Displaying bipartisanship seldom seen on Capitol Hill, the Antitrust Subcommittee of the House Judiciary Committee held a hearing yesterday on Reviving Competition in which Democrats and Republicans appeared to agree on crucial issues.[1] Subcommittee Chairman David Cicilline and Ranking Member Ken Buck echoed one another on the need for reforms, while many members of the full Judiciary Committee, including Chairman Nadler and Ranking Member Jordan, weighed in with their own support for writing new laws on Big Tech.

Virtually unanimous was the sentiment to increase funding for the Federal Trade Commission and the Antitrust Division at the Department of Justice. So was the desire to accelerate antitrust litigation and the idea of easing the burden on the government to stop mergers. Consensus seemed close as well on making data more portable for consumers who switch vendors and products and on improving the interoperability of apps and devices. Proposals to create a new federal agency to regulate Big Data met with less favor, and arguments to break up large firms did not capture the day. The Commission emerged as the agency most likely to see an expansion of authority.

The hearing was the first of a series planned to develop legislation based on the extensive investigation of competition in Big Tech that the subcommittee had conducted in the last Congress. Chairman Cicilline opened with a warning that dominant companies have too much power and it needs to be curbed. “Mark my words, change is coming. Laws are coming.” He cited dominant firms’ acquisitions of nascent competitors, contractual conditions that platforms impose on other vendors, disadvantaged news media, and measures that other countries have taken to rein in the companies. Perhaps most importantly, he concluded by noting the agreement of Ranking Member Buck on many of the proposals.

For his part, Mr. Buck recounted examples of conduct attributed to Big Tech during the investigation last year, including allegations of collusion, unfair competition against vendors on platforms, markups added to competitors’ products and actions to silence political speech. He then expanded on the remedies he proposed. First, he advocated data portability and recalled that one of the most popular laws Congress ever passed was the Telecommunications Act of 1996, which allowed consumers to keep their phone numbers when they switched carriers. Second, he extolled interoperability – allowing “competing technologies to speak to one another” – so consumers are not locked into one choice. Third, he supported more robust enforcement of the antitrust laws, although he cautioned against a Glass-Steagall Act for the internet (referring to proposals to prevent platforms from competing with vendors on them).

Witnesses representing a cross section of the political spectrum offered testimony ranging from a defense of modern antitrust doctrine to a proposal that Congress create a regulator like the bodies that once controlled railroad and telecom. The majority of the Committee was clearly between maintaining the status quo and replacing antitrust enforcement. Ranking Member Buck said, “the key is to make sure that we do not take a chainsaw to the whole economy, but rather we should implement a scalpel-like approach for Big Tech.” The odds of some sort of surgery loom large.

Background

Both the Chairman and the Ranking member issued reports in late 2020. The Majority Staff Report, Investigation of Competition in Digital Markets,[2] summarized more than a year of investigation that spanned seven hearings and amassed 1.3 million documents, “the most significant congressional antitrust investigation in more than a generation,” said Chairman Nadler at yesterday’s hearing. In over 400 pages the Report reviewed market structure, entry conditions, innovation, privacy, press, and economic liberty in light of modern technology and the large firms that have become identified as its leaders. Although focused on Big Tech, the recommendations could affect competition and consumer protection throughout the economy. The Staff Report advocated measures such as these:

a. Restoring Competition in the Digital Economy

Structural separations and prohibitions of certain dominant platforms from operating in adjacent lines of business;
Nondiscrimination requirements, prohibiting dominant platforms from engaging in self-preferencing, and requiring them to offer equal terms for equal products and services;
Interoperability and data portability, requiring dominant platforms to make their services compatible with various networks and to make content and information easily portable between them;
Presumptive prohibition against future mergers and acquisitions by the dominant platforms;
Prohibitions on abuses of superior bargaining power [and] due process protections for individuals and businesses dependent on the dominant platforms.

