Speaker 1: Hello, and welcome to the Votes in Verdicts podcast hosted
Speaker 1: by Bloomberg Intelligence, the investment research platform of Bloomberg LP.
Speaker 1: In this podcast series, we talk about the intersection of
Speaker 1: business policy and law. My name is Jennifer Ree and
Speaker 1: I'm a senior analyst with Bloomberg Intelligence covering United States
Speaker 1: anti trust litigation and policy. So this isn't the first
Speaker 1: of the Votes in Verdicts podcast series, but it is
Speaker 1: the first focus on anti trust issues. So I'm going
Speaker 1: to call it the inaugural anti trust episode. And I'm
Speaker 1: really excited because I'm joined by Bill Alsayed, who not
Speaker 1: only has a really impressive career and wide variety of
Speaker 1: anti trust experience, but it is also a good friend. Currently,
Speaker 1: Bill All is the Senior Competition Fellow for Tech Freedom,
Speaker 1: which is a nonprofit, nonpartisan technology think tank launched in
Speaker 1: twenty twenty one that focuses on issues of internet freedom
Speaker 1: and technological progress. But before joining tech Freedom, Bill All
Speaker 1: was with the Federal Trade Commission, where he was the
Speaker 1: director of the Office of Policy Planning. That was during
Speaker 1: the Trump administration while the chairman was Joe Simons, and
Speaker 1: it was Bill All's second stint at the FTC, after
Speaker 1: having been an attorney advisor for Chairman Tim Murris from
Speaker 1: two thousand and one to two thousand and four. Now,
Speaker 1: on top of all that, he's also a practice law
Speaker 1: and is an adjunct professor for anti trust at George
Speaker 1: Mason University's Law School. Bill All, that is really impressive
Speaker 1: and it's a lot, and I really appreciate you being here.
Speaker 1: Thanks so much.
Speaker 2: Oh, I'm excited ecstatic here.
Speaker 1: Well, we'll have fun and I'm enough to try to
Speaker 1: slow down how much high talk, and Bill All's gonna
Speaker 1: have to speed it up so that we meet in
Speaker 1: the middle, right, all right, you know, before we jump
Speaker 1: into our anti trust topics, it would just be interesting
Speaker 1: to hear a little bit about your career path and
Speaker 1: how you got there and which role of all of
Speaker 1: those you liked the most. So tell us a little
Speaker 1: bit about yourself.
Speaker 2: So first, you know, I grew up in New York.
Speaker 2: And the only relevance of that is after college, where
Speaker 2: we both were at the same college down at Case
Speaker 2: Western and Cleveland, I came back to New York to
Speaker 2: work on PhD in economic and I found that I
Speaker 2: liked law and economics more so than you know, sort
Speaker 2: of microeconomic or financial economics. And this was in the
Speaker 2: late eighties early nineties, and.
Speaker 3: Giving away our age, I decided, I decided I wanted
Speaker 3: to do lawn economics as sort of a career path
Speaker 3: and thought, well, maybe I'll go to law school.
Speaker 2: And at the time, George Mason was the only school
Speaker 2: and I think still is the only school with a
Speaker 2: sort of an emphasis on lawn economics as sort of
Speaker 2: the framing of teaching and thinking about law. Now, many
Speaker 2: of the law schools now have a lawn economic scholar
Speaker 2: or two or three. But Mason, you know, now, the
Speaker 2: Anthon in Scalia law school at George Mason University, you know,
Speaker 2: has just many right and then and it was the
Speaker 2: it was the place to do law in economics. UH.
Speaker 2: And so I left graduate school to go to UH
Speaker 2: Law to learn the law and learn this framework. And
Speaker 2: when I was there, I discovered that I also liked
Speaker 2: the practical application of economics the law UH and and
Speaker 2: the field you do that in a sort of the
Speaker 2: regulatory fields or and I trust. And I had the
Speaker 2: great benefit to hook up with a great professor at
Speaker 2: at you know, the law school, Timururus UH. And then
Speaker 2: while a student worked at two great law firms, uh
Speaker 2: what was then Kylier Shannon, Rill and Scott with Jim
Speaker 2: Rill uh and then Morgan Lewis with guys like John
Speaker 2: shann Field and Kas Hobbs uh. And so I stayed
Speaker 2: in the field. UH. And you know, I had gone
Speaker 2: down to Washington with the idea of doing public service. UH.
Speaker 2: And so when when mrs became chair of the FDC,
Speaker 2: I went with him. We left, you know, more or
Speaker 2: less together, practiced together with not only with Tim, but
Speaker 2: with Christine Wilson, who's who's still a commissioner at the
Speaker 2: FTC for a few more days. You know, had the
Speaker 2: had the had the ability to work on, you know,
Speaker 2: projects that were not just you know, sort of deal work,
Speaker 2: but that were sort of interesting policy projects. When Joe,
Speaker 2: Joe Simons went back, I went went to the Commissioner's chair.
Speaker 2: I'd worked with Joe starting at Kalia Shannon and then
Speaker 2: worked with Joe in the in the Mrrors Uh commission.
