The Sherman Act was passed in 1890. The Clayton Act in 1914. And they have hardly changed since. Last month, Senator Amy Klobuchar, the new chair of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, proposed an overhaul of the antitrust laws: CLERA, the Competition and Antitrust Law Enforcement Reform Act.  If passed, CLERA would constitute the most significant change to antitrust law in a least a generation. In particular, it would also pose substantial new antitrust concerns for technology companies seeking to engage in what have been standard mergers and acquisitions.

Mergers and Acquisitions

First, CLERA aims to lower the threshold for determining whether a merger or acquisition is prohibited under Section 7 of the Clayton Act.  Mergers that “create an appreciable risk of materially lessening competition,” would be prohibited.  Under current law, the “substantially lessen,” standard requires the government to establish the transaction has a near certainty of causing future harm.

Second, CLERA would create a presumption of illegality for a broad swath of transactions.  In these cases, the companies involved in the transaction must proactively prove that their merger or acquisition will not harm competition. This provision dramatically shifts the burden of proof away from the government.

Under CLERA, for instance, any transaction that would lead to more than a 50% market share would be presumptively illegal.  Additionally, the bill extend to deals worth more than $5 billion or deals involving a company worth more than $100 billion.  Other transactions also captured would include:

Any acquisition that would “lead to a significant increase in market concentration;”

  • Acquisitions of competitors by companies with a market share of 50% or more; or
  • Acquisition of a market disrupting competitor.

Third, the amendments would clarify that “monopsony” power is part and parcel of the monopoly power explicitly listed in the current statute, expanding the scope of prohibitions.

In total, these changes would dramatically restrict the types of transactions that could make it past government scrutiny, as it would substantially increase the number of potentially regulated deals and the government’s ability to block them.

Exclusionary Conduct

CLERA also shifts the focus of antitrust law from consumers to competitors. For instance, the bill would amend Section 2 of the Clayton Act to prohibit “exclusionary conduct.”  This prohibition would keep “dominant firms” from engaging in any conduct that would “materially disadvantage” a competitor or conduct that would disincentive competition.

Again, the bill draws a clear line on activity that is presumed to be illegal. Any firm with more than 50% market share would bear the burden of showing that its conduct does not harm competition. And perhaps most momentously, CLERA would eliminate the current judicial requirement to define a relevant market. Rather, direct evidence proving actual or likely harm will be sufficient to create liability under all antitrust laws. Eliminating the relevant market definition will substantially lower the government’s burden of proof in antitrust cases nationwide and permit it to bring claims in a wide variety of fields.

Penalties

 Senator Klobuchar seeks to add significant civil penalties for antitrust violations. Currently, civil fines are capped at $100 million. CLERA removes the dollar cap and shifts the focus to the violator’s revenues by permitting the greater of either (1) 15% of the violator’s annual revenue, or (2) 30% of the violator’s revenue during “period of the unlawful conduct. The extent of the civil penalties will be determined by considering a variety of factors including the existence of any previous antitrust violations, long-term exclusionary activity, and malicious intent.

Effect on Tech

Lowering the standard to block mergers while expanding the prohibition to include monopsonies would dramatically alter the M&A playing field.  Passage of CLERA would provide additional ammunition for challengers seeking to bring claims against recent Big Tech consolidation, as the major players exert something resembling monopsony power in at least one market segment (e.g. Amazon in the market for eBooks). While the bill would not retroactively apply to pre-passage conduct, it would discourage additional considerations moving forward.

By narrowing the types of mergers and acquisitions that can make it through the government approval process and adopting new standards of proof, the Klobuchar legislation will present substantial risk to technology companies engaging in these types of deals. A newly defined judicial standard would require years of litigation through the court system to flesh out, at substantial cost to the parties whose merger or acquisition is being challenged.

Potential for Passage and Next Steps

As noted, some similar changes were proposed by the House Antitrust Subcommittee last year, and several House Republicans spoke in favor of, among other things, presumptions of anti-competitiveness and increased enforcement. But it is notable that no Republicans signed on as cosponsors of her bill before its introduction. Moreover, Ranking Member Senator Mike Lee (R-UT) criticized the bill, arguing that regulators should enforce the law as is without making major changes. Neither fact bodes well for CLERA’s prospects, at least as currently formatted.  But it is likely that the committee will schedule a hearing in the near future, which may provide further insight into this administration’s antitrust priorities.

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Photo of Colin Kass Colin Kass

Colin Kass is a partner in the Litigation Department and co-chair of the Antitrust Group, and a member of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team. An experienced antitrust and commercial litigation lawyer, Colin has litigated cases before federal and state courts throughout…

Colin Kass is a partner in the Litigation Department and co-chair of the Antitrust Group, and a member of the Firm’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team. An experienced antitrust and commercial litigation lawyer, Colin has litigated cases before federal and state courts throughout the United States and before administrative agencies. His practice involves a wide range of industries and spans the full-range of antitrust and unfair competition-related litigation, including class actions, competitor suits, dealer/distributor termination suits, price discrimination cases, criminal price-fixing investigations, and merger injunctions.

