WEBVTT - A Year End Antitrust Special: Google, Kroger-Albertsons, and the FTC's Non-Compete Ban 0:00:02.400 --> 0:00:10.680 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Law. 0:00:10.800 --> 0:00:13.560 What does a prosecutor have to prove in order to 0:00:13.600 --> 0:00:16.720 get a Rico conviction? Tell us why this Solicitor General 0:00:16.800 --> 0:00:19.040 is sometimes referred to as the tenth Justice. 0:00:19.040 --> 0:00:22.200 Interviews with prominent attorneys in Bloomberg Legal Experts. 0:00:22.239 --> 0:00:24.959 That's Jennifer k for Bloomberg Law. Joining me is former 0:00:24.960 --> 0:00:26.840 of federal prosecutor Robert Mins. 0:00:26.600 --> 0:00:29.880 And analysis of important legal issues cases in headlines is 0:00:29.880 --> 0:00:32.879 the toughest hurdle for prosecutors. Proving Trump's intent. 0:00:33.040 --> 0:00:36.360 Alito took on Congress, saying Congress has no power to 0:00:36.440 --> 0:00:37.720 regulate the Supreme Court. 0:00:37.880 --> 0:00:44.680 Bloomberg Law with June Grosso from Bloomberg Radio. Welcome to 0:00:44.720 --> 0:00:47.440 a special edition of Bloomberg Law. I'm Ami Morris in 0:00:47.520 --> 0:00:50.320 for June Grosso. This year saw a number of high 0:00:50.400 --> 0:00:53.720 profile antitrust cases, so ahead on this show, we're going 0:00:53.760 --> 0:00:55.800 to take a look back at some of the big ones, 0:00:56.160 --> 0:00:59.800 including the blocked merger between Albertson and Kroger and the 0:00:59.800 --> 0:01:03.600 fan tie up between luxury brands Capri and Tapestry. We'll 0:01:03.600 --> 0:01:06.280 also look ahead to what President elect Donald Trump re 0:01:06.520 --> 0:01:09.440 entering the White House could mean for anti trust regulation 0:01:09.560 --> 0:01:12.360 moving forward. All that on the way on this special 0:01:12.480 --> 0:01:15.319 edition of Bloomberg Law. Now, what we're going to start 0:01:15.319 --> 0:01:19.840 with is non compete employment agreements. For decades, they've prevented 0:01:19.840 --> 0:01:23.640 all sorts of workers, doctors, engineers, hairstylists, and journalists from 0:01:23.800 --> 0:01:27.360 easily just switching jobs. The Federal Trade Commission approved a 0:01:27.400 --> 0:01:30.920 near total ban on these non compete clauses, but then 0:01:30.920 --> 0:01:33.240 that got blocked by a federal judge back in August. 0:01:33.640 --> 0:01:36.080 The judge said the FTC did not have the authority 0:01:36.080 --> 0:01:39.160 to do this. Professor Spencer Weber Waller is director of 0:01:39.200 --> 0:01:42.360 the Institute of the Consumer Anti Trust Studies at Loyola 0:01:42.520 --> 0:01:45.360 University Chicago School of Law, and joins us now to 0:01:45.360 --> 0:01:48.240 bring us up to speed on what this means. Professor, 0:01:48.320 --> 0:01:51.360 want to thank you for your time and explain about 0:01:51.400 --> 0:01:55.000 this block of what the FTC's proposed rule was. The 0:01:55.440 --> 0:01:59.000 judge called it arbitrary and capricious. But supporters say that 0:01:59.040 --> 0:02:01.320 if you force workers to sign and on compete that 0:02:01.400 --> 0:02:02.240 does harmed them. 0:02:02.800 --> 0:02:06.440 Well, sure, I'm chrilled to talk about this. I can't 0:02:06.440 --> 0:02:08.520 get into how the sausage was made. This was one 0:02:08.520 --> 0:02:11.000 of the projects that they worked on in twenty twenty 0:02:11.000 --> 0:02:13.519 two as a senior advisor for the Federal Trade Commission. 0:02:13.960 --> 0:02:16.800 But the idea is that these are very harmful for workers, 0:02:16.840 --> 0:02:20.240 and particularly in low salary workers, where there's really no 0:02:20.440 --> 0:02:23.560 serious question for a sandwich maker or a security guard 0:02:23.639 --> 0:02:27.000 or home healthcare worker about know how or technology or 0:02:27.480 --> 0:02:30.000 that sort of thing. And so the FTC was engaged 0:02:30.000 --> 0:02:34.639 in a long term project, research reports, conferences, and eventually 0:02:34.680 --> 0:02:37.400 the writing of an administrative rule that was released to 0:02:37.480 --> 0:02:40.239 the public for comments and revised and kind of toned down. 0:02:40.120 --> 0:02:40.560 A little bit. 0:02:40.800 --> 0:02:45.720 Final rule was issued. This is earlier this year, and 0:02:45.720 --> 0:02:49.160 there was some litigation and it's a little more complicated. 