Deep Dive Episode 46 – Big Tech, Competition, and Antitrust Enforcement
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Senator Elizabeth Warren recently claimed that big tech companies like Amazon, Google, and Facebook have grown into monopolies that make it effectively impossible for smaller competitors to gain a foothold in the market. As a potential fix, she proposed that the government should unwind past anti-competitive mergers. There is fierce debate about governmental oversight of big tech companies and the proper role of the federal government in promoting consumer welfare and market competition. In this episode of the Fourth Branch Podcast, Neil Chilson and Charlotte Slaiman will explore the surrounding debate.
Operator: Welcome to Free Lunch, the podcast of The Federalist Society’s Regulatory Transparency Project. All expressions of opinion are those of the speakers. On March 1, RTP cosponsored a symposium at Pepperdine Law School with the Pepperdine Law Review titled “Regulating Tech: Present Challenges and Possible Solutions.” On this episode, we bring you the keynote address from Roger Alford who is the Deputy Assistant Attorney General for International Affairs in the Antitrust Division at the Department of Justice. Please send us your feedback.
Dean Reuter: So it makes my job to introduce our keynote speaker, Roger Alford. And I usually like to try and tell some humorous story, or some story that at least I find humorous. And I was trying to connect it up to the events of the day. The closest I can get is something that I would direct to the law school students because we have a lot of students here. And it takes me back to a time when I had just gotten out of law school, taken and passed the bar exam. And I decided I would celebrate by going to — this is over 30 years ago, so you have to imagine what I looked like 30 years ago, which is basically the same.
So I go to a big box men’s store to buy a suit, sort of in celebration of myself having passed the bar exam. And I go in there, and there’s a very young man who approaches me eagerly and asks me if he can help me. And I say, “Yeah, I’m looking for a suit.” And he goes, “Well, what do you need? What kind of suit do you want?” And I say, “I need a suit to go to court.” And he looks at me and he says, “Oh, man, what did you do wrong?” And I said, “Well, I passed the bar exam.” So things aren’t always exactly what they seem to be. He thought I was looking for a suit to defend myself in court, or to be a defendant in court, and of course, I was looking to be an advocate. So to the younger law school students in here, just be aware of those pratfalls and the opportunities to be misheard and misunderstood.
Turning now to the introduction of Roger Alford, he’s a very accomplished gentleman. He earned his undergraduate degree with honors from Baylor University, his law degree with honors from NYU Law School, a Master of Divinity from Southern Seminary, and ranked first in his class at Edinburgh University where he received a Master of Laws. He then served as legal advisor to Judge Richard Allison on the Iran-United States Claims Tribunal in The Hague, the Netherlands. That sounds like a tough assignment over there.
He followed that serving as a law clerk to Judge James Buckley on the United States Court. And again, for the law school students, if you don’t know Judge James Buckley, you should look him up. He is a — I would describe him as a national treasure. A U.S. senator from New York, also served on the circuit court for D.C., also held high-level Executive Branch appointments, so he’s served with distinction in all three branches of government. And Roger, I don’t know if you know this, he recently moved back down to Washington D.C. I had lunch with him last week. So look him up.
Then, turning back to Roger Alford, after this, he practiced law with what is now Hogan Lovells, then did two years as a senior legal advisor to the Claims Resolution Tribunal for Dormant Accounts in Zurich, Switzerland. And next, he joined the faculty here at Pepperdine, so welcome back. He served here for 12 years as a tenured professor. Since 2012, he’s been at Notre Dame, more or less, but has a concurrent professorship at the Keough School of Global Affairs and the Kellogg Institute of International Studies. But his full-time job at this point is since 2017, he’s served as Deputy Assistant Attorney General in the U.S. Department Antitrust Division. We heard some praise for that Division and its head, Makan Delrahim, this morning, but Mr. Alford, Roger Alford, has been a key part of the work of that office. And we’re very pleased to welcome him, so please join me in welcoming Roger Alford.
Roger Alford: Thanks very much. I appreciate it. It’s great to be here. It’s great to be back at Pepperdine. I spent 12 years of my life here and so have very, very fond memories of my time here. I actually lived up on Baxter Drive just above the law school. And so the good news is every single window that was important in my life had a view of the ocean; my kitchen window, my living room window, my bedroom window, and my office window here at the law school. The bad news is that every time I looked out my window, I had to look down at the law school. I could never get away from work. I was always, always either in the law school or looking at the law school.