Speaker 2: And and you know, Joe was kind enough to bring
Speaker 2: me back in the policy shop. And the policy shop
Speaker 2: was the most at least potentially the most fun job
Speaker 2: to have because I participated in the cases and the
Speaker 2: tough cases and the interesting cases, but didn't have any
Speaker 2: management responsibility for them, and spent most of my time
Speaker 2: with with my group and others at the Commission, you know,
Speaker 2: thinking trying to think forward about you know, how did
Speaker 2: we want the law to develop in certain areas, you know,
Speaker 2: thinking about policy, the policy statements that you know would
Speaker 2: impact how the Commission, how hopefully how the courts you know,
Speaker 2: thought about anti trust or thought about privacy. Now, we
Speaker 2: were handicapped a bit by you know, COVID. It knocked
Speaker 2: us out for a year, and you know, the like
Speaker 2: every agency, I think, you know, you're scrambling in that
Speaker 2: last year. You got people spread out, you'd manage, you know,
Speaker 2: trying to manage how to how to how to get
Speaker 2: things done that you have to get done, you know,
Speaker 2: and the policy stuff took a little bit of a
Speaker 2: back seat. So I regret that. But but that was
Speaker 2: the best, the best job because you were in the
Speaker 2: mix of interesting cases but also thinking about you know, policy,
Speaker 2: So that that was the best the best job.
Speaker 1: Yeah, I can imagine, and I do think I do
Speaker 1: feel like that Commission really got going and then COVID
Speaker 1: kind of just you know, slowed everything. Put the brakes
Speaker 1: on and there was just a lot less happening. And
Speaker 1: you know, I think that happened for all of us,
Speaker 1: but in particular You're right for you for the kind
Speaker 1: of work you were doing. It it sort of slowed
Speaker 1: what you were able to do and what you wanted to.
Speaker 2: Yeah, we had you know, you have to bring the
Speaker 2: cases because you can get a second chance, but policy
Speaker 2: you can do it. You know, when things settled down,
Speaker 2: and you know, I just I mean everybody this this
Speaker 2: was it wasn't clear at the time, but this was
Speaker 2: the beginning of this shift to you know, working from home,
Speaker 2: not having a central location, and the agency was managing it.
Speaker 2: And the agency, like everyone else, was managing you know,
Speaker 2: people who were sick. You know, you were losing people
Speaker 2: luckily just almost entirely just you know, sick, but you
Speaker 2: lost resources that people had to learn to manage people
Speaker 2: that they didn't see, you know for sure some months.
Speaker 2: So you know, it was a great job. A little
Speaker 2: bit of popes unfulfilled, but it was a great job.
Speaker 1: And you know, well, I think things have taken quite
Speaker 1: a different turn.
Speaker 2: Now.
Speaker 1: We're going to get into that a little bit. In
Speaker 1: a little bit. The turn that policy has now taken
Speaker 1: at the FTC since we have a new administration. But
Speaker 1: I want to first talk about this paper that you
Speaker 1: just published for Tech Freedom. I read it. I think
Speaker 1: it's a great paper. This is called Actual Potential Entrance,
Speaker 1: Emerging Competitors and the Merger Guidelines, And I think particularly
Speaker 1: for any antitrust geek, but anyone just interested in the topic,
Speaker 1: it's a great read. For me. I'm going to keep
Speaker 1: this as a resource because it's just such a great
Speaker 1: compendium of the history of the way this topic has
Speaker 1: been treated. So and we're going to talk about this
Speaker 1: because it's kind of a new focus for the current FTC.
Speaker 1: So talk to me a little bit about the paper.
Speaker 1: You know, what you've said in this paper and why
Speaker 1: you decided to write it.
Speaker 2: So the paper really is an outgrowth, excuse me, of
Speaker 2: work we were doing at the agency. So you know,
Speaker 2: when when we got there, there was this focus on
Speaker 2: perceived failures by the previous administrations, both democratic and Republican,
Speaker 2: you know, to to protect competition, and one concern was
Speaker 2: you'll have too many mergers and you didn't think hard
Speaker 2: about future competition, right, the acquisition of let's say, small
Speaker 2: firms that if allowed to develop outside of the context
Speaker 2: of an acquisition, would have been you know, the the
Speaker 2: new Titans to take on you know at the time
Speaker 2: and even you know, Google and Facebook. So there was
Speaker 2: this belief, not a part that people forgot about it,
Speaker 2: and also that the law was not favorable or you know,
Speaker 2: useful enough to bring these types of cases, you know,
Speaker 2: to stop acquisitions of small firms that might develop into
Speaker 2: larger innovative competitors. And I thought that was a mistake.
Speaker 2: I mean a number of I think anyone who's practiced,
Speaker 2: I think realizes that's a mistake that the law is there.
Speaker 2: These are difficult matters to bring because they're factual, and
Speaker 2: the facts are tough. You know, you have a you
Speaker 2: have an Instagram that has thirteen employees. You Facebook's acquiring them.
Speaker 2: Instagram is going to be a challenge to Facebook in
Speaker 2: a few years.
Speaker 1: Ye have to predict. Nobody can predict the future when
Speaker 1: it comes to these.
Speaker 2: So the ideas was to just go back and look
Speaker 2: at the law and look at the cases that we
Speaker 2: were bringing in this case, the FTC and and just say, okay,
Speaker 2: here's what we've done right outside of litigation, but through
Speaker 2: you know, the consent process, mostly what theories have we used,
Speaker 2: what theories maybe are missing? You know what, what what
Speaker 2: is there law out there that can be further developed?
