WEBVTT - Trump Administration at Odds With FTC in Antitrust Case

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you inside and analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple podcast, SoundCloud

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<v Speaker 1>and on Bloomberg dot com slash podcast. This week, Pocom

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<v Speaker 1>was found two d seventy two million dollars by EU

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<v Speaker 1>antitrust regulators for predatory pricing that pales in comparison to

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<v Speaker 1>the one point one billion dollar find the EU imposed

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<v Speaker 1>last year on the chip maker. Of course, Qualcom is

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<v Speaker 1>appealing both rulings, just as it's appealing a decision by

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<v Speaker 1>a federal judge in San Francisco which would force the

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<v Speaker 1>chip maker to change its practices. In an unusual twist,

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<v Speaker 1>the Justice Department is now arguing against the Federal Trade Commission,

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<v Speaker 1>which brought the case, So joining me to help us

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<v Speaker 1>sort this all out. As Spencer Waller, professor of anti

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<v Speaker 1>trust law at the Loyola University School of Law, so,

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<v Speaker 1>Federal Judge Lucy co issued a sweeping, two three page

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<v Speaker 1>opinion that Qualcom had strangled competition for years. What remedy

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<v Speaker 1>did she order? So this case relates to the way

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<v Speaker 1>they license and sell their chips for what we would

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<v Speaker 1>call three G and four G smartphones. And so the

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<v Speaker 1>judge found that Qualcom monopolized and attempted to monopolize various

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<v Speaker 1>aspects of the chip market in terms of the way

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<v Speaker 1>it licenses technology, the way it refused to sell chips

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<v Speaker 1>or license to rival chip makers, and the way it

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<v Speaker 1>provided certain discounts to clients to sort of lockout competition.

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<v Speaker 1>What's controversial about her remedy is she found that this

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<v Speaker 1>was all illegal. She enjoyed the specific business behavior that

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<v Speaker 1>was illegal, but because it related to the old technology

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<v Speaker 1>three G and four G, she extended her injunction to

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<v Speaker 1>the ongoing sales and licensing of the five G technology.

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<v Speaker 1>So Qualcom basically passed to the license technology to rival

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<v Speaker 1>chip makers. It has to live up to its promises

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<v Speaker 1>to license all comers on fair, reasonable and nondiscriminatory terms,

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<v Speaker 1>and it has to avoid certain exclusive dealing arrangements and

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<v Speaker 1>certain sweetheart deals. So the Trump administration interfered even before

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<v Speaker 1>the judge's decision, asking her to consider limiting any penalties.

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<v Speaker 1>Now it's interfering again at the appellate stage. How unusual

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<v Speaker 1>is that it's not unprecedented, but it's highly unusual the

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<v Speaker 1>two agencies. This case was brought by the FTC that

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<v Speaker 1>as an independent agency with five commissioners appointed by the

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<v Speaker 1>President confirmed by the Senate, and the two agencies operate independently,

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<v Speaker 1>although they generally go out of their way to not

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<v Speaker 1>interfere with each other and generally not duplicate each other's efforts.

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<v Speaker 1>This is a rare, not completely unprecedented. This is the

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<v Speaker 1>most aggressive I've ever seen the d o J jumping

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<v Speaker 1>into an FTC case. Judge co refused to put her

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<v Speaker 1>ruling on hold while Qualcom appeals, so the chip makers

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<v Speaker 1>asking the Ninth Circuit to do that, and the Justice

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<v Speaker 1>Department is backing Qualcom, saying the case threatens national security.

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<v Speaker 1>How So, the Justice Department's position is that essentially Qualcom

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<v Speaker 1>is the most important maker of five G modem chips

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<v Speaker 1>and the related technology, and it's vital for national security

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<v Speaker 1>and energy policy, and the remedies should be limited so

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<v Speaker 1>as not to interfere with their innovation and the rollout

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<v Speaker 1>of five G secure technology. Is that an unusual position

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<v Speaker 1>to take? I know that last year the Trump administration

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<v Speaker 1>blocked a hostile takeover bid from rival chip maker Broadcom.

