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Antitrust enforcement needs money not reform, experts say
Antitrust experts said amending merger and acquisition laws would hamper competition. Instead, agencies should be better funded to expand on the work they're already doing.
Instead of changing current laws, funding may be at the heart of solving antitrust enforcement challenges, a group of legal and academic experts argued.
During a panel discussion Friday hosted by the Information Technology and Innovation Foundation, antitrust experts weighed in on the current national conversation about antitrust enforcement efforts against big tech companies like Google, Facebook, Apple and Amazon. Regulators in the U.S. and globally are looking to rein in tech giants by, for example, scrutinizing acquisitions that may be deemed anticompetitive. One commonly cited example is Facebook's 2012 acquisition of Instagram for $1 billion.
Lawmakers, including Sen. Amy Klobuchar (D-Minn.), have proposed legislation that would amend certain pieces of antitrust enforcement law, including the Clayton Act, to strengthen prohibition of anticompetitive mergers. Panelists said changing the antitrust enforcement framework -- particularly when it comes to mergers -- could be economically harmful. But they agreed that one piece of Klobuchar's proposed "Competition and Antitrust Law Enforcement Reform Act of 2021" could make an impact without having to scrap the enforcement architecture: giving more resources to antitrust enforcement agencies.
"Changes in [budget] appropriations can make a substantial difference in merger enforcement intensity without jettisoning the current antitrust framework," John Mayo, a professor of economics, business and public policy at Georgetown University's McDonough School of Business, said during the panel discussion.
Putting money behind enforcement agencies
The more resources a federal antitrust agency has, the more it's able to keep up with increasing merger filings and subsequent challenges. That's according to a study Mayo co-conducted that looked at how federal merger enforcement by agencies like the Federal Trade Commission (FTC) has changed over time.
John MayoProfessor of economics, business and public policy, Georgetown University's McDonough School of Business
The study analyzed antitrust agency data from 1979 to 2017 to determine the probability of a merger challenge. If antitrust agencies were becoming lax in merger challenges, Mayo said the data would show it.
"Lo and behold, what we find is that if you examine all the data, since 1979 the likelihood of a merger challenge by the agency has gone up -- not down," Mayo said. "In fact, the probability of a merger challenge since 1979 up to the end of the Obama administration has more than doubled."
Mayo said one of the main conclusions revealed by the study was that "budgets matter." Although merger challenges have gone up, antitrust enforcement budgets haven't kept pace, according to Klobuchar's proposed legislation. Providing more funding to antitrust enforcement agencies enable them to issue broader and deeper challenges of potentially anticompetitive behavior.
"If you examine, as we did, variations in challenge rates, they are directly correlated with changes in the inflation-adjusted budgets and appropriations from Congress to the agencies," he said. "We find that a 10% increase in budget appropriations would lead to an 8% increase in merger challenges."
Maureen Ohlhausen, section chair of antitrust and competition law and law partner at international law firm Baker Botts LLP, agreed with Mayo's argument that federal enforcement agencies need additional funds for taking on greater responsibilities when monitoring for antitrust activities.
"They have the tools," Ohlhausen said. "And if people want to see deeper dives into smaller deals, even if at the endpoint what you come up with is that there's not a case there, but you want a wider array looked at, the agencies need more money."
Still, experts like Douglas Melamed, professor of the practice of law at Stanford Law School, argued that money may not be a fix all, and regulatory changes could be necessary to keep up with tech giants and their acquisition activity.
Changing antitrust enforcement laws
Melamed said Mayo's study measured the "enthusiasm" of agencies like the FTC to apply antitrust enforcement law, but it doesn't answer the question of whether existing law is currently too lax to address a significant antitrust issue: "killer acquisitions."
Killer acquisitions occur when a larger firm acquires a young startup with a competitive product. Melamed advocated for increased merger scrutiny to avoid taking what could be the "next big thing" out of market contention, such as when Facebook acquired Instagram.
"This is a basic question for all antitrust enforcement, 'How do you deal with uncertainty?'" he said.
Melamed said he believes antitrust agencies should look more broadly at mergers and acquisitions to assess attributes of the buyer, the market and the acquired firm, something Klobuchar's regulatory reform proposal seeks to do.
However, Baker Botts' Ohlhausen argued that proposed rule changes wouldn't be limited to the big tech firms going forward and could cut off avenues that large organizations may have used to reposition themselves so that they can compete with big tech companies.
"We need to think carefully about these proposals because repositioning among big players could also be -- and has been -- a huge source of competition," she said.
D. Daniel Sokol, a law professor at the University of Florida Levin College of Law, echoed concerns about labeling acquisition behavior as anticompetitive and doesn't think greater reform of the current antitrust laws is the right step.
"There may be some acquisitions that are deeply problematic," Sokol said. "But the question is, '[Do] one or two stories suggest we should fundamentally transform the entire system?' I don't see that."
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington Star-News and a crime and education reporter at the Wabash Plain Dealer.