Recent Developments and the Need for Nuance
I. Is New School Officially Here?
In January 2007, the Economic Analysis Group at the Department of Justice Antitrust Division published a Discussion Paper entitled "Does Antitrust Need to be Modernized?" The paper reviewed whether "globalization and rapid technological change" necessitated changing federal antitrust laws. This Discussion Paper has proven prescient; it identified as a "key issue" the growing need for improving antitrust enforcement of alleged exclusionary conduct related to intellectual property.
Bipartisan support for antitrust reform has grown immensely since January 2007 due to heightened market concentration and Mergers & Acquisitions (M&A) rates in an increasingly complex digital economy. Senator Amy Klobuchar introduced antitrust reform legislation in February that would provide substantial funding increases to the FTC and the DOJ Antitrust Division, and the Biden Administration appears to be supporting efforts to modernize antitrust enforcement.
Recently, President Biden indicated intent to name two prominent "New School" antitrust attorneys and scholars, Lina Khan and Tim Wu, to positions in his administration. Kahn, who rose to prominence as a student at Yale Law School for "Amazon's Antitrust Paradox" and has since held positions at the Open Markets Institute and the FTC, will reportedly be nominated to serve as the Commissioner of the Federal Trade Commission. Wu is famous for coining the term "net neutrality" and authoring "The Curse of Bigness: Antitrust in the New Gilded Age," and he will serve on the National Economic Council as a special assistant to the president for technology and competition policy. Kahn and Wu have helped establish and develop the "New School" of antitrust jurisprudence, and both have taught related courses at Columbia Law School. Generally, the New School aims to prioritize "innovation, entrepreneurship, privacy, freedom of the press, and economic and civil liberties" rather than strictly focusing on "consumer welfare."
II. Senator Klobuchar's Competition and Antitrust Law Reform Act:
Senator Amy Klobuchar, who spoke passionately about her concerns related to antitrust enforcement throughout her Presidential campaign, introduced antitrust reform legislation in February.
Sen. Klobuchar's proposal, the Competition and Antitrust Law Reform Act, aims to "give federal enforcers the resources they need [to] . . . strengthen prohibitions on anticompetitive conduct and mergers, and make additional reforms to improve enforcement." In order to accomplish these goals, the proposal would provide increased funding for the DOJ Antitrust Division and the FTC and would create a new FTC "Market Analysis" Bureau. While these structural and administrative reforms may receive bipartisan support, Sen. Klobuchar's proposal would also substantially alter the legal standards used to evaluate antitrust challenges under the Sherman and Clayton Acts, a change likely to be met with pushback by conservative economists and lawmakers. Sen. Klobuchar's proposal aims to accomplish important goals, but some argue the Sherman and Clayton Act amendments included in the legislation would "add friction to M&A Activity, stalling capital markets, reducing innovation and investment, and frustrating economic growth."
1. Clayton Act Reforms
Senator Klobuchar's proposal would modify the Clayton Act to "restore its original intent by amending it to include reference to 'exclusionary conduct.'" The legislation would define exclusionary conduct as "any conduct that would materially disadvantage . . . actual or potential competitors, or foreclose the ability of or incentive to compete." Currently, antitrust challenges require the plaintiff provide prima facie evidence that alleged anticompetitive effects of proposed mergers would result, and "proponents of the merger are then permitted to rebut by providing evidence that the merger will not have the feared anticompetitive effects."
The amendments would shift the presumption that "exclusionary conduct" presents a violative "appreciable risk" where such conduct is taken by a firm with a market share greater than 50% or otherwise wields significant market power. In turn, the burden would be on firms to prove the procompetitive market effects of the challenged conduct or merger rather than on the challenging entity to establish the anticompetitive impacts of the conduct that would result.
While it is important that antitrust reform efforts prioritize enforcement of anticompetitive exclusionary conduct, the legislation arguably defines the term overbroadly. Accordingly, the proposal may result in disincentivizing innovation that would ultimately benefit consumers and the overall economy. By presuming the illegality of any conduct taken by large firms that disincentivizes market entry or competition, the proposal risks unintentionally penalizing firms for achieving beneficial economies of scale or otherwise innovating to provide higher quality products more cheaply than competitors. Arguably, threatening firms with costly antitrust litigation whenever they undertake innovative conduct that negatively impacts competitors risks disrupting market incentives and stalling economic growth.
