- Sen. Klobuchar is the new Chair of the Senate Subcommittee on Antitrust, lending seriousness to the economically devastating threat posed by her proposal.
- Her new bill, the Competition and Antitrust Law Enforcement Reform Act, would stifle mergers and acquisitions, which would limit innovation and economic growth.
- This proposal would shatter the data-driven consumer welfare standard that has defined the scope of antitrust for decades, forcing companies on the defensive against the heavy hand of the government.
It’s hardly news that Senator Amy Klobuchar doesn’t like big corporations and wants to use the government to take them down to size. Now, however, she holds the gavel on the Senate’s Subcommittee on Antitrust, Competition Policy, and Consumer Rights, and has wasted no time introducing an updated proposal to expand antitrust enforcement, the “Competition and Antitrust Law Enforcement Reform Act.”
The main thrust of the bill is a drastically more aggressive policy towards corporate mergers and acquisitions, amending the Clayton Antitrust Act to allow for prohibiting mergers which merely “create an appreciable risk of materially lessening competition.” Moreover, Klobuchar would shift the burden of proof from the government to the company to prove that a merger would not have an anticompetitive impact.
This represents a radical departure from the consumer welfare standard that has guided antitrust enforcement for nearly half a century. Presently, government antitrust actions have to be based on a measurable expectation of economic harm that would result from alleged anti-competitive behavior. Klobuchar’s bill hearkens back to the prior era where companies had to keep their heads on a swivel because of the arbitrary nature of what might cause regulators to swing the hammer of antitrust enforcement at them.
The practical effect of this would inevitably be a drastic slowdown in mergers, and likely not only large ones, as companies are forced to essentially beg the government for permission before proceeding. Ripping off the lens of looking at anything that increases the size of a large firm as somehow harmful, mergers are a necessary and frequently positive tactic for companies navigating the ever-shifting market landscape. It is often simply more efficient to combine with the resources of one’s competitors rather than building a new capability from scratch.
So, too, with acquisitions, which the “big-is-bad” crowd seems to automatically assume must be mostly predatory (and, hence, inherently anti-competitive) in nature. This assumption disregards the needs of small, innovative start-up companies, particularly in the tech sector, which need a viable exit strategy in order to attract enough venture capital to get off the ground. It is tremendously more difficult to build up a company to the level of being able to cash in by going public (especially with a mountain of government hurdles to getting to an IPO), so many entrepreneurs count on getting bought up by large, established companies as a way to make their investors whole.
Subjecting the growth and evolution of America’s large producers and employers is not a great idea at any time, but to propose doing so now, as our economy looks to recover from the devastating impacts of the pandemic and government lockdowns, is madness.
Ironically, one aspect of Klobuchar’s approach may even prove counterproductive to her desire to increase antitrust enforcement. Already, plaintiffs who succeed in an antitrust complaint are legally entitled to treble damages from the offending company, but Klobuchar piles onto this by also allowing the imposition of civil fines. As TechFreedom President Berin Szoka points out, raising the financial stakes of an antitrust proceeding so incredibly high tends to actually have the effect of causing enforcers and courts to be more cautious and narrow in how they enforce the law.
Senator Klobuchar will doubtless use her new platform to call hearings that will play on justified conservative angst about the behavior of Big Tech companies as a means to attract support for the radical government interventions she desires. The power to fine or even break up companies for anticompetitive behavior is one of the most intrusive and economically consequential legal authorities the government possesses. It is crucial that the use of this power be based on objective metrics addressing demonstrable economic harms to consumers.