- Wow, I love it. All
right, less than a minute. I'm Larry white. I'm a Professor of Economics
at the Stern School. I'm your moderator for
the Panel Number Two, which is on Mergers,
which Paul Romer told us, Piece of cake. That's the direction to go. Let's find out more what the format is gonna be. We all have to be
conscious of the fact that we are the folks that are
between you and lunch. (lady loughs) And so the format will be as follows. I'm going to offer very
brief introductions of our five speakers. You've got their longer
bios in the program. Then I've told each of
them they have five minutes for an opening statement. And I'm a tough guy, I'm
prepared to limit them at five. You may be able to help me out if you notice they're
going a bit more than five, you know, start doing this sort of thing. (crowd laughs) We take all the help we can. Then I will cause a few softball questions out to the panel. I hope of course, we'll
get brief answers back. And then we'll open it up for Q&A. And again, I'm hoping we
get Qs that are brief, and As that are brief as well. So let me quickly give you
brief bios of our five speakers. Just alphabetical order, Judge Walker is cursed as am I. Alphabetical order, we're
always at the end of the line. Sorry, Judge Walker. All right. So please. Bengtsson is Head of the Unit
for the Chief Economist Team at DG Competition at
the European Commission. He's worked for the European
Commission since 2002 in different capacities. Mostly recently as Head of Cabinet for Commissioner Margrethe Vestager. He has previously worked for the Commissioner for Trade Carol Do Cuhk and Commissioner for
Competition Neelie Kroes. Held several different
positions at DG Comp. Debbie Feinstein is a Global Head of the Antitrust Practice at Arnold and Porter from 2013 to 2017. She served as the Head of
the Bureau of Competition at the FTC. She is, you know, we clearly
have a number of Alums from the Commission, just as we have Alums from the Department Justice, and so she's an Alum of the Commission. John Newman is currently
an Associate Professor at the University of Miami School of Law. Fellow with the Thurman
Arnold Project at Yale, a member of the Advisory Board of the American Antitrust Institute. Prior to joining Academia, he practiced with the US Department of Justice. Another Alum. Sharis Pozen is currently the Co-Chair of Clifford Chances Global Antitrust Team. Prior to joining Clifford
Chance she spent five years as GE's Vice President and
Global Head of Antitrust. She's been a Practice Leader
at two US based law firms, Hogan and Skadden. And served at both the
Federal Trade Commission and the DOJ. And led the DOJ as Acting
Assistant Attorney General. And Judge Walker, last but not least, served as a U.S. District
Court Judge from 1990 to 2011. Before joining The Bench, he was a Partner in a major national law firm. A member of the California
Law Revision Commission and Law Clerk to a Federal Judge. He now conducts a Mediation
Arbitration Practice and serves on the Investment Committee of an International
Litigation Funding Group. So, there we have it. Ladies and gentlemen, five minutes. Thank, you know, Claes, start it out. - Thanks a lot and thanks
a lot for the invitation. And I only enjoyed this
morning tremendously so it can only go downhill
from here I think. (crowd laughs) My boss is the Executive Vice President of the European Commission. She has a part of a remedy to deal with Antitrust
Enforcement in Europe. But she is also the
Executive Vice President for making sure that Europe
is fit for the digital age. And that's a reflection
of the fact that I think we have ahead of us five years where they will in Europe be focused on two major issues. One of them is The Green Agenda and the other one is The Digital Agenda. So this conference really fits straight into to one of the main priorities of the European Commission. What will happen in Merger control. And the enforcement of
Merger control will of course remain independent and as a legal exercise just as it has always been. But I think in order to understand where we are headed on the broader agenda, I think it's important
also to understand that this digital transformation, we considered as a societal transformation that deals with our democracy
that we deal with our privacy. And that also deals with making
sure that markets are open. And so our merger enforcement if you think about where it
has been and where it's going, I think you have to think it
into this broader context. Now if you think of where we have, if you think about past practice and see where we have been in the last five years is not that there is a lot of enforcement in the digital sector that
is particularly informative or that I would want to highlight as particular indicative of where we could expect to
see the challenges ahead of us. We had in the last five
years in enforcement record that was roughly at par
with historical levels. We had one prohibition case that attracted quite a lot of attention, which was the provision of the merger between Siemens and Alstom to
European incumbent champions. And that has still provoked
a little bit of debate still, also among our member states, how our competition enforcement
aligns with the ambition to create champions in
this field or the other. So alongside the debate that
we have about whether our tools are fit for the digital age, there is also this agenda about whether we need to look at our tool in terms of industrial policy, I think the first trend is the
one I would keep my eye on. Because I think that's
the one that's gonna be by far the most important
and the most interesting of those two strengths going forward. When I say we don't have
that many interesting cases in our merger enforcement, I think what I can say about our cases is that most of them has been cleared, there have been very, very few remedies. Almost all of them are characterized with this combination of
assets from different markets rather than very dramatic
horizontal cases. which I think also reflect well the kind of business models we are seeing in the digital sectors. We do see people acquiring things that complement what they have themselves. And that put a challenge on us as enforces to make sure that we
get the analysis right of when is that exceptionally a bad idea rather than having the
presumption that it's a good idea. If I had to pick two things that I think will increase
in focus going forward I think one of them is
something that we already saw in the last five years, which was an increased focus
on the effects of innovation. We had a couple of cases
where we approached the process of innovation and
the competition for innovation much more directly and explicitly than we have done in the in the past. I would expect us to do more about that. Not only in the digital area,
but also in the judiciary because of course, if the
acquisitions by the companies are done with the view to make sure that innovation is not rewarded
with new potential entrants, then we will definitely look out for that. And the other one is
that the historical Maxim of following the money
will be complemented by a Maxim of following the data. I think we have in many of these markets, not been good enough at
looking at the effects of data, but clearly that is an
area of increased focus. And that is in a way what very often links the different activities
together from different markets, even when they are not defined
a separate relevant market in a standard competition sense then we will try to be more focused on understanding
data as a payment, data as an input and data as a source of market power. We have backed this up with a report we've received recently from a number of experts. And work on this will go forward. - Great. Alright, Debbie. - Sure, thanks. It's
a pleasure to be here. Just a couple of things I
think that are important when we're talking about the terminology. First what do we mean by
"killer acquisitions"? They can mean to at least, you know, two different things that I can think of. One is when you're actually
acquiring a company or a product to kill that. Basically just eliminate it. It's a pesky little nuisance to you, that's one thing. Another, sometimes though, is people talk about "killer acquisitions" as when you take a nascent
company and you combine it with or nascent product and you
combine it with a larger company. And then the question is what happens within the two. Sort of counter examples I use are when the FTC brought the Questcor Case? it acquired rights from a company that had rights to develop
the only competing product to what Questcor had. And the evidence suggested that had the Questcor not acquired it, it was going to be
