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U.S. companies have engaged in more than $10 trillion worth of mergers and acquisitions since 2008, and Sen. Amy Klobuchar (D-MN) on Thursday announced a bill aimed at making sure those deals don’t harm consumers or halt competition.
It’s not unusual, especially in the tech industry, for big player to acquire a popular peer. (See: Facebook buying Instagram, Twitter buying Vine, Uber buying Postmates.) Klobuchar wants to make sure that when “a maverick firm that plays a disruptive role in the market” is eyed by an established business it doesn’t present a threat to competition.
“While the United States once had some of the most effective antitrust laws in the world, our economy today faces a massive competition problem,” said Klobuchar in a statement. “We can no longer sweep this issue under the rug and hope our existing laws are adequate.”
The intention of the bill, dubbed the Competition and Antitrust Law Enforcement Reform Act, is: “To reform the antitrust laws to better protect competition in the American economy, to amend the Clayton Act to modify the standard for an unlawful acquisition, to deter anticompetitive exclusionary conduct that harms competition and consumers, to enhance the ability of the Department of Justice and the Federal Trade Commission to enforce the antitrust laws, and for other purposes.”
The bill, which was co-sponsored by Sens. Richard Blumenthal (D-CT), Cory Booker (D-NJ), Edward Markey (D-MA) and Brian Schatz (D-HI), makes clear that the government shouldn’t only be wary of monopolies, but monopsonies too. While a monopoly involves a company that sells a good or service, a monopsony involves one that buys a good or service (including labor). Both evoke concerns of predatory pricing (too high if there’s only one seller and too low if there’s only one buyer), stagnating wages and high barriers to entry for fledgling companies. (Read the full bill below.)
While competition and vertical integration have been a recurring concerns in the ever-consolidating entertainment industry — the most high-profile example in recent memory being AT&T winning a trial after the DOJ challenged its $85 billion purchase of Time Warner — so far, monopsonies haven’t caused much of a stir in Hollywood.
The bill amends the Clayton Act to lower the threshold from forbidding mergers that “substantially lessen competition” to those that merely “create an appreciable risk of materially lessening competition.” In some situations — like mergers valued at more than $5 billion or those that would give a company a market share of more than 50 percent — it shifts the burden from the government needing to prove there is risk of harm to the company needing to prove there isn’t any.
It also establishes the Office of the Competition Advocate within the FTC and proposes civil penalties for antitrust violations of up to 15 percent of the company’s U.S. revenue or 30 percent of revenue of those “affected or targeted” by the unlawful conduct.
In order to enforce the changes, the Antitrust Division of the DOJ would receive $484.5 million and the FTC would receive $651 million.
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