New York antitrust legislation update
Ongoing uncertainty in antitrust area
Big tech has become a major target for new antitrust proposals. On 11 June 2021, the chairman of the Antitrust Subcommittee of the House Judiciary Committee, Representative David Cicilline (Democrat - Rhode Island) made good on his promise to introduce a series of bills aimed at modernising the antitrust laws to address concerns raised by the actions of companies such as Facebook, Amazon, Apple and Google. With support from ranking member Representative Ken Buck (Republican - Colorado), Cicilline was the major force behind the introduction of a package of legislative measures, entitled "A Stronger Online Economy: Opportunity, Innovation, Choice". The bills consist of:
- the American Choice and Innovation Online Act, which forbids dominant companies from misusing marketplaces to give their own products preferential treatment;
- the Platform Competition and Opportunity Act, which curbs the practice of dominant companies buying and eliminating existing or potential competitors;
- the Ending Platform Monopolies Act, which prevents dominant platforms from using self-preferential treatment to advance their products in marketplaces that they control;
- the Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act, which makes it easier for users to leave a social media platform by lowering barriers to entry and increasing data portability requirements; and
- the Merger Filing Fee Modernization Act, which substantially increases merger filing fees, thereby ensuring that the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have additional resources needed to enforce the antitrust laws.
Most of the Cicilline-Buck proposals are more platform-focused than recent anti-monopoly legislation proposed by Senator Amy Klobuchar (Democrat - Minnesota) at the federal level and by State Senator Michael Gianaris (Democrat - Queens, New York) at the state level. Nevertheless, it is still true that the legislation proposed by Cicilline and Buck will have spillover effects for the broader economy – impact that will only be exacerbated by the recent appointment of an FTC chair who is plainly opposed to big tech (for further details please see "Pending legislative attempts to curb tech giants have much broader implications").
The big tech focus in four of the five Cicilline-Buck bills is evident in their use of the common definition of "covered platforms" to define their application. "Covered platforms" include any platform:
- with at least 50 million United States-based monthly active online users or at least 100,000 United States-based monthly active business users;
- that is owned or controlled by a person with net annual sales or market capitalisation greater than $600 billion; and
- that constitutes a "critical trading partner" for the sale or provision of any product or service offered on or directly related to the online platform.
A "critical trading partner" is further defined as an enterprise that "has the ability to restrict or impede the access of a business user to its users or customers" or "the access of a business user to a tool or service that it needs to effectively service its users or customers." The DOJ or the FTC may also designate a covered platform for a 10-year period, based on a finding that these criteria have been met. While these definitions are intended to limit the reach of the new legislation to just a handful of companies, plaintiffs' lawyers will undoubtedly seek to widen the net cast by the "covered platform" bills to the extreme, if they can meet the foregoing conditions. For example, one could imagine the four "covered platform bills" being stretched to include an internet service provider or any number of other large, but unintended, companies.
The fifth Cicilline-Buck bill – the Merger Filing Fee Modernization Act – also has considerably broader implications for the business community. First, the Act would dramatically increase the Hart-Scott-Rodino (HSR) Act filing fee for mergers. For example, for deals valued at $161.5 million to $184 million, HSR filing fees would more than double, rising from $45,000 to $100,000. The HSR filing fees for the largest deals, valued at $5 billion or more, would jump from $280,000 to $2,250,000.
Second, the Merger Filing Fee Modernization Act would significantly increase the resources available to DOJ and the FTC, likely increasing the number of investigations that are feasible for the agencies. Specifically, the bill would authorise (but not appropriate) $252 million to the DOJ and $418 million to the FTC, which goes well beyond the $389.8 million requested by the FTC for fiscal year 2022. During the House Judiciary Committee mark-up, the members voted down an amendment to limit the use of these new resources to just merger enforcement.
On 23 June 2021, the House of Representatives Judiciary Committee approved the Merger Filing Fee Modernization Act with a vote of 29 to 12, and a Senate equivalent of the bill passed the Senate on 6 June 2021, with large bipartisan support.
There is significant political momentum for increasing HSR fees and enforcement agency funding. Indeed, in the Senate, there is another, much broader antitrust modernisation bill – the Tougher Enforcement Against Monopolies (TEAM) Act – introduced by Senators Chuck Grassley (Republican - Iowa) and Mike Lee (Republican - Utah), which incorporates language from the Merger Filing Fee Modernization Act. The TEAM Act aims to consolidate antitrust enforcement at the DOJ and repeal Illinois Brick, the 1977 Supreme Court decision which established that indirect purchasers cannot recover antitrust damages in federal court. The TEAM Act itself has yet to garner much support.
New York antitrust legislation update
While the Cicilline-Buck legislative proposals have yet to reach a full vote in the House, New York's Twenty-First Century Antitrust Act – which would impose a first-of-its-kind comprehensive state merger filing requirement – has overcome at least one hurdle in its path toward enactment, passing the New York State Senate. It must still pass the State Assembly, which adjourned on 10 June 2021, without voting on the Twenty-First Century Antitrust Act. However, state leaders could still add more legislative days to the legislative calendar to facilitate its passage by the State Assembly this year. Failing such action, the bill would need to be reintroduced again in both chambers. It was anticipated that the bill would pass this legislative session, and there is no reason to suspect that it would lose popularity in the next.
Ongoing uncertainty in antitrust area
Major antitrust-expansion bills, many crafted with big tech in mind, are being submitted by both House and Senate Republicans and Democrats. Further, President Biden's nomination of Lina Khan, a 2017 law school graduate, to be a commissioner (and now chair) of the FTC seems to be based largely on her anti-big tech ideology. Furthermore, the fact that she was confirmed with a Senate vote of 69-28 evidences that the five Ceciline-Buck proposals are likely to receive some serious consideration, even in the face of opposition from Facebook, Google, a few Senate and House Republicans, and the Chamber of Commerce. The recent district court decision dismissing the FTC's complaint against Facebook should enhance the political momentum for new legislation, because it underscores the difficulty in applying the traditional market share analysis for establishing "monopoly power" in a Section 2 case against a clearly dominant digital platform. As the district judge had noted, Facebook simply does not have readily measurable "sales" or "revenues" in any well-defined or recognised antitrust market.
What may be even more important to other non-platform businesses, the FTC and DOJ seem likely to see their appropriations and staffing increased, while they are being encouraged by political leaders to undertake more investigations and cases.
Indeed, as this article was being prepared, it was being widely reported that President Biden would be issuing in the very near future an executive order to promote competition throughout the US economy.
All of this will leave the US business community with the potential reality of having to deal with much more stringent anti-monopoly rules federally and in at least one major state, while also facing the even more likely prospect of more FTC and DOJ enforcement, especially against borderline mergers, as well as other initiatives by federal agencies to instil competition in their relevant constituencies.
For further information on this topic please contact Donald I Baker or Amber L McDonald at Baker & Miller PLLC by telephone (+1 415 315 7545) or email ([email protected] or [email protected]). The Baker & Miller PLLC website can be accessed at bakerandmiller.com.