Charting the future: Marketplace at Aspen Ideas 2018

"The government is often the underdog," the U.S. assistant attorney general says

David Brancaccio and Danielle Chiriguayo Jun 27, 2018
“We don't have a 24-hour dedicated news channel to go out and spin your case to the American public and judges and others as some merging parties might,” says Makan Delrahim, pictured above at the Aspen Ideas Festival, of the loss of the AT&T-Time Warner case. Michael Lipkin/Marketplace
Charting the future: Marketplace at Aspen Ideas 2018

"The government is often the underdog," the U.S. assistant attorney general says

David Brancaccio and Danielle Chiriguayo Jun 27, 2018
“We don't have a 24-hour dedicated news channel to go out and spin your case to the American public and judges and others as some merging parties might,” says Makan Delrahim, pictured above at the Aspen Ideas Festival, of the loss of the AT&T-Time Warner case. Michael Lipkin/Marketplace

Top executives, policymakers and artists gather at the Aspen Ideas Festival every year to share their expertise with the public. This year, the focus is on globalization, free speech and how we’re adapting to an increasingly technical world. Marketplace is at Aspen focusing on what those experts are saying about the future. What’s next for the Trump administration’s antitrust efforts? Or the potential for a world without credit cards? Here’s the first conversation in our series. 

It’s still not clear whether the federal government will appeal the decision allowing AT&T and Time Warner to merge. Especially after the federal judge in the case strongly hinted the government shouldn’t even try.

Makan Delrahim is the assistant attorney general of the United States and chief of the Justice Department’s Antitrust Division. He sat down with Marketplace Morning Report’s David Brancaccio to talk about antitrust cases in light of the AT&T-Time Warner merger and the Department of Justice’s role in data privacy. The following is an edited transcript of their conversation. 

David Brancaccio: So what did you learn from the way it went down with AT&T-Time Warner?

Makan Delrahim: Well, we learned the government is often the underdog in a lot of these cases, and we’re still considering our next steps and whether or not the government will appeal.

Brancaccio: You’re the underdog. You’re the government — in some sense, do you feel you were somehow outgunned?

Delrahim: Well, look, we have some of the best and most dedicated public servants who tried this case, but we don’t have the same resources available to us. We don’t have a 24-hour dedicated news channel to go out and spin your case to the American public and judges and others as some merging parties might.

Brancaccio: Now you may have seen this quote from a Georgetown law person: “If the AT&T decision is not going to be a chill on antitrust enforcement, I don’t know what is.” You don’t agree with that?

Delrahim: You know, I don’t know if it’s on enforcement. It depends on if other judges follow the same evidentiary rulings this particular judge did and also dismiss the types of evidence we presented. I think eight out of 10 judges may have treated this case differently.

Brancaccio: All right, a different case. Maybe you want to try to don your law school professor hat — you taught at Pepperdine, right?

Delrahim: I did, as an adjunct.

Brancaccio: Yeah, so I don’t know if we’re going to fall deeply into the weeds here, but the big American Express case of this week involves something, an important distinction. What the pros call it is the “two-sided platform.” And in the case of American Express, it’s the merchants and American Express getting into this dispute, but also the other part of the platform are the customers who use American Express cards. But there’s something important about that distinction?

Delrahim: There is, and it’s important because our new economy is seeing more and more of those types of business models. Uber, Airbnb, are just two examples.

Brancaccio: Well, with Uber, you have the drivers as an important party and the rider.

Delrahim: Yes. And so the technology allows for that transaction to occur, and they have an effect on each other. The more drivers you have, the more likely you’re going to have more riders because it’s easier to find a driver. The more consumers you have, riders you have attached to that service, the more drivers you will have. So there’s an interdependence of those two which creates that market. And the court, you know, it’s an important decision in recognizing some of these efficiencies of some of these business models.

Brancaccio: The court said it’s OK if American Express compels the merchants who use American Express — it’s OK for American Express to have the rule that you can’t recommend to use the other card.