0:02:49.200 --> 0:02:51.920 There are three different cases. The FTC won one of 0:02:51.960 --> 0:02:55.040 those in Pennsylvania and lost to in the Deep South, 0:02:55.160 --> 0:02:57.360 one of which it resulted in an injunction. So the 0:02:57.400 --> 0:02:59.840 rule hasn't gone into effect. I don't think this is 0:02:59.840 --> 0:03:01.480 a I think it's going to go to the Court 0:03:01.480 --> 0:03:05.840 of Appeals and conceivably the US Supreme Court. At the 0:03:05.880 --> 0:03:09.000 same time, the FTC has also brought cases where it 0:03:09.000 --> 0:03:11.760 has the power to prohibit an unfair method of competition, 0:03:12.240 --> 0:03:16.000 either in litigation or in rule making. These cases only 0:03:16.040 --> 0:03:18.600 deal with the rulemaking. There have been at least three 0:03:18.600 --> 0:03:20.960 cases that I know of where the STC has challenged 0:03:21.600 --> 0:03:26.440 companies behavior in the particular industry as just unfair in 0:03:26.600 --> 0:03:29.760 keeping workers' wages and mobility down, and the courts have 0:03:30.000 --> 0:03:32.680 in each case the defendants have settled, and those are 0:03:32.680 --> 0:03:37.040 binding rulings now on those defendants. But the rule is 0:03:37.120 --> 0:03:40.880 the bigger deal because it would apply nationwide to most 0:03:40.920 --> 0:03:42.680 industries and most non competes. 0:03:43.200 --> 0:03:45.800 Now, this is under the FDC's purview, is it not. 0:03:46.120 --> 0:03:48.240 If they can't come up with this rule, then who would. 0:03:48.960 --> 0:03:52.240 Well, there's any there's a turny number of industries that 0:03:52.280 --> 0:03:55.600 are just not subject to the FDC's jurisdiction, things like 0:03:55.680 --> 0:03:59.160 airlines and other other regulated industries. But the FDC is 0:03:59.240 --> 0:04:03.840 the main, but not the only, consumer protection and antitrust agency. 0:04:04.040 --> 0:04:07.000 The Department of Justice litigates, but the FTC has the 0:04:07.040 --> 0:04:10.160 power to do both litigation and rulemaking, and this is 0:04:10.160 --> 0:04:14.320 what the rule making power. It is not the only, 0:04:14.480 --> 0:04:16.200 but it is one of the rare times the FTC 0:04:16.320 --> 0:04:19.400 has issued a rule relating to their antitrust not their 0:04:19.440 --> 0:04:21.000 consumer protection powers. 0:04:21.200 --> 0:04:23.680 I wanted to ask about that this doesn't happen very 0:04:23.720 --> 0:04:26.800 often with the FTC, and these noncompete clauses have been 0:04:26.800 --> 0:04:30.800 in effect for decades. Where's the FTC been on this before? 0:04:32.240 --> 0:04:34.279 Well, the FTC is one of a number of actors 0:04:34.320 --> 0:04:36.680 that has looked at this. State attorney generals and state 0:04:36.760 --> 0:04:39.600 legislatures in the US Congress have looked at these. There 0:04:39.600 --> 0:04:43.600 are seventeen states or so that either prohibit them outright, 0:04:43.640 --> 0:04:48.080 like California, or imposed conditions. When you can have the 0:04:48.120 --> 0:04:50.800 non compete in Illinois, there's a salary cap of about 0:04:50.800 --> 0:04:54.920 one hundred thousand dollars, where anything below that the noncompete 0:04:54.920 --> 0:04:58.640 would be illegal. And what the evidence is showing is 0:04:58.640 --> 0:05:04.760 that even having these state rules just isn't enough. And 0:05:04.800 --> 0:05:08.200 if you want a uniform national treatment of this issue, 0:05:08.360 --> 0:05:10.680 the FTC is the logical place. Whether they have the 0:05:10.720 --> 0:05:13.159 powers to do so is what's being litigated in the 0:05:13.160 --> 0:05:14.239 federal courts right now. 0:05:15.760 --> 0:05:20.360 Is this another example of sort of reigning in power 0:05:20.680 --> 0:05:24.040 from federal agencies resting that from them. 0:05:25.120 --> 0:05:27.479 That's hard to say. You know, you're absolutely correct that 