Strong winds of change keep blowing in the antitrust world. In the past weeks we’ve witnessed two new major developments in the U.S.: (i) President Biden’s Executive Order to increase antitrust enforcement, and (ii) six antitrust bills issued by the House Judiciary Committee. That’s a lot to summarize in one article, so we’ve decided to just unwrap them below for you to decide how deep you want to keep digging.
President’s Biden Executive Order on Promoting Competition in the American Economy
This month President Biden issued the Executive Order on Promoting Competition in the American Economy (the “Order”). The Order aims to reduce the trend of corporate consolidation, drive down prices for consumers, increase wages for workers and facilitate innovation. It establishes a Whole-of-Government effort to promote competition in the American economy by including 72 initiatives to enforce existing antitrust laws and other laws that may impact competition to combat what it sees as excessive concentration of industry and abuses of market power, as well as to address challenges posed by new industries and technologies.
The Fact Sheet further explains how the Order (i) encourages the leading antitrust agencies to focus enforcement efforts on problems in key markets and (ii) coordinates other agencies’ ongoing response to corporate consolidation.
Calling the DOJ and FTC to enforce the antitrust laws vigorously
The Order calls on the federal antitrust agencies, the Department of Justice (DOJ) and Federal Trade Commission (FTC), to enforce the antitrust laws vigorously. The Order acknowledges the overlapping jurisdiction of both agencies and encourages them to cooperate fully, both with each other and with other departments and agencies, in the exercise of their oversight authority.
In particular, the Order encourages the Chair of the FTC to exercise the FTC’s statutory rulemaking authority in areas such as (i) unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy, (ii) unfair anticompetitive restrictions on third-party repair or self-repair of items, such as the restrictions imposed by powerful manufacturers that prevent farmers from repairing their own equipment; (iii) unfair anticompetitive conduct or agreements in the prescription drug industries, such as agreements to delay the market entry of generic drugs or biosimilar; (iv) unfair competition in major Internet marketplaces; (v) unfair occupational licensing restrictions; (vi) unfair tying practices or exclusionary practices in the brokerage or listing of real estate; and (vii) any other unfair industry-specific practices that substantially inhibit competition.
Also, the Order specifically addresses merger review by (i) encouraging antitrust agencies to revisit and update the Merger Guidelines (both horizonal and vertical) and (ii) challenge bad mergers previously cleared by past Administrations. Immediately after the publication of the Order, FTC and DOJ also issued a joint statement highlighting the fact that the current guidelines deserve a hard look to determine whether they are overly permissive, and how they will jointly launch a review of the merger guidelines with the goal of updating them to reflect a rigorous analytical approach consistent with applicable law.
In parallel, FTC has also passed this month some new resolutions updating its rulemaking procedures to set stage for stronger deterrence of corporate misconduct, and authorizing investigations into key law enforcement priorities for the next decade. As FTC’s chair Lina M. Khan stressed in a recent statement, priority targets include repeat offenders; technology companies and digital platforms; and healthcare businesses such as pharmaceutical companies, pharmacy benefits managers, and hospitals. Last but not least, FTC recently voted to rescind a 1995 policy statement that made it more difficult and burdensome to deter problematic mergers and acquisitions. The 1995 Policy Statement on Prior Approval and Prior Notice Provisions made it less likely that the Commission would require parties that proposed mergers that the Commission had determined would be anticompetitive to obtain prior approval and give prior notice for future transactions. By rescinding this policy statement, the FTC will be more likely to obtain prior notice of future transactions by those parties even beyond HSR notice requirements.
Grab your popcorn. Following President Joe Biden’s recent nomination of Jonathan Kanter as the new AAG for U.S. Department of Justice Antitrust Division, it is likely we will see some important antitrust enforcement action from both agencies very soon aimed at corporate concentration, especially the big tech sector.
New White House Competition Council
The Order establishes a new White House Competition Council, led by the Director of the National Economic Council, to monitor progress on finalizing the initiatives in the Order and to coordinate the federal government’s response to what it sees as the rising power of large corporations in the economy.
The Council will meet on a semi-annual basis––unless the Chair determines that a meeting is unnecessary––and will work across agencies to provide a coordinated response to overconcentration, monopolization, and unfair competition. The FTC and other independent agencies are welcome and expected to participate in this process.
