Compliance challenges for foreign investment in the US

By Jeffrey L Kessler, Eva W Cole and Heather P Lamberg, Winston Strawn

While the US remains a top destination for foreign investment, certain laws and regulations create challenges for foreigners seeking to conduct business there. Failure to comply with these laws and regulations can lead to civil and criminal penalties, substantial administrative burdens, legal expense and unsatisfied business objectives. This article discusses some of the key challenges companies face when investing in the US, and certain compliance risks to consider.


Section 7 of the Clayton Act, the main substantive US antitrust law governing mergers, prohibits any corporation or person from acquiring, directly or indirectly, the stock or assets of another corporation where the effect of that acquisition may be substantially to lessen competition, or tend to create a monopoly.

Jeffrey L Kessler, Compliance challenges for foreign investment in the US
Jeffrey L Kessler
Co-Executive Chairman, Antitrust and Competition Co-Chair
Winston Strawn in New York
Tel: +1 212 294 4698

Pursuant to the Hart-Scott-Rodino (HSR) Act, the primary procedural law governing the antitrust review of mergers, transactions of a certain size must be reported to the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) before they are completed. Transacting parties that meet the HSR’s size-of-transaction and size-of-person thresholds must file notification forms with the government and observe a statutory waiting period before consummating the transaction. Reportability under the HSR Act does not depend on whether the transaction poses any substantive antitrust issues.

The FTC and the DOJ share responsibility for merger enforcement, and either agency may review or challenge a transaction. The question of which agency will review a given transaction depends largely on tradition, and the particular industry expertise each agency has developed. State attorneys-general also have express power under the Clayton Act to independently sue to enjoin a merger. They typically “piggyback” on the review conducted by the federal agency due to their more limited resources.

Most merger challenges are horizontal in nature and evaluate likely anti-competitive effects in each relevant antitrust market. Some challenges involve vertical concerns, usually focused on information exchange issues and the ability of the combined entity to disadvantage competitors of one party. The government and transacting parties may negotiate a remedy, typically a divestiture, or the government, states or private parties may sue to block the transaction.

Transactions that are not reportable under the HSR Act, or are reported and cleared, can later be challenged under section 7 or other antitrust laws. The FTC and the DOJ regularly monitor deal reports to stay apprised of non-reportable transactions, and they take complaints from customers and other third parties.


Corporate transactions resulting in non-US ownership or control of a US business are reviewed for national security concerns by an inter-agency governmental group known as the Committee on Foreign Investment in the United States (CFIUS). The CFIUS can put restrictions on transactions that fall short of blocking them. Assessing what may concern the CFIUS, and how best to address that risk, are important steps in any proposed acquisition or investment involving non-US investors.

Eva W Cole, Compliance challenges for foreign investment in the US
Eva W Cole
Partner, Antitrust and Competition Co-Chair
Winston Strawn in New York
Tel: +1 212 294 4609

US businesses that either: (1) collect or maintain sensitive personal data of US citizens; or (2) produce, test or develop critical technologies are considered a particular national security risk for the US government. Sensitive personal data include certain identifiable data (e.g., financial data that could be used to determine an individual’s financial distress or hardship, data in a consumer report, or individual health data) and certain results of an individual’s genetic tests.

Critical technologies include: defence articles and services included on the US munitions list; certain items included on the commerce control list; certain nuclear-related facilities, equipment, parts, components, materials, software and technology; certain agents and toxins including certain items under the export administration regulations; and emerging and foundational technologies controlled for export pursuant to the Export Control Reform Act of 2018.

Mandatory filings to the CFIUS are required for certain transactions that would result in sufficiently substantial interest, or where certain regulated technologies are implicated. Filing to the committee, if successful, may lead to a safe harbour – where the government cannot order a divestment post-acquisition.

Japanese companies looking to invest in the US should conduct a thorough investigation into the target company, including into its IP, technology, market share, whether it supplies the US government or is located near a military base, and whether the deal involves cybersecurity or personal data.


Export control regimes promote US national security, foreign policy and domestic economic interests by restricting or imposing requirements on the transfer of designated goods, technical information, and services to non-US persons or destinations. These include the US State Department’s International Traffic in Arms Regulations and the US Commerce Department’s Export Administration Regulations and Foreign Trade Regulations.