Speaker 2: What you know it was It was really just intended
Speaker 2: at the time, you know, to inform both policymakers and
Speaker 2: practitioner both of the tools that were in a sense
Speaker 2: were available and the tools that had been used, and
Speaker 2: maybe identify areas where Okay, maybe that's an area that
Speaker 2: we don't that we haven't been able to capture, we
Speaker 2: haven't thought about, or the law isn't clear. Whatever, you know,
Speaker 2: what do we what do we do next? And so
Speaker 2: you know, we again we we didn't I didn't have
Speaker 2: a chance to sort of finish it as a as
Speaker 2: a commission project, but just sort of redid it, revised it,
Speaker 2: extended it, h and issued it just as a as
Speaker 2: a standalone paper. You know, there's there's no there's no
Speaker 2: confidential information in it. It just says, look, let's put things
Speaker 2: all in one place and use this as a resource
Speaker 2: to say, what are we doing, what are we missing?
Speaker 2: How can we think about this going forward? And and
Speaker 2: of course you know, also recognize that acquisitions of small
Speaker 2: firms maybe you know, beneficial products get to maybe products
Speaker 2: get to market faster or get the market at all,
Speaker 2: get impolved, yeah, get improved. So you know, let's not
Speaker 2: let's not stop things that are potentially beneficial. You know,
Speaker 2: let's let's in a sense balance what's the harm, what's
Speaker 2: the benefit? You know. So it was just it was
Speaker 2: almost as you said, it's a compendium, right, it really is.
Speaker 2: There's a lot of stuff and a lot of theories,
Speaker 2: and hopefully, you know, when they do merger guidelines, maybe
Speaker 2: they highlight some some things that could have been clearer
Speaker 2: in earlier guidelines. But but you know this, it's hard now,
Speaker 2: I think for people to say, you know, we have
Speaker 2: to do something new, totally new, right, because this I
Speaker 2: think includes somewhere near one hundred cases of potential competition
Speaker 2: Nason competition or something similar where the you know, the
Speaker 2: Commission just you know, protective future competition. Uh, you know,
Speaker 2: and it's it's a it's this constant part of the Antichrist, you.
Speaker 1: Know, it is, and I think there's a lot of
Speaker 1: focus on it today by the FTC and the Department
Speaker 1: of Justice too, when they're looking at these new mergers
Speaker 1: that are getting proposed because I think there's a little
Speaker 1: bit of trying to make up or the lost time
Speaker 1: right past regrets. You know, you mentioned Google and Facebook.
Speaker 1: You know, I think there are these regrets about having
Speaker 1: cleared Facebook, Instagram, and Facebook WhatsApp and having cleared Google
Speaker 1: Double Click, maybe Google YouTube, and so you know, obviously
Speaker 1: we saw this kind of in play recently because the
Speaker 1: Federal Trade Mission did try to block well, they at
Speaker 1: least sought a preliminary injunction right to block Meta from
Speaker 1: acquiring a small virtual reality company called Within that makes
Speaker 1: this fitness app. And Meta wanted this fitness app, and
Speaker 1: it was one of these potential competition theories. I mean, honestly,
Speaker 1: the first complaint it started as just a plain old
Speaker 1: horizontal deal. They said the two companies already competed. I
Speaker 1: they sort of pulled back on that, which I think
Speaker 1: was a difficult thing to try to to try to
Speaker 1: prove and show. But they did say that Meta would
Speaker 1: have been potential competition had they not bought the entity.
Speaker 1: Now they lost, but it was a failure on proof.
Speaker 1: It wasn't a failure on the legal theory, right, And
Speaker 1: I think the FTC kind of seeing that as a
Speaker 1: little bit of having lost the battle, but maybe won
Speaker 1: the war. I mean, what do you think about that decision?
Speaker 2: So, you know, as it all things yes and no, right, right,
Speaker 2: I mean, I agree they lost on the facts, and
Speaker 2: that's I think it actually was unfortunate they went forward
Speaker 2: on what appeared to me such weak facts because it
Speaker 2: could have affected and I think it did affect, you know,
Speaker 2: whether they sort of won or lost on the on
Speaker 2: the law. So here's you know, my sense is they're
Speaker 2: claiming victory or some sort of victory because the court
Speaker 2: accepted the idea of a you know, potential competition doctrine
Speaker 2: as as a standard part of sort of Section seven
Speaker 2: merger law. You know, I don't think that was ever
Speaker 2: in doubt, understand anybody who practices in this area. They
Speaker 2: also got the court to except that, you know, the
Speaker 2: the evidentiary showing of future entry by in this case
Speaker 2: meta you know, only had to meet sort of a
Speaker 2: reasonable probability standard, which is the standard of Section seven cases.
Speaker 2: But some cases in the late seventies early eighties adopted
Speaker 2: a higher standard of proof, something like clear proof, which
Speaker 2: I might uh aligned with, you know, beyond a reasonable
Speaker 2: doubt type type of thing, and and that that type
Speaker 2: of standard you know, clear uh, clear probability, clear likelihood.
Speaker 2: That's pretty high, right, because whether you enter a market
Speaker 2: or not uh as a as a business, you know,
Speaker 2: is often not so clear, right, you know, you have
Speaker 2: counter countervailing influence. So in that sense, the agency won.
Speaker 2: But but and here's where I think they really did
Speaker 2: hurt themselves, and hurt in a sense of the cause.
Speaker 2: If you're interested in this as an agency, reasonable probability,
Speaker 2: the court said, is well north of fifty percent. And
Speaker 2: that's pretty damn high it is. And the agency itself,
Speaker 2: I think does not actually use that standard when they're
Speaker 2: bringing their own consent order right when I would my goal,
Speaker 2: you know, in a as a as an agency person,
Speaker 2: was to get some case law or even guidelines clarification
Speaker 2: that said reasonable probability was in fact well south of
Speaker 2: fifty percent. And I you know how you measure these things.