But it’s great to be back here at Pepperdine. I have many, many close friends on the faculty, and I continually engage with them and talk to them. And I see them regularly, two of them in Washington D.C., Babette Boliek and Trey Childress. So it’s wonderful to be back here, and I do miss more than just the ocean view about Pepperdine. So thank you for the opportunity to be here. And thank you for the symposium organizers, for Greg McNeal, Greg McNeal’s idea of doing this, and for Ashley Gebicke — am I saying that right? Close. Pretty close, pretty close. Dean Reuter, and then Devon also for organizing this event.
It’s a great topic. It’s a very, very hot topic of discussion and debate right now. It’s a hot topic of debate within the United States. There is a sort of mainstream traditional view that is espoused by Democrats and Republican administrations over the past 30 or 40 years, but literally, since pretty much my time that I’ve started at the Department of Justice, there has been now this very robust discussion about whether or not we should be rethinking antitrust enforcement, particularly in the context of digital markets.
That debate and discussion is only a small fraction of the larger debate and discussion about how to do antitrust enforcement globally. There are lots and lots of events that I attend and talk at around the world in Europe and in Asia and elsewhere where there’s an incredibly robust discussion about how we should deal with digital markets and antitrust enforcement. And a lot of the framing of the discussions that were presented here are similar, which is are the antitrust rules adequate to deal with the sort of emerging issues that arise in the context of digital markets and the power platforms and the like. So it’s great to be here, and I really appreciate the opportunity to come back and to talk about this issue.
One way to frame the discussion is to sort of think about the issue from the perspective of—and this was sort of referenced in the previous panel—what is the particular problem that you’re trying to deal with and whether or not that problem should be dealt with through a regulatory approach or an antitrust enforcement approach. And obviously, it’s clear that some issues should not be addressed by the antitrust framework. There’s many, many issues that no one would suggest should be dealt with by the antitrust framework. But what is debated now and what is increasingly up for discussion are more things than have traditionally been understood, the kind of things that should be dealt with within antitrust versus other regulatory frameworks. So that’s the sort of broad perspective. One way to think about it is ex ante anticipation of a problem through regulation or ex post resolution of a problem after the problem has arisen through antitrust enforcement is sort of one way to think about it.
I am very loathe to read my comments. I never teach that way. I never speak that way under normal circumstances, but one of the many new things about my current job is that every time I speak officially for the U.S. government, I have to be vetted, and my speech and my comments have to be approved by multiple levels of people above me that know more than I do about these issues. And so the good thing about my speech is it is official. The bad thing about my speech is I’m going to be reading it. So it’s not quite as entertaining, I think, when you read a speech, but at least you can know that it’s been vetted carefully.
So this year’s symposium focuses on a highly relevant topic, competitive challenges presented by today’s regulatory landscape and ways to avoid stifling competition by enacting and enforcing sensible and effective regulatory schemes. The relationship between competition and regulation has been a subject of intense debate for decades, and this topic is as relevant today as ever, as we can see from the previous panel. The role of anticompetitive regulation is something that the Antitrust Division of the Department of Justice has discussed on numerous occasions.
And indeed, just this past year, the Antitrust Division held a series of roundtable discussions on antitrust and deregulation—you can find those both in printed form and on the internet—which brought together leading thinkers from a range of legal and advocacy organizations across the political spectrum. So we literally had the Roosevelt Institute, Open Markets, U.S. Chamber of Commerce, and all of the sort of — everything in between, American Bar Association and the like, giving their diverse perspectives on the relationship between regulation and competition. While the views of the participants at those roundtables were varied, there was a consensus on one very broad premise, and that is that markets are best governed by competition and sound antitrust enforcement which allow markets to thrive while requiring less regulatory intervention.
I wholeheartedly agree with the premise, and I will talk about ways that the Antitrust Division helps to implement this principle. As my boss, also an adjunct professor at Pepperdine University prior to his appointment as the Assistant Attorney General, Makan Delrahim has said, “When regulation replaced antitrust enforcement, the regulations and the regulators become stealthy and disruptive forces that can interfere with the competitive marketplace, and therefore, we should proceed with heavy skepticism whenever we see regulation replacing vigorous enforcement of the antitrust laws.”
