WEBVTT - Lina Khan Is Sending a Message to the Private Equity Industry 0:00:10.080 --> 0:00:13.360 Hello, and welcome to another episode of the Ad Thoughts Podcast. 0:00:13.480 --> 0:00:16.599 I'm Tracy Alloway and I'm Joe Whysenthal. Joe, I think 0:00:16.600 --> 0:00:19.720 it's fair to say that anti trust is having a moment. 0:00:20.320 --> 0:00:23.320 It's been having a moment for a while. It feels like, 0:00:23.520 --> 0:00:26.639 especially under this administration, there is this sort of renewed 0:00:26.920 --> 0:00:30.080 energy and interest. Of course, I think last month or 0:00:30.080 --> 0:00:34.040 two months ago we interviewed Jonathan Canter, Jonathan Canter from 0:00:34.080 --> 0:00:37.080 the DOJ, about it, but what our appetite and we 0:00:37.080 --> 0:00:37.720 want to do more. 0:00:37.920 --> 0:00:39.760 That's right, we do want to do more. And a 0:00:39.920 --> 0:00:43.000 lot of this renewed interest in anti trust and even 0:00:43.040 --> 0:00:46.440 controversy is down to Lena Khan, the chair of the 0:00:46.479 --> 0:00:50.159 Federal Trade Commission, the FTC, who's been going after everything 0:00:50.200 --> 0:00:54.400 from big tech to private equity investments in the healthcare industry. 0:00:54.680 --> 0:00:57.720 And I'm very happy to say that today we do, 0:00:57.760 --> 0:00:59.520 in fact have the perfect guest because we're going to 0:00:59.560 --> 0:01:02.560 be speaking to Lena Kahn. I'm very excited, me. 0:01:02.560 --> 0:01:05.399 Too, I'm psyched. I've been looking forward to this episode 0:01:05.520 --> 0:01:07.600 for a long time. I'm thrilled that it's finally here. 0:01:07.760 --> 0:01:10.200 Well, without further ado, uh, Lena, thank you, so much 0:01:10.240 --> 0:01:11.160 for coming on all thoughts. 0:01:11.240 --> 0:01:12.280 Thanks so much for having me. 0:01:12.920 --> 0:01:16.080 So I wanted to sort of dive in immediately into 0:01:16.200 --> 0:01:18.560 some of the most recent stuff you at the FTC 0:01:19.000 --> 0:01:23.480 have been doing. And you recently filed this monopolization claim 0:01:23.680 --> 0:01:29.080 against a PE backed company that's been buying anesthesiology businesses 0:01:29.280 --> 0:01:32.399 in Texas, and I have to say, reading the suit, 0:01:33.319 --> 0:01:37.160 there's some unsettling stuff in there, particularly the bit where 0:01:37.360 --> 0:01:39.880 there's a guy from the company, which is called US 0:01:39.920 --> 0:01:43.280 Anesthesia Partners, where they're buying another business and he's talking 0:01:43.319 --> 0:01:45.959 about how they can now raise their prices, and this 0:01:46.080 --> 0:01:49.840 executive goes chu ching, which you know, I'm guessing you 0:01:49.880 --> 0:01:52.640 don't want to have written down in a lawsuit about 0:01:52.760 --> 0:01:54.360 raising prices and roll up strategies. 0:01:54.440 --> 0:01:56.200 Well, when you when you're filing a suit, you must 0:01:56.240 --> 0:01:56.680 love seeing. 0:01:58.080 --> 0:02:01.440 But okay, here's my question. Why go after roll ups 0:02:01.480 --> 0:02:05.600 in healthcare specifically? And could you theoretically go after private 0:02:05.600 --> 0:02:07.200 equity roll ups anywhere? 0:02:07.960 --> 0:02:11.360 So, just to zoom out, the FTC overseas markets across 0:02:11.400 --> 0:02:14.480 the economy, but that includes healthcare, and healthcare markets are 0:02:14.480 --> 0:02:17.360 some of the most important ones that we oversee precisely 0:02:17.400 --> 0:02:20.000 because this is not a matter of buying toasters or 0:02:20.080 --> 0:02:23.679 vacuum cleaners. Right, this is essential healthcare. And in the 0:02:23.800 --> 0:02:27.600 United States, you know, we pay more for healthcare than 0:02:28.040 --> 0:02:31.519 any other country in the OECD, close to twice as average. 