Sen. Hawley's "Trust-Busting for the Twenty-First Century Act," introduced on April 12, 2021, takes aim at "Big Tech, Big Banks, Big Telecom, and Big Pharma"1 by proposing to curb mergers and acquisitions by large corporations and ease the way for prosecutors and private plaintiffs to prevail in antitrust litigation. Sen. Hawley's bill is the latest proposal for antitrust reform, following Democrat-led efforts such as the House Judiciary staff recommendations in October 2020 and Sen. Klobuchar's antitrust reform bill introduced in February 2021.
On April 12, Sen. Josh Hawley (R-Mo.) introduced the "Trust-Busting for the Twenty-First Century Act," proposing to substantially rewrite the US antitrust laws along the lines proposed by prominent Democrats, including Sen. Amy Klobuchar (D-Minn.) and FTC Commissioner nominee Lina Khan. Sen. Hawley's plan would prohibit so-called "mega corporations"—those with a market-cap exceeding US$100 billion—from engaging in mergers and acquisitions; lower plaintiffs' evidentiary burdens in antitrust litigation; and create new restrictions on so-called "dominant digital firms."2
Sen. Hawley's proposal is the latest development in growing calls for sweeping antitrust reform from Congressional members from across the political spectrum, motivated by fears of so-called "Big Tech's" impact on competition. In October 2020, the majority staff of the House Judiciary Antitrust Subcommittee issued a report on competition in digital markets ("Majority Staff Report"), in which Khan played a role as Subcommittee counsel. Issued after a 16-month long investigation into the state of competition in the digital economy, the Majority Staff Report advocated broad-ranging changes to antitrust laws, applicable to the tech sector and beyond.3 The Majority Staff Report proposes overturning nearly 50 years of court precedent, including 14 US Supreme Court decisions.4 On April 15th, the House Judiciary Committee formally approved the Majority Staff Report along party lines.5
Although the Majority Staff Report was not bipartisan, many of the Majority Staff Report's recommendations were supported by four minority members, who expressed optimism about "bipartisan solutions" in a report authored by Subcommittee Ranking Member Rep. Ken Buck (R-Col.).6 Subsequently, Sen. Amy Klobuchar, Chair of the Senate Antitrust Subcommittee, introduced a bill in February 2021 that would lead to substantial revisions to the antitrust laws.7 In March 2021, Rep. David Cicilline (D-R.I.), the Chairman of the House Judiciary Committee's Antitrust Subcommittee, announced his plans to introduce a series of antitrust bills later this year.8
While Sen. Hawley's press release accompanying the draft bill singles out "Big Tech, Big Banks, Big Telecom, and Big Pharma,"9 many of the bill's proposals would affect companies of all sizes and in all industries. Notable changes under the proposal include:
Sherman Act Amendments Under the Hawley Proposal
The bill introduced by Sen. Hawley would redefine how anticompetitive conduct is evaluated under the Sherman Act, making it easier for the government and plaintiffs to prosecute cases against defendants.
- Burden Shifting: Shifting the burden of proof to the defendant in Sherman Act cases to establish that procompetitive effects outweigh any anticompetitive effects, and that such procompetitive effects could not be achieved by commercially reasonable alternatives.10
- Standard for Evaluating Competitive Effects of Business Conduct: Shifting the focus of competitive harm analysis under the Sherman Act from the common law consumer welfare standard to a codified "protection of economic competition within the United States" principle.11
- Market Definition: Relieving plaintiff of the burden to define a relevant market or prove market power if the plaintiff establishes that the defendant holds "substantial market power" or that the defendant's practices have "anticompetitive or other detrimental effects."12
- FTC Disgorgement: Providing the FTC with the ability to obtain disgorgement of profits as a penalty for antitrust violations.13
Clayton Act Amendments under the Hawley Proposal
Sen. Hawley's bill proposes to amend the Clayton Act's provisions governing the rules for mergers and acquisitions by prohibiting transactions by companies above a certain threshold and making it easier for state and federal antitrust agencies and private plaintiffs to challenge deals of any size.