In a similar vein, Naomi Rao, head of the Office of Information and Regulatory Affairs, the most important agency that you probably have never heard of, she said that “regulatory efforts are designed to promote economic liberty and to protect the average American, recognizing that regulatory burdens are often put in the place at the behest of businesses or powerful interest groups.” Again, always be skeptical of regulations because there is this risk that they are not there necessarily to serve the consumer but rather to serve special interest groups. As Naomi Rao noted, “Because regulations often create barriers to entry, it can limit competition by raising the cost of goods and services and stifling innovation.”
In the United States, our economy is premised on liberty and free market principles. We believe and history has shown that the competitive pressures maximize consumer welfare by favoring efficiency, innovation, choice, and lower prices to the consumer. The ideal of the free market is precisely what the antitrust laws are designed to protect. As the Supreme Court wrote over 60 years ago in Northern Pacific, “Antitrust enforcement rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality, and the greatest material progress.”
The focus of economic liberty and consumer welfare services are cherished values in the United States. The economic liberty approach to industrial organizations is also sound economic policy for any free nation. So any of you that have studied economics know very well Nobel Laureate Hayek’s explanation that price systems of the free market operates as a mechanism that efficiently communicates diffuse information held by consumers and businesses throughout the economy. The disaggregated and diffuse actors in the market gather, analyze, and utilize information with far greater efficiency and accuracy than government actors who struggle to reach sound decisions with imperfect and incomplete information.
Economic regulation often handcuffs the free market’s invisible hand, introduces a decision-maker who cannot possibly account for the wealth of information and dynamism that the free market incorporates and who does not face accountability for wrong decisions. The consequences of an entrepreneur who makes misjudgments are far greater than for a regulator who gets things wrong. All too often, as history has shown, complex regulatory schemes, however well intended, seriously distort the competitive process and even entrench incumbents, and thus ultimately run counter to the objectives that regulators were designed to achieve. Antitrust enforcement minimizes the need for regulatory intervention on issues of price, quality, choice, and investment, reducing the risk of regulatory distortions. It does so by protecting the competitive process to maximize consumer welfare, and it relies on economic analysis to serve the goal effectively.
Favoring competition over regulation does not mean, of course, that there is no need for sound regulation. Clearly, government intervention is often justified to regulate risks for health, safety, the environment, and other social goods. There are also areas where economic regulations may be needed because market forces alone do not work sufficiently. It’s not always the case that markets are effective and efficient. It is important, however, for lawmakers and regulators to consider the potential competitive effects of proposed and existing regulations and policies to guard against unintended consequences, including creating barriers to entry or deterring innovation.
Regulation sometimes can act as a barrier to entry by keeping out potential entrants who would otherwise increase competition, lower prices, and increase choices for consumers. Regulatory barriers can pose harm to competition because they cannot be undone by traditional market forces. It’s hard to think about regulation and sort of creative destruction of regulations whereas we often think about creative destruction in the normal market function. Incumbents often like regulation because it preserves the status quo and hinders competition from new entrants. Firms that have market power within a regulated market also pose a greater threat to competition because it is very difficult for them to be dislodged through fierce or disruptive competition. It is therefore important to distinguish between regulatory barriers that are the product of an incumbent’s efforts to block innovative entrants and regulations that are responsive to legitimate concerns.
Government regulation also can be problematic in fast-moving industries because regulation tends to be rigid and slow-moving, lagging behind changes in market conditions and technologies. This regulatory lag can delay entry, expansion, and innovation. In the age of GPS, for example, is a geography exam that requires detailed knowledge of every city street really a necessary qualification to be a taxi driver, or has it become a barrier to entry that serves merely to keep out potential competitors? I often say that you can tell whether or not a particular jurisdiction has a friendly regulatory environment as a sort of quick litmus test to determine if they allow Uber to be in the city.
We should proceed with heavy skepticism, therefore, whenever we see regulation replacing vigorous enforcement of the antitrust laws. Sound competitive analysis, not special treatment for particular industries or entities, should take precedence. Much as private restraints on competition can be harmful to consumers, government regulations that place limitations on competition may be equally harmful to consumer welfare.