acquired by another company who was going to develop it
as a significant competitor. And the evidence suggested that Questcor wasn't really
going to do anything much with this product. That's one kind of "killer acquisition". The other thing I've heard of described as the "killer acquisition", again, I never worked on
this, I don't know the facts. I know what I read so I don't wanna be read as
saying too much about it. But Facebook-Instagram is one
that folks often talk about as a "killer acquisition". But in fact, Instagram is alive and well. And that's exactly the
concern people have. But there's a real question about what Instagram
would have looked like but-for the merger. And I think you have to think about those kinds of transactions
very different differently. So I urge that people think carefully about when they're using the phrase "killer acquisition" what exactly they mean. Second is when talking about innovation, I think it's also important
to think differently about innovation for a
very specific product. When two companies are clearly developing to come up with a generic product for X, we know exactly what
we're talking about there. We can think about what it is. Or just general innovation
to find a cure for cancer. Innovation to come up with a
new solution to something else. The law and facts and economics for that are very, very different. I think it's different to say, we know, we have good empirical evidence that when two generic firms merge, if they are the only two
companies with a generic product, that compete, they're about to compete with a branded product. Prices will be different than if there's one generic product competing against that branded. There's lots of empirical
analysis about that. And don't think we know that when there are two companies doing just sort of general
innovation in a space, that competition rather than
collaboration is better. There's a lot more work that
we need to do to decide that and we're always in the
business of making predictions. But the example I often use, it's a case I worked on many years ago is Genzyme acquiring Novuson. For 50 years, folks knew of a
disease called Pompe disease, terrible disease that
people are born with. The infants usually don't
live through childhood. The two companies had been
trying to develop this product. It hadn't even been tested
yet in a human being. The CEO of the target company Novuson had two children with the disease. And he went out and looked
at the situation and said, "You know what? I formed this company "but by itself it's not getting there. "I really think we need
to get the best minds "in the world together to
be basically try to come up with a remedy for this terrible disease." Do we really think that CEO was selling to another company to
try to make more money and eliminate competition? He really believed that this
was going to find a cure. The combined company did,
in fact, find a cure. President Trump had his,
the daughter of the CEO, who is alive in a wheelchair,
but alive and in college at one of the state of the unions to talk about how, you know, it was important to have,
you know, regulatory. It was an FDA issue
that he was speaking to. But the notion is that
sometimes collaboration is better than competition for innovation. I think that we don't know enough about early stage innovation to say that competition is always better and thinking about efficiencies
is always really important. The third thing, I think it's important to do sort of backwards retrospectives on transactions that either were cleared or more importantly, were blocked. Oftentimes, we hear the one that I tweak folks about is the there was a Gene Therapy
case many years ago, 20 years ago at the FTC. At the time, the press release
from the Commission said that blocking the merger, I think was between Ciba and
Sandoz was about saving lives. Well, it took a lot
years before Gene Therapy was ever successful. And clearly I have no idea whether or not if people had been able to work together, they would have been able to
develop something more quickly or not. But certainly, it wasn't
the case that competition in that case led to very quick results. I just think you have to be careful when you're thinking
about all of these things. Because this is not like concentration, where we pretty much have good economics and good law that suggests that if you're going from
three competitors to two, probably that's going to be a problem. We don't know that going
from seven competitors to six in general innovation is likely
to be harmful or beneficial, we don't even know it for three to two, or even sometimes four to two ones. - Great. Thank you, John. - Well, thank you to the organizers for the opportunity to speak. I was sitting here thinking about this and I know there are a lot of
litigators out in the room. You know if you have, you
know, five arguments to make, and one of them is really
weak, what do you do with it? Just put it right in the middle, right? (lady laughs)
So nobody will notice. (crowd laughs)
If ya'll know it that's kind of especially
what's happening up here. But with that, I would like to maybe build on some things that have been said in the previous panel. And to suggest that high
technology or digital market is kind of a hard thing
to sort of classify. But then you kind of rigor, you know, What is a digital market? What's not a digital market? That's kind of a blurred line, and I think it's probably getting blurrier with each passing day. That said, though, I think digital market sort of loosely defined, in particular merger
policy and digital markets could be a fruitful area. And I would argue even the best area to start advancing
Antitrust Law more broadly. So the reason I say that
is, that at a high level, I think you can point to
unique sources of market power. Unique ways to acquire, maintain and exercise market
power in digital markets. And I think you can
point to a unique sort of lack of offsetting efficiencies when it comes to horizontal
mergers in many digital markets. Now, Merger Law is no
picnic for plaintiffs, but I think it is the most
friendly area to begin if you want to start developing
antitrust law more broadly. So with that, as a framing device, a couple of areas where
we might wanna think about advancing or developing
Antitrust Law more broadly using digital merger
policy as a springboard. The first is market definition. I tend to think we
should start getting away from formal market definition and particularly the SSNIP
variant as a requirement in cases It can be useful I think, in some cases, but it has become a kind of de facto and sometimes even de
jure it seems requirement. It's never and I don't think been a sort of particularly great
sort of universal idea. And it's had this unfortunate
tendency to spread into conduct cases where I think it really makes very little sense at all. It's very problematic in
zero-price markets, of course, where users produce things
called Attention and Data that they trade in order
to get access to platforms with or without a price, it's really hard to run a SSNIP test. And it often really doesn't
seem to add much, if anything. So I was struck when I took a look at the DOJ's recent
Saber-Farelogixs complaint. When you're reading
through that complaint, the idea of a SSNIP and market
definition in general just doesn't add much at all
to the core of DOJ's case, which seems to be all
about just direct evidence of competition and a
likely loss of competition. Second, theories of harm. I think you could use merger policy to develop unique theories of harm that could maybe then
migrate to conduct cases. I'm thinking here particularly
of cases like Zillow-Trulia where you had a horizontal
merger to monopoly. If you listen to their own CEOs, statements about market shares, post-deal. What Zillow-Trulia did post merger was to steer their users
to favored realtors in an effort to accelerate concentration in local realtor markets. Right? So this is a really interesting
kind of steering harm in related markets. The kinds of things we often talk about when we talk about Google, for instance. But maybe you could develop it in the relatively friendly
confines of a murder case, and then use it in other cases afterwards. Also on the idea of
theories of harm, you know, you could look at something
like Facebook-Instagram. And you have statements from
Sheryl Sandberg post-deal, where she said, "After
we acquired Instagram, "we could then target
users across platforms "and deliver the same ad to them now that they couldn't
