Consolidation Prevention and Competition Promotion Act of 2019

II 116TH CONGRESS 1ST SESSION S. 307 To amend the Clayton Act to modify the standard for an unlawful acquisition, and for other purposes. IN THE SENATE OF THE UNITED STATES JANUARY 31, 2019 Ms. KLOBUCHAR (for herself, Mr. MARKEY, Mr. BLUMENTHAL, and Mr. BOOKER) introduced the following bill; which was read twice and referred to the Committee on the Judiciary A BILL To amend the Clayton Act to modify the standard for an unlawful acquisition, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Consolidation Preven- 4 tion and Competition Promotion Act of 2019’’. 5 SEC. 2. FINDINGS AND PURPOSES. 6 (a) FINDINGS.—Congress finds that— 7 (1) competitive markets are critical to ensuring 8 opportunity for all people in the United States; 9 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 2 •S 307 IS (2) when companies compete, businesses offer 1 the highest quality and choice of goods for the low- 2 est possible prices to consumers and other busi- 3 nesses; 4 (3) competition fosters small business growth, 5 reduces economic inequality, and spurs innovation; 6 (4) concentration that leads to market power 7 and anticompetitive conduct makes it more difficult 8 for people in the United States to start their own 9 businesses, depresses wages, and increases economic 10 inequality; 11 (5) undue market concentration also contributes 12 to the consolidation of political power, undermining 13 the health of democracy in the United States; 14 (6) the anticompetitive effects of market power 15 created by concentration include higher prices, lower 16 quality, significantly less choice, reduced innovation, 17 foreclosure of competitors, increased entry barriers, 18 and monopsony power; 19 (7) monopsony power— 20 (A) allows a firm to force suppliers of 21 goods or services to cut their prices to unrea- 22 sonably low levels, resulting in reduced business 23 opportunities for suppliers and reduced avail- 24 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 3 •S 307 IS ability and quality of products and services for 1 consumers; and 2 (B) can result in workers being forced to 3 accept unreasonably low wages; 4 (8) horizontal consolidation, vertical consolida- 5 tion, and conglomerate mergers all have potential to 6 cause anticompetitive harm; 7 (9) unprecedented consolidation is reducing 8 competition and threatens to place the American 9 dream further out of reach for many consumers in 10 the United States; 11 (10) since 2008, firms in the United States 12 have engaged in over $10,000,000,000,000 in merg- 13 ers and acquisitions; 14 (11) between 2010 and 2015, there was a 50- 15 percent increase in the number of mergers and ac- 16 quisitions reviewed by the Federal Trade Commis- 17 sion and the Antitrust Division of the Department 18 of Justice; 19 (12) the antitrust laws, particularly section 7 of 20 the Clayton Act (15 U.S.C. 18), are the first line of 21 defense against anticompetitive mergers; and 22 (13) in recent years, some court decisions and 23 enforcement policies have limited the vitality of the 24 Clayton Act to prevent harmful consolidation by— 25 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 4 •S 307 IS (A) discounting previously accepted pre- 1 sumptions that certain acquisitions are anti- 2 competitive; 3 (B) focusing inordinately on the impact on 4 price of an acquisition in the short term; 5 (C) underestimating the dangers that hori- 6 zontal, vertical, and conglomerate mergers will 7 lower quality, reduce choice, impede innovation, 8 exclude competitors, increase entry barriers, or 9 create monopsony power; and 10 (D) requiring the government to prove 11 harmful effects of a merger to a near certainty. 12 (b) PURPOSES.—The purposes of this Act are to pro- 13 mote competition and prevent harmful consolidation by re- 14 storing the original intent of the Clayton Act to address 15 the full range of anticompetitive harms, including— 16 (1) eliminating the requirement that a merger 17 ‘‘substantially’’ lessens competition to clarify that 18 the Clayton Act prohibits mergers that, as a result 19 of consolidation, may materially lower quality, re- 20 duce choice, reduce innovation, exclude competitors, 21 increase entry barriers, or increase price; 22 (2) inserting the phrase ‘‘materially’’ to estab- 23 lish that the plaintiff need not show an acquisition 24 may cause a substantial amount of harm to competi- 25 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 5 •S 307 IS tion, but rather show that an acquisition may cause 1 more than a de minimis amount of harm to competi- 2 tion; 3 (3) amending the Clayton Act to include the 4 term ‘‘monopsony’’ to clarify that an acquisition that 5 tends to create a monopsony violates the Clayton 6 Act; and 7 (4) establishing simple, cost-effective decision 8 rules that require the parties to certain acquisitions 9 that either significantly increase consolidation or are 10 extremely large bear the burden of establishing that 11 the acquisition will not materially harm competition. 