Let me give you some examples illustrating Antitrust Division’s views on the proper delineation between competition and regulation and the Division’s advocacy efforts in this area. Virtually every aspect of our lives is regulated in some fashion through rules purported to — designed to protect health and safety from the food that we buy, the pharmaceutical products that we use, the homes and apartments in which we live, the schools that our children attend, the requirements for the jobs that we hold. And while certain kinds of regulation are necessary, without question, this role was never intended to be without appropriate limits. Unfortunately, governments at all levels, encouraged by the success of appropriate areas of regulation, all too often encroach on other areas where unencumbered markets function best.
In keeping with the Antitrust Division’s core function of enforcing antitrust laws to preserve competition and protect consumers, it is important for the Division to identify circumstances in which regulations run counter to or infringe upon its mission. A familiar form of anticompetitive regulation could present itself in the form of occupational licensing. So it’s obviously understandable why a lawyer or a doctor has to be licensed, but question whether or not all of the industries that currently require licensing actually should have such a restriction. Many professional activities require occupational licenses, and often with good reason; obviously, doctors, dentists, lawyers, bus drivers, and the like.
There are many other areas, however, in which occupational licensees are required, or the justification for such requirement is much less obvious. A report from 2015 found that the share of U.S. workers holding a professional license increased fivefold since the 1950s. Studies suggest that licensing requirements often exist not to protect the consumers but to limit the number of potential entrants to practice the profession and thus to protect incumbents from competition. One good test for that is how easy is it for one lawyer to move from one jurisdiction to the next after they’ve been experienced as practicing law multiple years? That’s an example of the kind of problem that we’re talking about.
It is not only in the United States that we see excessive occupational licensing requirements. Countries in Europe, for example, have licensing requirements even for hairdressers, for plumbers and for other craftsmen, all in the name of public health and safety. The Antitrust Division as well as the Federal Trade Commission has intervened in appropriate cases where private actors such as professional organizations attempted to use state regulations improperly to expand licensing requirements and thereby prevent competition from new and innovative providers.
Economic regulations are typically justified by perceived market failure, in particular, situations of natural monopoly. There are problems, however, when both the concept in general and its application to specific institutions; for example, while hardly conceivable today, for several decades, industries such as the air transport, trucking, telecommunications, and mail delivery services were all viewed as natural monopolies that necessitated comprehensive government regulation, including limits on supply and price control regulation. We should be very wary, however, when government regulators replace traditional economic actors and intervene in the nature of market stability.
The success of the deregulation efforts of the ‘70s and the ‘80s has shown that competition works. In essence, what may appear at a specific point in time to be an inevitable state of noncompetition may ultimately be nothing more than a lack of imagination or an insensitivity to new developments and technologies. Past instances of economic regulation also have often involved regulatory creep as regulations expanded further than necessary. Now that many of the industries that used to be viewed as natural monopolies have been successfully deregulated, it is the Antitrust Division’s responsibility to vigorously enforce antitrust laws to ensure that competition restraints by regulation are not replaced by restraints through private arrangements. As deregulation expands, so, too, must Antitrust fill the gap.
As you can probably tell by now, the Antitrust Division is highly skeptical about the use of regulations as a substitute for competition. One area where this approach may set us apart from other jurisdictions is in the area of technologies. Some societies approach new technologies with skepticism, favoring burdensome regulations on the belief that new, disruptive innovations should be monitored closely or even restrained. Other societies, most notably the United States, have created a legal culture that favors innovation, creating incentives for new technologies to flourish.
Innovators recognize these different cultures and respond to the incentives and disincentives as one would expect. As one observer has noted, “Innovators can and will move to those jurisdictions that provide a legal and regulatory environment that is more hospitable to entrepreneurial activity.” Just as capital now fluidly moves around the globe, seeking out more friendly regulatory treatment, the same is increasingly true for innovation. The common term for this is innovation arbitrage, that innovators can choose where they’re going to try to flourish in an environment. When it comes to new frontiers, the first mover often is not the entrepreneur or the startup company, but rather the city, the province, or the nation that promotes a culture of entrepreneurship and innovation.
Anticompetitive government regulations are like thousands of Lilliputian threads that tie down economies and stifle creativity. Those countries that have designed their laws and regulations to promote innovation and foster competition are the beneficiaries of innovation arbitrage. Entrepreneurs naturally will embrace warmer climates and avoid the islands of Lilliput that overflow with red tape. Governments should assess whether proposed and existing legislation or policy unduly hinders competition in emerging markets. Antitrust agencies can help by encouraging policymakers to seek solutions that do not unnecessarily restrain competition and by advocating for the removal of unnecessary regulatory barriers to open up markets for new entrants.