0:02:31.560 --> 0:02:35.320 We pay around a fifth of our GDP, and health 0:02:35.440 --> 0:02:38.600 outcomes are worse off. Right. We see higher rates of 0:02:38.760 --> 0:02:42.600 infant and maternal mortality, We see greater incidents of death 0:02:42.720 --> 0:02:46.519 from avoidable diseases, and so overall we see a whole 0:02:46.560 --> 0:02:49.200 set of problems that are stemming from a whole set 0:02:49.240 --> 0:02:52.920 of factors. The factor that's in our wheelhouse is looking 0:02:53.000 --> 0:02:56.080 at consolidation and a lack of competition, and so we 0:02:56.200 --> 0:03:00.680 enforce the nation's antitrust laws in hospital markets, in pharma markets, 0:03:01.200 --> 0:03:03.560 and we've been wanting to make sure that our enforcement 0:03:03.680 --> 0:03:06.920 efforts are really matching the realities of what we're seeing 0:03:06.960 --> 0:03:09.720 in today's markets. One of the trends that we've seen 0:03:09.840 --> 0:03:13.919 over the last decade is greater expansion of private equity 0:03:14.160 --> 0:03:18.040 in healthcare markets. At the FTC where business model agnostic, 0:03:18.200 --> 0:03:20.440 but we have been hearing from a whole lot of 0:03:20.480 --> 0:03:24.720 market participants, including healthcare workers, about the ways in which 0:03:24.760 --> 0:03:29.240 private equities incursion can result in detrimental outcomes. There was 0:03:29.280 --> 0:03:32.200 a study that found that, for example, when private equity 0:03:32.200 --> 0:03:36.360 bought out nursing homes, that you saw higher mortality rates. Right, 0:03:36.400 --> 0:03:38.600 So this is not even just about pricing, but it 0:03:38.600 --> 0:03:41.560 can really be life or death. So that's really overall 0:03:41.640 --> 0:03:44.320 what has stemmed our interest in taking a closer look 0:03:44.320 --> 0:03:47.280 at private equity and what ultimately led to the suit 0:03:47.360 --> 0:03:48.520 and the investigation. 0:03:48.920 --> 0:03:51.320 But what about in other industries? Is that something that 0:03:51.360 --> 0:03:53.000 you could theoretically also look at. 0:03:53.400 --> 0:03:57.160 Yeah, so we can look at businesses across the US 0:03:57.240 --> 0:04:00.960 economy and how they're structured and what they're particular business 0:04:00.960 --> 0:04:05.400 model is can vary. We've been particularly focused on healthcare markets, 0:04:05.440 --> 0:04:08.920 but especially after we filed this lawsuit, we've been hearing 0:04:08.960 --> 0:04:12.880 from market participants across sectors about additional areas where they 0:04:13.080 --> 0:04:15.880 believe that, you know, we should be scrutinizing, be it 0:04:15.920 --> 0:04:17.160 in healthcare or elsewhere. 0:04:17.920 --> 0:04:21.720 So it's not against the law to raise prices generally, 0:04:21.960 --> 0:04:25.400 and it might be elevised and it might make lawyers cringe, 0:04:25.440 --> 0:04:27.680 but it's also not against the law to right chi 0:04:27.800 --> 0:04:30.640 ching and an email. You know, the game is to 0:04:30.680 --> 0:04:34.520 make money. What is it about this case that makes 0:04:34.560 --> 0:04:40.360 it to your mind, anti competitive beyond just profitable raising money. 0:04:40.600 --> 0:04:43.560 Yeah, it's a good question. So this case is about 0:04:43.640 --> 0:04:47.279 a roll up scheme that was architected by the private 0:04:47.279 --> 0:04:51.440 equity firm Walsh Carson, and our lawsuit both names USAP 0:04:51.880 --> 0:04:54.760 as well as Walsh Carson because they were ultimately the 0:04:55.120 --> 0:04:59.320 core mastermind. And what happened was Welsh Carson recognized that 0:04:59.480 --> 0:05:04.040 the theesiology markets in Texas were quite fragmented and that 0:05:04.680 --> 0:05:07.560 created an opportunity for them to go in do a 0:05:07.600 --> 0:05:10.279 whole set of acquisitions. They ended up buying out some 0:05:10.400 --> 0:05:14.680 of the largest anesthesiology practices in Texas in ways that 0:05:14.839 --> 0:05:18.080 eliminated competition. Right, So you had a market that previously 0:05:18.200 --> 0:05:23.040 was fragmented where different anesthesiology providers were competing against one another, 0:05:23.440 --> 0:05:25.840 but ultimately, when they were a whole bunch of them 0:05:25.880 --> 0:05:29.440 put under the same ownership, that competition was eliminated. And 0:05:29.520 --> 0:05:32.640 we saw the effects of that pretty clearly because these 0:05:32.800 --> 0:05:36.240 entities were able to ultimately jack up prices, and so 0:05:36.320 --> 0:05:38.839 they did that in a whole set of cities across 0:05:38.920 --> 0:05:43.760 Texas for the anesthesiology practices that they weren't able to 0:05:43.800 --> 0:05:47.560 buy outright, they ended up entering into all sorts of 0:05:47.640 --> 0:05:51.480 agreements either not to enter each other's markets or to 0:05:51.720 --> 0:05:55.800 coordinate and ultimately hike prices. Nevertheless, so there's a whole 0:05:55.880 --> 0:05:59.400 set of anti competitive conduct that we alleged was going 0:05:59.400 --> 0:06:02.280 on here, and that's reflected and the whole set of 0:06:02.320 --> 0:06:06.680 antitrust claims that we bring both illegal acquisitions but monopolization 0:06:06.960 --> 0:06:09.640 as well as illegal market allocation schemes. 0:06:10.760 --> 0:06:12.680 One of the things I'm interested in, and we spoke 0:06:12.720 --> 0:06:15.520 a little bit to Jonathan Kanter about this, but how 0:06:15.520 --> 0:06:19.000 do you actually go about examining an industry and how 0:06:19.000 --> 0:06:23.120 did these things actually land on your radar? Because when 0:06:23.120 --> 0:06:25.680 we're doing odd thoughts, one of the things I think 0:06:25.680 --> 0:06:28.960 we've learned over the years is that even after we 0:06:29.040 --> 0:06:31.599 dive into a particular business for an hour, we often 0:06:31.640 --> 0:06:34.080 come away with more questions and this leads to, you know, 0:06:34.120 --> 0:06:37.400 five more hour long episodes about a single business. So 0:06:38.120 --> 0:06:41.400 what is your research process actually like? And then also, 0:06:41.960 --> 0:06:43.719 I know you said you were going to be reaching 0:06:43.760 --> 0:06:46.720 out to doctors to try to get more stories about 0:06:46.720 --> 0:06:49.719 the impact of PE on the healthcare industry, But what 0:06:49.760 --> 0:06:51.200 are the types of things that you're hearing? 0:06:52.320 --> 0:06:56.239 So we have phenomenal staff at the FTC who are deep, 0:06:56.279 --> 0:06:58.680 deep experts. I mean, these are the people who are 0:06:58.720 --> 0:07:02.719 really drilling in to the intricate mechanics of how various 0:07:02.720 --> 0:07:06.560 markets work. What are the contracting practices like if you're 0:07:06.600 --> 0:07:09.080 looking at pharma, you know, drilling down into what is 0:07:09.120 --> 0:07:12.520 the active ingredient, what are like the drugs and the pipeline. 0:07:12.560 --> 0:07:16.680 I mean, really just incredible mastery over just the nuts 0:07:16.680 --> 0:07:19.200 and bolts of all sorts of markets across the US, 0:07:19.600 --> 0:07:23.920 and so we really rely on their expertise. Beyond that, 0:07:24.080 --> 0:07:27.600 you know, we solicit information from a range of sources. 0:07:27.760 --> 0:07:30.480 One thing that I've been really focused on is making 0:07:30.520 --> 0:07:33.960 sure we're regularly engaging the broader public, and so we 0:07:34.080 --> 0:07:37.040 do these regular commission meetings where anybody can sign up 0:07:37.080 --> 0:07:39.880 and come talk to us. We've opened up a whole 0:07:39.920 --> 0:07:43.960 set of public dockets asking for information about certain types 0:07:44.000 --> 0:07:48.000 of contracting practices. We're doing an inquiry right now into 0:07:48.040 --> 0:07:51.320 pharmacy benefit managers the PBMs, which are these middlemen and 0:07:51.360 --> 0:07:54.360 the pharmaceutical supply chain. We've been getting a whole set 0:07:54.360 --> 0:07:58.360 of comments from independent pharmacies to patient advocates, and so 0:07:58.520 --> 0:08:01.640 we really want to make sure that you're sourcing broadly 0:08:01.760 --> 0:08:06.120 and making sure those information gathering channels are open, and 0:08:06.160 --> 0:08:08.840 really to make sure that our understanding of markets is 0:08:08.880 --> 0:08:12.400 really reflecting the reality. And this is actually how I 0:08:12.440 --> 0:08:15.360 got my start in anti trust as a business journalist 0:08:15.360 --> 0:08:17.840 and researcher, and one of my jobs was to really 0:08:18.120 --> 0:08:22.120 drill down and understand how various markets were faring, especially 0:08:22.160 --> 0:08:25.800 after decades of consolidation. And it was really that work 0:08:26.080 --> 0:08:30.000 and talking to market participants and understanding the reality and 0:08:30.080 --> 0:08:33.240 mechanics of their day to day and actually seeing how 0:08:33.280 --> 0:08:36.400 that departed from what some of the models in theories 0:08:36.440 --> 0:08:39.480 and anti trust were predicting. That really gave me a 0:08:39.520 --> 0:08:42.840 renewed appreciation for actually talking to the people in these 0:08:42.840 --> 0:08:45.679 markets to understand what's going on rather than just relying 0:08:45.679 --> 0:08:46.840 on our models and theories. 