The Road Ahead: Senate leadership maps out legislative reform for U.S. antitrust enforcement
As the Democrats took control of the presidency and both houses of Congress for the first time in a decade, commentators speculated about the potential impact on antitrust enforcement. We have our first look. An omnibus bill introduced by Senator Amy Klobuchar signals an ambitious agenda to reform U.S. antitrust laws that would lead to stronger enforcement by the agencies and private claimants for both mergers and monopoly conduct.
The proposal builds on recent progressive thought and is intended to reverse what Democrats identify as a long history of under enforcement. While each element of the bill will require bipartisan approval, and significant debate is expected, there is Republican support for moderate antitrust reform. In any case, the bill reveals Democrats’ initial policy priorities and the likely direction of the agencies.
Do the first shots fired signal a revolution in antitrust enforcement?
The Competition and Antitrust Law Enforcement Act (CALERA) proposes significant legislative changes that would reduce legal enforcement standards, stiffen potential penalties and increase funding and incentives for enforcement. While perhaps short of a revolution, these measures would prompt a major shift in antitrust enforcement landscape that companies face in the United States.
While the proposals are influenced by the global debate on digital markets and incorporate some aspects of reforms proposed in other jurisdictions, they have the potential for significant impact on companies across all sectors by promoting more active conduct and merger enforcement.
CALERA’s major policy goals include:
Reducing legal barriers to enforcement: The bill proposes to re-set legal standards that have hindered enforcement against both mergers and monopolistic conduct. Antitrust progressives believe that common law standards established by the courts have “sapped existing laws of their vitality, weakening enforcers’ ability to stop harmful consolidation and prevent anticompetitive conduct.” In place of the common law, the act would establish presumptions of illegality and shift the burden of proof from the agencies to defendants.
- Merger Control: The bill purports to give enforcers broader power to stop potentially anticompetitive mergers from “slipping through the cracks.” While the Clayton Act currently forbids mergers that “substantially lessen competition,” the act would instead forbid mergers that “create an appreciable risk of materially lessening competition.” The bill defines “materially” as “more than a de minimis amount.” The bill further lists certain categories of mergers where the burden would shift to the merging parties to prove that the merger does not meet this standard. These presumptively harmful deals include:
- deals that significantly increase market concentration,
- acquisitions of nascent competitors by dominant firms,
- all “mega-mergers” valued at more than $5 billion; and
- all acquisitions by companies with a market cap over $100 million if the transaction is valued over $50 million.
- Conduct Enforcement: Driven by concerns over monopolistic conduct of digital platforms, the bill further would prohibit exclusionary conduct by any firm that “materially disadvantages competitors or limits their opportunity to compete.” The provision does not require proof of a monopolistic position or actual competitive harm. Instead, the provision would allow for enforcement where the conduct creates an “appreciable risk of harming competition” and sets up a rebuttable presumption of harm to competition. Further, the bill “clarifies” that the antitrust laws do not require definition of a relevant market unless explicitly required in the statute.
Strengthening potential penalties: The bill seeks to address a perceived lack of “teeth” for federal enforcement of civil antitrust violations by providing civil fining authority. The federal agencies currently can only seek injunctive remedies requiring the parties to correct the alleged harm, and the power of the Federal Trade Commission to seek disgorgement of unlawful gains as part of this authority is currently being challenged at the Supreme Court.
Funding more active enforcement: The bill would dramatically increase funding for the agencies and create further economic incentives for whistleblowers. The bill more than doubles the budgets of the Federal Trade Commission and Department of Justice Antitrust Division. It would also create economic incentives for whistleblowers to support enforcement by establishing a bounty system for providing evidence in antitrust cases that result in fines. The bill also extends protections for criminal whistleblowers to civil enforcement actions.
What are the chances of success?
The ultimate result of this bill remains to be seen. Sweeping changes will face significant headwinds and likely will need to be moderated to gain bi-partisan support. Still, more tools to guard against the elimination of threats from nascent competitors may find common ground. And, the change in the balance of power in Congress will give this bill significantly more traction than prior attempts.