Now let me conclude with some remarks on the proper scope of antitrust law and the risk of antitrust enforcement to become a quasi-regulatory function. The antitrust laws should be vigorously enforced to protect the competitive process by preventing unlawful restraints of competition in any form, but it is through agreements, through mergers, or through unilateral practices. Sometimes, however, antitrust enforcers themselves may be tempted to regulate markets rather than to prevent or protect the competitive process and let market forces determine the outcome of competition.
One notable area where the Antitrust Division itself has, in the past, may have succumbed to some extent to this temptation are consent decrees used to settle civil antitrust cases. Of course, there is a place for settling cases through consent decrees if the parties agree to remedies that resolve the competitive harm identified by the Division. But well-designed consent decrees achieve effective results without litigation burdens on either the government or the companies involved. For example, structural decrees in the form of divestiture of overlapping businesses can be an appropriate and effective remedy in a merger case that does not raise competitive issues apart from those overlaps.
Consent decrees may be inappropriate, however, where the antitrust enforcer takes on a quasi-regulatory role. For example, consent decrees can sometimes inappropriately attempt to redesign the business practices of an industry rather than narrowly tailor the remedy to the violation of antitrust laws. Consent decrees that provide for behavioral remedies as opposed to structural fixes also may require ongoing oversight that an enforcement agency may not be well equipped to execute. Consent decrees also can outlast their relevance, especially where the decree does not provide for a limited term.
The Antitrust Division has been addressing these concerns by adjusting its practices in this area. For example, as a general rule, the Division does not accept behavioral remedies in merger cases where a structural fix to the remedy the competition issues would be available. The Division also has launched an initiative to terminate outdated consent decrees that no longer serve a pro-competitive purpose. So we literally have a consent decree task force that is looking at trying to terminate over 1300 consent decrees, some of them dating back to the 1920s and ’30s. And some of those consent decrees involve products or even industries that don’t exist anymore.
Another temptation for enforcement agencies is the pursuit of broad and vague objectives beyond the safeguarding of the competitive process, and this is, of course, what was discussed about earlier this morning. In the Antitrust Division’s view, competition policy should not be expanded to include freestanding social, economic, or political factors. The focus should be on the competitive process and on protecting consumers. Precisely how you define that, obviously, is subject to debate, but the focus should be on those issues. Antitrust laws are focused on promoting competitive markets and protecting the free market competitive process.
Antitrust enforcers should withstand the temptation to put their thumbs on the scale to select winners and losers in the competitive process. For example, antitrust agencies should make decisions based solely on the merits of the case, not with a view to promote the rise of strong regional actors or to create national champions. Whether a market participant ultimately becomes a national champion or even a world champion should be for the markets and the consumers to decide.
Contrary to what the Digital Commissioner for the European Commission said recently, competition agencies are not facing a Sputnik moment in a digital race to promote domestic competitors. Rather, as law enforcers, we function as neutral referees who help to ensure that everyone competes vigorously. As such, we must be vigilant to enforce the antitrust laws in a timely manner. We also have a responsibility to act as an advocate for competition within our own government. Not only is this good for government, but it has the real consequence for both our civil and criminal enforcement where the government action erects barriers to entry or otherwise makes markets less competitive, and it can make it easier for private parties to engage in anticompetitive behavior.
Our efforts in this regard can cut across a vast and diverse cross-section of industries in regulated sectors of the U.S. economy. They include formal public advocacy such as written comments, workshops, and hearings, speeches, articles, informal advocacy with agency heads and agency staff. Promoting competition in the U.S. economy through broad advocacy efforts is one of the Antitrust Division’s highest priorities. We are pleased that other competition authorities recognize the importance of this as well and applaud the work on competition advocacy that is happening around the world with many competition agencies, including through the International Competition Network’s advocacy working group.
So in conclusion, the relationship between regulation and competition and the role of antitrust agencies in defining this relationship remains a fiercely debated subject. The Antitrust Division will continue to promote competition in free markets through vigorous antitrust enforcement based on the consumer welfare standard. Thanks very much.
