On Antitrust

By Howard Ullman, Orrick, Herrington & Sutcliffe LLP

Howard Ullman

With largely bipartisan support, antitrust enforcement has been on a rather dramatic uptick in the past few years. Critiques of a narrow focus on the consumer welfare standard have been advanced, the agencies have stepped up the scope and pace of their work and a plethora of articles in the popular press have called for more aggressive enforcement. The press have blamed everything from low wage growth to purportedly dominant online platforms on a supposedly outdated “Chicago School” economic approach that has been equated with a laissez faire mentality. Against this backdrop, it is not surprising that antitrust law itself has been amended and that discussions of future amendments continue to percolate actively at the federal and state levels. This is a notable development given that the main federal antitrust laws have been in place for more than a century and the most recent amendment of any significance (the Foreign Trade Antitrust Improvements Act, or FTAIA) is 40 years old.

Let’s start with the bills that have already been enacted. Last year, Congress passed the Competitive Health Insurance Reform Act of 2020 (Public Law No. 116-327). That law repeals the McCarranFerguson Act’s (15 U.S.C. §§ 1011, et seq.) federal antitrust exemption for health and dental insurance (which to begin with was a complicated and never full exemption). At the same time, however, the law expressly permits (1) the collection, compilation or dissemination of historical loss data; (2) determination of a loss development factor applicable to historical loss data (a component of how insurers usually calculate rates); (3) the performance of actuarial services if they do not amount to a restraint of trade; and/or (4) the development of standard insurance policy forms, provided that the insurers do not agree to adhere to the terms of such forms. Thus, in many cases, the new law does not fundamentally alter the federal landscape. That said, it is important to keep in mind that state law antitrust regulation of health insurance remains in force.

At the end of 2020, Congress also passed the Criminal Antitrust Anti-Retaliation Act of 2019 (Public Law No. 116-257). That law provides “whistleblower” protections to private sector employees who report criminal antitrust violations or assist in federal investigations and prosecutions.

Now let’s turn to the bills still being considered. In 2021, both Republicans and Democrats introduced six antitrust bills in the House (some of which were also introduced in the Senate). These bills focused on curbing the purported power of technology platforms. Last April, the Senate antitrust subcommittee (chaired by Senator Amy Klobuchar) held a hearing on competition in app store markets. (Senator Klobuchar has written an entire book on antitrust. The title, “Antitrust,” is generic, but its subtitle, “Taking on monopoly power from the gilded age to the digital age,” gives a better sense of its contents.) As of this writing, two major or important bills are still actively being considered: the “Competition and Antitrust Law Enforcement Reform Act” (“CALERA”) and the “Open App Markets Act.”

CALERA would do several things. It would increase the federal antitrust enforcement budgets. It would also amend the Clayton Act to prohibit mergers that could “create an appreciable risk of materially lessening competition “more than a de minimis amount” (as opposed to the current standard which prohibits mergers that “substantially lessen competition”) and for certain types of mergers it would shift the burden of proof in court to the merging parties rather than the government. It also would prohibit “exclusionary conduct” by dominant firms, i.e., conduct that materially disadvantages competitors or limits their opportunity to compete that presents an “appreciable risk of harming competition.”

The proposed Open Markets Act would regulate digital technology platforms. Among other things, it would prohibit those platforms from requiring application developers to use the platforms’ in-app payment systems, allow app developers to sell their software directly to users, and prohibit platforms from unreasonably preferencing their own applications – subject to an exception where necessary to achieve user privacy, security, or digital safety.

Other bills are also being considered – in March, Senator Elizabeth Warren and Representative Mondaire Jones introduced the “Prohibiting Anticompetitive Mergers Act” that would authorize the FTC and DOJ to reject certain deals out of hand.

The federal government is not alone in revisiting the antitrust statutes. Last year, the New York Senate passed an antitrust bill (S933A) which if enacted would have wide-ranging effects. Among other things, the bill would extend the reach of the Donnelly Act (New York’s antitrust law) by enacting “abuse of dominance” provisions. The bill would create a presumption of dominance based on market shares (and would also provide that dominance may be established in other ways). The bill also sets forth a number of categories of “abuse,” including leveraging, certain refusals to deal and the like. The bill would also enact a premerger review program separate and apart from the federal Hart-Scott-Rodino premerger notification system and would require New York review for mergers falling below the federal thresholds. The bill would also allow a prevailing party/plaintiff to recover expert (economist) fees. Whether these provisions would be salutary additions to U.S. antitrust law or would impose burdensome, expensive and duplicative state court regulation remains to be seen.

As Ernest Hemingway wrote, one goes bankrupt in two ways – first gradually and then suddenly. The development of U.S. antitrust law may be somewhat similar – the basic laws have remained largely unchanged for almost a century, with only minor modifi-cations. The dam holding back additional amendments, however, might soon be breaking.

Mr. Ullman is of counsel with Orrick, Herrington & Sutcliffe LLP.  hullman@orrick.com