On September 14, 2017, Senator Amy Klobuchar (D-MN), introduced new legislation to curtail market concentration and enhance antitrust scrutiny of mergers and acquisitions. As the Ranking Member of the Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights, Klobuchar is the leading Senate Democrat for antitrust issues.
Two bills were submitted to the Senate: the Consolidation Prevention and Competition Promotion Act (CPCPA) and the Merger Enforcement Improvement Act (MEIA). The CPCPA is co-sponsored by Senators Kirsten Gillibrand (D-NY), Richard Blumenthal (D-CT) and Ed Markey (D-MA). The MEIA is co-sponsored by Senators Blumenthal, Markey and Gillibrand, along with Senators Patrick Leahy (D-VT), Al Franken (D-MN), Cory Booker (D-NJ), Dick Durbin (D-IL), Mazie Hirono (D-HI) and Tammy Baldwin (D-WI). Both bills propose amendments to the Clayton Act. Earlier this year, Senate democrats announced these legislative proposals as part of their "A Better Deal" antitrust agenda.
WHAT DO THE BILLS PROPOSE:
- Notably, the CPCPA proposes to revise the Clayton Act so that in challenging an acquisition, the Federal Trade Commission (FTC) and Department of Justice (DOJ) would only have to show that the proposed transaction materially lessens competition rather than significantly lessens competition, which is the current standard. The legislation defines "materially lessens competition" to mean "more than a de minimis amount." This change would reduce the burden of proof for the government in challenging an acquisition.
- The CPCPA would impose extra scrutiny on large companies seeking approval of so-called "mega deals" that significantly increase market concentration, by shifting the burden of proof from antitrust enforcers to the companies. It would thus become the merging parties' responsibility to prove that the transaction does not harm competition. This would apply to deals in which the value of an acquired business exceeds $5 billion or the transaction meets the Hart-Scott-Rodino (HSR) size of transaction test (currently $80.8 million) and either party has assets, sales or market capitalization over $100 billion.
- The CPCPA would update the Clayton Act to refer to "monopsonies" in addition to "monopolies" codifying existing merger enforcement principles (see Horizontal Merger Guidelines § 1).
- Finally, the CPCPA would also create a new Office of Competition Advocate within the FTC. This new office would chiefly be responsible for making recommendations to both the FTC and DOJ to solicit reports regarding potential anticompetitive practices or adverse effects of competition in the marketplace.
- The MEIA seeks to increase the resources allocated to antitrust enforcers. First, in terms of substantive information, the MEIA requires companies that complete transactions by entering into consent orders to submit annual reports for five years regarding market pricing and merger-related efficiencies. Second, in financial terms, the MEIA increases funding for the FTC and DOJ Antitrust Division. It also proposes to lower the HSR pre-merger notification filing fees for the three current transaction categories and create three new filing fee categories with substantial fees for deals in excess of $1 billion.
WHAT THIS MEANS:
- Although it is unlikely that either proposal will pass in a Republican-held Senate, companies should keep these legislative proposals in mind because they may signal the approach that Congressional Democrats would take if they were to win midterm elections in either the House or the Senate. If the legislation is enacted, merging parties will face a higher burden to obtain merger clearance, as well as an onerous obligation to produce documents and data post-clearance.
- Congressional Democrats continue to push for aggressive antitrust enforcement to "crackdown" on big corporations and high market concentration. The Democrats' "A Better Deal" platform and the proposal of legislation shows that antitrust will continue to be a political topic for the foreseeable future.
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