0:05:27.560 --> 0:05:30.919 the FTC has not issued a lot of antitrust unfair 0:05:31.040 --> 0:05:34.560 methods of competition rules, but that doesn't mean they don't 0:05:34.560 --> 0:05:36.280 have the power but that is one of the issues 0:05:36.279 --> 0:05:38.560 that the federal courts have to wrestle with, and looking 0:05:38.560 --> 0:05:41.000 at this particular rule, I don't know the history of 0:05:41.040 --> 0:05:44.320 why past administrations didn't do it. I think perhaps they 0:05:44.360 --> 0:05:46.200 thought that it was better to proceed just on a 0:05:46.200 --> 0:05:49.039 case by case basis in general, rather than getting into 0:05:49.080 --> 0:05:52.360 a rulemaking proceeding. But I thought it was necessary and 0:05:52.560 --> 0:05:54.520 quite a good thing that the FTC did, and I 0:05:54.560 --> 0:05:56.640 hope it'll hold up in court. But you know, I 0:05:56.640 --> 0:05:58.440 don't have a crystal ball that's any better than anybody 0:05:58.480 --> 0:05:59.239 else at this point. 0:05:59.400 --> 0:06:02.200 And it is interesting how you say how complicated this is, 0:06:02.360 --> 0:06:04.160 because it also put companies in a bit of an 0:06:04.160 --> 0:06:06.720 odd position. For a while. It wasn't really clear if 0:06:06.760 --> 0:06:08.760 the FDC was able to do this, if this was 0:06:08.800 --> 0:06:10.960 going to pass muster, if there was going to have 0:06:11.000 --> 0:06:13.279 to be shelved. For a while, employers were kind of 0:06:13.279 --> 0:06:15.760 in this mezzanine level where they didn't know if they 0:06:15.760 --> 0:06:17.720 were able to tell their workers that the non compete 0:06:17.760 --> 0:06:19.640 was no and void, or if it was something that 0:06:19.640 --> 0:06:21.960 they could enforce, and so everything was in limbo for 0:06:22.000 --> 0:06:22.359 a while. 0:06:23.120 --> 0:06:25.000 Well, and it is still in limbo, you know, as 0:06:25.000 --> 0:06:27.919 this gets resolved. And so you know what I understand. 0:06:28.200 --> 0:06:30.039 I'm not a labor and employment expert. I'm an anti 0:06:30.080 --> 0:06:33.000 trusted the consumer law person. But my friends in that 0:06:33.120 --> 0:06:35.720 minor work are telling companies to be very cautious and 0:06:35.760 --> 0:06:38.520 not to use these unless they have a strong reason 0:06:38.600 --> 0:06:41.720 to do so. Do them more selectively rather than across 0:06:41.760 --> 0:06:43.719 the board, and be aware that there's some states that 0:06:43.760 --> 0:06:47.320 they're simply flat out forbidden, like California, and also that 0:06:47.400 --> 0:06:50.800 there's legislation coming in other states that's cracking down on this. 0:06:50.880 --> 0:06:55.960 So state companies are on notice. And you know, the 0:06:56.600 --> 0:06:58.920 rule is just one aspect of how this is going 0:06:58.960 --> 0:07:00.280 to be regulated in the future. 0:07:00.520 --> 0:07:02.280 I know you don't have a crystal ball, you said 0:07:02.279 --> 0:07:04.839 so yourself, But what does this say then about the 0:07:04.880 --> 0:07:06.479 future of work? How far can this go? 0:07:08.240 --> 0:07:11.040 Well, you know what's likely to tee this up for 0:07:11.120 --> 0:07:13.160 Supreme Court review is if you get a split in 0:07:13.200 --> 0:07:15.800 the circuits. If you get, say, for example, the case 0:07:15.840 --> 0:07:18.720 in Pennsylvania where the FTC won, if the third circuit 0:07:18.760 --> 0:07:21.520 were to uphold that point of view, and let's say 0:07:21.520 --> 0:07:23.440 one of the circuit courts in the South were to 0:07:23.680 --> 0:07:25.800 find it's unlawful, and that's the kind of thing where 0:07:25.800 --> 0:07:28.960 the Supreme Court offer often ways in and yes, you're 0:07:29.040 --> 0:07:33.520 absolutely correct. They're not a fan of independent agency regulatory power, 0:07:33.600 --> 0:07:38.280 and the FDC faces a number of constitutional administrative wat challenges. 0:07:38.880 --> 0:07:41.320 The narrow list is that you know, the agency is 0:07:41.360 --> 0:07:44.560 fine for methods of competition are fine. They're even fine 0:07:44.560 --> 0:07:47.600 if you use them in a particular case against noncompete clauses. 