escape by switching away." In her words, not mine. "We can then drive them all
the way down the funnel." That's a unique theory of harm, I think could fit with an antitrust law but might need to be developed
in a horizontal merger case. And then finally, efficiencies. I think in general, we've
probably, to some extent, overestimated efficiencies
from horizontal mergers. I think horizontal mergers
and digital markets are probably particularly
likely not to produce. The kinds of efficiencies that the merger guidelines
talk about as being, you know, good and generally cognizable. And that is shifting
production among facilities that were formerly owned separately. That's talked about in the guidelines as the one really good type of efficiency. In a horizontal merger case involving digital platforms, you're not shifting production
among facilities post-deal. Instead, when cases do get filed, it seems like parties either
immediately abandon the deal as happened with FanDuel-DraftKings. Or just raise really just garbage like hilariously bad efficiencies claims like we saw in the H&R Block
case or the Bizarre Voice case, suggested to me that maybe
there is some, you know, room to educate courts
about the lack of likelihood of positive efficiencies here. So again, I think these are
just a few areas in which antitrust challenges to horizontal mergers in digital markets could
be used as a vehicle to develop the law more broadly. - Great. Sharis. - Sharis. Wow so. (laughs) Just for a little disclosure
on the front Larry's part, we each got five minutes but we didn't really coordinate very well. I could a little bit
collaborated a bit with Debbie but so otherwise, so bear with me here because I do wanna take a you know, what's been said particularly
by by Debbie, and by John and put it into a little bit of a context, 'cause I would suggest there's
been some experimentation on what to do about "killer
acquisitions" over time. And I want to sort of take that
and say where we are today, maybe that I'm kind of going
backwards a little bit, John, from what you said, because I think what we saw, again, we've been doing this for
30 years in full disclosure, we saw actual and potential
competition theories promoted and we know, we saw some failures there in terms of the cases and
some resistance to that. And I'm talking to sort of pre 2010. And particularly the FTC because they said they were skeptical these series and they came up with a burden of proof requiring clear proof of future injury and as a standard, so that I'm taking us
back in time a little bit. So then we saw a little bit
of a shifting and pivoting to looking at innovation
markets and R&D markets. And then we saw the 2010
guidelines, which you mentioned. And I think we saw the 2010
guidelines trying to suggest a little bit more about
nascent competition, "killer acquisitions",
as they're called today, and provide some more guidance that is especially to look at how
the agencies were thinking about these issues. So to quote the Horizontal
Merger Guidelines for 2010. "The concerns seem to be when
one of the merging parties "has a strong incumbency position "and the other emerging firm threatens "to disrupt market conditions
with new technology or a business model." So that was codified in the 2010 Horizontal Merger Guidelines. So then and we do have
an expert on the panel then we saw again, some
further experimentation in the Stairs, Stairs Cycle. Synergy Health, so sorry, Stairs Synergy Health matter
where they were looking at a market where there were
two companies merging, right? And the question was
whether or not Synergy was going to be a potential
entrant into the marketplace. And we saw the court reject that. So again, experimentation that's
been ongoing for some time. We next saw the CDK
acquisition of AutoMate. Again, that was an acquisition
of a small market share. And Debbie was talking about
some of those acquisitions and again, I think that
was under your watch. No, not your watch? Okay. (laughs) Debbie's saying no. But again, another Ex CC Case
where we saw experimentation. Then we saw the recent
Illumina acquisition of PacBio again, another big incumbent
buying a small percentage, we saw that deal abandoned. Not to be outdone, we saw
the Justice Department's Saber-Farelogix matter
that you were looking at. I think as we get into the two sided market discussion
a little bit further, that's an interesting one, because the DOJ did not leave
that as a two sided market where the Second Circuit come down with an opinion related
to say we're alleging that it was a two sided market. And so I think we'll see what
the court does with that. And most recently, we saw the Edgewell-Harry's Shaving
merger, also abandoned and again, it was not
the largest incumbent Gillette the Edgewell owning
Schick trying to buy Harry's, a new entrant into the market
and that being abandoned. I think there's ongoing litigation over the merger agreement there. So what do we take from that? I think that it's typically a dominant firm buying a small
firm that we've seen so far. I think that we've seen the the movement towards looking at disruptive technology and what that means. We've seen the courts come out
in different places on that. So again, in the U.S.
we are faced with courts who are coming out in different places. And I think we've seen
a move a step further in the Edgewell-Harry's
merger because again, the HHI is there, if we're gonna use those standards, we're relatively small in terms of the changes. And then finally, I would say
we haven't necessarily seen other than the Stairs Case where someone was a real
potential competitor, that the courts or the
agencies going after someone who isn't actually
a participant in the market, or is an adjacent market and
what impact that would have. So I think that's a stay tuned, we'll see what happens there. - Vaughn - When Eleanor Fox kindly wrote to invite me to participate in this event, she didn't say why she had written to me. But I inferred from the
title of the program that it was because I was the Judge in the Oracle-PeopleSoft cases
in about 2004/2005. That of course, goes back a long way. And as a result of the invitation and thinking about that case, and I will tell you, of course, as a Federal District Judge who in the course of 21 years on The Bench has heard thousands of cases. There are too many that
stick out in one's memory. But the Oracle-PeopleSoft
case, certainly does. And I didn't do a deep dive into the case certainly didn't do much reading about it, but thought a little bit about
it on the plane coming here. And was impressed, It seems to me by the comments that we've
heard from John, and from Debbie and we heard this morning
from Adam Rubinfeld and from Bill Kowalski
about the importance of integrating all of the
evidence in these cases. The merger guidelines we have, we've got The Brown Shoe Case, we've got Philadelphia National Bank, we've got Notions of Undue
Concentration and so forth. We've got Econometric
Studies, which you presented. Those have some important
value in deciding the case if you're a generalist judge. But what really strikes home is the more qualitative
evidence that comes to bear. In the Oracle-PeopleSoft case, which is the evidence of these,
what the government thought were fringe players in the market. What the government tried
to establish in that case was that there was a separate market in what it called "High Functioning "Human Relations Management Software and Financial Management Software." High Functioning. Well, there was a lot of
lesser functioning software that was present in the market that served medium sized
businesses and governments and was nibbling away at
the edges of the market. And the government never
really had a clear explanation of how you could distinguish
those competitors and why those competitors didn't offer a competitive threat to Oracle, and emerged Oracle and PeopleSoft. And then the other point, of course, which came out clearly there and has come out I think
in the years since, is technology doesn't stand still. In 2004 or five, whenever
that case was tried. Nobody was thinking about
all of this software, essentially on the cloud. And what we have, of
course, is the emergence of some big players who have essentially based competing
software on the cloud. And of course, Google and Microsoft have also nibbled around the edges. But in terms of the real impact, I think in competitive impact on the merged Oracle-PeopleSoft, it has come from
companies like Salesforce, and I can tell you although
it's not admissible evidence in terms of market share, if
you live In San Francisco, you know full well, that the traffic and hubbub associated with
