Merger & Acquisitions, Legislation & Regulation

Tech “Platforms” Would Have to Prove Acquisitions Are Good for Competition Under Proposed Bipartisan, Bicameral Laws

By attempting to hold platforms accountable, are legislators over-correcting?

Despite agreeing on almost nothing, Democrats and Republicans have found a common cause: the anticompetitive tactics of dominant digital platforms. Legislators have lined up to say the aggressive conduct undertaken by the platforms damages everything from free markets to free speech, from small businesses to innovative new players, from workers to consumers, and from national security to democracy itself.  


In addition to defending themselves on the legislative front, the platforms – Amazon, Apple, Facebook, Google – face challenges on the litigation and investigative front too, domestically and globally, from either government agencies or private parties or both.  


The Platform Competition and Opportunity Act (S. 3197) –  introduced by senators Amy Klobuchar (D-MN) and Tom Cotton (R-AR) – shares a significant element with another bipartisan bill that's in line for a vote by the House of Representatives. That is, dominant digital platforms intending to acquire other companies would have to demonstrate that the deal is good for competition. This shifts the burden from the government, which under current merger law has to prove that a transaction will harm competition before a court will block a deal, to the merging parties, which, under the proposed law, would have to demonstrate that a transaction won’t harm competition.  

House bill H.R. 3826 (also called the Platform Competition and Opportunity Act), introduced by Rep. Hakeem Jeffries (D-NY), House Antitrust Subcommittee Chairman David N. Cicilline (D-RI), and Ranking Member Ken Buck (R-CO), would also shift the burden onto dominant digital platforms to show that proposed acquisitions are not anticompetitive.

Another House measure that targets dominant platforms, H.R. 3825, or The Ending Platform Monopolies Act, was introduced by Vice-Chair of the House Antitrust Subcommittee Pramila Jayapal (D-WA), with support from representatives Cicilline, Lance Gooden (R-TX), Ken Buck (R-CO), and Jerry Nadler (D-NY). H.R. 3825 would make it unlawful for a platform operator to “own, control, or have a beneficial interest in a line of business other than the covered platform that — (1) utilizes the covered platform for the sale or provision of products or services; (2) offers a product or service that the covered platform requires a business user to purchase or utilize as a condition for access to the covered platform, or as a condition for preferred status or placement of a business user’s product or services on the covered platform; or (3) gives rise to a conflict of interest.”

Both House bills were introduced on June 11 and voted out of the House Judiciary Committee on June 24. 

Buying instead of competing.

Sen. Klobuchar, currently the Chairwoman of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, has been arguing for antitrust reform for several years, including during her bid to be the Democratic nominee for the presidency. In announcing the Platform Competition and Opportunity Act, she said the platforms are increasingly choosing to "buy their rivals rather than compete.” Her Republican colleague, Sen. Cotton, emphasized the importance of the new paradigm, where "the largest tech monopolies will have the burden of proving that further acquisitions are lawful and good for the American people." The senators point out that not only do these dominant players buy companies, but they acquire valuable data that expands their dominance.  


Last month, Klobuchar and Sen. Chuck Grassley (R-IA) introduced the bipartisan American Innovation and Choice Online Act (S. 2992) to establish “commonsense rules of the road for major digital platforms to ensure they cannot unfairly preference their own products and services." This legislation is cosponsored by Senators Dick Durbin (D-IL), Lindsey Graham (R-SC), Richard Blumenthal (D-CT), John Kennedy (R-LA), Cory Booker (D-NJ), Cynthia Lummis (R-WY), Mazie Hirono (D-HI), Mark Warner (D-VA), and Josh Hawley (R-MO). On the House side, H.R. 3816 Cicilline and Buck (R-CO) introduced a similar version of the bill, which was voted out of the House Judiciary Committee on June 24 along with the other platform-related proposals.


If the hurdles for enforcers are too high, maybe Congress should lower them. 


An antitrust rule which establishes a rebuttable presumption that all mergers by a “dominant digital platform” are anticompetitive unless the parties can demonstrate otherwise represents a significant departure from what has been the traditional approach to U.S. merger policy, in which mergers are assumed to be efficient absent specific evidence that they are anticompetitive. Under current law, if a dominant company makes an acquisition that stifles an emerging competitive threat, the courts require parties seeking to block the deal to come forward with a body of allegations and evidence that make that case. This is what the Antitrust Division did last year when it sued to block Visa’s acquisition of fintech disrupter, Plaid. Enforcers and antitrust plaintiffs’ counsel are used to meeting the burden of proving market power, dominance, and incipient harm to competition.


It does appear in recent years that the federal courts have been raising the bar for plaintiffs (including federal and state enforcers) and making it more difficult to carry the procedural and evidentiary burdens necessary to block transactions under the antitrust laws. If the law is going to require proof of market power and the other things that must be proven each time an acquisition by a dominant platform is challenged, then the courts ought not tilt the scales in favor of defendants by making those burdens higher than they ought to be.


It is not clear that the remedy is to shift those burdens entirely to the merging parties whenever one of them fits the definition of a “dominant digital platform.” Antitrust has always been a “one-off” form of governmental intervention and, with a few narrow and powerful exceptions for price fixing and bid-rigging, hostile to categorizing competitive effects except on a case-by-case basis. The presumptions in the proposed legislation move the law in a more regulatory direction. If the bills become law, prepare for plenty of effort to be devoted to the fine art of convincing the antitrust authorities that, while a transaction may give the acquiring platform a competitive advantage that will help it make more money (as, indeed, it must in order to make economic sense), it would not do so at the expense of competition. That is, to be approved a deal will have to be competitively advantageous, but not anticompetitive.


If the obstacle to more pro-competitive merger enforcement are the unreasonably high burdens placed on enforcers by the courts, perhaps Congress should lower those burdens in specific but incremental ways rather than shift the entire burden of going forward to the merging parties. Dominant digital platforms should also be required to report all acquisitions to the Pre-Merger Notification Office, including those that fall below the current reportability thresholds, so competitively significant acquisitions do not “fall under the radar.”

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Edited by Tom Hagy for MoginRubin LLP.   

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