Heather P Lamberg, Compliance challenges for foreign investment in the US
Heather P Lamberg
Partner, Antitrust and Competition Chair
Winston Strawn in Washington
Tel: +1 202 282 5274

Economic and trade sanction regulations prohibit or restrict transactions with designated countries or their nationals that are reasonably believed to pose a threat to national security, foreign policy or the economy. Trade restrictions also target transactions with a growing number of terrorist organisations, drug traffickers and other persons identified for any reason as a prohibited party. The US Treasury Department’s Office of Foreign Assets Control administers these regulations.

Anti-boycott laws administered by the Commerce Department and Treasury Department prohibit companies from complying with non-US sanctioned boycotts by foreign countries, such as the Arab League boycott of Israel.

US trade controls are complex and aggressively enforced. Failure to comply can lead to civil and criminal penalties, and substantial administrative burdens and legal expense. Japanese companies considering transactions that may be implicated by these rules should do so only after careful consultation with qualified legal counsel.


The US privacy regulatory landscape is a rapidly changing patchwork of complex (and often conflicting) privacy laws that impose extensive requirements on companies that collect, use and share a broad class of personally identifiable information. Certain such laws – including the federal Telephone Consumer Protection Act, Illinois’ Biometric Information Privacy Act, and the California Consumer Privacy Act – contain private rights of action and provide for uncapped statutory damages, leading to a heightened exposure landscape.


Once a company is doing business in the US it must comply with a variety of laws and regulations. One area of particular concern is antitrust, which seeks to promote competition and protect consumers. The principal federal statutes that prohibit anti-competitive conduct are the Sherman Act, Clayton Act and FTC Act. The antitrust laws are enforced by the FTC, the DOJ’s Antitrust Division and private plaintiffs.

Individual states also have separate unfair competition laws, which largely mirror federal laws, but may prohibit additional conduct. State attorneys-general and private plaintiffs enforce state antitrust laws. Private parties who sue to recover damages can receive an amount equal to three times their damages plus attorneys’ fees and costs. They may also obtain injunctive relief.

Section 1 of the Sherman Act prohibits unreasonable contracts, combinations or conspiracies in restraint of trade. A section 1 violation requires an agreement, which can include an informal “gentlemen’s agreement” or even an implied understanding.

The DOJ has exclusive jurisdiction to criminally prosecute naked agreements between competitors to fix prices or restrict output, rig bids, or allocate markets or customers, which are considered illegal regardless of the economic rationale or the consequences. Criminal violations carry a maximum fine of twice the gain or loss from the crime, or USD100 million for companies and USD1 million for individuals. Individuals may also be sentenced to up to 10 years in prison.

Other types of antitrust violations are enforced civilly and generally analysed under the rule of reason standard, balancing anti-competitive harm with pro-competitive justifications. These include other agreements restraining trade, including vertical agreements between parties occupying different levels in the distribution chain.

Section 2 of the Sherman Act prohibits monopolisation, attempted monopolisation and conspiracy to monopolise trade. A monopolisation claim requires that the defendant possesses monopoly power in the relevant market and has acquired, enhanced or maintained that power by exclusionary conduct.

The FTC Act prohibits unfair methods of competition and empowers the FTC to investigate and enjoin such conduct. The Clayton Act prohibits anti-competitive tying and exclusive dealing arrangements in some circumstances, as well as certain interlocking directorates.


The Foreign Corrupt Practices Act (FCPA) prohibits payments, gifts or offers of “anything of value” to foreign officials when made with corrupt intent to obtain or retain business. The FCPA applies to companies either registered under US law or located in the US. A company may be held liable for the corrupt actions of its employees, or of a third party that was acting on the company’s behalf.

Criminal penalties under the FCPA’s anti-bribery provisions include a maximum fine of twice the gain from the crime, or USD2 million per violation for companies, and USD100,000 and up to five years in prison for individuals.


Where a company has followed best practices but violates the law nonetheless, the government may be willing to agree to a reduced sentence, or even decide not to file criminal charges. The DOJ’s guidance instructs companies to ensure that their compliance programmes are specifically tailored based on their industry, risk profile, and the regions in which they operate.

Winston Strawn

Winston Strawn
35 W Wacker Dr.
Chicago, IL 60601, Illinois
Tel: +1 312 558 5600

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