the Salesforce conventions is just as great as the hubbub associated with the Oracle OpenWorld. Now, as I say that's not
admissible market share evidence, (crowd laughs)
but it certainly is something that impresses you if
you live in the Bay Area. So the more qualitative evidence that can be presented, I think, proves to be very
impressive to a generalist judge I was really struck by
Bill Kowalski's comment that judge Jackson was seeking
some kind of a focus group, when he talked to all of those reporters in the Microsoft case, it's a pretty lonely task
to be assigned a case like the Microsoft case, or
the Oracle-PeopleSoft case, where you are deciding
something that affects Thousands of people's livelihood. That affects commerce substantially. And what gives you a sense
of doing the right thing is less the numbers and much
more the human dimension that can be presented. That should not be overlooked
in presenting these cases, nor should it be overlooked in thinking about the field generally, because ultimately, as has come out in some of our discussion,
and certainly came out in Paul Romer's comments, this field is affected not
just by what happens in court, or what happens in regulatory agencies. There's also the political dimension. And what is necessary to present
a compelling case in court also has a has an echo through the political processes and government, processes
that are involved. - Alright, great. Thank you. I really, you know, positive feedback I really believe in thank you all for keeping
up within your time, a lot. (lady laughs)
Alright so I said I would start with a
couple of softball questions, we will get to the more general Q and A. Andy Gavil brought this up earlier today, this issue of the series of small mergers that may not even trip The Hart-Scott-Rodino filing requirements, but cumulatively over time and the general sort of conventional wisdom is you look at those Big Five, and you look at their history
over the last decade or so, and they've merged with dozens, if not multidozens of small enterprises. what's the best way he
antitrusts deal with something that incrementally doesn't seem to matter. But you wake up a decade later, and, Oh! There's a problem. Anybody have any ideas about how to deal with this incremental issue? Claes? You're, you're looking at expectant (Claes laughs)
so why not start with you? - No, I think it's a great question. I remember from my Philosophy
Class at University, I was asked "how many
grains of sand Do you need before you have a heap?" (crowd laughs) When you came up with econometric well estimated number, you'll probably realize
that you could take a grain of salt sand off
and you still had a heap. And so it was quite difficult
to exactly delineate when the heap ended or not. We have in our merger rules
a system to take into account if you have multiple transactions between the same two parties, so that you cannot
escape the merger vessels by carving up the
acquisition in smaller bites, and ship it off sequentially. But we don't have anything
to deal with the fact that you might have many,
many small acquisitions that when the combine produce a big effect within the merger rules. But we do have an interesting precedent in the pharmaceutical sector where we found an abuse
of a dominant position where part of the package of conduct that we held against a
company was acquisitions that were meant to take out
competitors from the market that had not been reviewed
under the merger rules. So there might be avenues
within the merger system, where you can think of ways to accumulate I don't think that is at
least from our advantage point is not in the pipeline. But you might also think
of ways to get around this through some of the other antitrust tools. - Sure, a couple of reactions. First is, you know, what is the problem that you woke up and found? Is it a conglomerate problem? Which is not really what our
antitrust laws are about. And, you know, question whether
or not that is something that the antitrust laws should be about, just because there are
a number of companies under one umbrella doesn't mean that that's necessarily a problem
or that consumers are harmed. Second, there's nothing
about Section seven that doesn't allow you to do that. You just have to show that the transaction is likely to harm competition. And I'll use the Instagram example again, 'cause I've heard people
at the FTC talk about this. At the time Instagram
was hired by Facebook, how many employees did it have? Yeah, 11 I think it was 11 fewer than the number of people sitting at some of the tables that I'm looking at. Second, I saw an article about I think probably only two years ago in the New York Times by somebody, one of the founders of
Instagram, who was one of the 11, who said, "Oh my God, what
Facebook has done with Instagram "is never what we imagined
that Instagram was going to be. "It was never supposed
to be a large platform. "It was always supposed to be this quaint cute little place." So the but-fore world of Instagram, would did it look like
the Instagram of today? Doesn't sound like it based on that. Again, I don't know the evidence. I've heard FTC people who
were there at the time, say, "There was nothing in
the record that suggested "that Instagram was going to be "this big competitor to Facebook. "And maybe it's only a big platform because Facebook made it one." So you have to figure out
what was likely to happen. And it's really hard to
make those predictions. And then the final thing is
if the company is in fact a monopolist and taking
actions to harm competition, Section Two does cover that as well. So there are ways to go after it. You just have to ask yourself
what exactly is the problem that's been caused? Was it foreseeable at the time? And what is it that is
now harming competition? And what is it that we
can do to address it? I do think there are, there are tools, but the facts matter as to whether or not you can say with confidence
that blocking the merger would have led to an outcome that actually benefits competition. - Anybody else? - Yeah. Can I still add to that? I think that Debbie's
point about Instagram, I think the compounding
factor was WhatsApp. Right? You had Instagram in isolation that maybe didn't make
an enormous difference at the time to your point exactly, Debbie. And then I think you
combine it with WhatsApp with millions of users of WhatsApp and then you did start to see a platform that has, I've had some estimates between four and 10
billion users globally. And so is it users that we
should be concerned about? Should there have been some foresight to see you know, one step of Instagram, maybe not so much two steps
of adding WhatsApp in there, Oh my God, you've got now the biggest telecommunications platform in the globe and one that once everything is nested in, can be used for who knows what purposes. So I will say that there
is a cumulative effect. I think in the agencies, they do rely on third parties complaining and raising these issues and
being sure that they listen to those at the time. And then they do have the
ability under Section Seven to go back and look at
them or under Section Two. I would agree with Debbie. - Yeap, John. - Oh, so yeah, I really, really appreciated Debbie's comment there we need, it's hard to talk about this at just an abstract level, right? 'Cause every market
that we talk about today is gonna be a little different. But maybe drawing on Bill's early idea of like appetite for risk. I guess I would just suggest
that we could approach this type of conduct without undue concern about the risk of spinning
off business units. First off, firms spin off
business units all the time, sometimes it works, sometimes it doesn't, we just generally assume
that the market will kind of, you know, fix any mistakes. And it does seem like
there's almost kind of a double standard here where people say, "We really don't want too
much merger enforcement, "because that will stifle the
market's ability to function. "We're also really worried about
spinning off business units "because we're, I guess,
worried that the market won't be able to fix that problem." And I would also just
suggest that you know, the agencies are already in
the business of overseeing and sometimes even
orchestrating spin offs, they do it in the merger conduct context when they required divestitures. And honestly, if I can be
a little bit productive, since it's getting close to lunch, we wanna keep everybody interested. I have a lot more faith
that an Instagram spin off would survive and maybe even thrive than I do honestly, that Dish is gonna launch really effectively.