- Merger Caps for Firms with $100 billion in Market Cap: Prohibiting all mergers and acquisitions by companies with a market capitalization greater than US$100 billion.14
- Vertical Mergers: Removing any presumption that vertical mergers do not harm competition.15
- Market Definition: Relieving the plaintiff of the burden of establishing market shares or market concentration where "the effect of an acquisition may be to substantially lessen competition or tend to create a monopoly."16
Restrictions on "Dominant Digital Firms"
- Dominant Digital Firms Defined: Establishing FTC power to designate a company as a "dominant digital firm," defined as a "person, partnership, or corporation" that "provides a website or service accessible through the internet" and "possesses dominant market power in any market related to that website or service."17
- Limits on Acquisitions by "Dominant Digital Firms": Presuming any acquisition by a "dominant digital firm" exceeding US$1 million is an unfair or deceptive act subject to civil penalties.18
- Limits on Self-Preferencing by "Dominant Digital Firms": Deeming that a "dominant digital firm's" preferencing of its own products or services in search results of their own search engine, without disclosure, constitutes unfair or deceptive conduct subject to civil penalties.19
Sen. Hawley's bill bears some similarities to Sen. Klobuchar's bill and the Majority Staff Report recommendations; while there are important differences in the contours of antitrust reform proposed across the three proposals, core issues are emerging as focal points for proposed changes to the antitrust laws. In particular, Sen. Hawley's bill shares common ground with certain aspects of Sen. Klobuchar's bill and the recommendations in the Majority Staff Report, including: presuming that acquisitions by certain large or "dominant" firms are anticompetitive; eliminating or reducing the need to define relevant markets; increasing antitrust defendants' burden of proof in conduct cases; clarifying the standard by which anticompetitive conduct is assessed; and targeting "dominant" firms for increased scrutiny.
Key issues from Sen. Hawley's bill as compared to similar issues in Sen. Klobuchar's bill and the Majority Staff Report recommendations include:
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||Sen. Hawley Bill
||Sen. Klobuchar Bill
||Majority Staff Report
|Merger Presumptions and Prohibitions
- Acquisitions by any company with a market cap exceeding US$100 billion are unlawful.20
- Acquisitions by a "dominant digital firm" valued at over US$1 million is presumptively unfair or deceptive and subject to FTC Act penalties.21
- Removes any presumption that vertical mergers cannot be anticompetitive.22
- Rebuttable presumption of harm to competition for mergers and acquisitions that would:
- involve a buyer with a market cap exceeding US$100 billion; or would transfer US$5 billion23 in assets or securities.24
- "lead to a significant increase in market concentration in any relevant market"25;
- involve a buyer with a greater than 50% market share or that "otherwise has significant market power," and the buyer competes with or has a "reasonable probability of competing" in the same relevant market with the entity or assets over which it would obtain control26; and
- lead to combination of competitors, or probable competitors, and would or probably "prevent, limit, or disrupt coordinated interaction among competitors in a relevant market."27
- Parties may offer rebuttal evidence that the merger would not "create an appreciable risk of materially lessening competition or tend to create a monopoly or monopsony."28 "Materially" is defined as "more than a de minimis amount."29
- These limitations would apply equally to vertical mergers.30
- Recommends codifying "bright-line rules for merger enforcement, including structural presumptions, e.g., mergers exceeding a 30% market share threshold (or lower for monopsony claims), or that would result in a single firm controlling an outsized market share" or "in a significant increase in concentration," would be "presumptively prohibited under Section 7 of the Clayton Act."31
- Structural presumptions would "place the burden of proof upon the merging parties to show that the merger would not reduce competition."32
- Acquisitions of "potential rivals and nascent competitors" would be prohibited under Section 7 of the Clayton Act.33
- Presumption that vertical mergers are anticompetitive when "either of the merging parties is a dominant firm operating in a concentrated market."34
|Monopolization/ exclusionary conduct law
- Provides civil penalties under the FTC Act if a "dominant digital firm" engages in search results self-preferencing without disclosing such conduct to users.35
