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Ohio Rethinks State Antitrust Laws to Confront Facebook, Google (1)

Oct. 17, 2019, 9:30 AMUpdated: Oct. 17, 2019, 9:01 PM

Ohio legislators are considering whether to rewrite antitrust laws to reflect the growth of big tech in the latest sign of growing bipartisan state-level interest in confronting Alphabet Inc.’s Google and Facebook Inc.

Most state antitrust laws directly mirror U.S. competition law and Ohio could only go so far with antitrust revisions before they potentially conflict with federal law or interfere with how companies do business.

“Given the global and national footprints for the digital technology companies, state legislative carve-outs for the sector could affect companies’ ability to do commerce across states and regions,” said Diana Moss, president of the American Antitrust Institute.

States do have some room to maneuver in areas where the U.S. Congress hasn’t expressly enacted legislation, similar to how California enacted its own privacy law in the absence of a federal statute.

“Just because certain conduct is legal under federal law doesn’t mean the state couldn’t outlaw it,” Ralph Breitfeller, of counsel at Kegler, Brown, Hill & Ritter Co. in Columbus, Ohio, said.

State Scrutiny

Ohio lawmakers discussed a possible rethink of the state’s antitrust laws Oct. 17 during a legislative hearing in Cleveland examining the impact of Google and Facebook. The hearing featured several academics and Yelp Inc. executive, Luther Lowe, who has emerged as an outspoken critic of Google’s power to control the internet.

Legislators should consider changing state antitrust laws to allow regulators to assess factors other than price, such how much data one firm controls, when reviewing a merger, Dennis Hirsch, a professor at The Ohio State University Moritz College of Law, said during the hearing.

Current merger analysis, at both the state and federal level, doesn’t factor in data aggregation since it’s mostly concerned on how consumer prices are impacted by a merger.

A second hearing will follow in Cincinnati on Oct. 28.

The probe—the first of its kind by any U.S. state legislature—is led by state Sen. John Eklund, a Republican who represents a district east of Cleveland and practiced competition law for more than 40 years.

Ohio’s Attorney General Dave Yost (R) is among state attorneys general in both parties that have emerged as some of the most vocal critics of big tech’s power. Multi-state investigations into Facebook and Google’s dominant market power have positioned the states as potentially more aggressive enforcers than federal regulators.

At the federal level, Justice Department and Federal Trade Commission officials have been hesitant to call for new antitrust legislation, while Congress contemplates whether modifications need to be made to address the unique challenges of big tech.

The antitrust laws that date back as late as 1890 during the breakup of Standard Oil don’t need major changes since they are flexible enough to deal with new technology changes, such as the rise of Amazon.com Inc. and Apple Inc., most federal enforcers argue.

Yost, who is involved in both a Google and Facebook multi-state antitrust investigation, said during a September press conference that these hearings will “help inform” the state’s investigation and the discovery it conducts into both tech companies.

Ohio has played a pivotal role in shaping the history of U.S. antitrust law.

The nation’s first antitrust legislation which is still the current federal statute that prohibits monopolistic conduct, the Sherman Antitrust Act, was introduced by Senator John Sherman (R-Ohio).

After the Sherman Act’s passage, it was then Ohio’s Attorney General David Watson who first sued Standard Oil, which eventually lead the U.S. Supreme Court to force a breakup of the corporate trust in 1911.

Workarounds

States have to ensure that any new antitrust statutes don’t directly conflict with existing federal law since courts generally strike state laws as invalid if they clash with the federal government, John Newman, a former attorney at the DOJ’s antitrust division, who is now an antitrust professor at The University of Miami School of Law, said.

But there’s still “considerable” room for states to devise new antitrust statutes since, for the most part, antitrust law hasn’t been as widely developed by the U.S. Congress as compared to other areas of the law such as immigration, Newman added.

States could possibly seek to lower the economic threshold that determines how competitive a market is, called the Herfindahl-Hirschman Index (HHI), Newman said. Such a measure may allow states to more easily deem a merger anti-competitive.

Attorneys generals and legislators should think “creatively” about how they define a product market before bringing a possible antitrust suit against one of the big tech companies, Chris Sagers, antitrust professor at Cleveland State University Cleveland-Marshall College of Law, said during the hearing.

It will be difficult to prove that Amazon.com Inc., for example, monopolizes retail when it makes up only a small portion of that market, Sagers said. Instead, state enforcers and legislators should more narrowly define the markets that tech platforms operate in, such as just the electronic retail market or the electronic books market, Sagers added.

Attorney General Yost said at the September press conference that restraints on how much data companies can control is a measure worth contemplating.

“If the changes lead to a result that is different than what would come out under federal antitrust law, there it would raise a constitutional question,” Breitfeller, who previously served in the antitrust section of the Ohio’s attorney general office, said.

Companies, such as Google, could seek to challenge new antitrust laws by claiming such measures inhibit the flow of business transactions between states in violation of the Interstate Commerce Clause, Breitfeller added.

Such an argument could be difficult for tech companies to make since most already operate under different types of antitrust statutes internationally, Harry First, the former chief of the antitrust bureau of the New York Attorney General’s Office, said.

Abroad, Google, Apple, and other tech companies have faced multi-million dollar fines for violating E.U. specific antitrust statues, most of which aren’t applicable in the U.S.

“These companies do operate globally and they do face different legal regimes, so they can’t say that this is impossible because they do it everyday,” First said

To contact the reporter on this story: Victoria Graham in Cleveland, Ohio at vgraham@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com