(crowd laughs loudly) - There are lots of
interested parties in the room (crowd laughs) Alright, well. Let me pick up on the one theme of the last few comments. The issue when you've
got antitrust case merger good example where there's a zero-price being charged to what appears to be the major customer. How is merger analysis gonna be able to deal with the zero-price phenomena? Anybody? - Is it really a zero-price? - Well, okay. - Because there is obviously a good deal of money that goes into providing that service. And you can price that service by the cost that it costs to produce the service and measure it in that capacity and look for what it earns on
the other side of the market. Seems to me that Zero-price product should be analyzed as much as you can just like any other product. - Would that, alright, you were on The Bench
when number of these. They didn't come before your court. But, you know, eight-10 years ago wouldn't have been possible for a District Court Judge to have used the language you just used. Arguably, let me play Devil's Advocate, he or she would have said, "Huh? Hey, customers aren't
getting charged a price? "You're telling me there's gonna be an adverse competition effect here?" - Well skeptici-- - I think all of us are leaning
forward on that one, Larry. (laughs)go a head judge you know-- - Skepticism is always a
very healthy characteristic to bring to The Bench, without regard to what the issue is and that form of skepticism would certainly be one
that you would expect. But I don't think you'd
have to think too hard - No - To drill down into - No
- What I think is essentially the problem here that you're driving at. - Can I? We're in a classroom,
so I get to do this. Show of hands. How many of you remember when there were basically three networks? (lady laughs) Do we honestly think 30 years ago that if CBS and NBC had tried to merge, even though they are zero-price, that a judge wouldn't have
been able to understand the consequences of that merger? I mean, of course, they would have. The General Counsel of NBC
who I used to do work for would basically yell or
slap the hand of anybody who talked about Free-TV "Free is not a business
model", he would say. And he's exactly right. We certainly understood
it was ad supported, it was eyeballs. We had no trouble understanding that there was competition
among networks 30 years ago, so I don't think this
is a new concept at all. - Now and I think it's a rat
hole to be perfectly honest, and I'm looking at Susan Creighton, 'cause I can remember
when I met her in 1997, and we were debating
the fact that Microsoft was charging zero for its browser, right? So this, we've been
there done that, I think. And so the discussion
on the previous panel about the Consumer Welfare Standard, and the only thing I don't know if it was
Steve Salver who said, "The other thing we
could measure is price." So we've been focused on price. I don't think that's true either. I think we've been looking at all aspects of consumer welfare in terms of innovation in terms of quality, they are hard to measure,
but at the same time the full components of
consumer welfare I think have been looked at and can be looked at under the current standards and the zerprice to quote the judge "Isn't really a necessary zero-price." - Right? - All right. Ohio v. Amex has come up a number of times Paul brought it up earlier. Two sided markets. To what extent should two sided markets enter merger analysis. And please understand, I'm not a lawyer. I would never practice
law without a license. But Gee, the way I read Section
Seven of the Clayton Act where the language says,
"In any line of commerce in any section of the country" I think I'm paraphrasing correctly. So how do we reconcile the two sided market issue with the language of
Clayton Section Seven? Anybody? - Okay, John? - Sure. I'll take a crack. I think that a lot of what
we're talking about today, are really attention markets, right? So if we're talking a
lot about Google Search, we're talking a lot about Facebook. These are attention markets. I would argue that they are not actually two sided platforms at all, although they are often
talked about that way. What makes something a two sided platform as opposed to just a traditional top down vertical distribution chain of change the type that we're
all very, very familiar with, I think it's that in a top down
vertical distribution chain, you can trace the asset,
the relevant asset, whatever that is all the way
through the chain. Right? So wheat is produced by the farmer, that wheat is then sold to an elevator. The wheat is then transported to a Miller where it's turned into
a different product. So I can trace that
product all the way down from producer to consumer. That's not a two sided market. You can do that with attention markets, you just have to kind
of move people around from where you might expect to put them. So you have to put us at the top we're the producers we
actually produce attention. We trade it we, sell it
really to Facebook and Google another attention intermediaries, attention merchants, I see
Tim in the room (laughs) and then they sell it to
the ultimate consumer, the advertisers. You just treat this like a
traditional top down market. You don't have to get
into the Amex mess at all with most of these. - Anybody else? Claes? - Have Europeans thought
about the sort of merger two sided issue. - Those are two very good opinions. The majority on the Brier dissent
are two very good opinions and they pose the issue quite clearly. But what I think comes across to me as much as anything else, is in a lot of these areas, we're in sort of a phase change state. After all, when you go from water to ice, it's a phase change. And the characteristics
of those are different. And it's awfully hard
for amateur economists who happened to wear a black robe to decide issues affecting
matters of that kind. It's hard for regulators to
see far enough into the future to know exactly what the
consequences are going to be when the phase changes to a
different kind of dimension. But ultimately what we fall back on is some advice that was
given at a training session by the Federal Judicial
Center when I became a judge, Gerhard Gesell, who is a very well known and very able judge in the
District of Columbia, said, "You know, when the evidence
is presented to you, "and the arguments are presented to you, "and you don't know what to
do, but you thought about it, you just have to do something
that is reasonably arbitrary." (crowd laughs) - And ultimately--
- But not capricious? - Not capricious, just
reasonably arbitrary. - Anybody else? - Maybe just one. One observation because I think, without at all being an
expert in that judgment, I think that the debate
we've had about making sure that we don't get into the trap of letting the market definition exercise,
run the rest of the show is super important also in this context. And we've had a case in the same sector. We've had a number of
antitrust enforcements with credit cards. And we had one case that went to the court and then was reversed on appeal from the European Court of Justice in the (speaks in foreign language), which was about a French
credit card system. And the thing that the
Court of Justice annulled the previous judgment on was exactly that the first instance
had fallen into the trap of making the market definition
being the straitjacket of its analysis because what was happening
in that case was that the credit card company was saying "Hey, I need to charge fees on one side "in order to make the system
work by benefiting people "on the on the other side. I need to use it to finance ATM machines." And in that case, the markets
had been defined as separate on each side of the market and the first court had said, "We are not gonna look into your argument "because we are only
looking at one market. "We will not take into
account what happens "on the other side of the market because the market has been
defined on the on each side." And the Court of Justice says "That's not closure. "you need to make sure that "even if you define the
markets on each side, "you need to make sure
that you take into account "all the effects on all the markets before you make up your mind." So in that sense, after
all the back and forth, what came out was, I think, a very fair and balanced way of saying that even if you,
regardless of what you do in terms of market definition ideally it should help you
to to make a sound analysis but you should never
use it as a straitjacket to avoid looking into what
are really important effects. - Yeah, and I think the
only thing I might add is you know obviously, stating the obvious that the Amex Case was a
Section One case, all right? And so in dominance and conduct cases, I can see folks trying
to look at that case, I'm trying to use it on
all sides of the equation, because, in my view, a humble opinion. You know, Justice
Thomas's majority opinion is a little bit of a mixed bag, right? Because you knew it, you could say, it's really specific to
credit card marketplaces. And just stop there because he does find this
exception for newspapers and an advertising space. Right? So you could say, okay, you know, if you're talking about advertising or something similar to newspapers, this holding doesn't,
you know, doesn't work. And so I do think there's
a little bit of a mixed bag in terms of how he looked
at the relevant market. He also said that only
two sided market you know, people participate in two sided market competing with others
in a two sided market. So it has something for
everyone, to some extent. And so I think as we watch these cases come through the Lower Courts and the Lower Courts really have to go to town understanding
