United States: The Potential Impact Of The Competition And Antitrust Law Enforcement Reform Act Of 2021 On Antitrust Enforcement And Private Antitrust Litigation

On Feb. 4, 2021, Sen. Amy Klobuchar, D-Minn., the new chair of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, introduced sweeping legislation - the Competition and Antitrust Law Enforcement Reform Act of 2021 (CALERA)¹ - to "overhaul[] and moderniz[e]" U.S. antitrust law.² If passed, CALERA's proposed amendments to federal antitrust laws will strengthen and increase the number of regulatory enforcement investigations and actions, likely increase the number of private antitrust lawsuits filed in federal courts, and increase the cost of and potential exposure in litigation for antitrust defendants. The proposed legislation would also increase funding to regulators and impose anti-retaliation whistleblower protections and a bounty program for individuals reporting antitrust violations or participating in enforcement actions.

Presumption of Harm for Exclusionary Conduct of 'Dominant' Firms

One of CALERA's most notable reforms is the addition of a new provision to the Clayton Act prohibiting firms from engaging in "exclusionary conduct that presents an appreciable risk of harming competition," where "exclusionary conduct" is defined as conduct that materially disadvantages competitors or limits their ability to compete.³ Under the proposed legislation, competition would be presumptively harmed if a company engaging in exclusionary conduct controlled more than 50% of the relevant market or otherwise had "significant market power."⁴ This new and relaxed basis for liability under the antitrust laws would likely lead to a dramatic increase in cases brought by companies against competitors with large market shares that allegedly "disadvantaged" them or "limited" their ability to compete.

Additionally, the bill would eliminate several important common law defenses to antitrust violations. Plaintiffs would no longer be required to demonstrate, for example, that the defendant terminated a prior course of conduct in refusal-to-deal cases; that the defendant's prices are set "below any measure of the costs to the defendant"; that the offending conduct makes "no economic sense"; or that the risk of harm to competition be quantified.⁵ As a result, under CALERA, enforcement agencies and private plaintiffs may succeed in challenging dominant firms whose low prices harm competitors, even when they arguably benefit consumers.

Once a plaintiff alleges that a dominant firm with more than 50% market power engaged in exclusionary conduct that harmed it, the burden of proof would shift to the dominant firm to demonstrate by a preponderance of the evidence that its actions were not anticompetitive, such as proof of distinct procompetitive benefits. This framework differs from current antitrust law, which requires both government and private plaintiffs to prove not only that a competitor has been injured but also that the offending conduct has harmed competition in the affected market.⁶ This bright line presumption and burden shift would likely make it harder for antitrust defendants to persuade regulators not to bring an action and to prevail at the motion stage of government and private plaintiff lawsuits, thereby increasing the potential cost and exposure of litigation.

Significantly, CALERA would also eliminate the need for antitrust plaintiffs to define a relevant market to establish liability in most cases, particularly where there is direct evidence of market power.⁷ The bill would only require establishment of a relevant market where a statute explicitly references any of the terms "relevant market," "market concentration" and "market share," which terms are not contained in Sections 1 and 2 of the Sherman Act or Section 7 of the Clayton Act. Notably, those terms are only found in sections of the proposed legislation that describe antitrust defenses, indicating that defendants would still bear the burden of proving a relevant market under certain circumstances. This would overturn long-standing Supreme Court precedent requiring antitrust plaintiffs to prove that competition has been harmed in a specific product and geographic market in order to prevail.⁸ Since antitrust litigation often involves complex expert witness disputes over the definition of the relevant market, removing this requirement would greatly assist antitrust plaintiffs in cases where the relevant market is unclear but evidence of harm exists, and potentially reduce the cost of litigation for plaintiffs while increasing the cost for defendants.

Lowered Standard and Shifting Burden for Merger Challenges

Section 7 of the Clayton Act currently requires enforcement agencies and private plaintiffs to prove that the effect of an acquisition "may be substantially to lessen competition."⁹ CALERA would rewrite the legal standard to prohibit mergers that "create an appreciable risk of materially lessening competition" (where "materially" is defined as "more than a de minimis amount").¹⁰ This revised language would lower the bar for the Department of Justice (DOJ) or Federal Trade Commission (FTC) to block mergers and make it harder for large companies to obtain antitrust clearance for deals.¹¹

Additionally, the proposed bill would shift the burden of proof in government enforcement actions to the merging party to show that the merger is not likely to materially lessen competition in certain scenarios. This includes mergers that lead to significantly increased market concentration; acquisitions by an acquirer with at least 50% market share; acquisitions of a "disruptive" firm by a competitor; mergers resulting in anticompetitive effects; and mergers valued at greater than $5 billion or involving acquirers with assets, net revenue or market capitalization greater than $100 billion.¹² Again, shifting the burden of proof to defendants would likely enhance regulators' appetite to question and impede large firm mergers and acquisitions.

Significant Whistleblower Provisions and Civil Penalties

The proposed legislation would further amend the Clayton Act by adding anti-retaliation protections for persons who voluntarily report civil antitrust violations to their employer or to the federal government, or who participate in an enforcement action.¹³ These protections prevent employers from discharging, demoting, suspending, threatening, harassing or otherwise discriminating against such persons. Civil whistleblowers would be entitled to "all relief necessary" to be made whole, including reinstatement of seniority, back pay and compensation for special damages sustained as a result of the retaliation.