We have several minutes. I’m happy to take questions from experts and novices alike. Yes?
Questioner 1: [Inaudible 29:55] Would you care to comment on the ongoing debate … the pros and cons of … platforms … not placing any restrictions, treating it like a FRAND type situation of sharing digital platforms and the big data that they generate is the preferable approach. Others, perhaps at the FTC and in international places, have looked at those digital platforms as information which should be shared and regulated. I’m curious perhaps in part because it may dovetail with the panel that’s coming up, if you’d care to foreshadow some of your thoughts of that very interesting issue. Thank you.
Roger Alford: Yeah. I mean, it’s a very, very broad topic, a very important topic. I would have to say that the two areas where I spend most of my time as the International Deputy for the Antitrust Division is on trying to promote due process around the world, and then trying to deal with the issue of the sort of diversity of viewpoints about digital markets. So I would say that this area is probably the area where there’s the greatest amount of interest in sort of looking forward at how the different agencies are going to deal with the issue.
So I think there’s several things that we can say — that I can say are clear positions of the United States government. One is that we strongly believe that evidence-based enforcement should occur, that there shouldn’t be presumptions or there shouldn’t be change in the rules that are not really strongly grounded in evidence-based cases. We strongly believe that these sorts of issues are iterative and should be addressed on a case-by-case basis. It’s extremely difficult to make broad, general statements about, say, data and how we should deal with data when some data is transitory and basically irrelevant within a day, whereas other data is going to be permanent, and difficult to collect, and historically valuable for decades. So there’s many, many instances where people have broad sayings about data, and yet, the nature of the data depends a lot on how one should respond to it. And therefore, I think you should be really careful about dealing with digital questions on a case-by-case basis.
I do think there is this incredibly complex discussion about data portability and whether or not there should be — come a point where there should be the forced sharing of data with competitors. That is an approach that the Antitrust Division has been very, very cautious about. It’s essentially an arrangement of a sort of a forced licensing arrangement or forced sharing of data that will dramatically stifle innovation and the collection of information. So we’re very, very nervous about certain agencies that are considering this sort of forced data sharing regimes going forward because we really think that that will stifle innovation.
Beyond that, there’s a lot of cases right now around the world that are looking at these issues. And we honestly take them on a case-by-case basis, and we engage with our counterparts informally. And of course, in the United States, also, we have been bringing a variety of different cases as well as filing amicus briefs in private litigation related to digital markets. So each of those cases, I think, raise very special and difficult concerns and questions, so that’s really all I’ll say. But, I mean, I would point you to, especially recently in the past two or three months, Makan Delrahim has started doing a lot of speeches on digital platforms. And if you go to the DOJ website and look at his speeches on that, some of them, I think, are very, very apropos to what your questions are. So I encourage you to look at those as well. Others?
Questioner 2: Hi. I have one quick question. You mentioned that antitrust enforcers should not have as a goal to create national champions. Could you give an example of or a hypothetical of where that has occurred?
Roger Alford: Sure. Yeah. So it’s one of the biggest risks, I think, if you watch the global antitrust enforcement is this temptation to try to put a thumb on the scale by enforcing your antitrust laws in a way that favors national incumbents, favors one competitor over the other competitor simply because of the nationality of that competitor. And so antitrust laws are supposed to be nondiscriminatory in that nature and to not give preferences to national champions, and yet, nonetheless, you do see political pressure for that to happen. And so my reference to the Sputnik moment was an example of that. The European Commission Digital Commissioner said that we need to have a massive infusion of European industrial policy to promote the success of European companies over Chinese and U.S. Companies that, essentially, are the most significant digital players. And so that’s an example. That wasn’t the Competition Commissioner, that was another commissioner, but that’s an example of that.
And to her credit, the European Commissioner for Competition, Margrethe Vestager, has resisted those calls. There is a recent effort by German and French politicians to try to basically allow a merger to go through in the railroad industry. Two of the major railroad industry players in Europe were trying to merge, and the specific argument that was made by politicians in Germany and in France was that that would help those two to merge into one to compete more effectively against China on the global stage. And the idea was that we need a European national champion, if you will. She resisted that, and she said, “No. We’re going to look at this on the merits, and we’re going to look at this based on harm to the European market.” And she announced that she’s going to challenge the merger of those two companies. Yep?