0:08:47.400 --> 0:08:50.440 One thing I really like about when reading through the 0:08:50.480 --> 0:08:54.920 complaint against US Anesthesia Partners, there's a really long conversation 0:08:55.040 --> 0:08:58.080 in there, just essentially about how the business model of 0:08:58.240 --> 0:09:01.040 anesthesia works and the relationship that the clinics have with 0:09:01.080 --> 0:09:04.600 the hospitals and how those arrangements are set. You know 0:09:04.800 --> 0:09:08.040 something though I'm curious about reading this is no one 0:09:08.120 --> 0:09:10.959 knows what the outcome is it seems straightforward. It seems 0:09:11.000 --> 0:09:14.319 like what we all think of as sort of classical 0:09:14.440 --> 0:09:18.040 anti competitive behavior. And the way you describe it is, yeah, 0:09:18.360 --> 0:09:21.959 they bought a bunch of regional clinics, got a big 0:09:22.040 --> 0:09:24.000 chunk of the market and raised prices, which I think 0:09:24.040 --> 0:09:26.840 if you ask people what anti competitive behavior looks like, 0:09:27.120 --> 0:09:30.360 it's something like that garnering a big and then saying 0:09:30.400 --> 0:09:32.440 chi ching and then saying chi ching. But the reason 0:09:32.600 --> 0:09:34.959 why I ask is that, you know, obviously, I think 0:09:35.000 --> 0:09:38.000 a lot of people associate your work with a sort 0:09:38.000 --> 0:09:42.520 of broader theory of anti trust related to corporate power 0:09:42.679 --> 0:09:46.640 and other ways that powerful corporate entities can affect employees 0:09:46.840 --> 0:09:50.559 or consumer or smaller businesses. Is it fair to say, though, 0:09:50.600 --> 0:09:53.560 that this is sort of retro old school anti trust 0:09:53.720 --> 0:09:57.160 is sort of a retro example of anti trust enforcement. 0:09:57.400 --> 0:09:59.880 I mean, everything we do is old school anti trust. 0:10:01.320 --> 0:10:01.680 Knowledge. 0:10:02.200 --> 0:10:04.319 There's some new thing, but it just feels it does 0:10:04.360 --> 0:10:08.720 not feel like some exotic or some sort of trendy 0:10:08.840 --> 0:10:10.120 legal theory. Yeah. 0:10:10.160 --> 0:10:12.280 So, look, the interesting thing about anti trust is that 0:10:12.320 --> 0:10:15.720 our foundational statutes are over one hundred years old, right. 0:10:15.760 --> 0:10:18.520 The Sherman Anti Trust Act was pass in eighteen ninety 0:10:18.640 --> 0:10:21.080 You then had the Clayton Act the FTC Act, which 0:10:21.120 --> 0:10:24.880 created the Federal Trade Commission in nineteen fourteen. And these 0:10:24.960 --> 0:10:29.600 laws set out terms like unfair methods of competition or 0:10:29.679 --> 0:10:33.600 restraints of trade, and at various points lawmakers had debates 0:10:33.640 --> 0:10:36.720 they said, should we define more specifically what that means? 0:10:37.160 --> 0:10:40.200 And they decided against it because they realized that as 0:10:40.320 --> 0:10:44.640 markets change, as technologies change, as business models change, firms 0:10:44.679 --> 0:10:48.040 are going to be endlessly innovative in how they monopolize 0:10:48.120 --> 0:10:50.720 right the tactics that they use. And so they left 0:10:50.720 --> 0:10:54.320 it open ended for enforcers to use their expertise to 0:10:54.440 --> 0:10:59.040 do deep investigations and make sure that those principles were 0:10:59.040 --> 0:11:02.959 being vindicated no matter whether you're in a smokestack industry 0:11:03.280 --> 0:11:05.400 or in the context of private equity, or in the 0:11:05.440 --> 0:11:08.240 context of some of these newer digital markets. And so 0:11:08.360 --> 0:11:11.440 those are really the principles that were