Will Congress restore antitrust to protect competition?

In a year like no other, with a deadly pandemic raging and in the midst of a polarizing presidential election, a recent congressional report on the state of competition and antitrust enforcement in America may not have received the attention it deserves.

The findings of the Investigation of Competition in Digital Markets report, by the majority staff of the U.S. House Judiciary subcommittee on Antitrust, Commercial, and Administrative Law, are not surprising. Amazon, Apple, Facebook and Google have become such entrenched monopolists in the digital marketplace — with levels of concentrated power not seen since, “the era of oil barons and railroad tycoons” — that open competition and even our “democracy are at stake.” What is surprising — and gives hope to those of us who care deeply about the need for renewed antitrust enforcement — are the bold and far-reaching recommendations proposed by the report (members of both political parties agreed on the findings but issued separate reports on proposed solutions).

At its core, the report recommends that Congress legislate to reverse recent decades of court decisions “that have significantly weakened [the antitrust] laws and made it increasingly difficult for federal antitrust enforcers and private plaintiffs to successfully challenge anticompetitive conduct and mergers.” In short, the report explains that Congress must “restore the antimonopoly goals of the antitrust laws.”

The Digital Marketplace Is Increasingly Controlled by Modern Monopolies

The House subcommittee spent more than a year investigating competition in digital markets — specifically the dominance of Amazon, Apple, Facebook and Google, “to determine how their power affects our economy and our democracy.”

The findings were unambiguous: “each platform now serves as a gatekeeper over a key channel of distribution. By controlling access to markets, these giants can pick winners and losers throughout our economy. They not only wield tremendous power, but they also abuse it by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them.”

The report acknowledged that while these tech giants “have delivered clear benefits to society,” their “dominance ... has come at a price.” Because Amazon, Apple, Facebook and Google essentially “run the respective marketplace while also competing in it ... they engage in a form of their own private quasi regulation that is unaccountable to anyone but themselves. The result is less innovation, fewer choices for consumers, and a weakened democracy.”

For those who practice antitrust law, these findings are not surprising. We receive regular reports from online businesses about the power and alleged anticompetitive conduct of these behemoths. But very few of these companies have the wherewithal to challenge them.

This is what makes the subcommittee’s report so important: it proposes bold solutions that, if implemented, could restore the antitrust laws to Congress’ original intent, which included not only protection of consumers but also “workers, entrepreneurs, independent businesses, open markets, a fair economy and democratic ideals.”

The Recommendations Include Congress Restoring the Power of Antitrust Law

Among other things, the report recommends structural changes to limit the dominant platforms from operating in adjacent lines of business and giving preferential treatment to their own products and services. The report also suggests imposing new presumptions against mergers and acquisitions by the dominant platforms.

Perhaps the most remarkable aspect of the report is the broader recommendations for strengthening the antitrust laws. This is the first time in recent memory that a major congressional committee has addressed the need for Congress to step in and restore the power of the antitrust laws to their original place in society.

As the report notes, federal courts have spent the past several decades limiting the power of the antitrust laws — particularly in cases brought by competitors. Abiding an alternative view originally promoted by Chicago School theorists (and divorced from the actual legislative history of the Sherman Act), federal courts have suggested that the antitrust laws should primarily be concerned with “consumer welfare” (price and output) rather than protecting the competitive process. Thus, federal courts “have adopted the view that under-enforcement of the antitrust laws is preferable to over-enforcement.” In response, “the subcommittee recommends that Congress consider reasserting the original intent and broad goals of the antitrust laws, by clarifying that they are designed to protect not just consumers, but also workers, entrepreneurs, independent businesses, open markets, a fair economy, and democratic ideals.”