Questioner 3: [Inaudible 36:35]
Roger Alford: Sure. Right, right. Yeah. I’m not suggesting that there are not other agencies within the government that are not seeking to promote U.S. companies, both at home and abroad. Obviously, that’s the case. What I’m trying to emphasize is that you don’t do competition enforcement in that manner. You don’t enforce antitrust laws in a way that gives preference to one competitor over the other simply because of their nationality. Yep?
Dean Reuter: [Inaudible 37:15] — maybe ask you to clarify, not push back, but maybe challenge you a little bit on the aiding of U.S. companies by U.S. antitrust authorities. Does that hold true even in the case where other governments — they’re not really free markets? They have government-run, government-owned, at least partially, government-owned entities, and it’s clear that those countries are using their antitrust regimes in a way to favor their sort of home-state favorites. And I’m thinking of — this morning we heard Don Rosenberg describe it as weaponization of antitrust or competition law. And I think he was thinking of China, and South Korea, and maybe Taiwan. Does that sort of playing-field issue come into the analysis of the Department?
Roger Alford: Yeah, that’s a great question. So you’re right that the Chinese situation is special because the nature of the competitive market there very often includes standard enterprises, and those standard enterprises in many countries are subject to slightly different rules because of exemptions related to sovereign immunity. The United States government’s position on that is that if a competitor, foreign or domestic, is engaged in commercial activity, then it falls under the exception for the commercial activity exception of the Foreign Sovereign Immunities Act, and you should be able to pursue that competitor. So standard enterprises are a difficult question, but generally speaking, the United States has said, and we’ve said in speeches, that standard enterprises that harms the U.S. market and acts as a commercial actor rather than a regulator is going to be subject to the U.S. antitrust laws. Yep?
Dean Reuter: Does the Antitrust Division ever take cognizance of national security implications if those are raised, or is that somebody else’s job? And here I’m thinking about foreign developed technology that will find its way into U.S. markets and either compromise individuals or compromise even government telephones, or jet aircraft, or whatever.
Roger Alford: Yep, that’s a great question. So the Department of Justice is not charged with looking at the national security implications of those situations, but you’re absolutely right that the Department of Treasury in their CFIUS review is, in fact, charged with looking at those issues. And it is the case that as part of the CFIUS review for national security reasons there will be occasions when certain mergers will not be allowed to go forward because of harm to the national — for national security reasons. So that is an example of an appropriate limit on the general rule of nondiscrimination.
That exception to nondiscrimination is not unique to the United States. If you look at OECD papers on the subject, there’s many, many countries that have national security exceptions with respect to that. Usually, those are not, again, applied by the competition agency. They’re applied by some other agency within their respective government. Obviously, also international law respects national security exceptions for nondiscrimination roles as well. The WTO has a nondiscrimination principle, but it also has an exception for national security. So that is a recognized exception to the general rule of nondiscrimination. Yes, sir?
Dean Reuter: There’s time left, Roger, and I want to keep you in the hot seat. You mentioned looking up sort of to international bodies other foreign country bodies. Can you describe what the Division does with regard to antitrust enforcement when it comes to other agencies at the federal level but also state level? So there’s state-level antitrust enforcement sometimes by state AGs either filing lawsuits, and then we have enforcement regimes through the FCC, through the FTC. I guess those are two different things, but maybe you could describe your approaches there.
Roger Alford: Right, right. So when I was talking about competition advocacy, I was primarily talking about agencies that do not do competition enforcement. They do other types of regulatory enforcement. And our encouragement is simply to try to have those rules and regulations be enforced in a way that is as much as possible market-oriented — or market-oriented enforcement. But you’re absolutely right that separate and apart from those agencies, there are these other groups which are certain agencies that have actually antitrust responsibilities. The FCC is obviously the most well-known example within the federal government. And then there’s the sort of state attorney general that enforce antitrust laws, state antitrust laws as well. So it is a patchwork.
The primary enforcers for antitrust law are the Federal Trade Commission and the Department of Justice, but there are these occasional so-called sectoral regulators that are charged with looking at antitrust principles as well and the way that they regulate. And so what happens in that context is we very, very closely liaise with them and discuss with them in the way that they’re looking at the particular issue at hand, and so there’s very often exchange of staff, or exchange of dialogues, or regular meetings to deal with that sort of horizontally within the federal government.
