Amy Klobuchar's Big Antitrust Bill Wants to End the Age of Megamergers

Klobuchar's bill takes much-needed aim at monopolies, but advocates say that it doesn't offer deep structural solutions.
February 5, 2021, 8:07pm
Amy Klobuchar's Big Antitrust Bill Wants to End the Age of Megamergers
Bloomberg / Contributor

On Thursday, Sen. Amy Klobuchar, the incoming Democrat head of the Senate Antitrust Subcommittee, introduced an omnibus bill signaling a pitched battle over the future of antitrust law. 

The law takes aim not just at big tech companies, but potentially all large companies. According to experts Motherboard spoke with, some parts of the bill offer ambitious changes to antitrust law, but others adhere to a framework that has undermined enforcing antitrust law for too long already.

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In an interview with Fast Company, Klobuchar—a former antitrust lawyer herself with a book on the subject coming out this spring—said that her intention was "to introduce a major bill" that also covered industries beyond tech, "then to start having hearings on different pieces of it." In a statement to the press, Klobuchar described the bill as a "first step to overhauling and modernizing our laws" to improve competition and protect consumers, but some commentators have already raised concerns with the bill’s framework and underlying assumptions.

At its core, the Competition and Antitrust Law Enforcement Reform Act essentially combines legislation Klobuchar has proposed over the past few years as well as some that Senate Democrats have been considering. It takes a harder stance on anticompetitive mergers and acquisitions, and also promises to empower the Federal Trade Commission and the Justice Department's antitrust division to aggressively enforce antitrust law.

Some of the bill’s key proposals concern amendments and provisions to the Clayton Act of 1914, an antitrust law that made certain anticompetitive practices such as price discrimination outright illegal. In her omnibus bill, one key proposal seeks to strengthen anticompetitive merger enforcement by amending the Clayton Act to outright ban mergers that "create an appreciable risk of materially lessening competition,” as well as mergers that create monopsonies (buyers or employers who can suppress prices or wages via anti-competitive practices targeting other buyers or employers). 

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Klobuchar's merger prohibitions also shift the burden of proof to the merging companies, which would have to prove a deal would not be anticompetitive, or create a monopoly or monopsony. In part, this means deals where a merger (or acquisition) yielded over 50 percent market share, where a transaction is valued over $5 billion, or where an acquisition worth over $50 million by a company valued over $100 billion would be presumed illegal. 

This move won her some praise from experts who praised its clear presumptive bar on large mergers. Other key proposals, however, that have raised concerns among antitrust advocates who are seeking larger structural changes. 

“We desperately need an overhaul, because Congress has let courts rewrite antitrust law for forty years,” Zephyr Teachout, a law professor at Fordham University, told Motherboard. While it was “designed to jump-start hearings,” she noted, it falls short of effecting large-scale change. 

“The bill package, as it currently stands, won't transform antitrust, because instead of overturning decades of bad case law, it overturns some case law at the margins, leaves judges in the untenable position of deciding what is procompetitive behavior, and uses some language that reflects the Chicago school biases,” she said, Chicago School referring to an antitrust approach advanced by certain economists and legal scholars out of the University of Chicago, that insisted price theory—not market structure—was key to ensuring competition.

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In March, Klobuchar proposed legislation offering similar changes to the Clayton Act and they were at the time critiqued as insufficient for choosing vague language instead of the clear bright-line rules in the new legislation. 

This concern about vague language traces back to what Teachout described as the “rule of reason.” This legal standard basically boils down to what Maurice Stucke, a law professor at the University of Tennessee, describes as a "fact-specific inquiry into whether a restraint of trade is 'unreasonable.'" In other words, rule of reason is a legal standard that empowers judges to use some of "antitrust’s most vague and open-ended principles" to make decisions on a case-by-case basis that provides "little predictability" to market participants, but also yields a long, sprawling legal process that prioritizes expert economic testimony "divorced from marketplace realities" and coincidentally aligned with monopolies hostile to antitrust review. 

In other words, as clear as some aspects of Klobuchar’s proposed legislation might be, it will always be up to interpretation by judges. 

"Are we going to reach—through the legislative drafting process, through policy debates, through investigations and hearings—an ideological coherence as the legislation professes that starts to address the key problems in antitrust?” Sarah Miller, executive director of the American Economic Liberties Project, asked in a conversation with Motherboard. “The vagueness in the law as it's currently interpreted and the deference to the judges and the kind of economic modeling—I'd say voodoo economics—[prevents] setting rules that benefit market participants and clarify how judges should be deciding these cases.”

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Hal Singer, managing director of Econ One and an adjunct professor at Georgetown's McDonough School of Business, pointed to a developing fight between “Obama holdovers” and the “New Brandeis” antitrust movement that is seeming to develop two differing agendas in the House and Senate. 

For example, Singer pointed to how Klobuchar promoted support from Fiona Scott Morton and Carl Shapiro, two antitrust scholars who are both consultants to large tech platforms and have both questioned the efficacy of breaking up corporate technology platforms. 

“They have an alternative agenda to the one that was spelled out in the House Majority antitrust report,” he said. “So there's this huge fight and it's not just policy-oriented or feelings and attitudes and egos, but it's a difference of opinion as to what the threats are and how to deal with them.”

As one example, Singer pointed to how the 2020 House antitrust report focused on tech platforms as the greatest antitrust problem and centered a structural approach. 

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"Remedy number one was structural separation and remedy number two was non-discrimination, but they've got other wonderful ideas like nullifying harmful Supreme Court precedents,” he said “Shortly after that, we saw the Washington Center for Equitable Growth put out an alternative report with an alternative roadmap. I would say that the Klobuchar bill is closer to their vision."

The Washington Center for Equitable Growth’s report “Restoring Competition in the United States” was released a month after the House report and offered remedies that did not go as far as the House report because they did not pursue structural separation as aggressively. 

All this aside, Singer, Miller and Teachout all expressed hope that Klobuchar’s bill would be the first step in a process that would eventually reign in not just corporate tech monopolies, but monopolies and monopsonies across the entire economy.

“What would be transformational?” Teachout asked. “Use per se rules instead of what is called ‘rule of reason,’ where judges make case by case decisions, influenced by expensive economists. Laying out a clear standard for labor monopsony cases.”

"Tough love," Singer added. "it's good, but we need to get focused on the real threats."

"There's an increasing understanding that the kind of major intellectual and ideological shift in the way antitrust was enforced under Reagan was a major mistake and we need to look backwards to bright-line rules and approaches that worked well for the middle of the 20th century," Miller told Motherboard. "I'm optimistic about the intellectual debate that will inform the legislation and I think over the course of hearings, investigations, increased enforcement action hopefully under the Biden administration at the FTC and DOJ, that this will just become even more clear and obvious."