0:07:47.880 --> 0:07:49.680 But there's a narrow path where they could say, you 0:07:49.680 --> 0:07:52.000 don't have the rulemaking authority to do this, but you 0:07:52.040 --> 0:07:55.480 do have the power to seek an individual case against 0:07:55.480 --> 0:07:59.720 an individual of the Senate. Problem with that is that's 0:07:59.760 --> 0:08:03.080 like lack of mole really in all fairness to business 0:08:03.080 --> 0:08:06.960 and to consumers and to employers employees, a nationwide uniform 0:08:07.000 --> 0:08:08.760 orle is the best way to tackle this in my view. 0:08:09.200 --> 0:08:11.160 Okay, we're going to continue to watch that as it 0:08:11.200 --> 0:08:13.440 makes its way through the courts. Meanwhile, we're going to 0:08:13.560 --> 0:08:15.880 shift gears now and talk about big tech and Google 0:08:16.120 --> 0:08:19.520 antitrust enforcing, wanting the search giant Google to make some 0:08:19.600 --> 0:08:24.280 big changes, including potentially selling its Chrome browser now. Professor 0:08:24.320 --> 0:08:28.160 Google says any remedy would allow competing browsers like Apple 0:08:28.200 --> 0:08:30.840 Safari to actually have the freedom to do the deals 0:08:31.000 --> 0:08:33.120 with whatever search engine that they think is best for 0:08:33.160 --> 0:08:35.560 their users. That's what they want to see happen. That's 0:08:35.559 --> 0:08:37.960 what they say should happen. The judges said that it's 0:08:37.960 --> 0:08:40.920 illegal for Google to pay Apple to use Google's browser 0:08:40.960 --> 0:08:44.200 as their default. Does Google have a point here, you know, 0:08:44.240 --> 0:08:46.079 market freedom, free enterprise, that sort of thing. 0:08:46.960 --> 0:08:49.440 Well, you know, this is one of a number of 0:08:49.800 --> 0:08:53.240 you know, probably the busiest few years in monopolization law 0:08:53.320 --> 0:08:57.319 in my lifetime, and Google was the case that finished first, 0:08:57.320 --> 0:09:00.840 and it was a great victory for the government. Google 0:09:00.920 --> 0:09:03.680 was found to have monopoly power over different aspects of 0:09:03.720 --> 0:09:07.920 search and that they violated the law by entering into 0:09:08.000 --> 0:09:11.480 those exclusive deals, paying the huge amounts of money that 0:09:11.520 --> 0:09:17.360 we've all read about. But they didn't obtain this monopoly unlawfully, 0:09:17.400 --> 0:09:19.719 at least the court didn't make any findings like that. 0:09:20.200 --> 0:09:25.000 But they did unlawfully maintain that monopoly. So you're right, 0:09:26.040 --> 0:09:29.680 everything rests with the remedy. And this case follows in 0:09:29.720 --> 0:09:32.920 the footsteps of Microsoft about a generation ago, where you 0:09:32.960 --> 0:09:35.199 have a company that didn't do anything wrong but had 0:09:35.200 --> 0:09:38.040 a monopoly and then started doing lots of things wrong 0:09:38.280 --> 0:09:42.040 to maintain that monopoly. And the problem in the Microsoft 0:09:42.120 --> 0:09:44.640 case was that the court kind of lost its mind 0:09:44.640 --> 0:09:46.760 when it got to the remedy's face. It wrote a 0:09:46.760 --> 0:09:50.960 really terrific, lengthy, detailed opinion the district court of why 0:09:51.000 --> 0:09:55.680 Google had acted unlawfully, why I had no pro competitive 0:09:55.760 --> 0:09:58.960 justification or business justification for what it's doing. And the 0:09:59.000 --> 0:10:02.240 court back in in the nineties early two thousands just 0:10:03.120 --> 0:10:07.400 rushed through a very short hearing on remedy and also 0:10:07.480 --> 0:10:11.160 had done some other kind of outlandish procedural things. And 0:10:11.200 --> 0:10:14.040 they had originally said you have to split essentially the 0:10:14.040 --> 0:10:18.520 Windows operating system from the application software like Word and 0:10:18.600 --> 0:10:20.599 Office and that kind of thing. And the Court of 0:10:20.600 --> 0:10:22.559 Appeals you said, you rushed it, you did some other 0:10:22.600 --> 0:10:26.840 things wrong. We're only going to prohibit the specific things 0:10:26.840 --> 0:10:30.559 that you found were you're legal. Not that much changed 0:10:30.600 --> 0:10:33.400 in the marketplace. And that's the issue before Judge Meta 0:10:33.760 --> 0:10:37.280 in Google, not just what did they do wrong and 0:10:37.320 --> 0:10:39.520 how do you stop it? But how do you deprive 0:10:39.600 --> 0:10:43.040 them of their unlawful profits from their illegal behavior, and 0:10:43.080 --> 0:10:45.880 how do you restore competition? And so I know in 0:10:46.000 --> 0:10:48.800 filibustering you a little bit, but the remedy stuff is 0:10:48.880 --> 0:10:54.400 absolutely key. And you have Microsoft as a roadmap for 0:10:54.840 --> 0:10:57.520 how to have a government victory that doesn't change very 0:10:57.600 --> 0:10:59.480 much in the marketplace. And I know the government and 0:10:59.520 --> 0:11:01.840 the court said on their mind to serve deciding the 0:11:01.880 --> 0:11:03.120 remedy stuff right now. 0:11:03.720 --> 0:11:06.120 It does seem like this is another example of the 0:11:06.200 --> 0:11:10.120 law trying to catch up with the technology a little bit. 0:11:10.240 --> 0:11:14.640 You know, ant trust lagation is backward looking. In Europe 0:11:14.640 --> 0:11:17.360 you have kind of more prospective legislation like the Digital 0:11:17.360 --> 0:11:21.800 Markets Act and the Digital Services Act. But here court 0:11:21.840 --> 0:11:24.679 has judged that they acted unlawfully maintain their monopoly in 0:11:24.720 --> 0:11:27.520 a way that goes beyond competition on the merits, and 0:11:27.559 --> 0:11:30.600 you have to stop that. And you don't want the 0:11:30.640 --> 0:11:33.480 Microsoft situation where the government wins but not really that 0:11:33.640 --> 0:11:36.840 much changes. And I know the government has recommended the 0:11:36.880 --> 0:11:40.640 sale of chrome or otherwise separating kind of the search 0:11:40.640 --> 0:11:44.840 function from the from the browser, and that's something I 0:11:44.840 --> 0:11:48.560 hope that court considers very seriously because these behavioral remedies 0:11:49.440 --> 0:11:52.720 often don't work. The history of Microsoft is a history 0:11:52.760 --> 0:11:56.360 of really really long periods of time where they're under 0:11:56.360 --> 0:11:59.360 court supervision. They did most but not all, the things 0:11:59.400 --> 0:12:02.000 that they were ordered too, and again not much changed. 0:12:02.200 --> 0:12:04.600 They had to share lots of technical information so that 0:12:05.240 --> 0:12:08.880 competitors could better interoperate with him. That's going to be 0:12:08.880 --> 0:12:13.120 part of this solution here. But when you do structural remedies, 0:12:13.160 --> 0:12:16.880 it's cleaner, it's more painful for the company. But they're 0:12:16.920 --> 0:12:18.280 the ones who are helped to break the law. This 0:12:18.360 --> 0:12:19.959 is not a criminal case. No one's going to jail, 0:12:20.120 --> 0:12:23.520 nobody's being fined. The question is what changes in structure 0:12:23.559 --> 0:12:27.360 and behavior are going to be enough to change the 0:12:27.440 --> 0:12:30.400 take away the fruits that there unlawful monopoly. 0:12:30.880 --> 0:12:32.600 Professor, We're going to leave it there. Thank you so 0:12:32.679 --> 0:12:34.240 much for your time, and it has been a pleasure. 0:12:35.040 --> 0:12:37.200 Well, thank you. I appreciate any our. 0:12:37.000 --> 0:12:39.760 Thanks to Professor Spencer Weber Waller. He is director of 0:12:39.800 --> 0:12:43.120 the Institute of Consumer Anti Trust Studies at Loyal University 0:12:43.240 --> 0:12:45.760 Chicago School of Law. Up next, we take a look 0:12:45.760 --> 0:12:48.200 at the block deal between Kruger and Albertson and a 0:12:48.240 --> 0:12:50.800 few other big ani trust cases in the retail space. 