Speaker 2: Who knows, but that you know that that we would
Speaker 2: accept significant uncertainty. And the court, both in this metal
Speaker 2: within challenge and in the most prior recent challenge that
Speaker 2: the FBC brought, you know, accepted, you know, more likely
Speaker 2: than not or well north of fifty percent, and that
Speaker 2: that is going to be a problem.
Speaker 1: Yeah, I think so, And I think.
Speaker 2: If they had better facts, the court might have thought
Speaker 2: harder about, you know, the potential magnitude of future harm
Speaker 2: or even you know, just does it really need to
Speaker 2: be above fifty percent? You know, you struggle with the facts.
Speaker 2: You know, you you make rough cutts, and you know, well,
Speaker 2: north of fifty percent is pretty high. I think in
Speaker 2: anti trust.
Speaker 1: Well, I think so too. I mean, I think that
Speaker 1: would be a very difficult thing to prove, especially if
Speaker 1: you think about the kinds of documents that are probably
Speaker 1: coming out in the evidence. Businesses talk about ideas all
Speaker 1: the time, they throw ideas around, they share them, they
Speaker 1: think about them, they develop them, and they go away
Speaker 1: all the time. And how to prove that, no, this
Speaker 1: was really going to happen. You have to be well
Speaker 1: down the road in introducing a product to be above
Speaker 1: that fifty percent. But let's talk about one where maybe
Speaker 1: I mean, I don't know because I only can see
Speaker 1: what's publicly available, but maybe the evidence is actually a
Speaker 1: little bit stronger. And that's a pending deal before the
Speaker 1: Department of Justice. I asked you about this earlier and
Speaker 1: whether you wanted to talk about it, and it's the
Speaker 1: Adobe Pigma deal. Again. I've researched this deal, and what
Speaker 1: struck me is the second I started to Google and
Speaker 1: look for information about it. The first thing I kept
Speaker 1: seeing was that Bigma was this new, scrappy company that
Speaker 1: was cutting into Adobe's market share, right. And if you
Speaker 1: see that, it's just jumping out at the page at you.
Speaker 1: And then you see that people say Adobe way over
Speaker 1: paid Pigma. You add that to it, which looks a
Speaker 1: little bit like the whole Facebook Instagram situation way back when,
Speaker 1: or WhatsApp. I wonder, now, we don't know what the
Speaker 1: evidence is really going to look like that will be
Speaker 1: before a judge, or that the d o J is
Speaker 1: looking at, But in my mind, it seems like that
Speaker 1: might be a stronger case.
Speaker 2: Well, I look, I think that's right. I think that's right.
Speaker 2: I don't you know, I won't be careful about talking
Speaker 2: about specific facts when neither of us have the underline record,
Speaker 2: But I agree that looks it looks stronger, it looks
Speaker 2: more poor. You know, to Adobe, you see of actual
Speaker 2: or there appears to be some actual effect you know,
Speaker 2: of of their of their entry. You just didn't see
Speaker 2: that in Metal Within, you know, in in Meta within
Speaker 2: it was a little bit of a you know, Meta
Speaker 2: Meta has these resources, they can enter any market. Mark
Speaker 2: Zuckerberg is interested, you know.
Speaker 1: In a lot of things they can do right.
Speaker 2: But but you know, so here I think it's a
Speaker 2: little different, and maybe I'd align it with uh, you
Speaker 2: know the visa plaid case DOJ brought in the Trump administration.
Speaker 2: You know, there was just it looked like there was
Speaker 2: more evidence of a focus on on the newcomer, the upstart, uh,
Speaker 2: the business model and seeing you know, some takeaway of
Speaker 2: of share or customers. You just you just didn't have
Speaker 2: that in the better and you know, it was it
Speaker 2: was just too speculative. It was you know, I don't
Speaker 2: I don't like to be critical of the agency, even
Speaker 2: when you know you could be critical because you know,
Speaker 2: you're when you're there, you're you're trying to put you know,
Speaker 2: develop the laws. Sometimes you know, you take a risk.
Speaker 2: But but that that seemed almost preordained. You know, Facebook
Speaker 2: wants to do a deal. Well, we don't like Facebook. Uh,
Speaker 2: this is the one in front of us. We better
Speaker 2: we better attack it, and you know, because otherwise we're
Speaker 2: gonna have some you know, some explaining to us to why.
Speaker 2: But I you know, I think it was a mistake
Speaker 2: just you just didn't see the evidence that you see
Speaker 2: in that. Potentially you've see in these other deals where
Speaker 2: products are further along or they're more in the fourth folcus,
Speaker 2: we see that, so I you know, they they may
Speaker 2: get a better result. This is still going to be a.
Speaker 1: Hard case, A hard case, absolutely. I mean, as you
Speaker 1: said that over fifty percent standard is really tough, and
Speaker 1: it is. I think that is going to be a
Speaker 1: hard case. We'll have to see what happened. I mean,
Speaker 1: there isn't a suit yet. It's still an investigation, so
Speaker 1: we don't even know that the Department of Justice will
Speaker 1: The news has suggested that there's been speculation, but we'll
Speaker 1: we'll have to see what happens there. I want to
Speaker 1: move on to another topic because I know that it's
Speaker 1: something you want to talk about, and I think it's
Speaker 1: really interesting, and I also think it's something that investors
Speaker 1: are not paying enough attention to. And that is Section
Speaker 1: five of the FTC Act. And so you know, we
Speaker 1: have a lot we have non anti trust folks probably
Speaker 1: listening to this, and so why don't we at least
Speaker 1: start by why don't you talk about what Section five is,
Speaker 1: what it does, and what's going on here?
