The U.S. Aims to Rewrite Enforcement Rules for the Tech Sector, But Faces Institutional Hurdles

By John W. Eichlin, Linklaters LLP

As digital markets continue to be a key battleground for efforts to reform antitrust policy around the world, the United States is staking out its own ambitious new policy position. Reforms outlined by the White House are now being picked up by new leadership at the agencies who are recalibrating enforcement guidance to target what they see as a history of underenforcement in the sector in both merger control and conduct cases. As recent cases show, however, the agencies will continue to be constrained by the courts absent new legislation. While legislative reforms have been tabled to facilitate enforcement, these initiatives are still in the early stages.

At the Federal Trade Commission (FTC), new Commissioner Lina Khan is a noted critic of large tech platforms who has promoted a broad approach to antitrust enforcement. Since her confirmation as Chair in June, Khan has outlined new enforcement priorities and taken steps to revoke or rewrite a broad set of key agency policies. Along with the Antitrust Division of the Department of Justice, for example, the FTC has launched an initiative to revise their joint horizontal and vertical merger guidelines to account for updated enforcement considerations.

The FTC has also built on a policy study of acquisitions by the leading technology platforms to reassess reportability rules to ensure more transactions are subject to mandatory merger reviews. On the conduct side, the FTC has further rescinded key guidelines on enforcement of unfair competition laws and has proposed rulemaking initiatives to more clearly capture specific conduct in digital markets that the agency may deem to be anticompetitive. While it is not uncommon for new leadership to revise the policies of old administrations, the approach here seems to signal a more fundamental shift that at a minimum will have a significant impact on the scope and depth of the agency’s investigations.

At its heart, the new policy approach seeks to introduce a broader range of potential harms and rebalance the assessment in favor of overenforcement rather than underenforcement. Ultimately, these policies will need to be tested in court where existing precedent cabins the agencies’ enforcement discretion. The courts have traditionally required significant burdens of proof to show an anticompetitive effect in nontraditional and inherently uncertain markets, for example acquiring a nascent competitor or blocking a competitor from accessing a dominant platform.

For the relevant harm, the agencies generally must prove the likelihood that the conduct will result in increased prices or stifle innovation. The new policy approach considers that this existing framework is based on faulty assumptions about the potential efficiencies and incentives for innovation, the likelihood or market self-correction, and the appropriate balance between the risk to consumers vs the potential impact on the parties if the courts get it wrong.

As a result of this tension, lawmakers are in parallel trying to support these policy shifts by reducing enforcement standards for merger enforcement and conduct cases. For example, proposed legislation in the Senate would permit enforcement where a firm’s conduct creates an “appreciable risk” of harming competition and would shift the burden on certain companies to prove that their conduct does not harm competition.

Similar initiatives to recalibrate the burdens of proof are also under consideration in the House in a series of bills supporting enforcement and regulation of large platform operators. Since these measures are still in the very early stages, any potential legislation faces a long road to approval and will likely look very different once passed.

While initiatives to revise antitrust rules have failed in the past, the growing momentum at home and abroad is increasingly converging to set the stage for potentially significant changes to antitrust enforcement in the tech sector.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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