Clock Expires on Dangerous New York “Anti-Trust” Expansion, For This Year…

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Posted by Sheridan Nolen on Monday, July 26th, 2021, 3:49 PM PERMALINK

Late this session the Twenty-First Century Anti-Trust Act (SB 933), passed the New York State Senate 43-20 on June 7, but avoided a vote in the Assembly. It did not make it over the finish line, but it made progress after its initial version was drafted in 2020.    

The wide-ranging bill would broaden the scope of conduct subject to antitrust enforcement, increase the penalties imposed on individuals and corporations found to violate the law, and incentivize class action lawsuits. If enacted, these changes would dramatically increase the liability exposure of corporations. While purportedly aimed at Amazon and Google, these policies punish success for any business in any industry.

What makes this mess of a policy especially dangerous is that it would set a de facto standard for the rest of the country. Any company that keeps doing business in New York would have to bend over backwards to comply with the new rules, and appease state regulators, impacting their operations beyond just New York. 

Under the proposed “dominance” rule, a company is presumed dominant if they have 40% of the market as a seller, or 30% as a buyer – so their competitors would control most of the market, yet that company would be considered “dominant.”  

Under U.S. law a company is considered a monopoly if they have controlled two-thirds of a market for an extended period of time, and that position is unlikely to change. Its conduct is not considered anticompetitive unless it can be shown to harm consumers.   

New York’s bill also says evidence of a dominant position includes “unilateral power to set wages,” or contractual provisions that restrict workers from moving from their current employer to a competitor. Companies would have to notify the state if they planned a merger or acquisition exceeding $8 million as well.   

Evidence is not limited to these factors, so actions could be brought based on actions not covered in the bill. This leaves the definition of “dominance” unclear. It could have state courts looking to European courts for guidance on how to implement the standard – dragging down U.S. economic growth to the weak growth of Europe. 

The many companies that fall afoul of this broad new standard would face harsh penalties, jacked up fines, and lawsuits.  

Violations would be a class C felony with a fine of up to $100,000 or imprisonment of up to 15 years. The federal maximum sentence for an individual is 10 years. Corporate offenses would be subject to fines of up to $100 million, current statute allows for fines up to only $1 million. Criminal offenses by individuals would be punishable by up to 15 years in prison—an increase from 4 years under existing New York law, and substantially greater than the federal maximum of 10 years. Corporate offenses would be subject to fines of up to $100 million, versus a current maximum penalty of $1 million.

On top of crushing job creators with fines and prison, the legislation would invite a feeding frenzy for trial lawyers. 

There would be a significantly broader range of offenses as compared to existing state and federal law, making New York courts a haven for contingency-fee-driven antitrust litigation. In other words, individual citizens would be incentivized to bring class-action lawsuits against companies who allegedly abused their “dominant” position.  

Supporters of the legislation, like the Teamsters union, praise the legislation for addressing abuses by companies with dominant positions. Opponents, are arguing that it will drive business out of the state and punishes success. Lev Ginsburg, senior director of government affairs for The Business Council of New York State said: “We are essentially punishing success and we are prohibiting all kinds of ordinary pro-competitive conduct.” 

New York State is home to 10% of the Fortune 500. This legislation would make their success illegal. 

If companies cease operations in New York, residents will lose jobs and economic opportunity. The state would likely lose tax revenue, as well. If the companies stay the rest of the nation will be held hostage by greedy New York regulators. 

This is a disaster of a bill that must be defeated for the good of consumers in New York, and across the country. 

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