Colin also has extensive experience dealing with the Federal Trade Commission and Department of Justice in obtaining clearance for competitively-sensitive transactions and handling anticompetitive practices investigations. His practice also includes counseling clients on their sales, distribution, and marketing practices, strategic ventures, and general antitrust compliance.

Photo of David Munkittrick David Munkittrick

David Munkittrick is a litigator and trial attorney. His practice focuses on complex and large-scale antitrust, copyright and entertainment matters in all forms of dispute resolution and litigation, from complaint through appeal.

David has been involved in some of the most significant antitrust…

David Munkittrick is a litigator and trial attorney. His practice focuses on complex and large-scale antitrust, copyright and entertainment matters in all forms of dispute resolution and litigation, from complaint through appeal.

David has been involved in some of the most significant antitrust matters over the past few years, obtaining favorable results for Fortune 500 companies and other clients in bench and jury trials involving price discrimination and group boycott claims. His practice includes the full range of antitrust matters and disputes: from class actions to competitor suits and merger review. David advises antitrust clients in a range of industries, including entertainment, automotive, pharmaceutical, healthcare, agriculture, hospitality, financial services, and sports.

David also advises music, publishing, medical device, sports, and technology clients in navigating complex copyright issues and compliance. He has represented some of the most recognized names in entertainment, including Sony Music Entertainment, Lady Gaga, U2, Madonna, Daft Punk, RCA Records, BMG Music Publishing, Live Nation, the National Academy of Recording Arts and Sciences, Universal Music Group and Warner/Chappell.

David maintains an active pro bono practice, supporting clients in the arts and in immigration proceedings. He has been repeatedly recognized as Empire State Counsel by the New York State Bar Association for his pro bono service, and is a recipient of Proskauer’s Golden Gavel Award for excellence in pro bono work.

When not practicing law, David spends time practicing piano. He recently made his Carnegie Hall debut at Weill Recital Hall with a piano trio and accompanying a Schubert lieder.

David frequently speaks on antitrust and copyright issues, and has authored or co-authored numerous articles and treatise chapters, including:

  • Causation and Remoteness, the U.S. Perspective, in GCR Private Litigation Guide.
  • Data Breach Litigation Involving Consumer Class Actions, in Proskauer on Privacy: A Guide to Privacy and Data Security Law in the Information Age.
  • Location Privacy: Technology and the Law, in Proskauer on Privacy: A Guide to Privacy and Data Security Law in the Information Age.
  • FTC Enforcement of Privacy, in Proskauer on Privacy: A Guide to Privacy and Data Security Law in the Information Age.
  • The Role of Experts in Music Copyright Cases, Intellectual Property Magazine.
  • Nonprofit Education: A Historical Basis for Tax Exemption in the Arts, 21 NYSBA Ent., Arts, & Sports L.J. 67
  • A Founding Father of Modern Music Education: The Thought and Philosophy of Karl W. Gehrkens, Journal of Historical Research in Music Education
  • Jackson Family Wines, Inc. v. Diageo North America, Inc. Represented Diageo in trademark infringement litigation
Photo of Shannon D. McGowan Shannon D. McGowan

Shannon McGowan is an associate in the Litigation department.  Shannon’s practice focuses on assisting clients navigate a range of antitrust issues.  In addition to her experience on wide-ranging antitrust litigations, Shannon works with clients on general antitrust compliance and litigation issues.  In connection…

Shannon McGowan is an associate in the Litigation department.  Shannon’s practice focuses on assisting clients navigate a range of antitrust issues.  In addition to her experience on wide-ranging antitrust litigations, Shannon works with clients on general antitrust compliance and litigation issues.  In connection with historic restructuring of Puerto Rico’s debts, Shannon advises the Financial Oversight and Management Board for Puerto Rico on a variety of issues related to Puerto Rico Oversight, Management, and Economic Stability Act.

Shannon maintains an active pro bono practice, including assisting non-profit organizations with research into immigration and refugee law and representing individual clients in litigation to improve housing conditions in the Washington D.C. area.

Shannon earned her J.D. from the University of Virginia School of Law, where she captained the school’s Philip C. Jessup International Law Moot Court team.  As an alumnae, she is active in advising the current UVA Jessup Team throughout the year-long competition.

Prior to law school, Shannon served as a legislative assistant to state representatives at the Oklahoma State House of Representatives, where she researched and advised on legislation and policy issues, including government transparency, education, and financial accountability.