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Antitrust

AT&T CEO Says Hiring Cohen Was ‘Big Mistake’ As Questions On Trump Administration Lawsuit Are Revived

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WASHINGTON, May 13, 2018 – AT&T CEO Randall Stephenson on Friday announced that the company was parting ways with the executive responsible for hiring Trump “fixer” Michael Cohen in an apparent effort to grease the skids for the company’s merger with Time-Warner.

The revelations of the AT&T payment to Cohen revived questions over whether Trump punished the company by ordering a Justice Department lawsuit to block its merger with Time-Warner.

The announcement ended a week of media scrutiny for the telecom giant. In a letter distributed to employees in which he acknowledged that the $600,000 contract with Cohen for advice on the pending merger, Stephenson admitted it had been “for all the wrong reasons” and was “a big mistake.”

“To be clear, everything we did was done according to the law and entirely legitimate,” Stephenson wrote. “But the fact is, our past association with Cohen was a serious misjudgment.”

Vowing to “do better,” Stephenson took responsibility for the vetting failure that had led to Cohen being brought on board as a “political consultant” despite being a personal injury lawyer with no experience in telecommunications or mergers and acquisitions law.

Stephenson also announced that the executive most directly responsible for the decision — Executive Vice President for External and Legislative Affairs Bob Quinn — will retire, and that AT&T’s internal lobby shop will report to General Counsel David McAfee “for the foreseeable future.”

Cohen offered insights into the incoming administration

According to a representative in AT&T’s Washington office, Cohen pitched his services to the company during the transition period between Trump’s November 2016 election victory and the January 2017 inauguration.

Cohen told AT&T executives that he was leaving the Trump Organization to consult for a small number of companies, to which he’d provide information on “key players” within the administration and their priorities, as well as insights into “how they think.”

Companies often retain persons close to an incoming presidential administration as consultants or lobbyists. Because former Secretary of State Hillary Clinton was widely expected to win the 2016 election, many such organizations were unprepared for dealing with a Trump White House.

Cohen took full advantage of AT&T’s electoral miscalculation, and despite his lack of total lack of qualifications — apart from a relationship with the incoming president — the decision was made to hire Cohen at a rate of $50,000 per month.

While his contract expressly forbade lobbying activity unless he’d notified the company beforehand, AT&T never asked him to set up meetings, nor did he set any up himself.

AT&T also revealed Friday that Special Counsel Robert Mueller and his team knew about the payments as of November 2017, when his office contacted the company for information as part of the ongoing probe into Russian interference in the 2016 election.

The AT&T representative indicated that there’d been no further contact with Mueller’s office since December of last year and that the company “considers the matter closed.”

The company’s relationship with Cohen became public after attorney Michael Avenatti, who currently represents adult film actress Stormy Daniels in a lawsuit against the president, released documents detailing how AT&T paid Cohen.

The company funneled the money through Essential Consultants LLC, a Delaware-based shell corporation he’d established as a vehicle through which he paid Clifford $130,000 just before the 2016 election in exchange for her not revealing a prior sexual relationship with Trump.

Cohen payments put DOJ effort to block merger back in the spotlight

Stephenson’s admission that AT&T hired Cohen to potentially leverage his relationship with Trump once again raised the question of whether the president personally intervened in the company’s merger with Time-Warner, which owns the cable news outlet CNN, a frequent target of his ire.

Trump has often spoken of his desire to personally direct the Justice Department’s operations and had frequently launched specific attacks on CNN’s coverage of him over the course of his 2016 campaign.

Trump specifically invoked CNN when he promised to block the merger

His public feud with CNN has led to questions whether he would retaliate by following through on a campaign promise to block the AT&T-Time-Warner merger, which he promised to do at an October 2016 campaign rally in Gettysburg, Pennsylvania, days after the deal was announced.

“As an example of the power structure I’m fighting, AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few,” Trump said.

His fury at CNN for the negative stories it reported about his campaign and wall-to-wall press coverage sparked by its reporting on the dossier and the intelligence community assessment was even more evident at his final news conference before taking office, during which he refused to take questions from CNN’s Jim Acosta, who he angrily dismissed as “fake news.”

While some dismissed Trump’s attacks on CNN and his comments about the merger as yet another example of Trumpian bluster, the questions over whether he’d intervened personally took on a new life last November when the Justice Department filed a lawsuit to block the merger.

