Panelists eye updating NY antitrust laws

New York Democrats are considering expanding its 121-year-old antitrust law, also known as the Donnelly Act, while 50 state attorneys general investigate Google’s possible antitrust violations. From left to right: Washington, DC Attorney General Karl Racine, Arkansas Attorney General Leslie Rutledge, Texas Attorney General Ken Paxton and South Dakota Attorney General Jason Ravnsborg listen during a news conference in front of the U.S. Supreme Court Sept. 9, 2019. Photo by Alex Wong/Getty Images/TNS

Witnesses worked to sway or deter Democratic senators during a hearing Monday from bolstering New York’s 121-year-old antitrust law to benefit the free-market economy.

The state’s antitrust law, known as the Donnelly Act, was enacted in 1899 before federal antitrust statute the Sherman Act, and prohibits price fixing, bid rigging, monopolization, boycotts and other practices to ensure industrial competitiveness, according to Lawmakers are considering a measure to broaden punishable antitrust actions under the state law.

Expanding state antitrust measures would force consumer welfare to take a backseat for the good of corporations, said Chris Marchese, policy counsel for NetChoice, a lobby group working for a digital-free enterprise.

“Should New York’s antitrust law protect consumers or competitors?” Marchese said Monday during opening remarks to senators. “I hope New York answers the latter as it has for the last century ... and it will heed that size does not determine guilt.”

Marchese testified Monday during the Senate Consumer Protection Committee’s public hearing, which lasted more than four hours, as lawmakers consider the 21st Century Antitrust Act.

Businesses that dominate an industry, Marchese said, such as major tech giants Apple, Google, Amazon or Facebook do not create barriers that discourage market competition.

“When a dominant player jacks up the price, it invites competition from other companies that ordinarily would sit on the sidelines because they see an opportunity to undercut that dominant player,” Marchese said. “I don’t think that’s big of a barrier entry as people say.”

NetChoice partners include Apple, Google, Amazon, Facebook, Etsy, EBay and Pinterest, among others.

“Everything you testify to right now, I find completely absurd,” replied Consumer Protection Committee Chairman Sen. Kevin Thomas, D-Garden City. “It goes against a lot of facts we have previously investigated. I have no further questions for you.”

Sponsored by Sen. Mike Gianaris, D-Brooklyn, the 21st Century Antitrust Act expands state antitrust law to make abuse of dominance illegal to prevent established companies from shutting out competitors.

“Our antitrust laws are broken — they were written over a century ago,” Gianaris said. “They deal with an economy that no longer exists.”

Unilateral conduct creating monopolies would also become illegal under the bill, as well as additional business actions and practices that establish a monopoly or restrict trade. Damages may be recovered through civil or criminal lawsuits.

Gianaris’ legislation would allow the state to take action against companies engaging in these practices, as well as allow for class action lawsuits.

The bill would increase criminal penalties to $1 million for individuals and $100 million for corporations to comply with federal antitrust law and would extend the statute of limitations from three to five years.

Gianaris spoke of misconduct rampant among big tech companies, including with foreign intelligence and election interference and misinformation.

“Many of the abuses we see today were not even contemplated back then,” Gianaris said.

State senators held Monday’s hearing on the heels of July’s House Judiciary Subcommittee on Antitrust hearings, where Apple, Google, Amazon and Facebook CEOs testified about their business practices following a lengthy investigation.

Lawmakers intend to update the Donnelly Act for the modern economy, as the growing global technology market and big tech companies, including Apple, Google and Facebook, continue to face allegations of antitrust misconduct.

“The majority of economists and shareholders would say a broken-up Amazon would be potentially good for shareholders,” NYU marketing professor Scott Galloway said. “...The person who owns those important voting shares typically likes sitting on top of the iron throne and is very reticent to give it up.”

State antitrust laws void contracts that establish a monopoly or restrain business competition, but senators argued without amendments to tackle abuse of dominance or unilateral actions, the 19th-century measure does not adequately address modern-day economic issues.

Ken Pokalsky, vice president of The Business Council of New York State Inc., voiced concern about broadly expanding a law defining market abuse. Undefined, wider parameters will open the door for the state attorney general and private litigants to sue businesses, he said.

“Certainly, there’s aspects that can be updated, but ... we have significant concerns about this bill,” Pokalsky said. “We would argue businesses would not know what the law is ... the broad, undefined terms about where or what constitutes abuse of power.”

Alec Stapp, director of technology policy for Progressive Policy Institute, said abuse of dominance claims often conflate harm to rival corporations and harm to consumers and unfairly target giant tech companies.

“If we want the focus to be on consumers, that’s where you have to keep the focus,” Stapp said.

The organization receives donations from several major U.S. technology conglomerates and other technological corporations Stapp did not name.

The proposed bill does nothing to limit the authority of future attorneys general or private prosecutors, Pokalsky said, and the criminal penalties increase should also be clearer about how and when the fees should be applied.

Several panelists testified the bill aims to protect small and mid-sized businesses, but Pokalsky countered the expanded anti-trust laws could incite more class action suits by private litigants.

Lev Ginsburg, the Business Council’s senior director of government affairs, noted increased antitrust suits could pose as a potential downside for consumers.

“We are all in favor of healthy competition, but one of the signs that has made the economy so vigorous in New York state over the course of time is allowing the market to make that decision, and not the government to make that decision,” Ginsburg said.

Panelists argued tech giants including Amazon, Google and Facebook manipulate the flow of information to consumers because of weak antitrust laws.

“Corporations are the pace-setter in a monopoly-dominated economy,” said Matt Stoller, research director for the American Economic Liberties project. “This bill would elbow-up those gatekeepers and allow commerce to actually happen. You have a private government in the form of monopolies overregulating those markets.”

Attorney Tim Wu, a professor at Columbia Law School, drew parallels to inflated medical services and medication prices and similar struggles facing smaller, independent pharmacies competing with large corporations.

One dose of a rabies shot costs about $6 in India, Wu said, while Americans are charged more than $10,000 per shot. Wu named one Florida patient charged more than $43,000 for the shot.

“That’s why you need something about an abuse of dominance provision to go after that kind of stuff,” Wu said. “Everyone knows something is wrong here ... there’s a core group of middlemen who are exploiting their positions. Similar with upstate agriculture ... they have squeezed the power of this economy and taken all the profit for themselves.”

Updating the criminal statute is important, Wu said.

“Let businesses know this is serious,” he said. “If you have evidence people are knowingly breaking the law, why should you be above the law?”

Wu recommended adding a component to the bill to control mergers, which he said can create impossible situations for workers.

“What happens is, workers have less and less options for employers ... and less and less options for bargaining power,” said Sally Hubbard, director of enforcement strategy at Open Markets Institute. “The less options, the less ability they have to unionize, and the less political power they have. Economic power translates to political power in terms of labor regulations and rules to protect workers.”

The state attorney general enforces state and federal antitrust laws through the Antitrust Bureau.

State attorney General Letitia James testified Monday she is in favor of updating the Donnelly Act because the state must question whether the current law adequately enforces antitrust regulations in an ever-changing marketplace based on free enterprise.

The Donnelly Act measure permits the attorney general to bring an action for civil fines up to $1 million for corporations and $100,000 for individuals.

Gianaris’ bill was first referred to the Rules Committee on July 8. Sen. Rachel May, D-Morrisville, co-sponsors the measure.

It remains in the Consumer Protection Committee.

The Assembly’s version of the bill, A10870, was referred to the Economic Development Committee on July 24.

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