2. Sherman Act Reforms
Similarly, the Sherman Act would be modified to allow civil penalties of either 15% or 30% of a firm's US revenues for anticompetitive exclusionary conduct. Sen. Klobuchar has indicated that civil penalties are necessary because the existing remedies—injunctions, equitable monetary relief, and private damages—have not sufficiently deterred anticompetitive conduct. This may be true, but civil penalties of this size likewise risk stifling and disincentivizing innovation.
3. Funding Enforcement Agencies, Financing New "Market Analysis Bureau"
While the Sherman and Clayton Act reforms are unlikely to garner significant support from conservative lawmakers, the funding increases and creation of the FTC Market Analysis Bureau are more likely to win bipartisan support.
Increasing the funding available to the FTC and the DOJ would enable the agencies to hire more attorneys and would finance the creation of the Market Analysis Bureau. The MA Bureau would supplement the FTC's existing Competition, Consumer Protection, and Economics Bureaus. It would be tasked with conducting market, industry, and retrospective merger analyses aimed at helping the FTC develop a better understanding of the competitive conditions and underlying economic dynamics affecting complex markets. The creation of the MA Bureau is likely to gain support because it would demonstrate a commitment to ensuring continued reliance on empirical analyses rather than judicial or political discretion. Accordingly, these reforms would likely bolster enforcement efforts without necessarily adopting the "Big is Bad" approach that has historically divided lawyers and economists.
III. Modernizing Antitrust Economics
The Market Analysis Bureau would theoretically improve enforcement agencies' understanding of the economics underlying complex markets. This would provide enforcers with the tools needed to prosecute anticompetitive conduct that may have otherwise skirted enforcement due to the difficulty of establishing the negative economic effects of the conduct in question.
The complexity of the digital economy and increasing market concentration has made it more difficult for prosecutors to prove these anticompetitive results, but advances in machine learning and computational antitrust may assist in identifying and consistently enforcing antitrust violations.
While computational antitrust is certainly in its nascent stages of development, the early returns from Stanford's new Computational Antitrust Project are promising. The project's seminal article, authored by Project Director Thibault Schrepel, defines computational antitrust as a "new domain of legal informatics which seeks to develop computational methods for the automation of antitrust procedures and improvement of antitrust analysis." There are more than fifty global antitrust enforcement agencies participating in the project, including both the US FTC and the DOJ Antitrust Division.
Schrepel situates computational antitrust within "Antitrust 3.0," which he explains "is emerging but remains incomplete." At the core of Antitrust 3.0 is the goal of developing consistent enforcement frameworks designed to combat anticompetitive conduct in digital markets.
IV. Outlook
In "The End of Antitrust History Revisted," Kahn "reviews" Wu's The Curse of Bigness and explains that the "task facing reformers is to translate their critiques into a positive vision, including legal rules and analytical frameworks." These analytical frameworks will be critical to ensuring that antitrust law promotes free market economics, rather than subjects firms to inconsistent judicial interpretation and prosecutorial discretion.
The majority of federal antitrust law applicable today was authored prior to 1915, and the unique challenges associated with prosecuting exclusionary conduct in digital markets have presented concerns for nearly twenty years. While bipartisan support for antitrust reform and emerging scholarship both provide legitimate reason to be optimistic about efforts to modernize federal antitrust law, it is important that reforms are nuanced enough to confront the complex problems they are enacted to address.
Accordingly, while Senator Klobuchar's proposal is certainly "well-intentioned," the budgetary reforms and creation of the Market Analysis Bureau should be separated from and passed without the proposed Sherman and Clayton Act amendments included in the legislation. The newly-appointed experts in the Biden Administration should be afforded the requisite resources to capitalize on the promise of New School antitrust jurisprudence and the development of Antitrust 3.0. By providing these resources, those leading antitrust modernization efforts will be equipped with the tools needed to create nuanced legal frameworks that reflect modern critiques and ensure consistent enforcement practices.