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Bill To Reform New York’s Antitrust Laws Again Passes the State Senate

Posted  June 15, 2023
By Daniel Vitelli

A bill in the New York State Legislature that would substantially reform New York’s antitrust laws and place the Empire State at the vanguard of antitrust enforcement has once again passed the New York State Senate and now rests with the Assembly.

Although the final legislative session day was scheduled for June 8, 2023, as reported by the Times Union, the Assembly may return in the near future—perhaps June 20—to address some remaining bills.  It remains to be seen whether the Assembly will take up the antitrust bill that the Senate passed, or whether proposed antitrust reform in New York will have to wait at least until next year.  The latter seems more likely.

On June 7, 2023, the New York Senate passed S6748, sponsored by Senate Deputy Leader Michael Gianaris and introduced in the 2023-24 Legislative Session, by a vote of 43 to 18.  The bill is now with the Assembly’s Committee on Economic Development, Job Creation, Commerce and Industry.

The bill is quite similar to Senate Bill S933C, which Senator Gianaris also sponsored and which the Senate passed in May 2022 by a vote of 36 to 25, though the Assembly did not pass it before the legislative session ended.

Constantine Cannon lawyers extensively covered S933, including its legislative history and the amendments to it — here (Jan. 11, 2022), here (Jan. 12, 2022), here (May 19, 2022), and here (May 26, 2022).  We also analyzed the details and potential implications of S933, including how it would (1) introduce an EU-inspired “abuse of dominance” antitrust standard; (2) launch a unique state level premerger review program; 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.  The firm also hosted a webinar on S933 featuring Sen. Gianaris and leading antitrust scholars and practitioners.

Much of that analysis applies equally to S6748.  Both bills, among other things, prohibit anticompetitive unilateral conduct, introduce an “abuse of dominance” standard, provide examples of direct and indirect evidence to establish dominance, define conduct that shows abuse of such dominance, introduce a premerger review program, expressly incorporate the concepts of monopsony and monopsonization (the buy-side mirror image of sell-side monopoly and monopolization), increase the fines for criminal violations, upgrade violations from a class E to a class D felony, and expressly permit antitrust class actions for damages and the recovery of expert fees for prevailing litigants.

There are significant differences between the two bills, however.  First, the new bill (S6748 at 2:49-54) adds to the listed examples of direct evidence of dominance the ability to “reduce output” without a reduction in profitability.  This addition is consistent with antitrust case law establishing that a reduction in output can evidence anticompetitive effects, harm to competition and consumers, and market power, as well as with antitrust enforcers’ consideration of how a merger may impact output and consumer welfare.

Second, the new bill (S6748 at 2:43-45) adds a new carveout to the abuse of dominance provision for businesses that “meet[] the definition a small business under section [131] of the economic development law,” which in turn defines “small business” as a “resident in this state, independently owned and operated, not dominant in its field and employs one hundred or less persons.”  This carveout appears intended to mollify concerns that the abuse of dominance provision in the prior bill (S933C) would potentially chill conduct by small businesses.

Finally, the new bill (S6748 at 6:56-8:34) contains language that broadly prohibits non-compete clauses.  The language parallels the FTC’s proposed ban on non-compete clauses.  Oddly, the version of S6748 on the New York Senate website does not reflect this text of the bill as amending (i.e., in green, underlined font) New York’s General Business Law.  In any event, S6748 broadly defines a “non-compete clause” to include an express or de facto non-compete clause between an employer and a worker that “prevents,” or “has the effect of prohibiting,” a worker from “seeking or accepting employment . . . or operating a business[] after the conclusion of the worker’s employment with the employer.”  The bill would make it “an unfair method of competition” for an employer to, among other things, enter into, attempt to enter into, or maintain, a non-compete clause with a worker, and it would require employers to rescind existing non-compete clauses and provide notice to the worker.  The bill provides an exception for a person selling a business, disposing of all of the person’s ownership in a business, or selling all or substantially all of a business’s operating assets, where the person is a substantial owner, member, or partner in the business when the person agrees to the non-compete clause, although such non-compete clauses “would remain subject to federal antitrust law as well as all other applicable law.”

S6748 is not the only bill that passed the New York Senate to address non-compete clauses.  On June 7, 2023, S3100(A), sponsored by Senator Ryan and introduced in the 2023-24 Legislative Session, passed the Senate by a vote of 40 to 21.  S3100(A) is currently in the Assembly and has been referred to its Committee on Codes.  S3100(A) would amend New York’s Labor Law to prohibit employers from “seek[ing], requir[ing], demand[ing] or accept[ing] a non-compete agreement from any covered individual.”  The bill defines a “non-compete agreement” as any agreement or clause between an employer and a covered individual that “prohibits or restricts such covered individual from obtaining employment[] after the conclusion of employment with the employer,” and defines a “covered individual” as a person who “performs work or services for another” and is “in a position of economic dependence on, and under an obligation to perform duties for,” that other person.  The bill would void contracts to the extent they restrain anyone from engaging in a lawful profession, trade, or business.  S3100(A) expressly does not reach agreements for a “fixed term of service” or that “prohibit[] disclosure of trade secrets, disclosure of confidential and proprietary client information, or solicitation of clients of the employer that the covered individual learned about during employment,” so long as they “do[] not otherwise restrict competition in violation of th[e] section.”  The bill would provide a private right of action for covered individuals and contemplates injunctive relief and awards of liquated damages up to $10,000, lost compensation, damages, and attorneys’ fees and costs.

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For the past few years, powerful voices in the New York Legislature have been seeking to reform and modernize New York’s antitrust laws.  If S6748 or a similar bill becomes law, New York would take a leading role in antitrust enforcement.  Companies, consumers, economists, and antitrust practitioners should all continue to follow these developments in the Empire State.

Written by Daniel Vitelli

Edited by Gary J. Malone

Tagged in: Antitrust Enforcement, Antitrust Legislation,