- Exclusionary conduct" by firms with greater than 50% market share or "significant market power in the relevant market" are presumptively anticompetitive.36
- Exclusionary conduct carries potential penalties under the FTC Act.37
- Requests that Congress investigate "self-preferencing" to determine when making a design change that excludes competitors can be a violation of Section 2.38
- Suggests extending the Sherman Act to include a prohibition on abuse of dominance.39
- "Strengthen" and "rehabilitate" Section 2, including by clarifying the law on monopoly leveraging, predatory pricing, essential facilities and refusals to deal, and tying.40
- Would not require plaintiffs to define a relevant market or "establish the share of such a market controlled by the defendant" if the plaintiff proves by a preponderance of the evidence that the defendant has substantial market power or engaged in conduct that is anticompetitive or has "otherwise detrimental effects" on the market.41
- Would prevent courts and the FTC from requiring definition of a relevant market if "the record is sufficient to prove" actual, likely, or an appreciable risk of harm to competition that is sufficient to satisfy the applicable statutory standard. requiring definition of a relevant market if "the record is sufficient to prove" actual, likely, or an appreciable risk of harm to competition that is sufficient to satisfy the applicable statutory standard.42
- Would not require plaintiffs to define a relevant market unless required, by specific statutory language, to establish a claim or presumption.43
- Requests that Congress review proposal that antitrust law should be "clarif[ied] [so] that market definition is not required for proving an antitrust violation, especially in the presence of direct evidence of market power."44
|Burden Shifting to Defendant in Conduct Cases
- Would amend the Sherman Act to require that defendants asserting procompetitive benefits prove that "the procompetitive effects of the[ir] conduct clearly outweigh the anticompetitive effects," and no possibility of obtaining "substantially similar procompetitive effects through commercially reasonable alternatives that would involve materially lower competitive risks."45
- Proposes a Clayton Act presumption that "exclusionary conduct" harms competition if the defendant possesses greater than 50% market share in the relevant market or otherwise possesses significant power in the relevant market.46
- The presumption may be rebutted with a defendant's showing that procompetitive benefits of the conduct eliminate risks to competition or competition in the market, or that the conduct does not present an appreciable risk of competitive harm.47
- Proposes examining the creation of "a statutory presumption that a market share of 30% or more constitutes a rebuttable presumption of dominance by a seller, and a market share of 25% or more constitute[s] a rebuttable presumption of dominance by a buyer."48
- Provides that if "a violation [is established], the court shall order disgorgement of all profits" to the FTC as a remedy for violations of the Sherman Act, "except upon a showing of extraordinary good cause."49
- The FTC and Attorney General issue to joint guidelines on civil penalties, including whether such civil penalty is to be applied in combination with disgorgement, structural remedies, or other remedies.50
- No explicit changes in remedies contemplated.
|Standard for Evaluating Anticompetitive Conduct
- Proposes that "protection of economic competition within the United States" be "the principal standard for evaluating the permissibility of practices under [the Sherman] Act."51
- Proposes prohibition of "exclusionary conduct," defined as "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."52
- Proposes clarifying that the antitrust laws "are designed to protect not just consumers," and that the analysis of competitive harm should examine the "competitive process" rather than "focus primarily on price and output."53
This is a period of considerable political ferment: numerous sweeping legislative proposals aimed at the nation's antitrust laws are being proposed, considered, and debated on Capitol Hill. While Sen. Hawley's bill has no announced co-sponsor at the time of this writing, Sen. Klobuchar's bill has nine co-sponsors, and the recent approval of the Majority Staff Report may signal more legislation is to come. These proposals are the latest indication of voices on both sides of the aisle proposing sweeping changes to the US antitrust laws, converging around certain core issues. Moreover, these proposals contain presumptions and prohibitions that would apply to businesses of any size and reach across industries well beyond the tech sector. White & Case is tracking these legislative developments closely.