Speaker 2: Sure, so, you know, we've been talking a lot about
Speaker 2: the FDC, and the FDC in fact, is not enforce
Speaker 2: the Sherman Act, but it enforces Section five of the Act,
Speaker 2: which prohibits unfair methods of competition. It also enforces the
Speaker 2: Clayton Act. But but Section five is believe, correctly, given
Speaker 2: what the courts have said, you know, to be broader
Speaker 2: than the Sherman Act prohibitions and arguably broader than the
Speaker 2: prohibitions of the Clayton Act, including the anti merger provisions,
Speaker 2: and so to the you know, some people believe the
Speaker 2: law has developed over the past forty years in a
Speaker 2: way unhelpful to plaintiffs, and the agency under new leadership
Speaker 2: has decided, I think, to reinvigorate Section five law as
Speaker 2: a way around the development of the law in the
Speaker 2: development of Shermanac law and Clatenact law. Right, So, for
Speaker 2: roughly forty years, the FDC enforced Section five in a
Speaker 2: manner generally consistent with the other anti trust laws. But
Speaker 2: that was a choice, right, It was a policy choice
Speaker 2: because of concern that too aggressive enforcement would chill pro
Speaker 2: competitive conduct. Well, you know, the new folks differ with
Speaker 2: respect to what conduct should be legal, what conduct should
Speaker 2: be benefit should be viewed as beneficial, and have decided
Speaker 2: to instance, reinvigorate Section five law. They've adopted a view,
Speaker 2: a policy statement of Section five that makes clear that
Speaker 2: it is distinct and separate from the Sherman Act or
Speaker 2: the Clayton Act, that it allows them to attack and
Speaker 2: prohibit conduct that does not meet the requirements of Sherman
Speaker 2: Act or even Play Act type cases. So this is
Speaker 2: a to me, this is a end run around. You know,
Speaker 2: the development of the case law in the last roughly
Speaker 2: forty years that has focused, I think appropriately on not
Speaker 2: only the harm right but harm to competitors. But you know,
Speaker 2: let's say, where's the harm to competition? You know, what
Speaker 2: are the benefits of this conduct? And they just through
Speaker 2: this policy statement, you know, arguably throw all that development
Speaker 2: out and return to what I believe is you know,
Speaker 2: nineteen sixties, you know competition law, you know broadly defined
Speaker 2: and say all these things that you know, the course
Speaker 2: have decided we're not harm full under the Sherman Act. Well,
Speaker 2: we don't need to meet those standards. We're going to
Speaker 2: show you they're harmful under some other process that turns
Speaker 2: on in a sense, exploitation.
Speaker 1: Yeah, and I want to emphasize why that's really important
Speaker 1: to big business because in my mind, so I've been
Speaker 1: writing for two years. You know, a company like Amazon
Speaker 1: that's had all sorts of criticism right about its conduct, Well,
Speaker 1: you know, I think it's pretty safe. I think it's
Speaker 1: pretty safe because under the Sherman Act. Well, it's just
Speaker 1: not clear that self preferencing is an anti thread, that
Speaker 1: that's a theory that that's an anti trust harm. Hey,
Speaker 1: it's really hard to challenge. Let's say, most Favored Nation's
Speaker 1: clause are predatory pricing, the things you hear critics talk about.
Speaker 1: And I keep saying that. But then all of a sudden,
Speaker 1: here comes this policy statement on section five. And you
Speaker 1: know what, that changes everything because I see the lawsuit
Speaker 1: against Amazon being under section five, and now all of
Speaker 1: a sudden, the FTCs made it a lot easier to
Speaker 1: actually find liability in these different actions that Amazon allegedly
Speaker 1: has undertaken that the FTC doesn't like. And and merger.
Speaker 1: It affects mergers too, right because you can say, well,
Speaker 1: the merger may not violate the Clayton Act. But you
Speaker 1: know it's unfair under Section five. And now all of
Speaker 1: a sudden, the FDC can really go after anything it
Speaker 1: doesn't like.
Speaker 2: No, I think that's exactly right. And you know we've
Speaker 2: both we've both read about lawsuits, you know, in the
Speaker 2: pipeline against Amazon. Sure, and I agree with you. They're
Speaker 2: gonna you know, they're not going to be monopolization case.
Speaker 2: They're not right, They're going to be Section five, you know,
Speaker 2: exploitive coorse unfair.
Speaker 1: You know what did Christine Wilson say? It was just
Speaker 1: a string of adjectives exactly.
Speaker 2: I mean it's always been a string. It's always been right,
Speaker 2: which is why they got away from it. So that's
Speaker 2: what that's what you're going to see. And uh, you
Speaker 2: know it's going to be interesting. I assume they're going
Speaker 2: to bring in their administrative system so the Commission can
Speaker 2: write an opinion about you know, its interpretation of its
Speaker 2: governance Statute and then and then you know, try to
Speaker 2: get that adopted, you know, buy an appellate court. Right.