Granted patents and the protection of standard setting processes
To avoid the potential for anticompetitive extension of market power beyond the scope of granted patents, and to protect standard-setting processes from abuse, the Order encourages the Attorney General and the Secretary of Commerce to consider whether to revise their position on the intersection of the intellectual property and antitrust laws, including by considering whether to revise the Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments issued jointly by the Department of Justice, the United States Patent and Trademark Office, and the National Institute of Standards and Technology on December 19, 2019.
Specific Industry Sectors addressed in the Order
The Order encourages the FTC to: (i) ban or limit non-compete agreements, (ii) ban unnecessary occupational licensing restrictions that impede economic mobility, and (iii) along with DOJ, strengthen antitrust guidance to prevent employers from collaborating to suppress wages or reduce benefits by sharing wage and benefit information with one another.
The Order directs the Treasury Department to submit a report on the impact of what it sees as the current lack of competition on labor markets within 180 days and encourages the FTC and DOJ to revise the Antitrust Guidance for HR Professionals.
The Order (i) directs the Food and Drug Administration (FDA) to work with states and tribes to safely import prescription drugs from Canada, pursuant to the Medicare Modernization Act of 2003; (ii) directs the Health and Human Services Administration (HHS) to increase support for generic and biosimilar drugs, which can provide low-cost options for patients; (iii) directs HHS to issue a comprehensive plan within 45 days to combat high prescription drug prices and price gouging, (iv) encourages the FTC to ban “pay for delay” and similar agreements by rule; (v) encourages HHS to consider issuing proposed rules within 120 days for allowing hearing aids to be sold over the counter, (vi) underscores that hospital mergers can be harmful to patients and encourages the DOJ and FTC to review and revise their merger guidelines to ensure patients are not harmed by such mergers; (vii) and directs HHS to support existing hospital price transparency rules and to finish implementing bipartisan federal legislation to address surprise hospital billing.
The Order directs the Department of Transportation (DOT) to consider (i) issuing clear rules requiring the refund of fees when baggage is delayed or when service isn’t actually provided—like when the plane’s WiFi or in-flight entertainment system is broken and (ii) issuing rules that require baggage, change, and cancellation fees to be clearly disclosed to the customer.
The Order further encourages (i) the Surface Transportation Board to require railroad track owners to provide rights of way to passenger rail and to strengthen their obligations to treat other freight companies fairly, and (ii) the Federal Maritime Commission to ensure vigorous enforcement against shippers charging American exporters exorbitant charges.
The Order expresses a concern on market concentration and helps ensure that the intellectual property system, while incentivizing innovation, does not also unnecessarily reduce competition in seed and other input markets beyond that reasonably contemplated by other laws.
In particular the Order directs the U.S. Department of Education (USDA) to consider issuing (i) new rules under the Packers and Stockyards Act making it easier for farmers to bring and win claims, stopping chicken processors from exploiting and underpaying chicken farmers, and adopting anti-retaliation protections for farmers who speak out about bad practices; (ii) new rules defining when meat can bear “Product of USA” labels, so that consumers have accurate, transparent labels that enable them to choose products made here; and (iii) a plan to increase opportunities for farmers to access markets and receive a fair return, including supporting alternative food distribution systems like farmers’ markets and developing standards and labels so that consumers can choose to buy products that treat farmers fairly.
Beer, wine, and spirits
The Order requests the Secretary of the Treasury, in consultation with the Attorney General and the Chair of the FTC to ––not later than 120 days after the Order is issued––, submit a report to the Chair of the White House Competition Council, assessing the current market structure and conditions of competition, including an assessment of any threats to competition and barriers to new entrants,
According to the Fact Sheet accompanying the Order, prices paid for broadband services can be 40% higher than advertised. During the Obama-Biden Administration, the FCC began developing a “Broadband Nutrition Label”—a simple label that provides basic information about the internet service offered so people can compare options. But the Trump Administration FCC abandoned those plans. The Obama-Biden Administration’s FCC adopted “Net Neutrality” rules that required these companies to treat all internet services equally, but this was undone in 2017.