0:12:51.000 --> 0:12:54.160 You're listening to a special year end edition of Bloomberg Law. 0:12:54.440 --> 0:13:05.280 I'm Amy Morris and this is Bloomberg. This is Bloomberg 0:13:05.400 --> 0:13:09.920 Law with June Grosso from Bloomberg Radio. This is a 0:13:09.920 --> 0:13:12.560 special edition of Bloomberg Law as we look at some 0:13:12.600 --> 0:13:15.640 of the big antitrust cases from this past year. I'm 0:13:15.679 --> 0:13:19.000 Amy Morris in for June Grosso. Now, we saw several 0:13:19.040 --> 0:13:22.160 big merger deals blocked, including one that would have created 0:13:22.200 --> 0:13:26.280 a grocery behemoth. A federal judge blocked Kroger's nearly twenty 0:13:26.280 --> 0:13:30.160 five billion dollar acquisition of Albertson, saying that proposed tie 0:13:30.240 --> 0:13:33.480 up would create a competition problem for shoppers. To take 0:13:33.480 --> 0:13:35.200 it close to look at the failed deal and the 0:13:35.240 --> 0:13:37.880 fallout for both grocers, plus a look at some other 0:13:37.960 --> 0:13:41.720 big cases in the retail space. We welcome Professor Peter Carstenson, 0:13:42.000 --> 0:13:46.520 Professor of Law Emeritus at University of Wisconsin Law School. Professor, 0:13:46.559 --> 0:13:47.960 thank you so much for taking the time. 0:13:48.720 --> 0:13:49.840 It's a pleasure to be here. 0:13:50.559 --> 0:13:55.079 Let's talk about this particular merger. The FTC blocked the deal, 0:13:55.640 --> 0:13:59.320 arguing that it would violate antitrust law. That was seen 0:13:59.360 --> 0:14:02.479 as an ft SE win, of course, but then Albertsons 0:14:02.559 --> 0:14:06.439 sued Kroger. Walk us through how this worked well. 0:14:07.760 --> 0:14:12.240 Albertson's got looted before it was sold. They gave up 0:14:12.600 --> 0:14:18.200 several billion dollars to their shareholders, so they're already impoverished 0:14:18.600 --> 0:14:21.640 expecting that this deal with Kroger was going to go through. 0:14:22.840 --> 0:14:28.080 They now claim that Kroger did not really do the 0:14:28.120 --> 0:14:32.120 best job it could have in defending and justifying the merger, 0:14:33.000 --> 0:14:38.240 inadequate proposed divestiture, et cetera, and that that obviously has 0:14:38.320 --> 0:14:44.200 harmed Albertson's enormously, And so they're seeking huge damages as 0:14:44.240 --> 0:14:46.720 a way of trying to get some funding back in 0:14:46.800 --> 0:14:50.119 place to restore themselves as a competitor, even. 0:14:49.840 --> 0:14:51.720 Though it was the FTC that blocked it. 0:14:52.720 --> 0:14:58.960 Right right well up until this case, the FTC, best 0:14:59.000 --> 0:15:05.600 of my present recollection, never actually stopped a grocery merger totally. 0:15:06.160 --> 0:15:08.480 It would say, you've got to give up these grocery stores, 0:15:08.560 --> 0:15:11.200 or those grocery stores. You proposed to give up one 0:15:11.240 --> 0:15:13.720 hundred and twenty grocery stores. We want you to give 0:15:13.760 --> 0:15:16.400 up two hundred and twelve grocery stores. But they let 0:15:16.480 --> 0:15:20.800 the mergers go through. This time they finally got the 0:15:20.840 --> 0:15:26.080 courage of my convictions and said, no, well, they've made 0:15:26.080 --> 0:15:30.120 a really stupid settlement actually with Albertson's. A few years 0:15:30.160 --> 0:15:33.720 ago they divested the one hundred and fifty something like 0:15:33.800 --> 0:15:37.440 that stores to a company that almost immediately went bankrupt, 0:15:39.160 --> 0:15:43.360 and partly because the stores that were divested were the 0:15:43.440 --> 0:15:49.800 dogs in part of the of the Safeway empire, so 0:15:49.920 --> 0:15:53.600 that this time the Trade Commission said, no, we're just 0:15:53.680 --> 0:15:55.680 not going to approve the merger. There was something like 0:15:56.240 --> 0:16:05.040 fourteen hundred local markets were Albertson's and Kroger were significant 0:16:05.040 --> 0:16:10.080 competitors with each other. They were proposing to fix a 0:16:10.120 --> 0:16:13.800 significant number of those overlaps, but not all of them. 0:16:14.360 --> 0:16:17.640 And so this is sort of where the tractory said, 0:16:17.760 --> 0:16:20.200 that's not an adequate settlement. First of all, this is 0:16:20.240 --> 0:16:24.840 a clearly any competitive merger in terms of those overlaps, 0:16:25.960 --> 0:16:29.120 and what you're proposing by way of a settlement simply 0:16:29.160 --> 0:16:32.840 doesn't solve the problem. Very good opinion by the judge. 