animated by and 0:11:11.480 --> 0:11:13.680 that we look to vindicate throughout our work. 0:11:14.040 --> 0:11:17.480 Well, let me just ask as a follow up, I mean, presumably, 0:11:17.480 --> 0:11:19.720 as you said, you're collecting more comments, you're looking at 0:11:19.760 --> 0:11:24.719 more areas, et cetera. Is there anything in this particular 0:11:24.920 --> 0:11:28.920 case that was anti competitive but not in this sort 0:11:28.920 --> 0:11:33.360 of straightforward garnering market share and raising prices. In other words, 0:11:33.640 --> 0:11:36.920 are there other types of roll ups, perhaps in healthcare, 0:11:37.280 --> 0:11:40.400 perhaps other parts of other things that private equity might 0:11:40.440 --> 0:11:43.360 engage in where this case could serve as a warning, 0:11:43.600 --> 0:11:47.080 even if the strategy isn't about, oh, let's get seventy 0:11:47.080 --> 0:11:48.640 percent of the market and raise prices. 0:11:49.280 --> 0:11:52.240 So this is the first roll up case that the 0:11:52.280 --> 0:11:55.600 FTC has brought in several decades. And what I mean 0:11:55.640 --> 0:11:59.440 by that is that this case was about not just 0:11:59.559 --> 0:12:03.360 looking at each acquisition in a silo, but really looking 0:12:03.440 --> 0:12:06.240 at them in the aggregate, right, And that's really what 0:12:06.320 --> 0:12:08.640 we see with some of these roll up and serial 0:12:08.679 --> 0:12:12.160 acquisition strategies is that they may be composed of a 0:12:12.200 --> 0:12:16.560 whole set of individual transactions and acquisitions. Each one, when 0:12:16.600 --> 0:12:19.640 considered in a silo, may not seem problematic from a 0:12:19.640 --> 0:12:22.320 competition perspective. Right. Some of them may not even be 0:12:22.440 --> 0:12:24.719 reportable because they may be, you know, just a few 0:12:24.760 --> 0:12:27.440 tens of millions of dollars and not even trigger the 0:12:27.480 --> 0:12:30.640 heart's got Redino filing. And so you may have a series, 0:12:30.880 --> 0:12:33.800 each one of which is small and may seem benign. 0:12:34.200 --> 0:12:36.840 But when you zoom out and look in the aggregate. 0:12:37.120 --> 0:12:38.960 You have what you may have seen is a rollup 0:12:38.960 --> 0:12:42.280 of a market. And so this case should really put 0:12:42.520 --> 0:12:45.680 market participants on notice that the FTC is going to 0:12:45.679 --> 0:12:49.000 be looking at these deals in the aggregate. We're reserving 0:12:49.040 --> 0:12:52.120 that right for ourselves rather than just looking at each 0:12:52.200 --> 0:12:53.679 one in a silo. 0:12:53.960 --> 0:12:56.520 Well, on that note, when I think of roll up strategies, 0:12:56.559 --> 0:12:59.200 I think of them as kind of a foundational aspect 0:12:59.280 --> 0:13:01.560 of private XA. And I think it's fair to say 0:13:01.559 --> 0:13:03.800 that there are a lot of you know, pe decks 0:13:03.840 --> 0:13:07.560 that go around where they talk about multiple acquisitions and 0:13:07.640 --> 0:13:11.040 the ability that gives them in pricing power. So I 0:13:11.040 --> 0:13:14.120 guess it's unsurprising that you have seen some pushback and 0:13:14.160 --> 0:13:17.800 some lobbying recently. I think Politico just this week or 0:13:17.880 --> 0:13:20.600 last week ran a story calling you Wall Street's enemy 0:13:21.240 --> 0:13:24.439 number one, something to that effect. And we have seen 0:13:24.520 --> 0:13:31.839 businesses trying to use political partisanship to persuade some politicians 0:13:31.880 --> 0:13:34.920 to maybe repeal some of these laws or kind of 0:13:34.920 --> 0:13:39.000 push back against them. How does that impact what you do? 0:13:39.240 --> 0:13:43.400 And I guess how vulnerable are some of the directional 0:13:43.440 --> 0:13:46.480 shifts or changes that you've made at the FTC to 0:13:46.679 --> 0:13:48.320 this type of political pressure. 