this and applying it to their specific facts. I think that's when we're
going to see more emerge. I don't think it impacts
merger analysis as much, right? Because I think on the
merger side, we do have, you know, a set standard, they are of substantially
less than in competition. And whether something is
a two sided market or not, I don't think impacts that section, you know, Clayton seven standard. I think in the conduct
side, I think that's where you're going to see this evolve. And like I said, I think
there's something for everyone in that opinion to some
extent along with the dissent. - All right. "Killer acquisitions". It's in the title of the
panel, Debbie brought it up. Is this just after the fact
2020 hindsight kind of issue. You know, the pharmaceutical
company that buys a rival that and then kills the R&D that might have generated a substitute. I mean, is that any different
from Company A buys Company B, and then decides it's not worth offering the company B brand anymore
in discount brokerage, where we've seen some action recently there might be that kind of outcome. Is that a "killer acquisition"? How should we think about these things? - Yeah, you have to pay
attention to whether or not it actually harms competition rather than eliminates a product. My husband jokes about a merger that eliminated his
favorite brand of ice cream. - There you go. - Does that make it anti-competitive? And he's an elite wrestler. Does that make it anti-competitive? No. I mean, it's like, you know, did the plate merger
eliminate my favorite color of blue paint? It's only a problem if
there wasn't somebody else who could compete to basically bring that blue paint to market or bring that ice cream to market. So I don't think you can simply say and this is why I think
it's a little dangerous. Sometimes I hear people say, well, it eliminated consumer choice, every decision a CEO makes in company eliminates consumer choice. Do I bring this product to market? Do I bring that product to market? If I decide that I don't wanna continue in this line of business because I don't think
that it's profitable, you know, is that a business
decision that can't be made? Including one that can't
be made after a merger if it didn't eliminate competition? But simply basically
substituted one CEO's judgment for another CEO's judgment. You have to think really
carefully about those because then you get into a
no merger could ever be done because it might risk
eliminating something that somebody cared about. You have to ask the question is, did it eliminate competition
between the companies? And in such a way that it actually harmed that competitive process
not an individual consumer? - Anybody else? John? Sure. - I guess I would just throw out that. I think I appreciate Debbie's comments. I think though it's also not that hard to spot one of these things
when they're about to happen. And a good example that
just got announced recently would be Intuit Credit Karma. I don't know if anybody's
looked at that one yet. But you've got into it
the maker of TurboTax, which has something
like a 67% market share in a well defined antitrust
relevant market we know that, buying up Credit Karma, which
has just started offering a free, not really free, but a free digital Do It Yourself
Tax product that competes. It's just been launched a year or two ago. It's starting to gain
traction is still very small. But you've got into it with a long history of trying to stifle the
race to free they call. Why are they buying Credit Karma? You know, I'll let a judge decide, but (crowd laughs) - Thanks a lot. (crowd laughs) - But I don't think it's that
hard to see what's coming in a case like that. - Yeah, I would just
echo what I started with. I think there's been experimentation
in this area already. Whether we call "Killer
acquisitions" or basic competition or potential competition as well, I think we've seen, you
know, mixed results on that. So, you know, we actually
just go to pragmatic, we know, if the agency
start challenging mergers, I saw a statistic that the FTC has now challenged more
mergers in this year, already in this year than it
has in the previous past year. So they are clearly out there
on the playing field and with real intensity. And I think we still have a courts, right? We still have judges, just
like, you know, Judge Walker, looking at these matters and
coming up with opinions that, you know, either this
isn't a lively entrant into the marketplace. And so, you know, we're not
going to hold the merger to be anti-competitive, or the parties abandon it. So there's more to calm on this, I think, as we watch this evolve even further, and we think about it in the tech space, and we think about how do you take that we can't just say it's an
anti-competitive, right? We have go before federal
courts, I guess is my point. And what's happened so far has been a little bit of a mixed bag, it doesn't mean that the agencies won't keep trying and shouldn't and shouldn't even look back
you know retrospectively. The FTC is doing that now
with their Six B Order that they just put out. And they're looking at all acquisitions for the last 10 years of five companies, you know, that are
below the HSR thresholds and they can bring an
actions if they want to based on what they find there. So stay tuned to this
space is what I would say. Larry, as I think we're going
to see it, evolve and emerge, and we're going to see the
thinking evolve and emerge. But if the FTC wants
to challenge the cases, they're gonna have to go
report to the Judge Walkers and others like him and possibly even more
conservative judges. Not more conservative judges (laughs) Sorry I meant that wherever
you are on the spectrum, some are on the other side of it that are going to
grapple with these issues and I think we might not see them stopped. And so I don't know what else
we do in our jurisprudence and on our system other than what we, you know, we have in place now unless-- - Well, more conservative
judges may not be hard to find. (crowd laughs) - But just one sentence
on that, in fairness, 'cause I'm I guess I'm
blessed with the view that one's political leanings affect how you view witness credibility. The judge in the Stairs decision, was a Democratic Appointed
Former Antitrust Division Judge who we went before. So we thought, okay, this is
at least a decent fair draw. But at the end of the day, he
had to evaluate the evidence of whether it was more likely than not, which was the standard and
he accepted the standard and we didn't argue about
the standard at all, he just accepted more likely than not 51% whether the company would
have entered the market and based on all the evidence
concluded that it was not. Now we can change the
Section Seven standard and maybe that's what people want to do. But right now, based on that standard, those cases are very hard to win. - Claes - Yeah, maybe just a few comments, I think I very much agree
that it is important to be precise about the what you mean when you talk
about "killer acquisitions" and your definitions. And I think that is definitely, it's very important to distinguish between the the pharmaceutical evidence that we have seen starting to pop up and whether or not we should
do something about that. And then the digital space because it's obvious that
Facebook or Instagram is still there and
WhatsApp is still there. I think your case with
Oracle and PeopleSoft was the last real "killer acquisition" that we had on the books because Larry Ellison back then was very explicit that he wanted
to discontinue PeopleSoft. I think we need to every time
take through the evidence and see exactly what is it
that is driving the deal? And we have to live with
the fact that very often the companies themselves
are not really sure about what is driving the deal. We don't know what will
happen with these vertically or conglomerate related
markets in the future. And yet, it's incumbent on us still to decide whether we clear
or prohibited the cases in our jurisdiction, 'cause we have to justify either way. - Well, and that's what's going on, right? 'Cause the Google look or transaction that was cleared, right? We have Google Fitbit now pending, and we've seen a lot of uproar
around health data etcetera In my view, this is we are
in real time now evolving and it's hard to predict, I think, based on what we've seen so far, but what we've seen so far is
a little bit of a mixed bag. And we'll see the appetite
of the agencies today, and how they face transactions that are "killer acquisitions"
or nascent competitors and again, they just did
it with Hedgewell-Harry's and it succeeded. That merger was abandoned. And it wasn't even the
biggest player in the market, you know it was buying a small share. So we are seeing that
in real time right now in the deals that the agencies
in the U.S. are blocking. - But this is a dynamic system. And things change. And there are shocks to
the system all the time. And so we're not going
to enter a phase I think in which things are settled, and everybody's gonna
know what the rules are. It's inevitably going to
be changing all the time. And we simply have to live
with that consequence. - One more from me, and then
we'll go to Q&A more generally. One click away. Since at least the middle of 1990s Dan, you had to deal with One click away when you were dealing with Microsoft. Now of course that was a
Section Two case but still One click away. How should we be thinking
about such assertions? We've heard it, you know, for 25 years. How should we be thinking about this? - Debbie? - Do you want me to go? - Yeah sure. - Debbie (mumbles) - No, no. - So I assume what you mean
by One click away, Larry, just so we're on the same time as an attempt to remind, especially in the antitrust authorities that you know, you're
