By Matt Pavich, J.D.
Acting Deputy Assistant Attorney General says courts should use Sherman Act, not Clayton Act, to address potential competition cases, citing under-enforcement concerns.
Section 2 of the Sherman Act could allow antitrust investigators to look at patterns of conduct and, thus, may be better suited than the Clayton Act to address potential competition antitrust issues, according to the Justice Department Antitrust Division’s Acting Deputy Assistant Attorney General Jeffrey Wilder’s prepared remarks delivered at the Hal White Antitrust Conference. Wilder said that relying solely on the Clayton Act to evaluate the potential harm done by serial acquirers could lead to under-enforcement.
Wilder noted the increased calls for increased antitrust enforcement, which he said was due to the "ubiquity of today’s large platform businesses." Many such businesses acquire start-up companies operating in adjacent markets that could potentially threaten the incumbent’s platform and according to Wilder the very nature of the start-up makes potential competition cases difficult. Such cases revolve around allegations that, absent the acquisition, the startup would be able to compete against the incumbent. Furthermore, the startups may have a functionality that could complement the incumbent platform and the incumbent platform could use its larger market presence to bring that product to a larger market.
Wilder also argued that the innovation paths faced by startups can complicate the enforcement process. Some startups choose to innovate against the incumbent, whereas others strive to complement the incumbent in the hopes of being acquired by the incumbent. Prosecuting potential competition cases can, therefore, reduce innovation and harm consumers.
One suggested method of approaching these cases is to block mergers in which the expected harm outweighs the expected benefit. Wilder argued that this approach requires courts to assess many unknown factors, including whether the startup would have attempted to compete with the incumbent absent the merger and possible consumer surplus.
Instead, according to Wilder, courts should use Section 2 of the Sherman Act to evaluate potential competition. This approach would allow for a consideration of patterns of conduct, which is essential when dealing with potentially anticompetitive conduct by firms seeking to maintain or obtain monopoly power through mergers with startups. He noted that serial acquirers often pursue targets with relatively low market shares and that only by looking at patterns of acquisition can the full, potentially anticompetitive, picture be seen.
Wilder suggested that this approach would impact that kinds of data and documents the DOJ would seek in investigations. Documents relating to business practices could show whether incumbents made a practice of targeting startups that threatened their platform and whether the incumbent changed tactics as the startups repositioned their product.
Wilder acknowledged that using the Sherman Act to challenge patterns of acquisitions presents obstacles that the DOJ does not face using the Clayton Act, but said that ways remain under the Sherman Act to prove either monopoly power or an intent to obtain monopoly power. He suggested it would be essential to consider whether an incumbent’s pattern of acquisitions has had monopolistic effects and urged examination of incumbent company documents regarding the scale of control needed to tip a given market and how an acquisition strategy could create that tipping point.
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