Senate Democrats Aim at Strengthening Antitrust Enforcement
On Friday, February 1, Senator Amy Klobuchar re-introduced two bills aimed at strengthening antitrust enforcement.
The co-sponsors include Senators Ed Markey (Dem-Massachusetts), Richard Blumenthal (Dem-Connecticut), Dick Durbin (Dem-Illinois) and Corey Booker (Dem-New Jersey).
The Consolidation Prevention and Competition Promotion Act of 2019 would, among many other things, include revising the Clayton Act to eliminate the well-established standard against mergers that would “substantially” lessen competition with a lower “materially likely” standard. It intends to “clarify that the Clayton Act prohibits mergers that, as a result of consolidation, may materially lower quality, reduce choice, reduce innovation, exclude competitors, increase entry barriers, or increase price.” This change would dramatically change current antitrust law by proposing new legal standards for approval of larger corporate mergers. The legislation makes clear that consolidation itself is harmful because, among other things, it threatens democracy by concentrating political power and creates hurdles for fresh competition from small businesses. A conclusion that a transaction “may cause more than a de minimis amount of harm to competition” is sufficient to make it illegal. Among the factors to be considered are the transaction’s impact on market concentration, the value of the transaction ($5 billion, to be adjusted annually), the market capitalization, the value of assets held or the amount of sales made by any party ($100 billion, to be adjusted annually), regardless of horizontal competition between the merging parties. This bill also proposes to establish a “new competition advocate,” which would have broad authority to monitor a range of potential market distortions and formally recommend competition investigations to the Federal Trade Commission (“FTC”) and the Department of Justice (“DOJ”). In addition, the legislation would require post settlement data to be submitted annually for five years after approval of a merger on the competitive impact of the acquisition, including information on pricing, availability and quality of any impacted product or service, as well as data on cost savings, consumer benefits and effectiveness of any merger conditions.
The Merger Enforcement Improvement Act would, likewise among many other things, require merged parties that settled with the antitrust agencies to submit to the FTC or DOJ, whichever vetted the deal, data that would allow them to assess the impact of the merger, including pricing of service, the cost-saving benefits claimed in the merger, and the effectiveness of any divestitures. In addition, the bill would direct the FTC to conduct a study, using any compulsory process necessary, to examine the competitive impacts of institutional investor ownership in competitors in moderately concentrated or concentrated markets, including assessing whether, and to what extent, mechanisms exist by which an institutional investor could affect competition. If the results of the study—which must be published within two years of enactment—find that there is undue influence, subsequent remedial action could profoundly impact the form and shape of institutional investor holdings.
Democrats Favors Aggressive Antitrust Reviews
Democrats in the House are aiming to ramp up oversight of the antitrust agencies. Congressman David Cicilline (D-R.I.) the new chairman of the House Judiciary Committee’s Antitrust, Commercial and Administrative Law Subcommittee wants the antitrust agencies “to drive down the cost of prescription drugs and health care” and “hold big tech companies accountable”.
The House Democrats plan to hold hearings related to a number of industries, including technology, healthcare and pharmaceuticals, food and several consumer products. Potentially joined by a few Republicans who have been critical of U.S. antitrust enforcement policy, the House Democrats also intend aggressive oversight of the FTC and the DOJ. Among other things, House Democrats propose creating a “consumer competition advocate” that will “proactively recommend competition investigations” to the DOJ and FTC. Under the House Democrats’ proposal, the DOJ and FTC would be required to publicly justify any decision not to pursue an investigation recommended by the consumer competition advocate. The office would also be responsible for maintaining and publishing data regarding market concentration and conditions.
The House Democrats are expected to work with their Senate colleagues to attempt to rewrite key provisions of the antitrust laws, because they believe the current antitrust laws do not appropriately address the “the full range of potentially anticompetitive behavior.”
The Democrats and Republicans have been critical of the lack of U.S. antitrust enforcement that has resulted in consolidation and increasingly concentrated industries. It is unclear how far these measures will advance but it has a better chance to do so in this Congress than it did in the last one. What is clear, however, is that these proposals are part of a broad agenda to enlarge the scope of antitrust enforcement. The initiatives and legislative proposals serve as a condemnation of the antitrust record of the Trump, Obama, and Bush administrations for being too lax, particularly in merger enforcement as well as in the remedies that were accepted by the FTC and DOJ that allowed both horizontal and vertical mergers to go forward. Regardless of whether any new legislation is actually passed, we would expect antitrust enforcement to continue to be a hot topic in the political arena as well as more congressional hearings and investigations of consolidated industries in the next two years.