Interest in antitrust reform has been growing steadily among policymakers in Washington, DC, over the last several years. Last year, the Democratic Majority Staff to the House Subcommittee on Antitrust, Commercial, and Administrative Law issued a highly-anticipated report on competition in digital markets that included several major reform proposals. Now, with Democrats in control of both chambers of Congress, antitrust reform appears ripe to play an even greater role in this year’s legislative agenda.

On February 4, Senator Amy Klobuchar, the new Chair of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, introduced the Competition and Antitrust Law Enforcement Reform Act of 2021, the most ambitious antitrust reform legislation in nearly half a century. The legislation includes several proposals that would dramatically reshape the US antitrust laws. The bill’s key proposals include: (1) lowering the legal standard for blocking mergers, (2) shifting the burden of proof to require companies to show their merger is not anticompetitive in certain circumstances, (3) creating a presumption that certain conduct by firms with at least 50% market share is anticompetitive and violates the law, (4) increasing antitrust fines, and (5) increasing antitrust agency funding.

Although the legislation as currently drafted likely faces headwinds, there may be narrower areas of common ground that could be enacted. Senator Klobuchar has said that she intends to hold a series of hearings in the weeks and months ahead to discuss her proposals and to build support for the legislation. We summarize the legislation’s key proposals below.

  • Lowering the Government’s Burden to Block Mergers 

Today the antitrust agencies must show that a transaction will substantially lessen competition in order to obtain an injunction preventing the deal from closing. Proponents of the new bill seek to update the Clayton Act to prohibit mergers that merely tend “to create an appreciable risk of materially lessening” competition. The legislation defines “materially” as “more than a de minimis amount.” This change would lower the bar for blocking mergers with perceived effects on price and non-price factors, including lower quality, reduced choice, and reduced innovation. The legislation also eliminates the requirement that the government must define a relevant market in order to prevail in a merger challenge as long as they can provide direct evidence of competitive harm.

  • Shifting the Burden of Proof to Merging Companies 

Even with a lower legal standard, under current law, the Department of Justice Antitrust Division (DOJ) and the Federal Trade Commission (FTC) ultimately would bear the burden of establishing that a transaction would harm competition. Senator Klobuchar’s legislation would shift this burden to the merging parties in five broad scenarios:

  • mergers that significantly increase market concentration;
  • acquisitions of competitors or nascent competitors by a “dominant” firm with at least 50% market share;
  • acquisitions of a disruptive firm by a competitor;
  • acquisitions resulting in anticompetitive effects; and
  • mega-mergers:  transactions valued at more than $5 billion or where the acquiror has assets, net revenue, or market cap of more than $100 billion and the value of the acquisition is at least $50 million. 

The second and third scenario are intended to enable heightened scrutiny of acquisitions of nascent or disruptive competitors – an enforcement priority in the wake of the DOJ’s recent challenges of the Sabre/Farelogix and Visa/Plaid transactions. The last scenario targets large transactions irrespective of whether or to what extent they may impact competition.

  • Creating a Presumption of Illegality for Exclusionary Conduct      

Supporters of the bill also seek to make it easier to prosecute exclusionary conduct under the antitrust laws. The legislation would create a presumption that exclusionary conduct is anticompetitive if undertaken by a “dominant” firm with at least 50% market share. In such circumstances, the burden would shift to the company to demonstrate that its actions did not harm competition. Exclusionary conduct is defined as conduct that “materially disadvantages” or “tends to foreclose or limit the ability or incentive of 1 or more actual or potential competitors to compete.” The presumption can be rebutted by demonstrating that the procompetitive benefits eliminate any risk to competition, that competitors have entered despite the alleged exclusionary conduct, or that the conduct does not present an “appreciable risk of harming competition.” This provision would override longstanding Supreme Court precedent in this area.

  • Increasing Civil Fines for Antitrust Violations

The proposed legislation would increase civil penalties for violations of Sections 1 and 2 of the Sherman Act and the exclusionary conduct provisions proposed in this bill. These fines would be in addition to other remedies already available to enforcers, including injunctions and the ability to break-up companies. The penalties would be the greater of (1) 15% of the company’s US revenues for the previous year; or (2) 30% of the company’s US revenues in the affected line of business.

  • Increasing Agency Funding by $600 Million

Senator Klobuchar’s legislation would increase annual funding to the FTC to $651 million and to the DOJ to $484.5 million—an increase of more than $300 million for each agency. Both agencies consistently note the difficulty of fulfilling their mandate with limited resources and have requested increased funding to support enforcement efforts. Increased agency funding is an issue that has received bipartisan support and is maybe the most obvious area likely to garner consensus. An increase in agency funding likely would lead to greater scrutiny, leading to an increase in the number of investigations, the number of in-depth merger reviews (i.e., Second Requests), and merger and conduct complaints filed.

While it remains to be seen whether Senator Klobuchar’s antitrust reform bill will gain traction in Congress, it is an important reminder that antitrust enforcement is in the spotlight and that it will continue to hold a prominent place on the legislative agenda for the foreseeable future.