Delrahim: It showed that the government didn’t prove an anti-competitive effect of that practice. That we showed a price effect, but not an output-diminishing effect of that practice. So it didn’t say that, you know, it’s completely per se legal. It provided a higher test for the government and for plaintiffs to show in order to find a violation.

Brancaccio: So as you say, other companies, perhaps some tech companies, are saying, “Wait a minute, I’m one of these two-sided platforms, I wonder if I could take advantage of this ruling?” They’re probably thinking about that right now.

Delrahim: I think that people need to be very careful of the application of this case to every other business. Everybody is going to try to argue, like you do in court cases, that somehow you should benefit from this case, and every company and each practice is different. Unquestionably, there will be some practices which will now be treated just like American Express was treated by the court. But that doesn’t give a free pass to every company that is out there.

Brancaccio: Now more generally, when you look at potential mergers and acquisitions, you’re more of a fan of making some requirements up front involving the structure of these deals to make sure that the result preserves competition as opposed to an ongoing watchdog role for the Justice Department?

Delrahim: So you’re getting into the distinction of what some would call, what’s called behavioral remedies to an otherwise illegal merger —

Brancaccio: Exactly.

Delrahim: — as opposed to structural. I view my role as a law enforcement role in the way Congress has allowed it [and] said, “Look at this merger. If there’s a substantial lessening of competition, that’s the legal test, then the transaction is illegal.” The antitrust division has gotten into this practice of saying, “If you promise certain things and now we start microengineering an industry which is dynamic” and saying that you must provide x number of resources, you must provide refrigerators to your competitor and their chicken coop —

Brancaccio: You don’t like that.

Delrahim: I don’t think it’s the role that Congress has given us. I think the role is you go in, if there’s problematic aspect of a transaction, you divest and you let the market decide what the prices are now.

Brancaccio: Now, people love their technology, but increasingly there’s concern that the big tech and social media companies are getting too powerful. I mean that’s your line of work, right, policing companies that get too powerful? Or is about just worrying that consumers are getting the best price?

Delrahim: It’s not so much the best price. The price is determined by the competition. So the idea is: the greater the competitive process, the better the price ultimately will be, or the better the products will be for the consumer. And that’s where you have fair competition in the marketplace. Our job is to police that. It isn’t to keep companies from getting too big. If they’re better at what they do, if customers like what they do, more power to them. The free market system encourages that. And we shouldn’t punish them once they have reached a certain level of success. If they are too big though, they also got to be careful. They can’t take anti-competitive practices that harms competition, which ultimately harms consumers. A perfect example of that was certain practices Microsoft was taking 20 years ago when they had 95 percent of market share of the operating system, and they were trying to prevent a new competition that would have threatened that through the internet browser, and the Justice Department brought a case, and there was a Court of Appeals affirmation of that.

Brancaccio: To what extent is this big debate over privacy, as these companies are getting bigger, is that your problem over in the antitrust division?

Delrahim: We would only think about the privacy effects to the extent it affects the competitive elements. With respect to online, the consumers show sometimes their preferences for different products. Consumers might begin valuing their privacy more than they do right now. Right now, they’re willing to trade where they’re going in exchange to use Waze for free. I do that every single day. But maybe there’s a point to which I may not be comfortable in providing that type of information.

Brancaccio: There’s all this innovation going on in the tech space — do you need to innovate? Do you need new tools to think about ways to spot antitrust and anti-competitive behavior, in for instance, the tech industry?

Delrahim: We always have to think about how we do our job and do it better, more efficiently and more effectively. There needs to be predictability — that’s what the Justice Department provides — of the laws. And we are, by the same token, the business community needs to have a certain level of stability and predictability of what the laws and rules of the games are. But that doesn’t mean with new economic thinking, we don’t change our framework for an analysis of what anti-competitive conduct is. And over the many years, I’d say the last 40 years or so, there has been continued new thinking in certain areas, whether it’s been bundling or loyalty rebates or how we treat intellectual property licensing, and the practices the Justice Department has changed since then.

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