Against the backdrop of broader shifts in capitalist incentives around the world, there are two movements underway to reform US antitrust law. The first is a “technocratic” movement that focuses on strengthening existing antitrust laws and enforcement to improve consumer welfare, the central goal of US antitrust policy since the 1980s. The second is a “populist” movement aimed at more fundamental changes to US antitrust laws to achieve purposes beyond the scope of the consumer welfare standard. While academics and antitrust experts may debate the merits of each approach, the fact is that both are playing out now through legislative proposals, regulatory efforts, and enforcement actions—with real-world implications for corporate America.
This essay summarizes the key trends at play and offers six practical steps chief legal officers can take to get ahead of them. It also suggests that corporate executives and boards who view the role of a corporation through a stakeholder lens, and who take environmental, social & governance (ESG) matters seriously are better situated to deal with this new era of antitrust.
There are two fundamental shifts underway in the incentives animating market capitalism around the globe. First, the corporate community—from investors to corporate boards to business regulators—are increasingly focused on ESG issues. Second, corporations are placing less emphasis on stockholder interests in favor of the long-term welfare of stakeholders—employees, customers, and communities—which is increasingly seen not just as a means to an end, but as a legitimate corporate goal in itself. In a recent survey, 90 percent of C-suite executives surveyed worldwide agreed that a shift to stakeholder capitalism was evident, and 80 percent said it was occurring at their company. While there are many factors driving these trends, both trends are grounded in a view—right or wrong—that the traditional, exclusive corporate focus on financial returns for shareholders is not in society’s long-term interest and is ultimately unsustainable.
Many critics of US antitrust policy argue that traditional approaches have not served the best interests of the average American. They point to increasing concentration in many US industries, cozy oligopolies, expanding corporate power, and widening wealth disparities as indicators that US antitrust enforcement has been inadequate—some would even say misguided. Many have taken aim at the consumer welfare standard, the legal yardstick that regulators and courts have used for the last four decades to determine whether business practices and mergers are anticompetitive. Rather than examining broader social impacts, the consumer welfare standard focuses on the much narrower question of whether the practice or transaction results in higher prices, lower output, lower quality, or slower innovation, all of which makes US consumers worse off.
Now, policymakers from both parties in the United States, and around the world, are looking at ways to reform the system. In the US Congress, Senator Amy Klobuchar’s (D-MN) proposed Competition and Antitrust Law Enforcement Reform Act largely reflects the “technocratic” school of reform. It would preserve the consumer welfare standard, but strengthen the tests applied to mergers, incorporate presumptions that certain conduct is unlawful, and shift the burden of proof to defendants under certain circumstances. Other proposed federal legislation would embrace a more populist approach, rejecting the singular focus of antitrust law on the economic welfare of consumers in favor of policies designed to promote greater social equality, distribution of wealth, and deconcentration of economic and political power. Many of these legislative proposals would require big tech platforms to aid their competitors by participating in data portability and other interoperability schemes; some would ban most corporate acquisitions by the largest firms.[1]
Importantly, a closely divided Congress does not guarantee inaction on Capitol Hill. In addition to Senator Klobuchar’s bill, Senators Mike Lee (R-UT) and Chuck Grassley (R-IA) have proposed legislation that would relax the standards for finding a merger unlawful under Section 7 of the Clayton Act. There is also bipartisan support for bills addressing specific potentially anticompetitive business practices in industries such as high tech and pharmaceuticals, which appeal to both technocratic and populist reformers.
A parallel shift of antitrust policy is underway at both the Federal Trade Commission (FTC) and the US Department of Justice Antitrust Division (DOJ). Earlier this year, these agencies announced plans to revise the federal government’s merger guidelines (and invited comments) in order to make it easier for the two agencies to challenge potentially anticompetitive mergers. In the interim, the FTC has suspended its merger guidelines applicable to “vertical” transactions as part of its efforts to subject such transactions to increased scrutiny, despite the fact that vertical transactions typically increase efficiency and are unlikely to decrease consumer welfare. This policy shift comes at a particularly challenging time for companies facing supply chain disruptions that may, therefore, want to vertically integrate with upstream suppliers.
Both agencies are also shifting enforcement into high gear. They are now issuing more expansive data and document requests in their merger reviews, including requests for information on the impact a merger may have on ESG issues, such as labor markets, the environment, and social welfare generally. The agencies are also pursuing civil conduct cases against Google and Facebook using novel legal theories, investigating Amazon, and bringing criminal antitrust cases in untested waters, particularly regarding certain mundane employment practices.
On the international front, there are technocratic efforts to strengthen competition law, such as reforms enacted last year in Germany. Other efforts have a strong populist element and go well beyond US reform efforts. One of these, for example, would target data ”gatekeepers,” (the EU Digital Markets Act); another would proactively evaluate the digital economy (the UK Competition and Markets Authority’s online platforms and digital advertising market study). Some of these, like some of the proposed legislation now pending in Congress, would go beyond the consumer welfare standard to assess the broader societal impacts of proposed mergers (UK’s Reforming Competition and Consumer Policy).
Here are six suggestions to help chief legal officers stay ahead of the curve in navigating the antitrust environment and prepare their firms for broader shifts in the legal and corporate landscape.
An abbreviated version of this article was first published in The National Law Journal.
[1] See, e.g., Ending Platform Monopolies Act, American Choice and Innovation Online Act; Platform Competition and Opportunity Act of 2021, and Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act of 2021.
August 30, 2024 | Newsletters & Alerts