House Antitrust Reform Bills Could Restrict How the Largest Online Platforms Do Business and Influence Future Enforcement Trends

On June 11, 2021, House lawmakers introduced a package of antitrust bills on the heels of the Antitrust Subcommittee’s 16-month investigation into competition in digital markets, resulting in the majority staff’s detailed findings. On June 23-24, the House Judiciary Committee held its markup hearing, voting to submit amended versions of the bills to the Rules Committee and ultimately the House Floor.

Subject to further revision during the legislative process, four of the bills could dramatically affect businesses controlling large online platforms by limiting their M&A activity, restricting their ownership of businesses that use the platform or create a “conflict of interest,” requiring them to share platform user and application data with third parties, and prohibiting an array of activities that the bills deem “self-preferencing” or “discriminatory.”  Although the proposed bills are specifically aimed at conduct by online platforms that meet certain criteria, the nature of the concerns purportedly addressed may impact antitrust policy and enforcement beyond the targeted businesses.

The legislative package primarily addresses applications, operating systems, websites, and services functioning as “online platforms,” defined to include search engines, e-commerce and transaction platforms, and services that allow users to generate or interact with content (e.g., social media platforms). The legislation would apply to businesses controlling or having a 25% or greater interest in any “covered platform,” defined as an online platform that meets each of the following criteria:

• has 50 million monthly active users or 100,000 monthly active business users in the United States;
• is owned or controlled by a person or entity with over $ 600 billion in net annual sales or market capitalization; and
• is a “critical trading partner,” defined as a platform with the ability to “restrict or impede” a business user’s access to its customers or a to a tool or service necessary to effectively serve those customers.

The FTC and DOJ would be empowered to designate online platforms as “covered platforms” subject to the legislation.

In their present form, the bills would impose the following restrictions on “covered platforms”:

1. The Platform Competition and Opportunity Act* (H.R. 3826) would prohibit substantially all acquisitions valued over $ 50 million by covered platform operators unless the operator shows by clear and convincing evidence that the target assets: (1) do not compete with the covered platform, (2) are not “nascent or potential competition to the covered platform,” and (3) do not “enhance or increase” the covered platform’s market position or ability to maintain its market position. Under this prohibition, competition includes “competition for a user’s attention,” and data acquisition alone may be sufficient to enhance or maintain the platform’s market position.
   
   A covered platform that violates this Act could face an enforcement action brought by the FTC, DOJ, or any State Attorney General, including civil penalties, or a private treble-damages lawsuit.
   
   The FTC and DOJ would be directed to issue joint guidelines regarding enforcement.
2. The Ending Platform Monopolies Act* (H.R. 3825) would prohibit covered platforms from owning or controlling any other line of business that: (1) uses the covered platform to sell its products or services, (2) offers a product or service that the covered platform requires its business user to purchase or use for access to the platform or “preferred status or placement” on the platform, or (3) creates an “incentive and ability” for the platform to engage in conduct characterized as “advantaging” its own products or services or “disadvantaging” those of a competing or nascent business.
   
   A covered platform that violates this Act could face an enforcement action brought by the FTC or DOJ, including civil penalties for each day of continuing ownership.
3. The American Choice and Innovation Online Act* (H.R. 3816) would prohibit covered platforms from engaging in conduct deemed to “self-preference” the platform operator’s products or services or to “discriminate” among similarly situated business users. The bill would also specifically prohibit a range of specific acts such as: (1) restricting or impeding the same level of access or interoperability with the platform, operating system, hardware and software features available to the covered platform; (2) conditioning access to the platform on the purchase or use of other products or services; (3) using platform-generated data to support the covered platform’s own products or services; (4) restricting business users’ access to or use of platform-generated data; (5) restricting un-installing applications, changes to default settings or steering users to the covered platform operator’s products or services; (6) restricting business users from communicating with users to facilitate business transactions; (7) treating the platform operator’s products and services more favorably in connection with any user interface; (8) interfering with a business user’s pricing of its goods or services: (9) restricting users from interoperating or connecting to any product or service; and (10) retaliating against complainants.
   
