Twice in the past two years, the New York State Senate has passed a bill called the “Twenty-First Century Antitrust Act” (the “Act”). Although the bill has not yet passed both houses of the Legislature, many lawmakers have expressed strong support for updating the state’s century-old antitrust laws. The Act would introduce an express monopolization provision, institute premerger notification requirements, establish an abuse of dominance standard for the first time in the United States, and increase penalties and remedies to levels on par with those available under federal law.
New York’s Donnelly Act currently follows Section 1 of the Sherman Act in prohibiting agreements in restraint of trade, but it has no express Section 2 equivalent prohibiting monopolization or attempted monopolization. The Act adds a unilateral conduct provision prohibiting unlawful monopolization, attempted monopolization, and conspiracy to monopolize. Notably, the Act also prohibits monopsonization.
The Act institutes premerger notification requirements. It requires that any person conducting business in the state who files a premerger notification with federal antitrust enforcers pursuant to the Hart-Scott-Rodino Antitrust Improvements Act must also provide the same premerger notification in its entirety to the New York Attorney General at the same time. The Act also directs the Attorney General to consider the effects of mergers on labor markets.
No state, as yet, has such a broad premerger notification requirement.
Unlike the premerger requirements, the Act’s unilateral conduct provisions extend further than the federal standard. Going beyond monopolization, the bill includes language prohibiting abuse of dominance:
It shall be unlawful…for any person or persons with a dominant position in the conduct of any business, trade or commerce, in any labor market, or in the furnishing of any service in this state to abuse that dominant position.
Under the Act, a seller with 40% market share or a buyer with 30% market share is presumed to have a dominant position. The Act also authorizes the Attorney General to promulgate rules for the abuse of dominance provision, pursuant to the requirements of the New York State Administrative Procedure Act and subject to a legislative veto.
While the majority of countries with antitrust enforcement regimes prohibit abuses of dominance, it appears that no American jurisdiction has so far established an antitrust violation for abuse of dominance. Should the Act be passed with this standard, New York would become the first such jurisdiction in the United States.
The Act provides a non-exhaustive list of activities that would be considered an abuse of dominance, including leveraging dominance in one market to limit competition in another market and refusals to deal “with the effect of unnecessarily excluding or handicapping actual or potential competitors.” Additionally, the Act outlines presumptive labor market abuses of dominance, such as covenants not to compete and restricting employees from disclosing wages.
In contrast to most current federal and state jurisprudence, procompetitive justifications would not be a valid defense against abuse of dominance.
The Act expands the relief available to private parties under the Donnelly Act by explicitly permitting class action antitrust lawsuits to recover treble damages. This provision would overrule a 2007 holding by the state’s highest court barring such recoveries.
The Act would also raise civil and criminal penalties recoverable by the Attorney General under the Donnelly Act to levels commensurate with the current penalties under federal law. The current maximum monetary penalties under the Donnelly Act—set nearly half a century ago—are $100,000 for individuals and $1 million for corporations. The Act would raise them to $1 million for individuals and $100 million for corporations.
Further, criminal violations of the Donnelly Act—currently Class E felonies—would become Class D felonies. Consequently, the maximum custodial sentence for an individual defendant, if guilty, would increase from four to seven years.
Finally, the Act would lengthen the statute of limitations for criminal antitrust violations and civil penalties from three to five years after the date of violation.
The Twenty-First Century Anti-Trust Act seems to be aimed at two goals: to modernize New York state antitrust law to be closer to federal and other state standards and to adopt a more robust approach to ensuring competition in the marketplace. The bill’s preamble notes that antitrust laws passed over a century ago have not kept pace with technological advancements. Many view the Act to be taking aim at Big Tech.
But will the Act pass the State Assembly? In the last two years, the Act passed the State Senate but did not come up for a vote in the Assembly. It remains an open question whether the Act and its reforms will find enough support to eventually become law.
Winston is a rising second-year at Baylor University School of Law who recently finished a summer clerkship in the Antitrust Division of the Texas Attorney General’s Office.
This article prepared by the Antitrust Law Section's State Enforcement Committee.
