Senate Democrats Propose Major Changes in Antitrust Review of Mergers
Fears of increased concentration in certain industries have led to calls in the media for greater antitrust scrutiny of mergers. Last week, U.S. Sen. Amy Klobuchar (D-MN), the ranking Democrat on the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, introduced two bills that would make drastic changes in how mergers are reviewed under the antitrust laws.
The Merger Enforcement Improvement Act (MEIA) attracted several other Democrat senators as co-sponsors. The bill would make several changes, starting with the adjustment of the fees paid by buyers in transactions requiring a Hart-Scott-Rodino filing. The fees would be reduced slightly for deals valued at less than $1 billion but increased considerably for larger deals. For instance, the top fee, for deals valued at more than $5 billion, would be $2.25 million, up considerably from today’s $280,000.
The MEIA also would require parties whose deal was approved subject to a Federal Trade Commission (FTC) or Department of Justice (DOJ) consent order to submit annual reports for five years detailing the competitive impact of the transaction, any efficiencies obtained as a result of the merger and the effectiveness of any divestitures. In addition, the MEIA would require the FTC to conduct a study on the competitive effects of institutional investor ownership in multiple companies in “moderately concentrated or concentrated markets.” The requirement for this study seems to be in response to a debate in the academic literature about whether such overlapping ownership reduces incentives to compete. Finally, the MEIA would require the comptroller general to conduct a study of recent FTC and DOJ merger remedies and then update that study three and six years later.
The other bill, the Consolidation Prevention and Competition Promotion Act of 2017 (CPCPA), attracted fewer co-sponsors but would make even more drastic changes in the antitrust laws. The bill would change the Clayton Act’s prohibition of mergers that “substantially” lessen competition to one that prohibited those that only “materially” lessen competition or “lower quality, reduce choice, reduce innovation, exclude competitors, increase entry barriers or increase price.” The term “materially” is defined as “more than a de minimis amount of harm to competition.” Mergers that would lead to a “significant increase in market concentration” or that are valued at more than $5 billion would be presumed to “materially lessen competition” unless the parties showed otherwise by a preponderance of the evidence.
The CPCPA also would establish an Office of the Competition Advocate in the FTC that would collect data, including through subpoenas; report on market concentration; and make recommendations to the FTC, DOJ, and other federal agencies about private and administrative actions that might harm consumers and that should be investigated or stopped. Finally, like the MEIA, the CPCPA would require parties whose transaction was cleared through an order to submit annual reports for five years.
Both bills seem unlikely to become law in the current Congress; however, they show that antitrust policy has captured the attention of both commentators and legislators alike. As a result, companies should look for changes to long-standing antitrust laws and principles to be discussed, at least, in the coming years.