Our last article, New Brandeisians keep their promise, discussed the contents of Sen. Amy Klobuchar’s (D-MN) proposed overarching antitrust legislation, Competition and Antitrust Law Enforcement Reform Act (CALERA). Now, we’d like to take a step back and focus on the arguments supporting and opposing such reform, and in particular the precise manner in which the proposed legislation goes about such reform. We’d also like to highlight another antitrust statute proposed by Sen. Klobuchar, the Journalism Competition and Preservation Act.
What do New Brandeisians believe is broken?
There are two main components to antitrust infrastructure – law and enforcement. The former involves Congress and the judiciary, while the latter implicates the executive branch. Greater enforcement simply takes commitment by the enforcement agencies, but they can only enforce the laws that exist. By proposing legislation like CALERA, it is clear that New Brandeisians believe that the antitrust laws are broken and therefore require a re-set. But remember that the antitrust laws are a lot like the Constitution – broadly-worded statutes that rely on the judiciary to interpret them and adapt them to the changing times. CALERA aims to change that evolutionary process and, rightly or wrongly, provide an inherently political solution to a complex area of the law.
As we discussed in our previous article, the biggest problem that CALERA seeks to correct is the perceived power imbalance in the country, where just a few entities in each industry possess market power. According to the authors, this imbalance not only negatively affects our economy, but raises serious social and political concerns as well. Putting aside perceived lax enforcement, the need for a statute like CALERA is contained in the legislation’s findings. Chief among these findings is that “market power and undue market concentration contribute to the consolidation of political power, undermining the health of democracy in the United States.” Additionally, the findings state that “in the United States’ economy today, the presence and exercise of market power is substantial and growing” and “makes it more difficult for people in the United States to start their own businesses, depresses wages, and increases economic inequality, with particularly damaging effects on historically-disadvantaged communities.”
The authors of the legislation go on to find that “courts have declined to rigorously examine the facts in favor of relying on inaccurate economic assumptions that are inconsistent with contemporary economic learning, such as presuming that market power is not durable and can be expected to self-correct, that monopolies can drive as much or more innovation than a competitive market, that above-cost pricing cannot harm competition, and other flawed assumptions.” Because the authors find fault with the way the judiciary has interpreted the arguably vaguely-worded Sherman Act, they have chosen to draft fairly prescriptive legislation.
Likewise, with respect to mergers, CALERA’s authors find fault with how the judiciary has interpreted and applied the Clayton Act. The authors find that “in recent years, some court decisions and enforcement policies have limited the vitality of the Clayton Act to prevent harmful consolidation.” This limitation includes the perception that courts focus “inordinately on the effect of an acquisition on price in the short term, to the exclusion of other potential anticompetitive effects” and “underestimating the dangers that horizontal, vertical and conglomerate mergers will lower quality, reduce choice, impede innovation, exclude competitors, increase entry barriers or create buyer power, including monopsony power.” Once again, such issues would seem to require a prescriptive remedy.
CALERA’s primary remedy is to state, legislatively, that a company (or companies) with a 50% market share are presumed to possess market power. Moreover, mergers that result in such market power or exclusionary conduct by a company (or companies) with a 50% market share are presumptively unlawful. Thus, not only does CALERA emphatically state that market power is bad, but also assigns a bright line test to defining market power.
The arguments pro and con
New Brandeisians’ logic proceeds as follows: Market power is rampant throughout the country, market power is bad for the country, the current state of antitrust case law will not allow for change – no matter how much enforcement is increased – and case law is changed too slowly to remedy the current problems. With this as a foundational perspective, it makes perfect sense why legislation such as CALERA has been introduced, reflecting New Brandeisian views.
But, these proposals beg the following questions: Are these reforms a bit too sweeping? Would this type of reform be better shaped and implemented through case law? Are certain social and political aims really best addressed by antitrust reform? Those who oppose such transformative reform point out that competition policy and law is usually developed through studies, case law and agency direction to study mergers and other economic behavior. This allows for antitrust to be developed with careful consideration to the prevailing economic research and with real-world scenarios as the backdrop for decision-making. Opponents of the CALERA-approach argue that the legislation is premised on political findings and that assigning arbitrary numerical figures to complex and fact-based concepts like market power can do more harm than good.
Klobuchar’s Journalism Competition and Preservation Act
In addition to CALERA, Sen. Klobuchar has introduced industry-specific antitrust legislation. In March, she co-sponsored antitrust legislation in support of the local news industry. The Journalism Competition and Preservation Act of 2021 (JCPA), S. 673 and H.R. 1735, has become a bipartisan effort as it is co-sponsored by Sen. John Kennedy (R-LA), Sen. Cory Booker (D-NJ), Sen. Rand Paul (R-KY) and Sen. Sheldon Whitehouse (D-RI). The JCPA has been read in both the House and Senate and has been referred to the Subcommittee on Antitrust, Commercial, and Administrative Law.
Safe harbor for certain collective negotiations and limited liability under the Clayton Act
In response to Americans getting their news via online platforms, as opposed to television, radio or print media, Sen. Klobuchar introduced the JCPA to provide news outlets with an equal playing field to compete for online distribution. The shift to news consumption through technological platforms has led to layoffs and consolidation within the news industry, allowing for few companies to control a majority of the online advertising market.
Sen. Klobuchar sees this consolidated news industry as a problem for news outlets, particularly that of local news. Local news outlets are currently at a disadvantage because they lack the bargaining power of large technology companies, who have gained control of news dissemination via technology. As a result, these outlets have struggled to provide Americans with news, which Sen. Klobuchar sees as an erosion of the guarantee of free press.
Sen. Klobuchar’s JCPA seeks to provide an equal playing field for news outlets by creating a 48-month limitation of liability, called a safe harbor, to allow news companies time to collectively negotiate distribution of content. This 48-month negotiation safe harbor allows news publishers to band together and collectively bargain to decide on revenue-sharing terms with online content sharing websites. This safe harbor shields the news content creators from antitrust liability and gives companies time to collectively negotiate about how their content is distributed on certain websites.
Further, this safe harbor is narrowly tailored to ensure that coordinated negotiation by news publishers with online platforms is in the interest of free press and quality journalism. News companies can only coordinate if it:
- directly relates to the quality, accuracy, attribution or banding, and interoperability of news;
- benefits the entire industry, rather than just a few publishers, and are non-discriminatory to other news publishers; and
- is directly related to and reasonably necessary for these negotiations.
The safe harbor works in conjunction with the narrowly tailored coordinated negotiation provision to protect the guarantee of free press and promote quality journalism.
An addition to Klobuchar’s previous future of Local News Commission Act
The JCPA also supports Klobuchar’s previous legislation, the Future of Local News Commission Act of 2020. The Future of Local News Act was re-introduced in late May 2021 in the U.S. Senate and serves to sustain local newspapers, radio stations and broadcasters that keep their communities informed and have suffered in the current advertising-based business model. The Future of Local News Act has been referred to the Committee on Commerce, Science, and Transportation.
Proposed legislation continues to reflect permeation of New Brandeisians’ beliefs and objectives. Founded on the assumption that market concentration is consolidated in the hands of a few, the described legislation aims to remedy and distribute market power by establishing hard lines to make certain mergers automatically suspect under antitrust laws. While antitrust law remains a hot topic in the mainstream news, it remains to be seen if the antitrust revolution is on its way, has arrived, or is simply a prolonged phase. Either way, the objective we collectively assign to competition and how we seek to protect that concept will change, perhaps dramatically.