The DOJ lawsuit raised eyebrows because vertical mergers are rarely challenged

The lawsuit is unusual because the DOJ rarely intervenes in so-called “vertical” mergers between companies that represent two links in a supply chain, such as Time-Warner (which produces news and entertainment content) and AT&T (which owns the infrastructure to deliver it to consumers).

When the Justice Department intervenes in a merger on antitrust grounds, it is usually a “horizontal” merger, which joins two competitors in the same industry.

Because such mergers are often more closely reviewed by regulators, the Trump administration’s intervention in the vertical one between AT&T and Time-Warner became even noticeable when Federal Communications Commission Chairman Ajit Pai began taking actions to facilitate broadcast TV giant Sinclair Broadcasting’s purchase of Tribune Media, even though regulators would traditionally be more skeptical of such a deal, which would give Sinclair control of far more stations than allowed under current media ownership rules.

Trump has publicly praised Sinclair, and Sinclair often returns the favor

Even as Trump has attacked and threatened CNN along with most other major media outlets that cover his administration, he has repeatedly praised Sinclair’s coverage, which he has called “far superior to CNN and even more fake NBC.”

Sinclair, which is based in Hunt Valley, Maryland, is notorious for forcing its local stations to air “must run” political content reflecting its owners’ conservative views.

Many of these segments are commentaries by the company’s “chief political analyst,” Boris Epshteyn, in which the former White House staffer obsequiously defends the administration from which he resigned after less than three months service. Another “must-run” segment which was met with widespread ridicule and criticism forced Sinclair’s local anchors to denounce “fake stories” and journalists who “use their platforms to push their own personal bias and agenda to control what people think” as “dangerous to our democracy.”

Once again, Giuliani makes things worse

Trump’s attacks on outlets that report stories which are unflattering to him or his administration gave rise to suspicions that he had involved himself in the decision to try and block the AT&T/Time-Warner merger. Those were allegations the White House strongly denied at the time.

But Trump attorney Rudolph Giuliani reignited the controversy Friday when addressing whether AT&T’s decision to hire Cohen was the kind of “swampy” behavior that Trump had promised to end.

Giuliani echoed a statement by White House Press Secretary Sarah Huckabee Sanders, who on Friday told reporters that Trump wasn’t affected by AT&T’s payments to Cohen because the Justice Department was opposing the merger.

But in an interview with The Huffington Post, Giuliani went further by suggesting that the president had personally intervened to block it, contradicting the White House’s prior assertions that Trump wasn’t involved.

“He did drain the swamp…the president denied the merger,” Giuliani said. “They didn’t get the result they wanted.”

The former New York City mayor — who resigned from his law firm this week over his representation of the president — attempted to walk back his statement on Saturday, telling CNN that Trump personally told him that he did not interfere.

The president also weighed in with a tweet late Friday, attributing the opposition to “the Trump Administration’s Anti-Trust Division,” and suggesting that his administration’s opposition to the merger was going unreported.

 

Andrew Feinberg is the White House Correspondent and Managing Editor for Breakfast Media. He rejoined BroadbandBreakfast.com in late 2016 after working as a staff writer at The Hill and as a freelance writer. He worked at BroadbandBreakfast.com from its founding in 2008 to 2010, first as a Reporter and then as Deputy Editor. He also covered the White House for Russia's Sputnik News from the beginning of the Trump Administration until he was let go for refusing to use White House press briefings to promote conspiracy theories, and later documented the experience in a story which set off a chain of events leading to Sputnik being forced to register under the Foreign Agents Registration Act. Andrew's work has appeared in such publications as The Hill, Politico, Communications Daily, Washington Internet Daily, Washington Business Journal, The Sentinel Newspapers, FastCompany.TV, Mashable, and Silicon Angle.

Antitrust

FTC Mum on Microsoft-Activision Deal, Proposes Review of Merger Guidelines

The deal would elevate Microsoft in an even more favorable position in the games-as-a-service market.

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FTC Chairwoman Lina Khan on CNBC last week

WASHINGTON, January 24, 2022 – As Federal Trade Commission Chairwoman Lina Khan does media rounds this past week, she has refused to comment on last week’s news that Microsoft has agreed to buy video game making giant Activision-Blizzard for nearly $70 billion.

As per policy, the FTC and the Department of Justice, which on Tuesday jointly held a press conference on merger reform on the same day of the announced consolidation, said they could not comment on the deal, which would increase the Xbox maker’s gaming market share and allow it to better compete with Japanese behemoth Sony.

During the press conference, Khan, installed as chairwoman in June as an already outspoken critic of certain big tech practices, announced that the organizations would be launching a review of merger guidelines. Khan stressed that the current guidelines do not adequately protect consumers and promote competition in the era of the digital economy.