0:13:49.440 --> 0:13:52.840 Look embedded in the DNA of the FTC is when 0:13:53.000 --> 0:13:55.880 as an agency, we're being faithful to the statutes, right, 0:13:55.920 --> 0:13:58.959 the anti monopoly statutes, we're going to be pitted up 0:13:59.000 --> 0:14:03.200 against monopoly and very well healed interests, right. And these 0:14:03.480 --> 0:14:06.480 entities have power, they have resources, and they have a 0:14:06.480 --> 0:14:09.640 lot to lose if the antitrust laws are faithfully enforced, 0:14:10.040 --> 0:14:12.920 and so you know, that type of pushback is probably 0:14:12.960 --> 0:14:15.600 baked in if we're doing our job and being effective. 0:14:16.000 --> 0:14:18.920 The important thing, though, to recall, is that the business 0:14:18.920 --> 0:14:21.840 community is not a monolith, right, And we've been hearing 0:14:22.120 --> 0:14:28.360 equally from businesses, from entrepreneurs, from startups about the ways 0:14:28.400 --> 0:14:33.480 in which consolidation and anti competitive practices are locking them 0:14:33.480 --> 0:14:36.800 out of markets, are muscling them or squeezing them. We 0:14:36.920 --> 0:14:40.320 heard a lot from independent pharmacies, for example, about the 0:14:40.360 --> 0:14:44.120 ways in which vertical integration by PBMs may be leading 0:14:44.160 --> 0:14:48.520 to practices that is, you know, squeezing them. And especially 0:14:48.520 --> 0:14:51.119 in rural areas where you have some of these independent 0:14:51.400 --> 0:14:55.320 pharmacies shutter. That's essential healthcare that's no longer being provided 0:14:55.360 --> 0:14:59.000 to communities. The other week, I spoke to a conference 0:14:59.160 --> 0:15:03.080 of ERD doctors who shared the way in which private 0:15:03.120 --> 0:15:08.000 equity expansion into emergency medicine they believe is really harming 0:15:08.080 --> 0:15:11.480 not just the doctors, but ultimately the quality of patient care. 0:15:11.920 --> 0:15:15.440 And so these are real problems with real material effects 0:15:15.480 --> 0:15:17.960 on people. And so that's where making sure that we're 0:15:18.160 --> 0:15:21.520 hearing broadly and not just from you know, well healed 0:15:21.520 --> 0:15:24.960 companies that can afford lobbyists in DC is really critical, 0:15:25.000 --> 0:15:26.840 and make sure that we're keeping our eye on the 0:15:26.880 --> 0:15:40.720 prize and faithfully doing our jobs. 0:15:45.240 --> 0:15:48.680 I'm glad you brought up the potential harm to doctors 0:15:48.680 --> 0:15:50.760 and obviously the quality of care. There was an interesting 0:15:50.840 --> 0:15:53.200 article I read. I guess it was just yesterday in 0:15:53.240 --> 0:15:57.200 the American Prospect about the AMA considering a resolution for 0:15:57.440 --> 0:16:00.600 a federal ban on the corporate practice of medicine, and 0:16:00.680 --> 0:16:02.400 I guess, you know, I want to go back to 0:16:02.440 --> 0:16:04.000 what you said about I think was in the first 0:16:04.080 --> 0:16:07.440 question about listening to more people and opening up comments. 0:16:07.840 --> 0:16:10.080 Are you hearing the same thing the sort of frustration 0:16:10.160 --> 0:16:14.120 from doctors, And could the FTC in theory take action 0:16:14.200 --> 0:16:16.560 at some point in the future against an entity that 0:16:16.720 --> 0:16:21.200 wasn't necessarily aggressively raising prices but by dint of their 0:16:21.280 --> 0:16:26.080 having rolled up multiple clinics are mistreating workers or mistreating patients, 0:16:26.080 --> 0:16:27.040 like could that be enough? 0:16:28.040 --> 0:16:31.960 So the antitrust laws protect everybody. They protect patients and consumers, 0:16:32.000 --> 0:16:35.640 but they're also supposed to protect workers. And we've seen 0:16:35.680 --> 0:16:39.640 over the last decade, in particular, significant empirical research from 0:16:40.080 --> 0:16:43.240 labor economists finding that labor markets in the US are 0:16:43.320 --> 0:16:46.920 much more concentrated on average than previously believed, and that 0:16:46.960 --> 0:16:50.360 you have what's called, you know, monopsony power that can 0:16:50.400 --> 0:16:54.040 give employers outsized power over their workers when they're not 0:16:54.200 --> 0:16:58.400 checked adequately by competition. So that's a dimension of competition 0:16:58.800 --> 0:17:01.920 labor markets that we are very much looking at. The 0:17:02.040 --> 0:17:04.840 revised merger guidelines that we put out a draft