The Twenty-First Century Anti-Trust Act (S933C) cleared the New York State Senate in May 2022, but the legislative session ended without the State Assembly members approving the bill. Antitrust law for New York State claims will have a dramatic tide shift if the bill becomes law in its current form.
Potential Amendments to Antitrust Law in New York
The Twenty-First Century Anti-Trust Act would reform the state’s 120-year-old antitrust law (known as the Donnelly Act) in several ways. One way would be the criminalization of business practices that establish a monopoly or take over a labor market by establishing market dominance.
The bill would allow New York State and private plaintiffs to file actions against businesses or other entities seeking to monopolize a market. Under current law, New York State can only take legal action when two or more companies conspire to stifle competition. The proposed measure would prohibit anticompetitive conduct committed by a single firm. The bill would make it unlawful for a business or other entity conducting business in New York to monopolize, attempt to monopolize, or conspire to monopolize a relevant market. The proposed measure authorizes the New York Attorney General to study single-party anticompetitive conduct and issue guidelines on interpreting and enforcing the law. It would also allow the prevailing plaintiffs to fully recover expert fees and other costs.
Supporters argue that updating the state’s antiquated antitrust laws is imperative and that the bill would create a new standard for the rest of the country to follow. Critics contend that the measure adopts an “abuse of dominant position” standard that diverts from current U.S. jurisprudence.
A Dominant Position Under the Twenty-First Century Anti-Trust Act
The Twenty-First Century Anti-Trust Act would prohibit any company with a dominant position in any business or labor market from abusing its dominant position. This provision applies to sellers and buyers and extends coverage to any labor market.
In any legal action brought under the proposed law, a plaintiff may demonstrate the defendant’s dominant position through direct or indirect evidence or a combination of both. Examples of direct evidence include the power to do the following:
- Set prices, terms, conditions, or standards;
- Dictate anticompetitive contractual terms; and
- Set wages in labor markets.
Examples of indirect evidence include the defendant’s share of a relevant market and durable barriers to entry into the relevant market. The bill presumes a “dominant position” for (i) a seller to be 40 percent or more of sales in the relevant market and (ii) a buyer to be 30 percent or more of purchases in the relevant market.
Abuse of Dominance Under the Twenty-First Century Anti-Trust Act
“Abuse of dominance” includes “conduct that tends to foreclose or limit the ability or incentive of one or more actual or potential competitors to compete,” such as the following:
- Leveraging a dominant position in one market to limit competition in a separate market; and
- Unnecessarily refusing to deal with competitors.
This standard includes conduct that may not violate current federal or state antitrust law.
In labor markets, abuse of dominance involves the use of non-compete or non-solicitation agreements that restrain any person from engaging in any lawful business, profession, or trade. The U.S. Federal Trade Commission recently proposed a new rule, the aim for which would prevent employers from imposing non-compete clauses on their employees or former employees, prohibiting them from joining a competitor.
The bill also provides that evidence of procompetitive effects “shall not be a defense to abuse of dominance and shall not offset or cure competitive harm.” This provision diverges significantly from case law under Section 2 of the Sherman Act (15 U.S.C. § 2), in which courts have considered procompetitive economic benefits, such as improved market efficiencies or lower consumer costs.
Pre-Merger Notification Under the Twenty-First Century Anti-Trust Act
The bill would require pre-merger notification filings with the New York Attorney General for any transaction that must also be reported under the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act,” 15 U.S.C. § 18a). Filings must occur at least 60 calendar days before closing of the transaction, rather than the 30 days required under the HSR Act.
The Main Takeaway
Whether the Twenty-First Century Anti-Trust Act will be reintroduced in the state legislature this year remains to be seen. If enacted, the law may expose companies doing business in New York—in all practicality, most large companies do business in New York—to antitrust liability for permissible conduct under existing antitrust laws. The best way to be ready to proactively address whether actions violate the New York antitrust laws is to consult an experienced antitrust and unfair competition lawyer.