unable to lock in consumers, 'cause they'll just go
someplace else, right? And yet, I will remind us
all that we really haven't, we've seen a lot of innovation. But these platforms haven't
grown and been sustained. We don't have any new
platform seemingly emerging than the ones we have today. I think that what we do have is this accumulation of data
by particularly one party, and I'm just naming Google, which I think has greatly inhibited others from being able to compete and it may be that people can click away, but it's even harder to click
away and harder to, you know, in the advertising space
do anything because of the, you know, we talked about Chrome Chrome as a 65%. Share now, right? You know, so it is
extremely large and robust. And maybe it's because
it's a better mousetrap. But with all the other
between Ways, and YouTube and the other ways that
Google is collecting data and accumulating it, that's
a power that they have. There's just no question about it. And so what they do
with that power matters. And so I think that's what the agencies must be looking at today is to see what happens there. So, one click away when you control that much of a marketplace and data, to me really is again, a
little bit of a rat hole or a red herring. - Okay. Any? John? - Yeah, I would absolutely echo that. I like that term rat hole. I might start stealing that. But yeah, I've always thought of this as just really kind of
misleading or sort of misdirecting us as sort
of Antitrust Analysts. You know, first off, it's a claim about switching costs, right? It seems the switching
costs are really low in digital markets. And first off, I think that's just sort of descriptively inaccurate as
to a lot of these things. Is it really that easy to switch between, say, Instagram and Twitter where they're highly
differentiated if by nothing else than their user base, which we had a question
about earlier, right? You know, if my friends are on Twitter I might be able to click to
a different social network. But that's not a reasonable
substitute to me right? And that's the question
we should be focusing on. And then kind of the
second point to be made is that switching costs have
never been and shouldn't be, I don't think outcome
determinative in antitrust analysis and I like to use the
example of toothpaste. For what product can there
be lower switching costs than toothpaste? Right? It's literally the question of
whether I reach for the Crest or the Colgate or two
inches apart on a shelf. Talk about low switching costs, right? But if you combine those two companies, they would have something
like a 65 or 70% share of the US toothpaste market. I don't think the low switching costs mean that regulators shouldn't
take a look at that deal. So switching costs isn't really the right question to be asking. We're supposed to be asking about reasonably interchangeable
substitutes I think. - Anybody else? All right. So we're gonna now go to audience Q&A. Anybody have a question
please A, identify yourself and B, keep it short and
keep it as a question. (crowd laughs) Yeah, all right. Identify yourself now. - [Nicholas] Yes, I am
Nicholas from (mumbles) (crowd laughs) Okay, so the question is as follows digital platforms such as
the Google and Facebook have been able to act as observers in the market for information, personal information, leveraging their market
power in whatever they do for instance search of
social network functions, leveraging that power to be
able to gain power in data. So the question is how do you see horizontal and vertical mergers in dealing
with acquisition of data in this particular market? Not so much what happens
after you have the data but there has to be a condition. Thank you - I'm glad you brought
up vertical mergers, if we have time, at the end, we may wanna come back to vertical mergers, the guidelines etcetera. But John? - I guess I could take a crack at it. But hopefully people will
be able to clean up my mess. I would urge us just to stop
focusing so much on data in these markets. I think you mentioned Google
and Facebook in particular. Why do they want our data? Right? Why does say an advertiser want our data? They really don't. They don't just want to sit there in their sort of high tower and
like cackle up knowing that, that I have slid into the DMS
of an ex girlfriend, right? Like, why would they want to know that? (crowd laughs) What do they want to do? What's the-- (murmurs) (crowd laughs) What is their business model? It's not accumulating data about the john Newman's of the world. It's really about
gathering attention, right? They really want to capture eyeballs so that they can sell them to advertisers, which again, are the
consumers in the market? So I think data is-- - In a very effective
way, in a very focused-- - They do want to
narrowly slice it, right? I just want to buy the slice that I want. I don't want everybody's attention. But yeah, so I think
focusing on data is really just the sort of derive demand product is not the core of the action. I like to liken it to if you
were back in the late 1990s, focusing on the demand for mouse pads because PC demand to take off that's just kind of missing the boat. - Anybody else? - I don't know if I agree with that I think the data is the key. And I think that data accumulates profiles on all of us that are sold to advertisers. So I do think that that is there's a power in the data
that's being accumulated. - I think you have to think about-- - Is that an antitrust problem? - I agree that's a-- - Now I think there's a serious question whether it may be another gene as problem. - And I think it's awfully broad. It's sort of like is online shopping a market? Is data market? I mean, I think you have
to really ask the question of what's the, you know, data
that's being accumulated? Are there other sources of that data? Is it being used in an
anti competitive manner in a vertical transaction? Is there actually an ability to foreclose or is there the availability
of data elsewhere and I can't say it enough times
that somebody had to look at you know, hundreds of cases
when I was an enforcer the facts really matter. You can't just place these broad brushes and say that, you know,
two companies have data and therefore that merger is a problem. I just think that is just not a way to go. - Okay, another Q from Yeah - Over here, - identify yourself-- - [Tim] My name is Tim Weaver (Tim mumbles) I want to get back to your
serial acquisitions question. First of all, thanks for the panel, a distinguished professor here at NYU has been putting forth a theory ability and has mentioned that the Section Two is a good way to think about
serial acquisition problems. I say good things about him, because he's also my co-author. (crowd laughs) If that's right, isn't
the right way to think you know, if you think
about the Section Two frame isn't this sort of but-for analysis kind of the wrong way
of thinking about it? Should'nt we be thinking in line with Microsoft
about the use of mergers to insulate the monopolist
from competitive forces and maintain the monopoly? Which seems to be a completely
different kind of question to whether Instagram had
11 people added or not or that kind of question. And on that Instagram, I think Twitter tried to get it anyway. So who knows what that would have been. But just sticking with that, that's a completely different framework. And I just have a second
question for Debbie Feinstein. I think I heard if I wasn't
mistaken, you said that, even three to two, two to one mergers, we need to sort of analyze those on a case by case basis and balance. Now, I may be old fashioned
but learned in law school, of structural presumptions
and (Tim mumbles) - Well, wait-- - Okay - Yeah, let me respond to the, I wanna respond to both of those. But let me take the first, what I said is two to
one, or three to two, when you're talking about
general concepts of innovation. We don't know whether or not two companies that are innovating in a broad space We don't know whether or not collaboration or competition is better in that. I don't wanna be heard that, you know, mergers to monopoly or three to two, when you're talking
about specific products. I don't think you have
structural presumptions, when you can't define a market. You know, we have people
sometimes just say, well, they're innovating
in the technology space. I mean, that's not a well defined market. And what I'm saying is
in those sorts of cases, we don't know whether or
not at that broad level of innovation, there is a difference. So that's point one. On the Section Two case. Yeah. I mean, I think that's the FTC when I was there brought
the case against Questcor for acquiring an entity that was basically the only possibility that it was a threat. And I don't think that
the Commission thought they wrote a blog post on that, whether they could have proved that it was more likely than not that another company would
have acquired that, and again it was, that the Buffer World
wasn't and isn't standalone the Buffer World was another company would have acquired it
and made a difference. And the Commission brought
it under Section Two and must have been fairly convincing. They got 100 million
dollars in disgorgement from the company, because we, you know, we thought we had a
pretty good case on that. So I think Section Two can be used. And I think in that case,
the standard is likely to be less than is it likely
that it would have entered the Commission is at
least taken the position that it doesn't need to show
likelihood in that case. So they're not afraid
to take that position on the Section Two case. - I think the other thing