of 0:17:04.880 --> 0:17:08.880 this past summer includes a particular guideline laying out how 0:17:08.920 --> 0:17:12.879 we will assess whether mergers may unlawfully lessen competition in 0:17:13.000 --> 0:17:16.199 labor markets. And one of the hospital mergers that we 0:17:16.280 --> 0:17:20.640 sued to block last year in Rhode Island included analysis 0:17:20.680 --> 0:17:22.960 about how the merger would be bad not just for 0:17:23.040 --> 0:17:27.200 patients but also for registered nurses. So it's becoming more 0:17:27.240 --> 0:17:30.680 and more key part of our analysis. Earlier this year 0:17:30.680 --> 0:17:34.480 In January, the FTC also brought a series of enforcement 0:17:34.560 --> 0:17:38.080 actions relating to the use of non compete clauses. So 0:17:38.119 --> 0:17:42.000 we brought one lawsuit against this company called Prudential Security. 0:17:42.200 --> 0:17:45.199 It's been employing security guards that were making close to 0:17:45.280 --> 0:17:48.480 minimum wage, and it had imposed on them these non 0:17:48.520 --> 0:17:52.119 compete clauses that we alleged were coercive and unfair methods 0:17:52.160 --> 0:17:55.600 of competition. We also brought a set of cases in 0:17:55.640 --> 0:17:59.359 the glass manufacturing industry. This is a part of the 0:17:59.359 --> 0:18:02.840 market that's quite concentrated. You basically have three big players, 0:18:03.240 --> 0:18:05.880 and we allege that their use of non competes had 0:18:05.880 --> 0:18:08.440 not even just been bad for workers, but it actually 0:18:08.520 --> 0:18:12.200 harmed competition because if you had an upstart who wanted 0:18:12.240 --> 0:18:14.159 to enter the market, they believed that was, you know, 0:18:14.240 --> 0:18:16.679 excess demand that they could come in and fill, they 0:18:16.720 --> 0:18:19.720 wouldn't be able to scale ultimately because the relevant talent 0:18:19.760 --> 0:18:21.919 pool was all locked up through these non competes. So 0:18:22.640 --> 0:18:25.560 that's becoming a greater part of our work. In January, 0:18:25.640 --> 0:18:29.439 we also proposed a rule that would eliminate non compete 0:18:29.440 --> 0:18:33.760 clauses in employment contracts for the vast majority of workers, 0:18:33.800 --> 0:18:37.360 with a couple of exceptions. And that again was stemming 0:18:37.400 --> 0:18:40.120 from a whole set of empirical research that found that 0:18:40.240 --> 0:18:43.879 non competes maybe depressing workers' wages to the tune of 0:18:43.920 --> 0:18:47.280 three hundred billion dollars a year annually. One thing that 0:18:47.320 --> 0:18:49.520 was very interesting to me was that, you know, you 0:18:49.520 --> 0:18:51.840 can imagine how the non compete may be bad for 0:18:51.920 --> 0:18:55.720 the worker that's directly covered by the non compete, but interestingly, 0:18:55.920 --> 0:18:58.920 they also have a negative effect even on workers who 0:18:58.960 --> 0:19:01.600 are not directly covered, which kind of makes sense, right, 0:19:01.640 --> 0:19:05.360 if there's less churn in the economy because workers are 0:19:05.600 --> 0:19:08.040 locked in by a non compete, that means there are 0:19:08.119 --> 0:19:11.360 fewer opportunities even for workers that are not covered by 0:19:11.400 --> 0:19:14.160 non compete. So we found harm to workers, we also 0:19:14.240 --> 0:19:17.760 found harm to competition and to innovation, and so this 0:19:17.840 --> 0:19:20.600 is another area of our work where we're looking at 0:19:20.640 --> 0:19:23.440 product markets, but we're also looking at labor markets. 0:19:23.480 --> 0:19:26.040 Tracy, that's interesting about the non competes. It's almost like 0:19:26.160 --> 0:19:29.560 the corollarya or flip side to what we've talked about recently, 0:19:29.640 --> 0:19:32.439 workers getting wages even if they're not in the union 0:19:32.880 --> 0:19:35.720 from wage gains. So what may affect just sort of 0:19:35.760 --> 0:19:39.199 one subset of workers has broader impact on it. 0:19:39.280 --> 0:19:41.760 Oh totally. Also, can I just say, ever since the 0:19:41.880 --> 0:19:45.439 twenty eighteen Jackson hole, I get really excited whenever anyone 0:19:45.440 --> 0:19:47.920 says monopsony, thanks. 