Hawley’s antitrust bill focuses on market cap, ignoring consumers

Hawley’s antitrust bill focuses on market cap, ignoring consumers

Sen. Josh Hawley (R-Mo.) proposed a new bill on Monday aimed at blocking mergers and acquisitions for companies with market caps of over $100 billion.

The bill, introduced by Hawley, a frequent critic of Big Tech, is strikingly brief, at just eight pages long. It would amend the Sherman Act, the Clayton Act, and the Federal Trade Commission Act—three antitrust laws enacted around the turn of the 20th century.

“It is a radical, populist transformation to antitrust,” said John O. McGinnis, a professor of constitutional law at Northwestern University.

In addition to barring large companies from making deals, it specifically calls out “dominant digital firms,” which Hawley defines as companies that provide a website or service over the Internet and have dominant positions in a related market. This would presumably include Amazon, Google, and Facebook, and it would likely include Apple and Microsoft.

Market cap as a measure for anticompetitive behavior is not a metric used in today’s antitrust laws. In relying on it, Hawley’s bill would ensnare companies in a wide variety of industries that go well beyond Big Tech, including banks, pharmaceuticals, retailers, automakers, telecoms, and more. Nearly 150 companies would qualify today.

“The $100 billion is really quite striking, because it’s a real example of populism,” McGinnis told Ars. “It’s headline grabbing, but it’s not connected to any attempt to show that an acquisition would have anything anticompetitive about it at all.”

The bill focuses on unilateral conduct by monopolists. It does not appear to change the tests for what constitutes collusive anticompetitive behavior, where two or more firms act to limit competition.

“Look at what the company does”

The bill’s proposed changes to unilateral anticompetitive behavior are significant, though. Today, judges hearing antitrust cases apply two screens to determine anticompetitive behavior, McGinnis said. The first is that the government has to prove that a company or companies acted in ways that harmed competition. The second is that the government has to show that said behavior harmed consumers. “The reason for that is it’s not so clear what is ‘anticompetitive conduct.’” he said. Adding an additional screen—showing that consumers were harmed—helps ensure that consumers themselves aren’t harmed by any enforcement action against the monopolists.

“The general view in antitrust law is that size itself is not a sign of anticompetitiveness—it may be good. You have to look at what the company does,” McGinnis said.

He also points out that the goal of many startups is to be acquired by a larger company. In many industries, acquisition might be one of the only viable outcomes. Startups often serve as incubators that produce new technologies and discoveries, but they often lack the scale—or the ability to achieve scale—required to bring a new product to market.

Take battery manufacturing, for example. More than a decade ago, A123 Systems was a small startup with a novel battery chemistry that was safer and more powerful than existing types. But the US lacked battery-manufacturing infrastructure, so A123 Systems had to build a vast supply chain from scratch just five years after the company’s founding. The scale of its operation ended up being difficult to manage and was one reason the company ultimately failed. Today’s American battery startups seem to have learned this lesson: many are seeking to partner with larger companies and potentially be acquired. Hawley’s bill might prevent a new battery technology (depending on the size of the company seeking to acquire it) from becoming commercially viable.

“You might worry that this would decrease innovation,” McGinnis said.