12 SEC. 3. UNLAWFUL ACQUISITIONS. 13 Section 7 of the Clayton Act (15 U.S.C. 18) is 14 amended— 15 (1) in the first and second undesignated para- 16 graphs, by striking ‘‘substantially’’ each place that 17 term appears and inserting ‘‘materially’’; 18 (2) by inserting ‘‘or a monopsony’’ after ‘‘mo- 19 nopoly’’ each place that term appears; and 20 (3) by adding at the end the following: 21 ‘‘In a case brought by the United States, the Federal 22 Trade Commission, or a State attorney general, a court 23 shall determine that the effect of an acquisition described 24 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 6 •S 307 IS in this section may be materially to lessen competition or 1 create a monopoly or a monopsony if— 2 ‘‘(1) the acquisition would lead to a significant 3 increase in market concentration in any line of com- 4 merce or in any activity affecting commerce in any 5 section of the country; or 6 ‘‘(2)(A) the acquisition is not a transaction that 7 is described in section 7A(c); and 8 ‘‘(B)(i) as a result of such acquisition, the ac- 9 quiring person would hold an aggregate total 10 amount of the voting securities and assets of the ac- 11 quired person in excess of $5,000,000,000 (as ad- 12 justed and published for each fiscal year beginning 13 after September 30, 2020, in the same manner as 14 provided in section 8(a)(5) to reflect the percentage 15 change in the gross national product for such fiscal 16 year compared to the gross national product for the 17 year ending September 30, 2019); or 18 ‘‘(ii)(I) the person acquiring or the person being 19 acquired has assets, net annual sales, or a market 20 capitalization greater than $100,000,000,000 (as so 21 adjusted and published); and 22 ‘‘(II) as a result of such acquisition, the acquir- 23 ing person would hold an aggregate total amount of 24 the voting securities and assets of the acquired per- 25 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 7 •S 307 IS son in excess of $50,000,000 (as so adjusted and 1 published), 2 unless the acquiring and acquired person establish, by a 3 preponderance of the evidence, that the effect of the acqui- 4 sition will not be to tend to materially lessen competition 5 or tend to create a monopoly or a monopsony. In this 6 paragraph, the term ‘materially lessen competition’ means 7 more than a de minimis amount.’’. 8 SEC. 4. POST-SETTLEMENT DATA. 9 Section 7A of the Clayton Act (15 U.S.C. 18a) is 10 amended by adding at the end the following: 11 ‘‘(l)(1) Each person who enters into an agreement 12 with the Federal Trade Commission or the United States 13 to resolve a proceeding brought under the antitrust laws 14 or under the Federal Trade Commission Act (15 U.S.C. 15 41 et seq.) regarding an acquisition with respect to which 16 notification is required under this section shall, on an an- 17 nual basis during the 5-year period beginning on the date 18 on which the agreement is entered into, submit to the Fed- 19 eral Trade Commission or the Assistant Attorney General, 20 as applicable, information sufficient for the Federal Trade 21 Commission or the United States, as applicable, to assess 22 the competitive impact of the acquisition, including— 23 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 8 •S 307 IS ‘‘(A) the pricing, availability, and quality of any 1 product or service, or inputs thereto, in any market, 2 that was covered by the agreement; 3 ‘‘(B) the source, and the resulting magnitude 4 and extent, of any cost-saving efficiencies or any 5 consumer benefits that were claimed as a benefit of 6 the acquisition and the extent to which any cost sav- 7 ings were passed on to consumers; and 8 ‘‘(C) the effectiveness of any divestitures or any 9 conditions placed on the acquisition in preventing or 10 mitigating harm to competition. 11 ‘‘(2) The requirement to provide the information de- 12 scribed in paragraph (1) shall be included in an agreement 13 described in that paragraph. 