The report makes a myriad of specific recommendations too extensive to fully address here. Below are a few highlights:

Invigorate Merger Enforcement. The report notes that since 1998, Amazon, Apple, Facebook and Google acquired more than 500 companies. Yet, the Department of Justice and Federal Trade Commission did not block a single acquisition. The report suggests that reforms are needed to strengthen merger enforcement. Among the recommendations is the suggestion that new bright-line rules, including structural presumptions, be enacted so that “a single firm controlling an outsized market share, or resulting in a significant increase in concentration, would be presumptively prohibited.” The report also suggests that Congress codify a presumption against acquisitions by dominant firms, particularly direct competitors, “as well as those operating in adjacent or related markets.”

Rehabilitate Monopolization Law. Recognizing that “[o]ver recent decades, courts have significantly heightened the legal standards that plaintiffs must overcome in order to prove monopolization” under Section 2 of the Sherman Act, the report suggests adopting an abuse of dominance standard (similar to the European Union) and creating a statutory presumption that a 30% market share or more “constitutes a rebuttable presumption of dominance by a seller”; and a similar rebuttable presumption of 25% market share should be enacted to show dominance by a buyer. (By comparison, modern antitrust case law often suggests that a defendant have at least 70% market share to satisfy the standard for monopolization.)

The report also suggests that Congress override Supreme Court precedent and reinvigorate monopoly leveraging as a violation of Section 2 of the Sherman Act, i.e. it should be unlawful for a monopolist using its power in one market to injure competition in a second market. Under modern case law, monopoly leveraging has been limited to situations where the plaintiff proves the defendant not only injures competition in the second market but actually monopolizes the second market — a very difficult standard to meet.

The report further recommends that Congress override Supreme Court precedents that have made it virtually impossible to prove predatory pricing or predatory buying (pricing or buying below cost to harm a competitor). And, the report suggests that Congress override judicial rulings that have made it exceedingly difficult (and often impossible) for smaller competitors to successfully sue monopolists for refusing access to what are essential facilities or refusing to deal with smaller competitors at all.

Invigorate Agency Enforcement. The report was particularly critical of the FTC and DOJ: “[o]ver the course of the investigation, the subcommittee uncovered evidence that the antitrust agencies consistently failed to block monopolists from establishing or maintaining their dominance through anticompetitive conduct or acquisitions.” The subcommittee explained this failing as emblematic of a “multi-decade trend whereby the antitrust agencies have constrained their own authorities and advanced narrow readings of the law.” The report notes that the DOJ “has not filed a significant monopolization case in two decades” (the DOJ’s recent lawsuit against Google was filed after the report was issued). Among the recommendations to invigorate the agencies, the report suggests that Congress bolster civil penalties for “unfair methods of competition”; require the agencies to provide greater transparency and accountability in merger reviews, including mandating public input; impose stricter prohibitions on the “revolving door between [senior officials moving from] the agencies [to] the companies that they investigate,” and increase the enforcement budgets for both the FTC and the DOJ.

Invigorate Private Enforcement. While noting that “[p]rivate enforcement plays a critical role in the nation’s antitrust system,” the report explains: “In recent decades … courts have erected significant obstacles for private antitrust plaintiffs, both through procedural decisions and substantive doctrine.” Among the specific recommendations: eliminating the court-created doctrines of “antitrust injury” and “antitrust standing” (barriers to bringing and maintaining private antitrust claims that nowhere appear in the antitrust statutes and were only added to the case law in the late 1970s); eliminating forced arbitration clauses and class action waivers; and overruling the heightened pleading standard introduced by the Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).

Will the Report Usher in a New Era of Antitrust?

As lawyers who have toiled in the field of antitrust for the past couple of decades (on behalf of both plaintiffs and defendants), we are not surprised by the findings of dominance and abuse in the digital marketplace. The question now is whether Congress will actually take up the mantle and implement some or all of the recommendations. Various entrenched interests are already pushing back on any change to the status quo. Our hope is that many of the recommendations are adopted so that the antitrust laws are restored to their intended power and purpose. Supreme Court Justice Thurgood Marshall once wrote that the “antitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise.” Let us hope that the Magna Carta of free enterprise is restored. 

The views expressed herein are the authors’ own.