0:19:48.000 --> 0:19:51.439 We need an air hornyye off, what Tracy? 0:19:51.600 --> 0:19:55.040 But I mean, just on this labor issue point, I mean, 0:19:55.080 --> 0:19:57.040 this is where we're sort of getting into the heart 0:19:57.240 --> 0:20:00.320 of the idea of hipster antitrust or sort of moving 0:20:00.359 --> 0:20:04.520 away from more traditional or classical interpretations of it. And 0:20:05.240 --> 0:20:07.239 you know, you're obviously the expert and correct me if 0:20:07.280 --> 0:20:09.679 I'm wrong, but my impression is that a lot of 0:20:09.680 --> 0:20:13.679 this is untested in courts, and as you just pointed 0:20:13.680 --> 0:20:17.159 out on the non compete clauses that you know, you 0:20:17.240 --> 0:20:20.439 could maybe fix some of this through new rule making, 0:20:20.480 --> 0:20:22.840 but otherwise you're going to have to pursue it through 0:20:22.920 --> 0:20:26.840 legal channels. So what exactly is the argument there, Like, 0:20:27.000 --> 0:20:31.160 how do you get the courts to incorporate this idea 0:20:31.320 --> 0:20:32.320 into existing law. 0:20:33.359 --> 0:20:37.000 So the idea that anti trust laws protect everybody, including workers, 0:20:37.080 --> 0:20:41.439 including competition in labor markets, is entirely accepted by the courts. 0:20:41.520 --> 0:20:43.800 There was a few years ago a Supreme Court decision 0:20:43.960 --> 0:20:48.000 and CAA v. Alston relating to student athletes, where the 0:20:48.000 --> 0:20:51.359 court you know, reaffirmed the idea that anti trust laws 0:20:51.400 --> 0:20:54.160 protect competition on the whole set of sides of the market. 0:20:54.640 --> 0:20:57.680 And just recently, the Justice Department prevailed in a case 0:20:58.080 --> 0:21:01.040 that they brought against publishers that were seeking to merge, 0:21:01.359 --> 0:21:03.600 and one of the arguments they advanced there was that 0:21:03.600 --> 0:21:06.640 that merger would have depressed the payments that are made 0:21:06.680 --> 0:21:09.919 to authors. And so they again were looking at you know, 0:21:10.000 --> 0:21:13.159 sides of the market other than end consumers. And you know, 0:21:13.200 --> 0:21:16.439 there again that that idea also prevailed. So you know, 0:21:16.840 --> 0:21:20.159 I believe we're you know, returning to faithful interpretations of 0:21:20.200 --> 0:21:23.479 the law which are accepted by courts. And on you know, 0:21:23.520 --> 0:21:25.760 the non compete side, for example, a lot of the 0:21:25.800 --> 0:21:29.280 comments that we've gotten are also from healthcare workers, and 0:21:29.359 --> 0:21:32.199 so something that we heard, for example, was that the 0:21:32.320 --> 0:21:36.000 use of non competes during the pandemic really impeded the 0:21:36.040 --> 0:21:39.680 ability of physicians to move. And this was a moment 0:21:39.720 --> 0:21:42.200 in time where you know, you had outbreaks at different 0:21:42.520 --> 0:21:46.399 cities and different regions, and so doctors and healthcare workers 0:21:46.480 --> 0:21:48.360 wanted to be mobile, right, they wanted to be able 0:21:48.400 --> 0:21:52.880 to go where COVID was really breaking out, and they 0:21:52.920 --> 0:21:56.040 found that they weren't able to move easily and some 0:21:56.080 --> 0:21:58.800 instances at all because of these non competes. And so 0:21:58.880 --> 0:22:02.160 you see again in a verry real material way, how 0:22:02.280 --> 0:22:05.119 this is not just about abstract debates with you know, 0:22:05.200 --> 0:22:08.280 various labels tacked on, but really just you know, real 0:22:08.320 --> 0:22:09.720 life impact I have. 0:22:10.359 --> 0:22:13.200 It's kind of a philosophical question that I've been thinking 0:22:13.200 --> 0:22:16.000 about a lot since we interviewed your sort of counterpart 0:22:16.119 --> 0:22:18.880 over it, the DOJ. You know, when I think about 0:22:18.880 --> 0:22:22.720 the broader economic agenda of the Biden administration, you don't, 0:22:22.840 --> 0:22:25.159 you know, And many commenters have talked about this is 0:22:25.200 --> 0:22:29.719 this sort of turn away against sort of neoliberalism, turnaway 0:22:29.760 --> 0:22:32.600