that will be interesting in the cases that are
going through the agencies right now that Google the
Facebook, Apple etcetera. 'Cause we've known it's pretty
public those are all ongoing is how predatory intent factors into that, you know, when we look at this right, and are we going to find I can remember sitting in the
opening arguments in Microsoft and you know, David Boies,
putting email after email about the predatory intent of Microsoft and to your point Judgment Vaughn, I think that was extraordinarily impactful in the courtroom and in the
District Court's opinion. But then we saw the course of conduct, come back and haunt right? and say, you know what? In
the Court of Appeals decision, so they're hard cases to bring doesn't mean you shouldn't bring them. They're hard cases to bring. And I'm thinking that, given
some of the folks names who were, you know, thrown out in in some of our earlier panels, they seem to be very actively
involved in their companies and writing documents, and I think we'll see what that
cache of documents discloses and I think that'll be very insightful. Will it be dispositive? No, but I do think predatory
intent is one element of the full picture to
Judge Vaughn's point about how these cases can proceed. - All the facts, - All the facts (laughs) - Alright. Any more? Questions? - Yeah, Steve. All right, identify yourself. - Steve Hahn. So In case we're talking about (mumbles) Is also a simple case right? It acquisition of the-- - Make sure it's a question Steve (crowd laughs) Its a question, what do
you do with acquisition where it does appear to
be a competitive problem at the time, the acquiring company uses the product transforms the product, combines it with other technology. So that it does increase the
value of their own product and increasing market share. Is that something the
agency should look at after the fact and do
something about or not? That's the question - Okay, and the question I'm gonna ask is what's the harm to competition or have customers benefited from a new way they wouldn't have absent the merger? That's ultimately the question the antitrust authorities
are trying to answer and the fact as you laid them out. I don't know the answer to that question one way or another without
learning a whole lot more. - Anybody else? Alright Any other questions? Yeah
(crowd laughs) Andy, come on. (mumbles) - [Andy] All right, Andy Gavil. I wanted to follow up on
something that Sharis said about the empty Cs 6(b). Is it possible that one
consequence of that 6(b) looking back at these past acquisitions will be to rethink that
Hart-Scott-Rodino revocation might it be informative
on what we can think as nation competition and
innovation competition? And could that really change
our use of dollar threshold, for example, and identifying
what kinds of mergers will have to be pre notified? - Yeah, they've stated that
Andy the purpose in the study you know, if you read
the public statements that the FTC put out with their initiation of the 6(b) orders that was why they were doing this, you know, they they have these
special powers at the FTC. I don't think it's a coincidence that they're exercising
them at the same time as senators introducing
a bill to rearrange them. So but same time I take it at face value that they are looking to see I've had clients say 90 million, right? If it's 91 million, then I
don't have to buy anything. They have, we have a whole body of informal interpretation surrounding the Hart-Scott-Rodino Act. And it's sad to see that go by the wayside 'cause we've all lived and breathed by it and it gives business a lot of certainty. On the other hand, I think if we are going to look holistically, which I think the FTC is trying to do at the Hart-Scott-Rodino Act and see if it's capturing
those acquisitions that do potentially cause harm, you know, it's another stay tuned. - Yeah, I think it'll always
be some bright dollar threshold because otherwise it's,
you know, impossible. You can't have people sort of, I mean, I just think the
market share thresholds that Europe uses make
my hair stand on end, because it's very hard. You have to define the
market to figure out whether you even have to report and then argue with the government about how to define the market doesn't strike me as
the easiest way to go. But the Commission already took
a step toward this years ago when they basically changed
the size of person tests to say that we're not gonna
pay too much attention to the size of the target. If the acquisition
price is a certain size, in other words, we're gonna
presume that target means a little more than it's $10 million in revenues
might otherwise suggest if somebody's paying a
billion dollars for them. And so the notion that they might say that if the acquisition price is X, or the the size of the acquiring company is Y, that we don't have a
$90 million threshold, you know, might be a way they go they will capture additional transactions that don't need to be notified but that's a balance that the Hart-Scott Rules always have to make and they'll just try to figure out whether they've erred one
side or the other side. - All right. The vertical issue did come up. Nick briefly raised it
but let me raise it again. The contrary to Bill
Kowalski earlier comment, the Department of Justice and FTC have managed to come together
at least on proposing a set of vertical merger guidelines. They're out for, Maybe the comment period
ended day before yesterday, but they've been out for comment. Anybody on the panel have any thoughts about the proposed
vertical merger guidelines? Anybody looked at them? - I've commented so anyway (laughs) My law firm filed comments as well and had a lot of clients,
you know, making comments. And I have to sort of self dispose. I was on the panel, I
think with Steve Salie and others talking about
whether they should update the vertical guidelines. And my own view is they at least had to withdraw
the old guidelines 'cause they clearly did not represent the agency's views on vertical guidelines and were cited by Judge Leon
in the AT&T-Time Warner matter, so that was just, you
know, have to be done. And advocated for some
sort of a policy statement. So now they've done that. And you know, it's a bit
of a missed opportunity to some extent, I know these are hard to negotiate between the agencies, etcetera. But I think without more
clarity around the economics, I think that that's hard. And then I think, you know, if it was possible to sort of somehow have the European, you
know, looking at class, you know, and the U.S.
standards for what is either a soft, safe harbor
or not a safe harbor, whatever we're going to call it, of 20% versus 30%. Would have been helpful at least to have some
dialogue around that. - Anybody else? - Yeah, I would just say look, I think they basically say what the
agencies have been doing now for 10 or 15 years. I don't see anything
particularly new in those. I think if you read a number
of the complaints going back, a good 10-15 years now you
look at Pepsi's acquisition of its bottlers and Coke's
acquisition of its bottlers and you read the complaint
complaint and the analysis there. You read about GE's acquisition Avio and the complaint there. So just on Pepsi and the bottlers
and Coke and its bottlers, the concern where there was whether there were adequate firewalls because Pepsi also and Coke
also distributed Dr Pepper and the concern was whether
or not as a result of this a parent Pepsi whose bottlers
were distributing Dr Pepper would get advance notice and the firewalls were put up and everybody always says,
"But do we know if it worked?" Just like, I gotta think
Dr Pepper would complain if it felt like every time it was about to initiate something new, it got beat to the
marketplace by Coke or Pepsi. So there's somebody with
a real incentive to know what's going on and complain
and you read, you know, a complaint like GE-Avio,
which is a question GE bought Avio, which also sold parts to Pratt & Whitney to make engines GE and Pratt
& Whitney compete in engines and the concern was whether or not they were going to be able to foreclose and delay slow down. Oops! The shipment got lost sorry, we didn't get you the parts to make your engine competing against us. And the Commission had
a series of requirements in the consent decree
that that really bolstered an existing commercial agreement between GE and Pratt & Whitney to basically remedy those issues. So I think if you read those complaints, there's nothing in those complaints that really isn't covered in
the guidance and vice versa. So I don't think there's anything new. And I think if you look, there have been a lot of
vertical enforcement actions is just that most of them
get addressed by consent or by commercial issues. And so I don't, you know, I just think you have
to look at that context. I used to complain when I was at the FTC that reporters only
thought I was doing my job if we actually had a
case that went to court and got litigated. They never paid attention to the consensus and they never paid
attention to the transactions that were abandoned because
they don't make the News, but I think when you look
at the body of enforcement that the agencies do you have to look at all of those things and ask the question of, you know, are they looking at the right things? Is it enough? Did the remedies work? Not just the ones that get
litigated in the courtroom. - Alright. I'm going to end this
session with a question and I will also provide the answer. (crowd laughs) The question, what happens when Conference Organizers invite five smart, articulate people to provide a discussion and
comments on merger issues? And the answer is Magic. (crowd laughs) Please join me in thanking them.
(crowd applauds)