b. Strengthening the Antitrust Laws

Strengthening Section 7 of the Clayton Act, including through restoring presumptions and bright-line rules, restoring the incipiency standard and protecting nascent competitors, and strengthening the law on vertical mergers;
Strengthening Section 2 of the Sherman Act, including by introducing a prohibition on abuse of dominance and clarifying prohibitions on monopoly leveraging, predatory pricing, denial of essential facilities, refusals to deal, tying, and anticompetitive self-preferencing and product design; and
Taking additional measures to strengthen overall enforcement, including through overriding problematic precedents in the case law.

c. Reviving Antitrust Enforcement

Restoring the federal antitrust agencies to full strength, by triggering civil penalties and other relief for “unfair methods of competition” rules, requiring the Federal Trade Commission to engage in regular data collection on concentration…; and
Strengthening private enforcement through elimination of obstacles such as forced arbitration clauses, limits on class action formation, judicially created standards constraining what constitutes an antitrust injury, and unduly high pleading standards.

Committee staff reports and recommendations are at best long shots to legislation, especially in a Congress as divided as the 117^th. The odds of action here got an immediate boost, however, when Mr. Buck issued a report, The Third Way,[3] in which minority members endorsed some of the recommendations. Among the areas of agreement, the Report cited these:

More Resources for Antitrust Agencies - The report makes a good case for the need to strengthen our nation’s antitrust agencies with regard to resources.
Data Portability - Conservatives should consider supporting very limited legislative changes to provide consumers with a data portability standard that is similar to transferring cell phone numbers, as mentioned above. However, the language must be exact to prevent regulators from stretching Congressional intent to regulate Internet data companies as public utilities under Title II of the Communications Act of 1934, similar to net neutrality.
Reforming the Burden of Proof in Merger Cases – The evidentiary burden of proof that antitrust agencies must meet in many merger cases has become insurmountable. As a result, our nation’s antitrust enforcement agencies have built a wall, making it nearly impossible to bring an enforcement case on potential competition grounds in digital markets, granting near-total immunity for Big Tech. …. Congress should reaffirm to the antitrust enforcement agencies that the standard given to the agencies by Congress under the Clayton Act Section 7 allows them to challenge a merger when “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” The standard does not specify price change as our enforcers’ only way to review cases where harms to innovation and potential competition exist, and neither does it raise the evidentiary bar on potential completion versus actual competition. In other words, the antitrust agencies raised the bar on themselves, with help from the courts, in the years since Congress adopted the Clayton Act.

In The Third Way, the minority members stopped short of endorsing reform of monopolization laws and their proscriptions of unilateral conduct:

However, instead of issuing new bright line rules and creating a large regulatory framework to govern these behaviors, we believe the solution is to offer a thoughtful plan that ensures our nation’s antitrust enforcers are following Congress’ original intent regarding the burden of proof needed to bring and win cases involving these theories of harm.

Among the issues that warranted further review, according to the minority members, were proposals to change the laws on monopoly leveraging, predatory pricing, the essential facilities doctrine, exclusionary product improvement, and the Supreme Court’s decision in Ohio v. American Express (which required proof of competitive effects on both sides – buyers and sellers – of a charge-card platform). The minority members expressed serious skepticism about proposals to resurrect the case law of the 1960s that had established strong market-share presumptions in merger cases, and proposals to prohibit acquisitions altogether when companies reach certain share thresholds.

The agreements and disagreements in last year’s reports were on display in yesterday’s hearing. The agreements could well signal the most significant changes to antitrust laws in decades. Whether the majority and minority can come together on the open issues remains less likely.

[1] Hearing video available at https://judiciary.house.gov/calendar/eventsingle.aspx?EventID=4382.

[2] Available at https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf?utm_campaign=4493-519.

[3] Joined by Doug Collins, Matt Goetz and Andy Biggs, Available at https://buck.house.gov/sites/buck.house.gov/files/wysiwyg_uploaded/Buck%20Report.pdf.

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Prospects Rise for Antitrust and Data Legislation