper supply chain. These include the current and projected demand for copper in critical sectors like defense, energy, and infrastructure, as well as the ability of domestic production, smelting, refining, and recycling to meet this demand. The investigation will also examine the role of foreign supply chains, particularly major exporters, and the risks associated with the concentration of U.S. copper imports from a small number of suppliers. It will assess the impact of foreign government subsidies, overcapacity, and predatory trade practices on U.S. competitiveness, as well as the economic effects of artificially suppressed copper prices through dumping and overproduction. The investigation will explore the potential for foreign nations to restrict exports or weaponize their control over refined copper, and whether increasing domestic copper mining and refining capacity could reduce reliance on imports. Finally, it will review the impact of current trade policies and whether measures such as tariffs or quotas are necessary to safeguard national security.
Under U.S. law, the Commerce Department must consult with the Secretaries of Defense, Interior, and Energy, as well as other relevant agencies, during the investigation. Once initiated, the Secretary of Commerce has 270 days to present findings on whether copper import dependence threatens national security, along with recommendations to mitigate these risks, including tariffs, export controls, or incentives for domestic production. The Secretary will also provide policy suggestions for strengthening the copper supply chain through strategic investments, permitting reforms, and enhanced recycling efforts. While the public may have an opportunity to comment on the investigation, it is not required by statute; the Department of Commerce may gather additional information from surveys of industry stakeholders and other external resources. If the Secretary concludes that imports threaten national security, the President has up to 90 days to decide whether to implement trade restrictions based on these findings.
Potential Outcomes
If President Trump decides to act on the 232 investigation results, adjusting imports of copper to mitigate the perceived national security threat, all measures must be implemented within 15 days. Possible actions include new tariffs and quotas, which would not ban the importation of copper, only limit the import amounts and make them more expensive. The 232 investigation results will help determine the tariff rate.
If President Trump seeks to limit or restrict imports, and either no agreement is reached within 180 days or an agreement fails to address the national security threat, he may take additional actions under Section 232. The President must submit a written statement to Congress explaining his decisions within 30 days and publish notice of all actions in the Federal Register.
If President Trump decides action is unnecessary, he must submit a written statement to Congress within 30 days explaining his reasons. He must also publish this determination and the accompanying explanation in the Federal Register.
Correlating Policies and Next Steps
As part of his America First Trade Policy, President Trump signed proclamations to close loopholes and exemptions, restoring a true 25% tariff on steel and raising the aluminum tariff to 25%. He also raised the general tariff on Chinese imports to 20% in response to China’s alleged role in the fentanyl crisis. Shifting focus to protect a strategic mineral like copper appears consistent with this administration’s trade strategy.
While publishing the executive order signals a meaningful action, it merely initiates the 232 investigation. However, given the administration’s current approach to trade strategy, it seems likely this exercise will lead to additional tariffs—potentially reaching the 25% rate applied to steel and aluminum. New tariffs will almost certainly prompt foreign governments to protest and likely bring challenges before the World Trade Organization. And make no mistake – copper import tariffs will impact the U.S. economy. From defense to electronics to automotive, all major U.S. corporations that depend on copper will feel the pinch.
[1] https://www.federalregister.gov/documents/2025/02/28/2025-03439/addressing-the-threat-to-national-security-from-imports-of-copper
[2] https://www.statista.com/statistics/254877/us-copper-imports-by-major-countries-of-origin/
[3] The definition of copper derivate products will likely be the same used for steel and aluminum derivative products found in Section 232 of the Trade Expansion Act of 1962.
The Personal Side of M&A: Helping Business Owners Turn Vision into Legacy
For many business owners, their company is far more than a financial asset or something they list on a personal financial statement. It’s the product of their years of hard work, risk, and dedication. In many cases, it is even a family legacy. As an M&A lawyer, I have had the privilege of counseling many business owners through one of the most significant chapters in their lives: the sale of their business.
The Emotional Aspect of Selling a Business
Selling a business isn’t simply a transaction; it’s a transition from one phase of life to the next. For entrepreneurs, a company is more than just an income stream. It embodies their vision, the long days and late nights they worked to build it, and the sacrifices they made to keep it growing.
For me, as an M&A lawyer representing the seller’s side, guiding owners through this emotional journey is a more worthwhile experience than the sale itself. While the numbers and legal terms are critical, equally important are the personal goals and aspirations of my clients. For some, selling a business marks the beginning of retirement or a well-earned sabbatical. For others, it’s an opportunity to invest in a new venture and reignite their entrepreneurial spark. Understanding why they are selling and what’s next for them is as essential as negotiating the deal itself.
Aligning Personal Goals with Strategy
Each seller’s situation is unique. Some business owners want to maximize value to secure their family’s future, while others prioritize finding the right buyer to preserve the culture and legacy they’ve built. I view my role as more than just structuring a deal—it’s about helping clients achieve their personal definition of success.
For instance, when an entrepreneur tells me they want to ensure their employees are taken care of following the sale, I weave that commitment into the negotiation process along with the other material deal terms. When an owner envisions using the proceeds to pursue philanthropic endeavors, I help ensure that the practical financial outcome supports that goal.
Celebrating the Entrepreneurial Spirit
Entrepreneurs are remarkable individuals. They start with an idea, take risks others might avoid, and build a legacy that positively impacts their lives and the lives of their employees. I’ve always admired the entrepreneurial spirit and it’s incredibly rewarding to be part of their journey at such a transformative moment.
One of the most fulfilling aspects of my work is seeing business owners realize what they’ve built. In many ways, a successful sale is a celebration of their achievements. It’s an acknowledgment that their vision and effort created something enduring—a business that now has new opportunities for growth under new leadership.
Why the Right Counsel Matters
The sale process can be complex and overwhelming, especially when emotions run high. Having the right M&A counsel means having someone who not only understands the legal and financial nuances, but also appreciates the personal stakes. My approach is to bring clarity, confidence, and care to every step of the process. Sellers need someone who can advocate for their best interests while respecting the legacy they’re entrusting to the next owner.
Final Thoughts
The sale of a business is more than a transaction; it’s the culmination of a dream. Representing sellers has given me a front-row seat to some truly inspiring entrepreneurial stories, and I feel privileged to help business owners achieve their goals—both professional and personal. Whether it’s unlocking new opportunities, securing a family’s future, or ensuring the continued success of a legacy, my mission is to make the process as smooth, successful, and meaningful as possible.