Speaker 1: But you see, that's that's the lynch pin. I mean,
Speaker 1: that's you know, I look at this and I think
Speaker 1: it's so long as it's a defendant like Amazon that
Speaker 1: has the time and the money maybe in the wherewithal
Speaker 1: to stick it out. Because I want to lay out
Speaker 1: again the way the system works is if they sue
Speaker 1: internally in their administrative system, it's their own administrative law
Speaker 1: judge that makes sort of the trial court decision, and
Speaker 1: the first appeal goes to the commissioners. And that's where
Speaker 1: the commissioners get to do what Bill I'll just describe.
Speaker 1: They can write their own they can do whatever they want,
Speaker 1: whether the alj goes against them or not. They can reverse,
Speaker 1: they can write the opinion they want. But now the
Speaker 1: defendant can go to federal court. And you know, that's
Speaker 1: where I think things could change a little bit.
Speaker 2: Well, I agree, I think. I mean, look, that's what
Speaker 2: did happen in the as you know, in the late seventies,
Speaker 2: early eighties. So it brought some expansive Section five cases,
Speaker 2: and the appellate courts said, you know, too too far,
Speaker 2: you know, not enough evidence, too far of a legal theory.
Speaker 2: And that's in fact, you know why why the agency
Speaker 2: sort of pulled back, you know, because it didn't have
Speaker 2: a clear principle of what what what's going to fly
Speaker 2: and what's not going to fly?
Speaker 1: And I think there still isn't a clear and there is, Yeah,
Speaker 1: there just isn't exactly. I mean, it's the whole. I'll
Speaker 1: know it when I see it, right.
Speaker 2: And the interesting thing is, so you know, look, in
Speaker 2: the ordinary course, they get some different they get some
Speaker 2: difference in interpreting their own statute. But over the last
Speaker 2: forty years we've seen the courts be less willing to
Speaker 2: grant deference to agency interpretations of their own statutes. So
Speaker 2: I think the combination of that development or administrative west
Speaker 2: side and the you know, now clear divergence between sort
Speaker 2: of Sherman Act or anti trust law. From this view
Speaker 2: of unfair methods, the competition is going to hurt them, right,
Speaker 2: I mean, you know, it's just too different for basically,
Speaker 2: you know, it's a different analysis for the same conduct
Speaker 2: in part depending on which agency pursues, right, And that's
Speaker 2: that can't be good.
Speaker 1: It doesn't, it doesn't, It isn't good, And it provides
Speaker 1: no guidance to businesses as to what they should and
Speaker 1: shouldn't do, what what conduct is or isn't legal going forward.
Speaker 1: You know, there are some other things we want to
Speaker 1: talk about too, and I want to move on because,
Speaker 1: you know, I feel like we're there's so much to
Speaker 1: talk about, and there's a lot of stuff that's kind
Speaker 1: of under the radar, and I feel like that's what
Speaker 1: we're talking about, and I'm glad we are, because these
Speaker 1: under the radar things that are happening will impact publicly
Speaker 1: traded companies and so generally, just as a general matter,
Speaker 1: both the Department of Justice and Federal Trade Commission are
Speaker 1: just erecting a lot of hurdles to completing deals. You know,
Speaker 1: included in those I think is no early terminations, which
Speaker 1: you're going to talk about in a second. I think
Speaker 1: there's sudden distaste for private equity buyers, which I know
Speaker 1: you've got some opinions on. So let's move into that
Speaker 1: and what's going on there.
Speaker 2: So let me let me say one thing just to
Speaker 2: tie off what you said. Sure, if they're successful with
Speaker 2: this approach on section five, and in some of these cases,
Speaker 2: you know, you're looking at a turnback to an m
Speaker 2: and a environment that looks like the nineteen sixties and
Speaker 2: not the nineteen nineties. Right, we're turning the clock back
Speaker 2: not a few years, but decades, And you know, other people, deal, lawyers,
Speaker 2: you know, investors, They're going to have a better sense
Speaker 2: of what the nineteen sixties look like than me and you.
Speaker 2: But that's the kind of change we're looking at.
Speaker 1: You know, you know, blal in so many ways, our
Speaker 1: countries moving back to the nineteen sixties, not just anti trust.
Speaker 2: Yes, so honest, yeah, let's.
Speaker 1: Talk about let's talk about what's happening on.
Speaker 2: This other stuff. Right. First, the agency not only are
Speaker 2: they in particular the FDC, but this is true of
Speaker 2: both agencies. Right, Not only are they trying to make
Speaker 2: changes on the substance of the law, right, they are
Speaker 2: trying to make changes in the process or procedures they
Speaker 2: follow right as a means, I think right of just
Speaker 2: throwing up hurdles to in particular transact. Right. And that's
Speaker 2: this idea of you know, heart Scott. Right, most of
Speaker 2: us doing this and listening here, know that you know,
Speaker 2: most deals used to that require a heart Scott filing
Speaker 2: notifications of the government would get cleared in about two weeks.
Speaker 2: They were quickly. They see there was no issue. Well,
Speaker 2: the truth is that that's still true today. Right, most
Speaker 2: deals don't have issues. You don't see a lot of
Speaker 2: cases coming out of the agencies. But but they've decided
Speaker 2: just to stop, particularly the FDC decided to stop granting
Speaker 2: early termination of transaction. And part of that, you know,
Speaker 2: they justified that we don't have enough people, We're so busy,
Speaker 2: we just can't do it. Part of it is I think, well,
Speaker 2: let's see, maybe someone will knock on the door on
Speaker 2: day twenty nine in the waiting period and tell us
Speaker 2: something we didn't know, So we want to just use
Speaker 2: that whole period well, or.