0:16:32.840 --> 0:16:38.400 By the way, we've seen this year at least four 0:16:38.760 --> 0:16:43.280 really good decisions, three that I can think of from 0:16:43.320 --> 0:16:50.200 trial judges, this one, the one in the Google monopoly case, 0:16:50.440 --> 0:16:52.160 and the. 0:16:54.120 --> 0:16:55.640 Tapestry. 0:16:56.880 --> 0:17:00.920 All of them the judges did really really good jobs. 0:17:02.200 --> 0:17:07.720 And the judge said on the settlement was it would 0:17:08.160 --> 0:17:12.440 reduce the number of markets where there are arms substantially 0:17:12.880 --> 0:17:17.679 if and only if the company acquiring these assets is 0:17:17.720 --> 0:17:20.959 actually one hundred percent successful, if it has any failure, 0:17:20.960 --> 0:17:23.800 there's going to be more markets harmed. And this is 0:17:23.840 --> 0:17:26.920 a company that in the past has bought grocery stores 0:17:26.960 --> 0:17:30.520 and then sold them one way or another. So the 0:17:30.640 --> 0:17:35.280 judge said, this is really not a very good settlement 0:17:36.119 --> 0:17:39.159 proposal from Kroger. I'm not going back to Albertsons. I 0:17:39.200 --> 0:17:44.880 think this is why Albertson's is irritated that Kroger did 0:17:44.920 --> 0:17:48.480 not come up with a more credible buyer and did 0:17:48.520 --> 0:17:57.080 not offer more stores by way of a settlement, which 0:17:57.119 --> 0:18:02.800 made it harder to justify the proposed dissolution of the 0:18:03.280 --> 0:18:06.760 our se the the M just by the merger because 0:18:06.800 --> 0:18:09.119 of what was being sold off. U. 0:18:09.400 --> 0:18:12.560 Well, so does albertson S d uh have a j 0:18:12.600 --> 0:18:14.440 a shot at winning this case? 0:18:17.119 --> 0:18:23.440 I this gets over into outside really of antitrust law, 0:18:23.520 --> 0:18:29.560 over into corporate duties. Uh ha, did they fail to 0:18:29.680 --> 0:18:37.160 engage in good faith? Uh? Advancement of the merger. They're 0:18:37.200 --> 0:18:39.480 gonna be saying something on more or less along the 0:18:39.520 --> 0:18:43.359 lines of ours was a really good proposal that judge 0:18:43.520 --> 0:18:46.480 just didn't accept it. It was as far as we 0:18:46.520 --> 0:18:49.400 was reasonable to go given how much we were gonna 0:18:49.440 --> 0:18:52.560 pay for Albertson's or wards to that general effect. And 0:18:52.600 --> 0:18:55.399 so that's gonna turn it's it's in Delaware, it's in 0:18:55.480 --> 0:18:59.440 state court. It's gonna turn on the duties of a 0:18:59.560 --> 0:19:03.600 buyer to a seller where there are some conditions. And 0:19:04.320 --> 0:19:11.520 that's my pay grade to speculate. I mean, I would 0:19:12.040 --> 0:19:16.320 guess if Albertson's has some pretty good evidence, there'll be 0:19:16.359 --> 0:19:20.000 a settlement. Kroger will pay some more money to Albertson's. 0:19:20.560 --> 0:19:23.760 Now, you mentioned Caprian Tapestry earlier in this interview, and 0:19:24.359 --> 0:19:27.439 that deal wasn't blocked, but they mutually decided to end 0:19:27.440 --> 0:19:30.680 the agreement after a court order froze them. To walk 0:19:30.760 --> 0:19:33.439 us through that decision, it sounds like it's not quite 0:19:34.080 --> 0:19:36.200 as contentious as the Albertson Kroger. 0:19:36.840 --> 0:19:40.600 Oh, I think it was at least as contentious. On 0:19:41.000 --> 0:19:48.560 what's called the market definition. These are high priced purses 0:19:49.200 --> 0:19:53.359 that are in the popular high price or something like that. 0:19:53.760 --> 0:19:58.239 And the argument was a purse is a purse, and 0:19:58.280 --> 0:20:01.240 you can get a purse for twenty dollars at Walmart. 0:20:01.640 --> 0:20:03.720 You can get a purse from one of these fancy 0:20:04.080 --> 0:20:06.640 folks for one thousand dollars. I've been seeing some ants 0:20:06.720 --> 0:20:09.960 recently and I keep asking myself, why would anybody pay 0:20:10.000 --> 0:20:14.560 that much for a purse, But it's not me. So again, 0:20:15.280 --> 0:20:17.720 this was a set they were seeking preliminary injunction as 0:20:17.760 --> 0:20:21.880 I recall for the Trade Commission so they could proceed. 