Now the Order encourages the FCC: (i) to prevent Internet Service Providers (ISPs) from making deals with landlords that limit tenants’ choices; (ii) to revive the “Broadband Nutrition Label” and require providers to report prices and subscription rates to the FCC, (iii) to limit excessive early termination fees, and (iv) to restore Net Neutrality rules undone by the prior administration.
Technology (online platforms)
The Order announces an Administration policy of greater scrutiny of mergers, especially by dominant internet platforms, with particular attention to the acquisition of nascent competitors, serial mergers, the accumulation of data, competition by “free” products, and the effect on user privacy.
The Order further encourages the FTC to establish (i) rules on surveillance and the accumulation of data, and (ii) rules barring unfair methods of competition on internet marketplaces.
Banking and Consumer Finance
The Order encourages (i) DOJ and the agencies responsible for banking (the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency) to update guidelines on banking mergers to provide more robust scrutiny of mergers; and (ii) the Consumer Financial Protection Bureau (CFPB) to issue rules allowing customers to download their banking data and take it with them.
The House Judiciary Committee’s Approval of Six New Tech Antitrust Bills
Previously, on June 23, the House Judiciary Committee marked up and reported favorably six new tech antitrust bills called to be a “historic package of bipartisan legislation” aimed at “reining in anticompetitive abuses of the most dominant firms online.” If finally enacted, they would significantly alter current U.S. antitrust rules affecting big tech companies moving forward.
When ––even whether––the six antitrust bills will get final approval by both the House and the Senate is still far from clear for at least three reasons.
First, there are significant differences between Democrats––whose main concern is the monopoly power that dominant online platforms seem to enjoy—and Republicans––whose main concern is perceived online censorship and suppression of speech as addressed in their own agenda for taking on big tech.
Second, there are strong disagreements on both sides of the aisle over key issues such as what constitutes an online platform, the criteria to establish which platforms should be targeted and which not, what is covered under the definition of “data,” the impact if this new legislation on privacy issues, and why Congress would pass rules to constrain U.S. companies, but not their foreign competitors, among many others.
And third, several important voices representing powerful Silicon Valley tech companies such as Congresswoman Zoe Lofgren (CA-19) and House Minority Leader Kevin McCarthy (R-CA) have raised serious concerns about how the proposed legislation will create more harm than good for consumers in the U.S.
In a nutshell, the six new tech antitrust bills are:
- Merger Filing Fee Modernization Act (H.R.3843): To increase most filing fees that merging companies are required to pay to the U.S. antitrust agencies and ensure that DOJ and FTC have the necessary resources to enforce the antitrust laws. Senator Klobuchar was particularly pleased with this bill, which she considers the House version of her bipartisan previous bill to update merger filing fees.
- State Antitrust Enforcement Venue Act (H.R.3460): To stop companies from being able to move antitrust suits brought by the states (AGs) to other venues,
- Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act (H.R.3849): To promote data portability and interoperability to lower barriers to entry and switching costs.
- Platform Competition and Opportunity Act (H.R.3826): To prohibit acquisitions of competitive threats by dominant platforms, as well as acquisitions that expand or entrench the market power of online platforms.
- American Choice and Innovation Online Act (H.R.3816): To prohibit discriminatory conduct by dominant platforms covered by the bill, especially when they favor their own products over that of their rivals (self-preferencing).
- Ending Platform Monopolies Act (H.R.3825): To prevent dominant platforms from operating as both an operator and user of online platforms, which would eliminate their ability to self-preference and disadvantage competitors in an anticompetitive way.
The stakes are very high, with new and exciting developments coming up almost every day.
On the one side Congress, FTC and DOJ are arming up and getting ready for current and future antitrust battles that might stop big tech companies from prioritizing their own products online, force them to break up and divest parts of their current businesses, or even face scrutiny of acquisitions of nascent competitors previously cleared by the authorities.
On the other side, big tech companies are trying everything in their hands to pump the breaks on future legislation and antitrust enforcement action due, among other things, to the negative effects they say those could have on their services used by hundreds of millions of people, how they could undermine U.S. technology leadership, and raise serious privacy and security issues overall.
More to come very soon.