Speaker 1: Walk away from the deal because they don't want to
Speaker 1: wait the thirty days, yeah.
Speaker 2: Yeah, or just let's put some hurdles in the way
Speaker 2: of things, you know. And some of this too extends
Speaker 2: to you know, hedge funds and private equity funds who
Speaker 2: really are doing often doing acquisitions, whether partial or full,
Speaker 2: you know, for reasons not at all related to competitive overlap,
Speaker 2: but but you know, sort of good investment opportunities if
Speaker 2: they if they get in there, and and you know, instance,
Speaker 2: fix up companies who have gone astray. Right, Most private
Speaker 2: equity firms my recollection, are not buying highly successful businesses,
Speaker 2: looking at businesses who have hit some kind of rough
Speaker 2: spot maybe who needs some capital, maybe who needs to
Speaker 2: get out of the public markets maybe who needs some
Speaker 2: new management, you know, to turn them around. And the
Speaker 2: agency uh doesn't have that perspective.
Speaker 1: They not at all.
Speaker 2: They think these guys are you know, vultures, laying off people,
Speaker 2: lowing companies up with debt, you know. And and they, yeah,
Speaker 2: they don't they don't think about the Okay, what was
Speaker 2: the butt for world, right, It wasn't that. You know,
Speaker 2: these companies continue as you know, titans of industry, they fail,
Speaker 2: you know, and and private equity, you know, sort of
Speaker 2: turns around some percentage of them, right, and has the
Speaker 2: incentive to do that. Uh. And they're just you know,
Speaker 2: they're just uh slamming the door on these guys. You know,
Speaker 2: they're they basically don't want to use them as rescuers
Speaker 2: of divested assets. They you know, they they just have
Speaker 2: they just have a different perspective private ACA.
Speaker 1: Yeah, you know. And the crazy thing, it's not just different,
Speaker 1: it's a complete one eighty because if you go back
Speaker 1: five or six years, you'll find articles by FTC folks
Speaker 1: talking about how great private equity is as a buyer
Speaker 1: because oftentimes it represents new entrant. Yeah, right, And that's
Speaker 1: a good thing.
Speaker 2: New entrance, new entrants.
Speaker 1: New money, new investment, new management. Then that's a good thing.
Speaker 1: And so they talk about how they're happy, and they
Speaker 1: prefer that. I know, when I was a lawyer, I
Speaker 1: think most of our divestiture buyers when I worked on
Speaker 1: deals were private equity and the agency was perfectly happy.
Speaker 1: And now all of a sudden, absolutely not. So it's
Speaker 1: just and that puts up hurdles because sometimes the only
Speaker 1: buyer out there is private equity because the act that
Speaker 1: the strategic buyers have their own interest problems.
Speaker 2: I mean, it's a very strange thing. I mean we
Speaker 2: I think, as you know, we want to see active
Speaker 2: management of companies. And I got to tell you from
Speaker 2: my experience, there is nobody more active than you know,
Speaker 2: Apollo or Blackstone. I mean right right, you know, you
Speaker 2: know they get in there and they want results and
Speaker 2: it's you know, it is it is what you want
Speaker 2: to see in in companies that have grown stagnant. You
Speaker 2: want people who you know, we're going to turn this
Speaker 2: company around, We're going to make a profit, We're going
Speaker 2: to put it back on them.
Speaker 1: And which is which is supposed to be good for inchant?
Speaker 2: I mean you think about the the statism of you know,
Speaker 2: Japanese companies for example. You know, again not the data,
Speaker 2: but you know remember the fear in the eighties about
Speaker 2: Japanese company as well. You know, they're they have a
Speaker 2: different model there. You know, it's not this dynamic innovative approach.
Speaker 2: You know, creative destruction. And where's the PANM been in
Speaker 2: the last forty years, right, you know Europe, Right, you know,
Speaker 2: the economy is dynamic here because of this idea of
Speaker 2: you know, getting in, you know, letting go of assets
Speaker 2: that aren't working, but but but also fixing up the
Speaker 2: ones that you can and taking a risk. And you
Speaker 2: know this is this is just a horrible, horrible chain.
Speaker 2: You know, it's protective. It is literally protect the weaker,
Speaker 2: protect the less innovative company.
Speaker 1: Yeah, it's a very European approach, I think. You know,
Speaker 1: now we're running out of time, but there's just one
Speaker 1: last talk, a big topic because we're talking about private equity.
Speaker 1: You know, we do have the Department of Justice coming
Speaker 1: down on some private equity entities under Section eight. We're
Speaker 1: now we're talking about another law, but I'll talk about
Speaker 1: what's going on there.
Speaker 2: So this is an interesting question and I haven't. I
Speaker 2: mean I have somewhat different views on this, I mean
Speaker 2: more aligned with the OJ. But but first of section eight,
Speaker 2: the klit NAK prohibits interlocking director so prohibits, by its terms,
Speaker 2: a person from serving as a director of two or
Speaker 2: more competing companies. Right, it's an old statute back from
Speaker 2: the nineteen.
Speaker 1: Fourteen really dormant, the dorm but you know.
Speaker 2: Created in response to the trust that developed, you know,
Speaker 2: back back then. Now my view, you know, I it
Speaker 2: comes comes from tim Uorris, comes from something Timuarrris told me.
Speaker 2: He said Bill Baxter, and Bill Baxter was a giant.
