Under the Clayton Act (15 U.S.  Code § 18), certain business acquisitions are prohibited where “the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.” Long-standing jurisprudence has established that merger challenges require, at the outset, a prima facie showing of the likelihood of a substantial lessoning of competition that would result from the merger or acquisition.  Such prima facie showing typically takes the form of claims and evidence related to market shares above a certain level, but can take other forms.

With antitrust enforcement of the technology sector making headlines daily, and as lawmakers focus on strengthening and potentially reforming antitrust laws as a tool to regulate the tech industry, we anticipate a significant increase in scrutiny by US federal antitrust authorities of vertical mergers,[1] including merger of complements and so–called “diagonal mergers” in the technology sector.  Notwithstanding the current challenges of vertical merger enforcement,[2] on June 30, 2020, the Federal Trade Commission (“FTC”) and the Department of Justice (“DOJ”) issued guidelines (the “Vertical Merger Guidelines”)[3] describing the practices, techniques and enforcement policies the agencies use to evaluate vertical mergers, and on December 22, 2020, the FTC issued additional guidance on Vertical Merger Enforcement (the “Commentary”).[4]  Tech companies and dealmakers should be aware of the type of technology related M&A transactions that may potentially be captured under the Vertical Merger Guidelines and Commentary, along with current enforcement priorities at the agencies. 

A major technology innovator finds itself on the defensive this week after a start-up company filed an antitrust lawsuit for alleged deceptive business practices. A tech-based online broker named Rex alleged that the National Association of Realtors (“NAR”) and Multiple Listing Services (“MLS”) operate as a cartel to control access to real estate markets, and that Zillow joined their efforts and cut Rex out of the market.

Zillow, the top real estate listings website, recently changed their online listing policy to segregate listings by real-estate broker type. Rex, founded in 2015, uses data and artificial intelligence rather than traditional brokers to match sellers to home buyers. Rex alleges that Zillow has relegated all listings that are not maintained by brokers who belong to the National Association of Realtors (“NAR”) to a “hidden tab” on their website. This change, Rex claims, unfairly lowers the visibility of its listings.

The Sherman Act was passed in 1890. The Clayton Act in 1914. And they have hardly changed since. Last month, Senator Amy Klobuchar, the new chair of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, proposed an overhaul of the antitrust laws: CLERA, the Competition and Antitrust Law Enforcement Reform Act.  If passed, CLERA would constitute the most significant change to antitrust law in a least a generation. In particular, it would also pose substantial new antitrust concerns for technology companies seeking to engage in what have been standard mergers and acquisitions.