Would Klobuchar Bill to Limit Very Large Mergers Help o Harm Competition?

On February 4, 2021, Senator Amy Klobuchar, chair of the antitrust subcommittee of the Senate Judiciary Committee, introduced legislation that would make sweeping changes as to how antitrust cases are prosecuted. The Competition and Antitrust Law Enforcement Reform Act of 2021 seeks, in its own words

to reform the antitrust laws to better protect competition in the American economy, to amend the Clayton Act to modify the standard for an unlawful acquisition, to deter anticompetitive exclusionary conduct that harms competition and consumers, to enhance the ability of the Department of Justice and the Federal Trade Commission to enforce the antitrust laws, and for other purposes.

If not a complete overhaul of current antitrust laws, the bill does attempt several large-scale changes to fix what Democrats and Republicans alike admit is an ineffective system. The bill runs to 56 pages and, although Big Tech is nowhere mentioned explicitly, there can be little doubt that the near stranglehold a handful of tech companies have on their business sectors is very much in the measure’s crosshairs.

Perhaps the most sweeping change made by the bill is that it seeks to amend Section 7 of the Clayton Act (the 1914 legislation that prohibits mergers “that lessen competition or…tend to create a monopoly”) by altering the standard of proof required to establish a merger as anticompetitive. The current standard is “

whereas the proposed new standard is the less stringent to

The proposed legislation does more than just change the standard. It also reassigns the burden of proof in antitrust

The bill would similarly alter provisions against exclusionary practices with a change in focus so that the issue of harming competition becomes one of harming competitors. In one of the bill’s more counterintuitive moves, this would apply to eliminating predatory pricing, which is good for consumers while bad for competitors.

The legislation also proposes provisions for far larger civil penalties in antitrust cases brought by the government. These amount to the greater of

Like any legislation that comes before an equally divided body, Klobuchar’s bill faces an uphill battle in the Senate. There is, for the time being, no comparable legislation in the House, and there are also expectations that a more radical bill is in the making. Senate Republicans, for their part, will probably want something more moderate, meaning that badly needed antitrust reform is likely heading toward an impasse.

There has also has been some concern that Klobuchar’s bill could conceivably stand in the way of innovation in the technology sector. Startups that don’t make billions for their investors are often acquired by Big Tech companies, providing some return on investment, even as the big tech company gobbles up another asset. Hindering that scenario on the grounds of fair competition might discourage venture capitalists from backing new ventures.

A Republican colleague of Klobuchar’s on the Senate Judiciary Committee’s Antitrust Subcommittee, Senator Mike Lee (in fact the committee’s ranking member), issued a statement that sheds some light on the issue from the opposite direction:

We have much to address. The actions of Big Tech continue to divide the nation, undermine fundamental liberties, and distort the market. The Silicon Valley fairytale of innovation and technological progress sold to Americans has turned into a corporatist nightmare of censorship and hypocrisy.

On the other hand, he opposes the kind of sweeping reforms Klobuchar’s bill proposes on the grounds that:

Our time and resources will be much better spent ensuring that we are adequately enforcing existing laws, rather than pursuing drastic changes with unintended consequences that could wreak havoc on the economy.

Ultimately, the question isn’t whether steps need to be taken (anyone looking at Google can see that), but whether Klobuchar’s bill outlines the right steps.

For her part, Klobuchar seems sanguine, having stated at a conference earlier in the year:

With a new administration, new leadership at the antitrust agencies and Democratic majorities in the Senate and the House, we're well-positioned to make competition policy a priority for the first time in decades.