   Otherwise prohibited conduct would not be unlawful if the defendant shows by clear and convincing evidence that the conduct would not harm the competitive process, would increase consumer welfare, or is required by law.
   
   A covered platform that violates this Act could face an enforcement action brought by the FTC, DOJ, or any State Attorney General, including civil penalties, or a private lawsuit seeking treble damages or injunctive relief.  If a violation is found to result from ownership of a line of business that creates the ability and incentive to engage in conduct deemed to “advantage” the platform owner’s businesses or “exclude” competitors, the court may order divestiture of that line of business. The FTC could also seek emergency injunctive relief where there is a plausible claim that a violation impairs competition with the platform. Further, if the covered platform is deemed a repeat offender, the court may consider requiring the CEO and other corporate officers to forfeit one year’s compensation.
   
   The bill would create a Bureau of Digital Markets within the FTC charged to enforce the Act, and the FTC and DOJ would be directed to issue joint guidelines regarding enforcement.
4. The Augmenting Compatibility and Competition by Enabling Switching Service (ACCESS) Act* (H.R. 3849) would create broad “data portability” and “interoperability” requirements for covered platforms. However, despite the broad scope of the bill, many particular details are not specified. In the most recent version, covered platforms would be required to maintain interfaces allowing users to transfer data regarding their use of the platform to themselves or to businesses operating on the platform, and to maintain interfaces to facilitate interoperability. The FTC could require a covered platform to obtain prior FTC approval for making any changes to the interoperability interface.
   
   Violations of this Act would be subject to enforcement action by the FTC, including civil penalties and equitable relief. The FTC could also seek emergency injunctive relief where there is a plausible claim that a violation impairs competition with the platform. Further, if the covered platform is deemed a repeat offender, the court may consider requiring the CEO and other corporate officers to forfeit one year’s compensation
   
   To provide the detail missing from the bill, the FTC is directed to create a Technical Committee and to undertake rulemaking to develop technical standards specific to each covered platform that would then be used to facilitate enforcement.

As introduced, these bills could significantly restrict covered platforms’ ability to engage in M&A activity, to hold and operate related lines of business, and to monetize user data. The new proposed restrictions on how covered platforms deal with businesses and users on their interfaces could create substantial new risks of liability, as well as potential claims by users, competitors and businesses that interface with the covered platform. Furthermore, actual and potential competitors and platform users would have new grounds to request that antitrust enforcers seek injunctive relief against unilateral conduct by covered platform operators.

Importantly, because the definition of a covered platform is based in part on the market capitalization of the firm owning the particular online platform, the bills appear to specifically target just a handful of companies. The user base threshold could, however, bring a broad range of applications, websites, and operating systems controlled by each such firm within the scope of the legislation. Whether such platforms are “covered” would therefore depend on the FTC’s and DOJ’s interpretation of whether the online platform has “the ability to restrict or impede” other businesses’ access to or ability to effectively serve their customers.

Also introduced on June 11, the Merger Filing Fee Modernization Act* (H.R. 3843) would modify the fee structure for pre-merger notifications, paralleling proposed legislation in the Senate, by reducing some filing fees while significantly increasing filing fees for transactions of $1 billion or more. In addition, the bill would increase appropriations for the DOJ and FTC.

Finally, the Judiciary Committee also advanced the State Antitrust Enforcement Venue Act* (H.R. 3460), which would prevent defendants from obtaining a transfer of venue in actions brought by State Attorneys General. 

Although the introduction of the bills was preceded by an investigation by the House Antitrust Subcommittee over the past two years, the Judiciary Committee has cited those hearings as a justification for the unusual move of going directly into the mark-up process, and it is as yet unclear whether the bills will be subject to further public hearings.  Nevertheless, as the House considers these proposals, further revisions are possible.  It also remains to be seen how these types of legislative proposals – including, for example, restrictions on acquisitions involving nascent or potential competitors, limitations or prohibitions on so-called “self-preferencing” or “conflicts of interest” – will impact antitrust policy and enforcement beyond the legislative process and impact industries beyond “big tech.”

Crowell & Moring will continue to monitor developments and provide updates.

* As of writing, bill text on congress.gov does not reflect amendments made by the Judiciary Committee.