1 Sen. Josh Hawley, Senator Hawley Introduces The “Trust-Busting for the Twenty-First Century Act': A Plan to Bust Up Anti-Competitive Big Businesses, www.hawley.senate.gov/ senator-hawley-introduces-trust-busting-twenty-first-century-act-plan-bust-anti-competitive-big (last visited Apr. 13, 2021) (hereinafter Hawley Press Release).
2 Trust-Busting for the Twenty-First Century Act, S. 1074, 117th Cong. § 3(2) (2021), available at https://www.hawley.senate.gov/sites/default/files/2021-04/The%20Trust-Busting%20for%20the%20Twenty-First%20Century%20Act.pdf (hereinafter “Trust-Busting Act”).
3 Investigation of Competition in Digital Markets, Majority Staff Report and Recommendations, Subcomm. on Antitrust, Com. & Admin. Law, 116th Cong. (2020), https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf (hereinafter “Majority Staff Report”).
4 See, e.g., id. at 396-99.
5 Chris Mills Rodrigo, House committee approves Big Tech antitrust blueprint, The Hill (Apr. 15,2021), https://thehill.com/policy/technology/548506-house-committee-approves-big-tech-antitrust-blueprint.
6 See generally Rep. Ken Buck, The Third Way, Subcomm. on Antitrust, Con. & Admin. Law, 116th Cong. (Oct. 6, 2020), https://buck.house.gov/sites/buck.house.gov/files/wysiwyg_uploaded/Buck%20Report.pdf. The three other minority members were Doug Collins (R-Ga.), Ken Buck (R-Col.), Matt Gaetz (R-Fla.), and Andy Biggs (R-Ariz.).
7 Competition and Antitrust Law Enforcement Reform Act, S.225, 117th Cong. (2021), available at https://www.klobuchar.senate.gov/public/_cache/files/e/1/e171ac94-edaf-42bc-95ba-85c985a89200/375AF2AEA4F2AF97FB96DBC6A2A839F9.sil21191.pdf (hereinafter “CALERA”).
8 Johnathan Swan, Margaret Harding McGill, Inside the Democrats’ strategy to bombard Big Tech, Axios (Mar. 21, 2021), https://www.axios.com/tech-antitrust-facebook-google-amazon-apple-275f122d-b3f5-49cb-b223-f77c95a49252.html.
9 Hawley Press Release.
10 Trust-Busting Act § 2(1)(B).
11 Id. § 2(2)(B).
12 Id. § 2(1)(B).
13 Id. § 2(2)(B).
14 Id. § 3(2).
17 Id. § 4.
20 Id. § 3(2).
21 Id. § 4.
22 Id. § 3(2).
23 CALERA § 4(b)(3).
31. Majority Staff Report at 393.
33. Id. at 394.
34. Id. at 395.
35 Trust-Busting Act § 4 (declaring it "shall be an unfair or deceptive act" if a designated firm "provides search functionality; promotes or demotes particular search results, on the basis of whether those results are affiliated or not affiliated with the dominant digital firm; and does not disclose such affiliation to users of the search functionality").
36 CALERA § 9(a).
38 Majority Staff Report at 398.
39 Id. at 395-96.
40 Id. at 396-98.
41 Trust-Busting Act § 2(1)(B).
42 CALERA § 13(b).
43 Id. § 13(a) (“Establishing liability under the antitrust laws does not require the definition of a relevant market, except when the definition of a relevant market is required, to establish a presumption or to resolve a claim, under a statutory provision that explicitly references the terms ‘relevant market,’ ‘market concentration,’ or ‘market share.’”).
44 Majority Staff Report at 399.
45 Trust-Busting Act § 2(1)(B).
46 CALERA § 9(a).
48 Majority Staff Report at 396.
49 Trust-Busting Act § 2(2)(B).
50 CALERA § 11(b)(5)(A).
51 Trust-Busting Act § 2(2)(B).
52 CALERA § 9(a).
53 Majority Staff Report at 391-92.