It’s also the case that there’s incredibly fluid discussions that happen between the federal government and various state attorneys general if they’re interested in an issue that also deals with an issue that we’re dealing with. That most commonly occurs in the merger context. If it looks like there’s a merger that may be problematic, it’s very often the case that not only the federal government but also states are going to want to look at the issue. And if that happens, then we have a very, very close collaboration with those states to see how they’re going to deal with the issue and whether or not we’ll collaborate in terms of challenging the merger. So yeah, that does happen a lot, very often through just constant phone calls and discussions.
And it’s not directly relevant to your question, but I should say also that outside the United States, they very, very often are mergers that happen that cross borders and that have multiple agencies around the world looking at them, and that also requires incredibly close cooperation. Any major, multinational merger will very often trigger review by numerous countries, sometimes even a dozen different countries. And if that happens, we have really, really close cooperation with those countries around the world. And very often, in order to expedite the process, the merging parties will waive confidentiality rules so that we can share documents with those agencies around the world. And we’ll not only look at the analysis of the potential harm that we’re seeing or that they’re seeing, but we’ll also look at what are the possible remedies that we might be pursuing.
And there’s a dialogue that happens in that respect as well. What kinds of product lines are we concerned about? What timelines are we talking about? Who would be — if there is going to be a spinoff, who would be the appropriate buyer of the spinoff? Would that buyer be viable and likely be a strong competitor? All of those sorts of issues happen in a context of a multinational merger that has many, many jurisdictions looking at it. And so what that means — what I’m truly trying to say is a lot of what we do in the Antitrust Division is coordination, either across jurisdictions, or with the states, or sometimes with other federal agencies in antitrust enforcement. Yep?
Questioner 5: Another — you deal a lot in international antitrust enforcement, and I was wondering if there were any other countries who use a different standard than consumer harm, and any one you find particularly interesting?
Roger Alford: Yeah, that’s a great question. So there’s a great — OECD has been mentioned a couple of times already in the discussions today. There’s a great roundtable that OECD held, I think in 2016, about the public interest standard in competition enforcement, and a whole variety of different countries submitted papers associated with that. And it is correct that there are some countries that don’t apply just a consumer welfare standard. They do apply a broader public interest standard. South Africa is one that immediately comes to mind that applies a much broader standard, and they think that that is appropriate. And what that means, though, in practice is that in the analysis of whether or not there is competitive harm, they throw in a lot of other things in the bucket, and therefore, often will reach results that might be different than the way the United States would analyze the question.
So for example, South Africa will not only look at consumer harm but also what will happen to the B side of the merger, the firm that’s going to be purchased, and what will happen to all of the workers if there is this merger, and essentially get behavioral remedy commitments by the buyer of that company that they will not do certain things with respect to job protection for X number of years. So when Walmart moved into South Africa and purchased one of the largest big boxes in South Africa, the competition enforcer in South Africa basically said, “We’ll allow you to purchase this big box in South Africa, but you have to commit to not firing anyone for the next five or ten years,” which, of course, makes the analysis about whether or not it’s a legitimate or appropriate or efficient purchase a different question. It’s a different analysis about whether or not that’s the kind of purchase that they want to do. So there are very vigorous debates about what is the appropriate standard in certain countries, and this is the kind of thing when you go to these international conferences, these sorts of issues are addressed.
There’s also more broadly many, many agencies that have a general consumer welfare standard, but there’s a statutory mandate to look at a few key things in addition to the consumer welfare standard. So the United Kingdom, for example, has a special statutory obligation to look at diversity of viewpoint in media mergers to make sure that there’s a very, very broad and diverse viewpoint in any media merger. And so that’s a sort of a special case of a traditional consumer welfare standard but in a very, very narrow situation where they might look at a special issue.
But generally speaking, most agencies, especially in the larger markets, apply a consumer welfare standard. And then the real question is how broadly or narrowly you define the consumer welfare standard. Obviously, everyone now recognizes the consumer welfare standard is more than just price; it’s quality, it’s innovation, it’s experience, it’s the competitive process more generally. But then the broader question is should it also include other things? And so if you look at the German Facebook example, that would be an example of a very, very prominent agency looking at consumer welfare more broadly than maybe other European agencies or the United States.