With the New York State legislative session scheduled to adjourn in a few weeks, the State Senate this week returned to work on New York’s groundbreaking antitrust bill.
On May 16 (S933B), and again on May 17 (S933C), the Senate amended New York’s proposed “Twenty-First Century Anti-Trust Act” (S933), the trailblazing legislation that would reshape the state’s antitrust law and enforcement. The bill still needs to pass both houses of the New York State Legislature and be signed by the governor to become law.
While the amendments change the earlier version of the bill (S933A) in significant ways, the biggest takeaway is that bill keeps its core framework, which would (1) introduce an EU-inspired “abuse of dominance” antitrust standard; (2) launch a unique state level premerger review program (with the below amendments); and (3) make New York “Antitrust Central,” for private litigation, including by allowing for recovery of expert fees and by giving antitrust plaintiffs a means to avoid federal precedent on two-sided markets.
These and other key aspects of the New York antitrust bill were analyzed in depth during a webinar that Constantine Cannon hosted featuring the bill’s sponsor, Deputy Majority Leader Sen. Michael Gianaris, and leading antitrust scholars and practitioners.
While much of the bill has stayed the same, three key amendments make significant changes.
A Streamlined Premerger Notification Program
The earlier version of the bill included a detailed premerger notification program that required parties acquiring assets or voting securities to file a prescribed notification with the New York Attorney General if aspects of the transaction exceeded certain percentages of federal Hart-Scott-Rodino (HSR) thresholds. The details are here, from page 4 line 53 to page 6 line 2. Some commentators noted that these provisions would have resulted in relatively low notification thresholds, potentially inundating the New York Attorney General’s Office.
The amendments simplify the premerger notification program and remove the thresholds that were based on certain percentages of the federal HSR thresholds. Now, the bill provides that any person or entity “conducting business” in New York that is required to file the federal HSR notification and report form would have to “provide the same notice and documentation in its entirety” to the New York Attorney General “at the same time that notice is filed with the federal government.” The details are here, from page 5 line 12 to line 52.
These amendments respond to concerns that the proposal in the earlier version of the bill would have significantly burdened transacting parties, but may go too far in the other direction. While the earlier version of the bill would have permitted review of some transactions that fell below the roughly $100 million HSR size-of-transaction threshold, the amendments would put the New York Attorney General’s Office in the same position as the Federal Trade Commission and Department of Justice in not having an opportunity, preclosing, to investigate and challenge anticompetitive transactions that fall below the HSR notification threshold. Yet, many so-called “killer acquisitions” have evaded premerger antitrust scrutiny because they fall below the notification threshold.
Moreover, while the earlier version of the bill did not adopt many of the exemptions and exceptions provided by HSR regulations, the amendments adopt the federal standard, under which certain transactions may evade regulatory review. In short, while the establishment of a premerger review program in New York would be a welcome development, the value of such a regime would be maximized by filling the gaps in enforcement of the HSR Act.
Finally, the recent amendments have not addressed the absence of an explicit standard for assessing the competitive effects of mergers. Under Section 7 of the federal Clayton Act, mergers may be prohibited if they result in a substantial lessening of competition in a relevant market. Under EU competition law, mergers can be blocked if they impede competition by creating or strengthening a dominant position. Although the New York bill proposes to adopt an abuse of dominance standard for unilateral conduct, the bill is silent as to whether New York intends to import the European standard for assessing the competitive effects of mergers as well.
A New Copyright Carveout
Two sections of the amended bill provide a carveout for “the creation, production, and dissemination of a single expressive work that is copyrighted, including but not limited to, a streaming series, television programs and or motion pictures” (the “Copyright Carveout”). First, the Copyright Carveout would be added to the list of carveouts from the entire article that is already in the existing New York law, covering things like cooperative associations of farmers or gardeners and bona fide labor unions. The Copyright Carveout next appears in the set of transactions that would be exempt from the section governing premerger notification. The details are here, from page 4 line 13 to line 19, and from page 5 line 12 to line 24.
Although the bill does not explain why copyrighted expressive works receive special treatment like cooperative associations of gardeners or fruit growers, presumably this is the result of lobbyists’ efforts. The inclusion of the Copyright Carveout also raises the question of why the list does not include other activities, such as the creation, production, and dissemination of expressive works that are not copyrighted; the creation, production, and dissemination of other forms of intellectual property; or other endeavors that benefit society.
A New Severability Section
Some critics of the recent efforts to update New York’s antitrust laws have raised constitutionality concerns. The amended bill now includes a severability section, providing that if any provision of the act or its application is held invalid or unconstitutional, “that invalidity or unconstitutionality shall not affect other provisions or applications of this act that can be given effect ….” The details are here, from page 7 line 4 to line 9. This appears to be an effort to protect against attempts to strike down the entire law (if the bill is passed) on the grounds that some aspect of it is unconstitutional.
Bonus Analysis
To dive further into the weeds, there is a meaningful difference between the amendment introduced on May 16 (S933B) and the amendment introduced on May 17 (S933C). S933B contained a new section that would have labeled certain conduct per se illegal. For context, antitrust case law deems certain conduct, such as agreements among competitors to fix prices, to allocate markets, or to engage in a horizontal group boycott, per se illegal, meaning defendants cannot escape liability by offering procompetitive justifications for their conduct.
Under S933B, “the use of noncompete clauses, restrictions on class and collective actions aside from those prerequisites laid out in article nine of [New York’s] civil practice law and rules [governing class actions], and no-poach agreements,” would have been “per se illegal,” irrespective of “whether the agreement is horizontal or vertical.” Those who violated the section would have been “civilly liable to a covered employee or independent contractor” either for treble damages, attorneys’ fees, and costs, or for statutory damages of $2,500 per violation, attorneys’ fees, and costs–at the employee’s or contractor’s election. The details are here, from page 3 line 30 to line 40. However, S933C, introduced the next day, removed this section.
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While the three amendments discussed above are important, the big story remains the core framework of this innovative bill. If passed, the bill would fundamentally change New York antitrust law and enforcement, and be a trailblazer for other jurisdictions. Stay tuned. We will soon learn whether or not the bill will become law this year.
Written by Daniel Vitelli
Edited by Gary J. Malone
Read New York Senate Amends Groundbreaking Antitrust Bill at constantinecannon.com
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