Last week, Senator Amy Klobuchar introduced the Competition and Antitrust Law Enforcement Reform Act (CALERA), which provides for wide-ranging changes to the U.S. antitrust laws.¹ CALERA follows the release of a report last year by the staff of the House Judiciary Committee Democrats, led by Representative David Cicilline.² Senator Klobuchar's legislation proposes significant changes to the antitrust laws but is less radical than some of the recommendations in the House Judiciary Committee report. Still, if enacted, CALERA would result in the most significant changes to antitrust law in decades, likely resulting in more aggressive merger enforcement, particularly for large technology companies.

CALERA demonstrates the continuing momentum for congressional action on antitrust. While it is unlikely that Congress will pass CALERA in its current form, the legislation could represent the framework for a bipartisan compromise on amendments that would result in material changes to the antitrust laws in the next two years.

Below, we summarize the legislation and its potential impact on businesses. In short, CALERA provides the antitrust agencies with more flexibility and tougher tools for enforcement. The legislation represents a legislative attempt to reverse several decades of antitrust jurisprudence, with a return to market share presumptions and bright-line rules. If enacted, the legislation would provide the antitrust agencies with far greater discretion than they possess today, likely leading to substantial uncertainty about the boundaries of anticompetitive conduct.

Tougher Enforcement on Transactions

CALERA potentially increases the number of transactions that would be prohibited under the Clayton Act and establishes a rebuttable presumption of illegality for certain transactions, including transactions with a value greater than $5 billion and when the acquirer has a market capitalization or sales greater than $100 billion. These provisions could make transactions substantially more difficult to clear when the acquirer is a large company and could lead to longer review periods before a decision from the reviewing agency. If enacted in their current form, these provisions may deter parties from undertaking transactions involving large technology companies or other large companies even if they are competitively benign or even efficiency-enhancing, because of the potential uncertainty and cost that the new merger regime might impose.

• Lower standard in Section 7 of the Clayton Act (Section 4): CALERA amends Section 7 of the Clayton Act to prohibit a transaction if the effect "may be to create an appreciable risk of materially lessening" competition rather than if the effect "may be substantially to lessen competition." This is a lower standard that would potentially expand the number of transactions prohibited by Section 7 and therefore subject to an enforcement action by the antitrust agencies. The legislation also amends Section 7's prohibition on transactions that "tend to create" monopolies to include monopsonies as well. "Materially" means "more than a de minimis amount."
• Presumptions for $5 billion transactions and $100 billion companies (Section 4): Courts should consider a transaction to have the effect of creating an appreciable risk of materially lessening competition when:

1. the acquisition "would lead to a significant increase in market concentration";
2. the acquirer has a market share greater than 50 percent or otherwise has market power;
3. the acquisition would lead to market power or materially increase the probability of coordination;
4. the transaction value is greater than $5 billion; or
5. the acquirer has assets, net annual sales, or a market capitalization greater than $100 billion. There are about 100 companies in the U.S. stock market that have a market cap greater than $100 billion.³ The House Judiciary Committee report also called for "structural presumptions" for transactions.⁴

• Rebutting the presumption (Section 4): In those cases, the parties must establish by a preponderance of the evidence that the transaction does not have an appreciable risk of materially lessening competition. It is not clear in the text whether the parties must affirmatively prove a transaction is procompetitive or simply rebut the presumption.

Prohibition on "Exclusionary Conduct" and Framework for Civil Penalties

CALERA creates a new section of the Clayton Act on "exclusionary conduct," which includes conduct that disadvantages competitors. In doing so, the legislation would bring U.S. antitrust law closer to competition law in the European Union, which has often concerned itself with protecting competitors rather than competition. The legislation includes a new framework for civil penalties, which may not have a large deterrent effect because follow-on class action litigation after an enforcement action is very common.

It is unclear how the courts would construe the new section on "exclusionary conduct." Courts have recognized that nothing "materially disadvantages" a competitor more than intense competition—more efficient production leading to lower prices—so the language, if enacted, will require judicial review and interpretation. For example, as the Supreme Court stated in Copperweld, "an efficient firm may capture unsatisfied customers from an inefficient rival, whose own ability to compete may suffer as a result. This is the rule of the marketplace and is precisely the sort of competition that promotes the consumer interests that the Sherman Act aims to foster."⁵

• New section on exclusionary conduct (Section 9): CALERA defines "exclusionary conduct" to mean conduct that "materially disadvantages 1 or more actual or potential competitors" or "tends to foreclose or limit the ability or incentive of 1 or more actual or potential competitors to compete." The section then prohibits exclusionary conduct that "presents an appreciable risk of harming competition." Exclusionary conduct is presumed to harm competition when the defendant(s) have a market share greater than 50 percent or otherwise has market power, which the defendant can rebut. The Department of Justice (DOJ) and the Federal Trade Commission (FTC) are instructed to issue joint guidelines on agency enforcement against exclusionary conduct.
• New civil penalties (Sections 9, 10, 11, 12): The DOJ and the FTC can recover civil penalties of a) 15 percent of revenues or b) 30 percent of revenues in affected lines of commerce for violations of Sections 1 or 2 of the Sherman Act as well as the new section on exclusionary conduct. The DOJ and the FTC are to issue joint guidelines on enforcement policy for the civil penalties. The FTC is empowered in the FTC Act to seek civil penalties. The House Judiciary Committee report also called for civil penalties.⁶
• Market definition not required (Section 13): Market definition is not required to establish liability for violations of the antitrust laws unless it is explicitly required in the statute. Direct evidence of a harm to competition or an appreciable risk of materially lessening competition is sufficient. Again, this will require interpretation, as harm to competition today means harm in a market as a whole rather than to individual competitors.
• Limitations on implied immunity (Section 14): Courts shall not find implied immunity from application of the antitrust laws except under certain defined exceptions.