0:20:22.840 --> 0:20:30.000 And the question was whether you could distinguish in this 0:20:30.400 --> 0:20:38.720 purse and other accessories world a domain an an area 0:20:38.760 --> 0:20:45.160 of competition involving this sort of middle price range from 0:20:45.200 --> 0:20:49.040 like one hundred dollars to nine hundred dollars for a 0:20:49.119 --> 0:20:51.959 purses as opposed to purses that were priced one thousand 0:20:52.040 --> 0:20:59.040 dollars or under a hundred. And the Trade Commission put 0:20:59.119 --> 0:21:03.200 in some pretty good evidence of the way in which 0:21:03.600 --> 0:21:08.919 these two companies had specifically identified themselves as being in 0:21:09.119 --> 0:21:16.119 that zone of perse competition accessory competition, and it identified 0:21:16.160 --> 0:21:21.679 each other as being their most major competitor. And so 0:21:22.119 --> 0:21:25.959 again the argument was under the antitrust law, a merger 0:21:26.080 --> 0:21:32.280 which may underscy the word may substantially lesson competition or 0:21:32.320 --> 0:21:35.639 tend to create a monopoly, is unlawful. So it doesn't 0:21:35.680 --> 0:21:40.800 have to actually eliminate the harm competition, restrain competition. It 0:21:40.920 --> 0:21:47.760 simply is something that may is reasonably likely to harm competition, 0:21:47.800 --> 0:21:51.879 and these two firms identified themselves as each other's primary competitor. 0:21:52.760 --> 0:21:57.240 There were other associated facts that really, in the judges 0:21:57.359 --> 0:22:02.240 view and the Trade Commission's earlier view, really did create 0:22:02.400 --> 0:22:08.320 this kind of competitive zone where if these firms merged, 0:22:08.400 --> 0:22:11.040 there really would not be they had four or five 0:22:11.080 --> 0:22:14.840 different brands as well, there really would not be another 0:22:16.240 --> 0:22:24.520 other equally significant competitors in that band of person accessory supplies. 0:22:25.280 --> 0:22:32.000 The high end producers brand named European outfits would be 0:22:32.119 --> 0:22:35.520 unlikely to want to cut price to enter that area, 0:22:36.160 --> 0:22:41.720 and that the low priced people have a very hard 0:22:41.800 --> 0:22:48.280 time apparently raising their profile, so that if you traditionally 0:22:48.280 --> 0:22:51.240 saw one of their purses as a ninety eighty or 0:22:51.320 --> 0:22:55.840 ninety dollars perse, for them to convince you that it's 0:22:56.040 --> 0:23:01.480 real that a different line but with the same brand 0:23:01.600 --> 0:23:04.399 name is really a two hundred and fifty dollars person 0:23:05.119 --> 0:23:12.120 is apparently a very difficult advertising promotion credibility problem. So 0:23:12.280 --> 0:23:15.919 that the judge felt that there was good reason to 0:23:15.960 --> 0:23:21.880 believe that this would this merger would significantly affect competition 0:23:22.040 --> 0:23:23.720 in that domain. 0:23:24.359 --> 0:23:27.160 Well, professor, before I let you go I'm curious about 0:23:27.200 --> 0:23:29.879 what this could mean for future M and A type deals. 0:23:29.880 --> 0:23:32.480 We've just talked about two really big ones that got 0:23:32.520 --> 0:23:35.199 frozen and got dissolved. Does this have a chilling effect 0:23:35.240 --> 0:23:39.159 on others who may be looking at mergers and acquisitions? 0:23:40.680 --> 0:23:43.520 I would so like that to be the case. Most 0:23:43.560 --> 0:23:49.560 of these mergers of this scale have no legitimate justification 0:23:49.720 --> 0:23:57.080 in terms of efficiency, product promotion, innovation. I think if 0:23:58.560 --> 0:24:04.040 the Biden Harris administered had been had been retained by 0:24:04.080 --> 0:24:08.680 the voters, there was a reasonable probability that this would 0:24:08.720 --> 0:24:14.760 have had an inhibiting effect. What is very uncertain is 0:24:15.000 --> 0:24:19.840 with the new Trump administration, even though the designated heads 0:24:19.840 --> 0:24:23.520 for the Anti Trust Division and the Trade Commission are 0:24:23.560 --> 0:24:30.240