Speaker 2: And then I trust law, you know, fixing it in
Speaker 2: a sense in the Reagan administration, he says, Bill Baxter
Speaker 2: said that section eight is the most important anti trust law. Right. Interesting,
Speaker 2: I said, okay, if Bill Baxter thinks this, then well
Speaker 2: I got to think part about it, and you know,
Speaker 2: and I agree, Right, why do you want a person
Speaker 2: sitting on the board of do competing companies where there
Speaker 2: is at least the temptation to share information or to
Speaker 2: share directors? Right now, the agency, the DJ has pursued
Speaker 2: this in its most broadest scope, right by looking at
Speaker 2: I think two things where the law is either not
Speaker 2: clear or could use some improvement. First, because look, we
Speaker 2: don't see situations where the same person is sitting on
Speaker 2: the board, but we see situations where you know, the
Speaker 2: same entity of private equity. As an example, private equity
Speaker 2: entity has it's you know, partners sitting on the boards
Speaker 2: of competing companies, and so it's not you know John
Speaker 2: Smith on both but it's John Smith and you know
Speaker 2: Jane Smith, and look they work down the hall. We
Speaker 2: think this is the same person, right and you know,
Speaker 2: there's some support for that idea. My experience is that
Speaker 2: private equity firms are very sensitive to this issue, you know,
Speaker 2: and aren't you know, directing companies through through their individuals.
Speaker 2: But at least it's you know, quasi sensible, I think,
Speaker 2: or at least something to be sensitive to. The Other
Speaker 2: thing I noticed from the DJs actions, though, is they
Speaker 2: have a very potentially a very wide definition of what
Speaker 2: is a competitor, right sure, And and that I think
Speaker 2: is a problem because you know, you can be you know,
Speaker 2: pharmaceutical companies as an example, right is it? You know,
Speaker 2: is every pharmaceutical company a competitor because they do pharmaceuticals. No, right,
Speaker 2: they do.
Speaker 1: Different certainly not purposes, they do.
Speaker 2: Different things, right. So there, I think this potentially expansive
Speaker 2: definition of you know, who's a competitor is hurting right
Speaker 2: again again the same reason you want private equity. Look,
Speaker 2: private equity goes to investment companies. They put people on
Speaker 2: the board to manage that investment. And if you're cutting
Speaker 2: them out of managing their investment, you know, I think
Speaker 2: again that leads to the you know, some some loss
Speaker 2: of dynamoe right now, you know you can get around it.
Speaker 2: You can. You can find someone like minded and sponsor
Speaker 2: them for the board, and you know, maybe you get
Speaker 2: eighty percent or seventy percent of what you would have got.
Speaker 2: But you know you want. The way I put it is,
Speaker 2: you know you want you want your mouth where your money.
Speaker 2: You want you want to be able to say what's
Speaker 2: going on here, move faster, you know, decide whether we're
Speaker 2: going forward or not with this product, you can serve resources.
Speaker 2: So I think the agency again, and you know they're
Speaker 2: not bringing these cases. These are very simple cases to
Speaker 2: win if you're correct on the fact, right, you can
Speaker 2: you just cannot be on the board of.
Speaker 1: To compete they're just pushing people off.
Speaker 2: So they're just basically pushing people off boards, right because
Speaker 2: you know, I mean private equity doesn't want to get
Speaker 2: into litigation. Yeah, you know, and I think but again
Speaker 2: I think it's a it's a it's a problem. And now,
Speaker 2: you know, you saw it ten years ago, the ten
Speaker 2: fifteen years ago, the FTC did a little bit of
Speaker 2: this in the text space, right, and and it was
Speaker 2: sort of legit. You know, you might have had somebody
Speaker 2: on the board of Google and Apple, well you know
Speaker 2: fifteen years ago or twenty years ago when they got
Speaker 2: on the board, they weren't sort of in the same space.
Speaker 2: Over time, it looked like they were moving into the
Speaker 2: same space. And so okay, you want to be sensitive
Speaker 2: to the same person on the board, but you also
Speaker 2: want to be sensitive to, you know, removing people who
Speaker 2: are going to you know, direct these companies, you know,
Speaker 2: to produce.
Speaker 1: Where it does more bad than good, where it may
Speaker 1: be actually beneficial to have that person.
Speaker 2: It's just the hostility in a in a way that
Speaker 2: I think is unwarranted. But you know, like I said,
Speaker 2: I agree, I agree, I do too that you know,
Speaker 2: if Bill Backs said it, I got a seriously, then
Speaker 2: me too. You know I got app right profile.
Speaker 1: Well, you know the thing is, I think we're out
Speaker 1: of time, so you're really lucky you don't have to
Speaker 1: answer our silly, stupid question. But we'll do this again
Speaker 1: and I'll make sure next time you have to answer
Speaker 1: the silly stupid.
Speaker 2: Oh answer it.
Speaker 1: Well, no, we don't have time. We're done, so all
Speaker 1: I can stay stay tuned for Bill all to answer
Speaker 1: a silly stupid question down the road. And thank you
Speaker 1: very much. I think that was super interesting.
Speaker 2: It was fun. I hope it was fun. But the
Speaker 2: antrest world may change, you know in two years. I
Speaker 2: think so too, and that's gonna you know, your investments
Speaker 2: today may be affected by that down the road, you know,
Speaker 2: bad or good or now yeah yeah, well you know, potentially.
Speaker 1: Bad, potentially bad. All right, well, thanks so much.
Speaker 4: All right, thank you, thank you everybody.
Speaker 2: H