CALERA would also amend the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 by creating a reward system for whistleblowers in criminal cases.¹⁴ It would authorize the DOJ to pay significant monetary awards to persons who provide "original" information relating to antitrust law violations that lead to successful actions.¹⁵ If implemented, whistleblowers could obtain up to 30% of criminal fines exceeding $1 million, and the U.S. attorney general would have the discretion to determine the amount of any award. 

These expanded monetary and anti-retaliation benefits, if passed, are likely to motivate more potential antitrust whistleblowers to come forward. A rise in whistleblower complaints followed the enactment of a similar whistleblowing program in 2011 under the Dodd-Frank Act. The Securities and Exchange Commission's (SEC) Dodd-Frank whistleblower program authorizes awards of between 10% and 30% of monetary recoveries exceeding $1 million to whistleblowers who provide the SEC with original information about securities law violations that lead to successful enforcement actions, as well as affording whistleblowers anti-retaliation protections.¹⁶ Notably, the SEC reported a record-breaking 6,900 tips in 2020, an increase of more than 130% since the successful program's inception, and has recovered more than $2.7 billion in monetary sanctions in enforcement actions brought with information from whistleblowers.¹⁷ Given CALERA's analogous financial and anti-retaliation incentives, one could expect a similar spike in antitrust whistleblower complaints to follow the implementation of its whistleblower provisions, which could increase the number of private antitrust lawsuits as follow-on litigations to DOJ actions.

CALERA also provides for additional civil penalties for antitrust violations. It would authorize enforcement agencies, for the first time, to seek civil fines of up to 15% of the violator's annual U.S. revenues or 30% of revenues in any affected line of commerce.¹⁸ CALERA would also make it easier to obtain prejudgment interest on treble damages awarded to successful antitrust plaintiffs.¹⁹ These penalties would dramatically increase financial risk to violators while further incentivizing plaintiffs to assert private rights of action by "more fully compensat[ing] injured parties."²⁰

Looking Forward

Although unlikely to pass in its current form, CALERA may help shape the framework for a bipartisan compromise on significant amendments to the U.S. antitrust laws. Sen. Klobuchar has conveyed optimism in finding common ground with Republicans who have raised concerns about monopoly power.²¹ Sen. Mike Lee, R-Utah, the leading Republican on the Senate Judiciary Committee's Antitrust Subcommittee, recently expressed enthusiasm for a bipartisan approach to improving antitrust enforcement, particularly the dangers posed by "Big Tech."²² However, while appreciating Sen. Klobuchar's "opening contribution to this bipartisan discussion," he reaffirmed his support of the existing antitrust laws and rejected "any legislative attempt to replace or undermine the consumer welfare standard."²³ It is premature to assess how bipartisan support will play out for CALERA, and for antitrust reform more broadly. We will keep you apprised of developments as they continue to unfold.

Footnotes

1 Competition and Antitrust Law Enforcement Reform Act of 2021 (CALERA), S. 225, 117th Cong. (2021).

2 Press Release, Senator Klobuchar Introduces Sweeping Bill to Promote Competition and Improve Antitrust Enforcement (Feb. 4, 2021), available at https://www.klobuchar.senate.gov/public/index.cfm/2021/2/senator-klobuchar-introduces-sweeping-bill-to-promote-competition-and-improve-antitrust-enforcement.

3 CALERA § 9(a).

4 Id.

5 Id.

6 See Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 116 (1986) ("To hold that the antitrust laws protect competitors from the loss of profits due to such price competition would, in effect, render illegal any decision by a firm to cut prices in order to increase market share. The antitrust laws require no such perverse result, for '[i]t is in the interest of competition to permit dominant firms to engage in vigorous competition, including price competition.'") (internal citations omitted).

7 CALERA § 13.

8 See, e.g., United States v. Marine Bancorp., 418 U.S. 602, 618 (1974) (holding that "[d]etermination of the relevant product and geographic markets is 'a necessary predicate'" to Clayton Act Section 7 claims); Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965) (holding that "[w]ithout a definition of that market there is no way to measure [a defendant's] ability to lessen or destroy competition" in Sherman Act Section 2 cases).

9 15 U.S.C. § 18.

10 CALERA § 4(b).

11 The bill would also expressly prohibit mergers that create a monopsony, or monopoly power on the part of a buyer rather than a seller. Id. § 4(b)(2).

12 Id. § 4(b)(3).

13 Id. § 16(a).

14 Id. § 16(b).

15 "Original" information is defined as information that is derived from the independent knowledge of the whistleblower, unknown to the DOJ or U.S. attorney general, and not exclusively derived from government or news sources. Id.

16 Securities Whistleblower Incentives and Protections, 76 Fed. Reg. 34,300 (June 13, 2011) (codified at 17 C.F.R. pts. 240 & 249).

17 See U.S. Securities and Exchange Commission, 2020 Annual Report to Congress: Whistleblower Program, at 2, available at https://www.sec.gov/files/2020%20Annual%20Report_0.pdf.

18 CALERA § 10.

19 Id. § 17.

20 Id. § 2(b)(9).

21 Cat Zakrzewski, The Washington Post, The Technology 202: Klobuchar's new antitrust bill may hit Big Tech where it hurts (Feb. 4, 2021), https://www.washingtonpost.com/politics/2021/02/04/technology-202-klobuchar-new-antitrust-bill-may-hit-big-tech-where-it-hurts/.

22 See Press Release, Sen. Lee Sets Senate Republican Antitrust Agenda for 117th Congress (Feb. 16, 2021), available at https://www.lee.senate.gov/public/index.cfm/2021/2/sen-lee-sets-senate-republican-antitrust-agenda-for-117th-congress.

23 Id.

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