With a new session of Congress and a new administration in the White House, Big Tech is on the cross again. Not only are big companies like Apple, Amazon, Facebook and Google being investigated for allegedly violating the existing antitrust law, but a newly proposed bill in the Senate will make it harder for these and other companies to be so concerned in the first place. to grow up. .
The bill (PDF), which calls the Competition and Antitrust Law Enforcement Act (abbreviated as CALERA, which is still uncomfortable) the biggest overhaul of U.S. antitrust regulation in at least 45 years when it becomes law.
“While the United States once had one of the most effective antitrust laws in the world, our economy today has a major competitive problem,” Sen. Amy Klobuchar (D-Minn.) Said when she introduced the bill on Thursday. “We can no longer sweep this issue under the rug and hope that our existing laws are adequate,” Klobuchar added, calling the bill “the first step in overhauling and modernizing our laws” to boost competition in the current era. protect.
The bill proposes that the Federal Trade Commission and the Antitrust Division at the Department of Justice propose significantly expanded resources (i.e., more money) so that both can investigate more mergers more aggressively. As Klobuchar put it to CNBC: “You can not start a billion dollar business with band aids and tape.”
More importantly, however, the proposed law will call for modern legal theories to update antitrust law for the way companies do it and not compete in the 21st century.
Sens Richard Blumenthal (D-Conn), Cory Booker (DN.J.), Edward Markey (D-Mass.) And Brian Schatz (D-Hawaii) sponsored the bill, which firmly targets the tech sector without actually mentioning it at all.
What does antitrust law do?
There have been four major antitrust bills in U.S. history so far, all aimed at preventing a single company from using unfair tactics to dominate its market sector and suppress potential competitors.
The first time Congress enacted the struggle against the monitoring application, the Sherman Act, was in 1890. The Sherman Act was surprisingly short and simple, making it illegal to monopolize a market, try to monopolize or conspire to monopolize a market. Once the baseline was established, the subsequent laws tried to address all the ways businesses tried to operate.
In 1914, the Clayton Act significantly expanded on existing antitrust legislation, primarily to deal with the rush of acquisitions and founding corporations that flowed into the Sherman Act. The law bought acquisitions through shares, but left a huge void for businesses that acquired other businesses by buying their assets directly.
The next major antitrust revision, the Celler-Kefauver Act of 1950, sought to address the loopholes in the Clayton Act by establishing regulations regarding vertical mergers (when a business acquires a business in its supply chain, rather than to obtain a direct competitor) and amalgamation of conglomerates. Finally, in 1976, the Hart-Scott-Rodino Act introduced a rule that companies planning mergers for a certain value ($ 92 million by 2021) should notify regulators and possibly investigate. previously they complete their transaction.
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All the laws that currently apply to the review of mergers place the burden of proof in the same place: on the regulator.
When companies submit their notice before the merger to regulators (usually the FTC; the DOJ for high-profile, valuable, or particularly troublesome transactions), their paperwork basically says, ‘We’re going to do this and that’s fine. “The regulator rests in particular on seeking, defining and possibly being able to reason in court reasons why the proposed transaction may not be.
Klobuchar’s bill will shift the burden in the other direction for businesses that already have a dominant market position. Those companies – which in technology will absolutely include companies like Amazon, Google and Facebook – would have to proactively demonstrate that a merger would not create a significant risk of significantly reducing competition, and that it would not create a monopoly or monopoly not.
Mono-wat?
A monopoly is in fact the same problem as a monopoly – excessively concentrated market power – but vice versa. Instead of having only one seller, monopsony is a situation in which there are many sellers, but only one buyer.
In a classic monopoly, there is only one seller available. For example, a single oil company bought all the oil fields and oil transportation companies and related companies in the country. If you want oil, you have to buy it from the company. If there is no competition, the company has no incentive to be flexible in any way, including price, and it can squeeze not only consumers but also other businesses up and down the supply chain.
In monopsony, there is only one buyer available – or one large buyer has at least such extraordinary market power that it can only determine how sellers work and what prices they can determine. In the 1990s and 2000s, for example, Walmart was frequently criticized for forcing sellers to lower prices to unsustainably low thresholds. Walmart was able to do this because it commanded such a large portion of the U.S. retail market that suppliers who wanted access to consumers could not realistically refuse to work with it.
In the technological space, one could argue that Facebook, Google and Apple are currently exercising monopsony power in at least one market segment. Amazon, for example, is so dominant in the book sales space that publishers basically cannot avoid the platform if they want to sell books, and this gives Amazon the chance to set conditions that may be unfavorable to publishers.
Although the first known use of the word “monopsony” dates back to 1933, no U.S. antitrust law has so far ever addressed the idea of anti-competitive behavior from the kind of bottom-up direction. If it becomes law, Klobuchar’s bill would be the first to increase the risk of creating monopsony among the factors competition regulators should consider when reviewing mergers.
And talking about “competitive”
The bill also expands the scope of what is considered illegal bad behavior by a dominant enterprise.
As we have explained before, it is not in itself illegal to be the biggest – or even the only – player in a sector. Rather, the competition laws relate to how you get there and what you do with the market power that dominates you. Klobuchar’s proposal would increase the threshold and ban ‘exclusionary behavior’ which posed a ‘significant risk of harm to competition’.
This kind of legal standard, for example, could have led to a different outcome in the Qualcomm case, where the ninth circle reversed an earlier judge’s finding that the company was acting competitively.
“This damage, even if it is real, is not ‘competitive’ in the sense of antitrust – at least not directly – because it does not involve any restrictions on trade or exclusion in the field of effective competition,” the court said in a wide-ranging opinion. Laws that expand the definition of ‘exclusionary conduct’ may in future lead to different findings in similar cases.
But will it ever become law?
Six months or a year ago, any reform proposal for antitrust in the water would have been dead (as was Klobuchar’s 2019 reform bill).
However, as Democrats currently control the White House, the House and – through Vice President Kamala Harris – the Senate, the idea of reform is more possible. The wheels of Congress are naturally turning at the rate of frozen molasses, and lawmakers on the Hill are currently prioritizing COVID-related packages … but there is enough generous anger for Big Tech, both in government and in the country at large that there there is no chance that an account of these types of bones can have.