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<v Speaker 1>Is it unusual to be so protective of a company

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<v Speaker 1>like this. Well, there's two separate things. There's the antitrust review,

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<v Speaker 1>which is generally limited to what is the likely harm

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<v Speaker 1>to competition and for certain deals, there's a separate review

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<v Speaker 1>for national security and qual acquisition was blocked on national

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<v Speaker 1>security grounds. This is the first time I can think

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<v Speaker 1>of that the Justice Department has ever gone into court

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<v Speaker 1>to argue that an otherwise antitrust violation should be remedied

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<v Speaker 1>in limited ways because it also threatens national security. The

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<v Speaker 1>Antitrust Division has really always taken the decision that all

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<v Speaker 1>they do is antitrust. All they do is analyze effects

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<v Speaker 1>on competition, and this is a very different and important

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<v Speaker 1>and troubling step for them to jump in in this

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<v Speaker 1>particular way. It's also very troubling because right now the

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<v Speaker 1>technical issue is just whether the District cart judges order

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<v Speaker 1>should be stayed, But in doing so, the Justice Departments

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<v Speaker 1>partially arguing that the STC is not likely to prevail

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<v Speaker 1>on appeal. So they're really signaling to the court that

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<v Speaker 1>one agency believes that the case is no good and

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<v Speaker 1>the other agency just one the case below. How is

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<v Speaker 1>her order as far as you're concerned, do you think

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<v Speaker 1>it will be subject to reversal by the Nine Circuit? Oh,

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<v Speaker 1>it's a long and complicated opinion. Much of it turns

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<v Speaker 1>on on the facts, and you know the credibility of witnesses.

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<v Speaker 1>All I can say is it's hard for me to

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<v Speaker 1>predict what the Ninth Circuit says. I think if this

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<v Speaker 1>case gets in front of the Supreme Court, the FTC

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<v Speaker 1>will have some uphill slating. Supreme Court has been very

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<v Speaker 1>narrow in its views of Section two of the Sherman

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<v Speaker 1>Act about what is and is not monopolization. You mentioned

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<v Speaker 1>what's going on in the EU. Their law is more expansive,

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<v Speaker 1>it covers more things, They have better theories, and they

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<v Speaker 1>have different remedies, including fines, and so the EU stuff

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<v Speaker 1>is on pretty firm ground, and at least the U

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<v Speaker 1>S stuff is subject to debate. Although I find the

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<v Speaker 1>FTC case credible and based on existing law, including when

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<v Speaker 1>you pledge to a trade association or a standard setting

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<v Speaker 1>body that you're gonna license things in a certain way.

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<v Speaker 1>If they adopt your technology, you're to stick with that.

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<v Speaker 1>I want to ask you about the FTCs argument in

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<v Speaker 1>their argument opposing Qualcoms intervention. Here it says that the

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<v Speaker 1>argument that an anti trust remedy that reduces Qualcoms profits

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<v Speaker 1>constitutes an impermissible threat to national security would imply that

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<v Speaker 1>Qualcom is immune from antitrust scrutiny. Do you agree with that?

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<v Speaker 1>Does it go that far? Well, I mean, you know,

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<v Speaker 1>the agencies are starting to throw some sharp alpos at

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<v Speaker 1>each other. I agree with the stec's position on this.

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<v Speaker 1>This has come up many other times. For example, when

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<v Speaker 1>a T and T was being broken up, the antitrust

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<v Speaker 1>concerns prevailed over certain parts of the government who thought

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<v Speaker 1>that this would be bad for national security. This is

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<v Speaker 1>an antitrust case. There are other ways to pursue the

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<v Speaker 1>national security concerns. Well. Anti trust is becoming very much

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<v Speaker 1>a part of the conversation today, and certainly Qualcom is

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<v Speaker 1>keeping a lot of anti trust lawyers in business. Thanks

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<v Speaker 1>so much for joining us. That Spencer while or he's

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<v Speaker 1>a professor of antitrust law at the Loyola University School

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<v Speaker 1>of Law. Thanks for listening to the Bloomberg Law Podcast.

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<v Speaker 1>You can subscribe and listen to the show on Apple Podcasts, SoundCloud,

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<v Speaker 1>and on Bloomberg dot Com. Slash podcast. I'm June Rosso.

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<v Speaker 1>This is Bloomberg m