Organizational Changes to the DOJ and the FTC

CALERA establishes an Office of the Competition Advocate to push for pro-competition changes across the federal government. The legislation also authorizes a rough doubling of appropriations for both the FTC and the Antitrust Division. More resources for the antitrust enforcement agencies is likely uncontroversial given the continued increase in HSR filings and the recent suspension of early termination for transactions.⁷

• Office of the Competition Advocate (Section 8): The FTC will have an Office of the Competition Advocate (OCA). The Competition Advocate will report directly to the FTC chairman and would provide recommendations to the FTC/DOJ and other federal agencies on competition matters. The Competition Advocate would also have subpoena authority to assess competition.
• Increase in DOJ and FTC appropriations (Section 15): The legislation authorizes about a doubling of appropriations for the FTC and the Antitrust Division. The House Judiciary Committee report also called for large increases in antitrust agency funding.⁸

Data and Fact-Gathering

The legislation establishes several mechanisms for greater data collection and studies of antitrust enforcement, matching the House Judiciary Committee report.⁹

• Post-settlement data (Section 5): Parties reaching an agreement to settle a transaction must provide data on pricing, efficiencies, and divestitures to the FTC or the DOJ for five years.
• Institutional investor study (Section 6): The FTC and the U.S. Securities and Exchange Commission (SEC) must conduct a study on the competitive effects of institutional investors (e.g., index funds) having overlapping ownership in concentrated markets.
• GAO study on merger remedies (Section 7): The Government Accountability Office must conduct a study on the success of the DOJ and FTC merger remedies and the effect of transactions on "wages, employment, innovation, and new business formation."
• Data Center and Division of Market Analysis (Section 8): The Office of the Competition Advocate would also have 1) a Data Center for maintaining and publishing market data and 2) a Division of Market Analysis to investigate industries and assess the competitive effects of recently consummated transactions.

Whistleblowers

• Anti-retaliation protections for civil whistleblowers (Section 16): employer retaliation against whistleblowers providing information about alleged violations of the antitrust laws is prohibited.
• Criminal antitrust whistleblower incentives (Section 16): whistleblowers may receive up to 30 percent of criminal antitrust fines collected by the DOJ.

Conclusion

The timeline for passage of the legislation is uncertain, as the Senate is currently focused on impeachment and COVID-19 relief. The press release for the legislation touted the support of the American Antitrust Institute, Consumer Reports, and several prominent academics.¹⁰ CALERA has six co-sponsors, all Democrats, but there is bipartisan interest in reforming the antitrust laws. Senator Klobuchar is also taking over as chair of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights. She previously introduced similar antitrust legislation last year¹¹ and is also writing a book on antitrust.¹²

If enacted in its current form, CALERA would represent the most dramatic overhaul to U.S. antitrust law in decades. If enacted, CALERA will likely strengthen the hand of the antitrust agencies, leaving them less constrained by precedent, with more flexibility and greater discretion to pursue novel theories of anticompetitive harm. Given its potential wide-ranging impact, we expect that this bill will attract much comment and debate as it moves through the legislative process. We will provide further updates and analysis as the legislation continues to take form.

^[1] Competition and Antitrust Law Enforcement Reform Act, S. 225, 117th Cong. (2021).

^[2] Investigation of Digital Markets: Majority Staff Report and Recommendations (2020), available at https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf. (“House Judiciary Committee Report”).

^[3] “Largest companies by market cap — US Stock Market,” TradingView, available at (https://www.tradingview.com/markets/stocks-usa/market-movers-large-cap/.

^[4] House Judiciary Committee Report, supra n.2, at 393 (“the Subcommittee recommends that Members consider codifying bright-line rules for merger enforcement, including structural presumptions. Under a structural presumption, mergers resulting in a single firm controlling an outsized market share, or resulting in a significant increase in concentration, would be presumptively prohibited under Section 7 of the Clayton Act.”).

[5] Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767 (1984).

^[6] House Judiciary Committee Report, supra n.2, at 403 (“Subcommittee staff recommends that Congress consider the following: Triggering civil penalties and other relief for violations of “unfair methods of competition” rules, creating symmetry with violations of “unfair or deceptive acts or practices” rules”).

^[7] Press Release, FTC, DOJ Temporarily Suspend Discretionary Practice of Early Termination (Feb. 4, 2021), available at https://www.ftc.gov/news-events/press-releases/2021/02/ftc-doj-temporarily-suspend-discretionary-practice-early.

^[8] House Judiciary Committee Report, supra n.2, at 403.

^[9] Id. (“Subcommittee staff recommends that Congress consider the following: . . . Requiring the Commission to regularly collect data and report on economic concentration and competition in sectors across the economy, as permitted under Section 6 of the FTC Act”).

^[10] Press Release, Senator Klobuchar Introduces Sweeping Bill to Promote Competition and Improve Antitrust Enforcement (Feb. 4, 2021), https://www.klobuchar.senate.gov/public/index.cfm/news-releases?ID=A4EF296B-9072-4244-90AF-54FE43BB0876.

^[11] Merger Enforcement Improvement Act, S. 306, 116th Cong. (2019); Consolidation Prevention and Competition Promotion Act, S. 307, 116th Cong. (2019); Monopolization Deterrence Act, S. 2237, 116th Cong. (2019); Anticompetitive Exclusionary Conduct Prevention Act of 2020, S. 3426, 116th Cong. (2020).

^[12] Elizabeth A. Harris, Senator Klobuchar to Write Antitrust Book, Jan. 11, 2021 (N.Y. Times), available at https://www.nytimes.com/2021/01/11/books/amy-klobuchar-antitrust-book.html.