14 ‘‘(3) The Federal Trade Commission, with the con- 15 currence of the Assistant Attorney General, by rule in ac- 16 cordance with section 553 of title 5, United States Code, 17 and consistent with the purposes of this section— 18 ‘‘(A) shall require that the information de- 19 scribed in paragraph (1) be in such form and con- 20 tain such documentary material and information rel- 21 evant to a proposed acquisition as is necessary and 22 appropriate to enable the Federal Trade Commission 23 and the Assistant Attorney General to assess the 24 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 9 •S 307 IS competitive impact of the acquisition under para- 1 graph (1); and 2 ‘‘(B) may— 3 ‘‘(i) define the terms used in this sub- 4 section; 5 ‘‘(ii) exempt, from the requirements of this 6 section, information not relevant in assessing 7 the competitive impact of the acquisition under 8 paragraph (1); and 9 ‘‘(iii) prescribe such other rules as may be 10 necessary and appropriate to carry out the pur- 11 poses of this section.’’. 12 SEC. 5. OFFICE OF COMPETITION ADVOCATE. 13 (a) DEFINITIONS.—In this section— 14 (1) the term ‘‘agency’’ has the meaning given 15 the term in section 551 of title 5, United States 16 Code; 17 (2) the term ‘‘covered company’’ means any 18 company that has, at any time, been required to 19 make a filing under section 7A of the Clayton Act 20 (15 U.S.C. 18a); 21 (3) the term ‘‘Office’’ means the Office of the 22 Competition Advocate established under subsection 23 (b); 24 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 10 •S 307 IS (4) the term ‘‘Chairman’’ means the Chairman 1 of the Commission; and 2 (5) the term ‘‘Commission’’ means the Federal 3 Trade Commission. 4 (b) ESTABLISHMENT.—There is established within 5 the Federal Trade Commission the Office of the Competi- 6 tion Advocate. 7 (c) COMPETITION ADVOCATE.— 8 (1) IN GENERAL.—The head of the Office shall 9 be the Competition Advocate, who shall— 10 (A) report directly to the Chairman; and 11 (B) be appointed by the Chairman, with 12 the concurrence of a majority of the Commis- 13 sion, including at least 1 Commissioner who is 14 not a member of the same political party of the 15 majority members of the Commission, from 16 among individuals having experience in advo- 17 cating for the promotion of competition. 18 (2) COMPENSATION.—The annual rate of pay 19 for the Competition Advocate shall be equal to the 20 highest rate of annual pay for other senior execu- 21 tives who report to the Chairman of the Commis- 22 sion. 23 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 11 •S 307 IS (3) LIMITATION ON SERVICE.—An individual 1 who serves as the Competition Advocate may not be 2 employed by the Commission— 3 (A) during the 2-year period ending on the 4 date of appointment as Competition Advocate; 5 or 6 (B) during the 5-year period beginning on 7 the date on which the person ceases to serve as 8 the Competition Advocate. 9 (d) STAFF OF OFFICE.—The Competition Advocate, 10 after consultation with the Chairman of the Commission, 11 may retain or employ independent counsel, research staff, 12 and service staff, as the Competition Advocate determines 13 is necessary to carry out the functions, powers, and duties 14 of the Office. 15 (e) DUTIES AND POWERS.—The Competition Advo- 16 cate shall— 17 (1) recommend processes or procedures that 18 will allow the Federal Trade Commission and the 19 Antitrust Division of the Department of Justice to 20 improve the ability of each agency to solicit reports 21 from consumers, small businesses, and employees 22 about possible anticompetitive practices or adverse 23 effects of concentration; 24 VerDate Sep 11 2014 02:11 Feb 09, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S307.IS S307 dlhill on DSK3GLQ082PROD with BILLS 12 •S 307 IS (2) recommend practices in certain industries 1 that merit antitrust investigation, but may not rec- 2 ommend practices in certain industries that do not 3 merit antitrust investigation or are not anticompeti- 4 tive; 5 (3) publicly provide recommendations to other 6 Federal agencies about administrative actions that 7 may have anticompetitive effects and the potential 8 harm to consumers if those actions are carried out; 9 (4) publish periodic reports on— 10 (A) market concentration and its impact 11 on the United States, local geographic areas, 12 and different demographic and socioeconomic 13 groups; and 14 (B) the success of merger remedies re- 15 quired by the Department of Justice or the 16 Federal Trade Commission in consent decrees; 17 (5) collect data regarding concentration levels 18 across industries and the impact and degree [Text truncated for display. 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