On February 4, 2021, Democratic Senator and chair of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights Amy Klobuchar introduced the Competition and Antitrust Enforcement Reform Act of 2021 (the “Act”), which proposes to overhaul existing antitrust laws by expanding their scope and bolstering enforcement resources.
If passed, the Act would significantly increase funding to the U.S. antitrust agencies, the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”), providing additional resources to investigate and potentially challenge corporate transactions and other conduct that may not receive such scrutiny today. And the Act proposes substantial changes to the legal framework that would make it less difficult for the DOJ and FTC to prevail in such challenges. Not limited to well-known tech giants and other firms mentioned in the news, the Act proposes changes to antitrust law that would cover transactions large and small.
If the proposed Act (or some later version that is materially similar) becomes law, a meaningful increase in agency activity likely would follow. By lowering the legal standard under the Clayton Act, shifting the burden in some cases to require companies to establish that the proposed transaction is not anticompetitive and enhancing the prohibitions on exclusionary conduct, the Act would expose more companies to potential liability and substantially broaden the scope of transactions that may be subject to antitrust scrutiny. The enhanced civil monetary penalties may have the effect of chilling lawful conduct by companies or creating additional transaction costs to ensure that business decisions are in compliance with these enhanced antitrust standards.
While it is not clear whether Senator Klobuchar has enough votes to pass the Act, it is impossible to deny the number of antitrust headlines that dominate the media and the growing, widespread interest in antitrust matters. The activity in recent years of antitrust agencies, state attorneys general, and Congress are widely reported. And in Congress, legislators on both sides of the political aisle may very well have the appetite to take on antitrust.
Companies should monitor these developments closely. MoFo’s Antitrust Group will continue to follow this draft legislation and update on progress, changes, and timing for possible passage. For companies considering deals, the provisions in the Act could affect expectations related to timing, negotiations, and likelihood of antitrust scrutiny. Businesses that may be identified by the agencies as having market power or market shares exceeding the thresholds outlined in the Act may need to revisit their compliance policies, in anticipation of, or if the Act becomes law, as their business decisions may face enhanced risk of being labeled presumptively exclusionary. Our team will continue to monitor developments in this area and will provide further insights as the situation unfolds.