“While the current merger boom has delivered massive fees for investment banks, evidence suggests that many Americans historically have washed out with diminished opportunity, higher prices, lower wages, and lagging innovation,” she said. “These facts invite us to assess how our merger policy tools can better equip us to discharge our statutory obligations and halt this trend.”

She reiterated those goals on a CNBC interview on Wednesday. The purchase of the highly influential Call of Duty franchise maker will have to go through her office. It also presents another stress test for the office, as it is already engaged in an existing lawsuit against Facebook practices. Both Facebook and Amazon have asked for Khan to be recused from investigations in their companies because of her past positions on them.

The deal would significantly expand Microsoft’s Game Pass platform, which offers free games to play for a monthly subscription. Microsoft announced on the day of the proposed deal that Game Pass surpassed 25 million subscriptions.

“Upon close, we will offer as many Activision Blizzard games as we can within Xbox Game Pass and PC Game Pass, both new titles and games from Activision Blizzard’s incredible catalog,” said Microsoft Gaming CEO Phil Spencer said in a statement.

Despite its numerous successful intellectual properties, Activision Blizzard has been marred with scandal in recent years. In 2021, the company was sued by California Department of Fair Employment and Housing for promoting a “frat boy” culture, whereby female employees were not only allegedly discriminated against, but also subjected to sexual assault and misconduct.

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Antitrust

American Innovation and Choice Online Act Advances to Senate Floor With Bipartisan Alliance

Klobuchar was able to rally Democrats and Republicans to support her bill, but its future depends upon a shaky alliance.

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Sen. Amy Klobuchar

WASHINGTON, January 21, 2022 – Senators on the Senate Judiciary Committee have formed a tenuous, bipartisan alliance to curb allegedly anticompetitive behavior by large tech companies.

During a Thursday markup, the Senate Judiciary Committee voted 16-6 to send the American Innovation and Choice Online Act, S. 2992, to the Senate floor. The bill would prohibit certain companies with online platforms from engaging in behavior that discriminates against their competitors.

There is a laundry list of violations and unlawful behaviors enumerated in the bill, including unfairly preferencing products, limiting another business’ ability to operate on a platform, or discriminating against competing products and services.

This bill would only apply to companies with online platforms that meet one of the following criteria:

  • Has at least 50,000,000 United States-based monthly active users on the online platform or 100,000 United States-based monthly active business users on the online platform
  • Is owned or controlled by a person with United States net annual sales or a market capitalization greater than $550,000,000,000, adjusted for inflation on the basis of the Consumer Price Index and is a critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform

Sen. Amy Klobuchar, D-Minn., the sponsor of the bill, referred to the bipartisan effort as “the Ocean’s 11 of co-sponsors,” featuring a diverse line-up of legislators, from Sen. Josh Hawley, R-Miss., and Sen. John Kennedy, R-La., to Sen. Dick Durban, D-Ill., and Sen. Richard Blumenthal, D-Conn.

Senators embrace specific and direct targeting of Big Tech

Klobuchar spoke directly about the need to target large companies, “We have to look at this differently that just startup in a garage – that is not what they are anymore. They may have started small, but they are [now] dominant platforms,” she said. “For the first time, the monopoly power is going to be challenged in what I consider to be a smart way.”

At the outset of the meeting, there were more than 100 amendments proposed by members of the committee, but by its conclusion, more than 80 of them had been withdrawn.

One of the amendments that worked its way into the bill was a markup that exempted subscription-based services from complying with the legislation, allowing services like Amazon Prime and Netflix to promote their own content above others’.

“The bill strikes the right balance between preventing the conduct that hurts competition, while also ensuring that platforms can continue to provide privacy and data security features to their users, compete against rivals in the United States and abroad, and maintain services that benefit consumers,” Klobuchar said.

A fragile alliance between read-meat Republicans and progressive Democrats

Though there were big names on both sides of the aisle supporting the bill, the alliance seemed fraught. Despite being supportive of the bill, Kennedy made it clear that his support was conditional. “I am a co-sponsor of this bill, but this bill is going to change – it is going to change dramatically,” he said. “I hope to be in the room when those changes are made, otherwise I will be off this bill faster than you can say ‘Big Tech.’”

Some of Kennedy’s criticisms harkened back to Section 230 issues raised by former President Donald Trump – calling some of the targeted companies “killing fields for the truth,” and stating that “their censorship is a threat to the first amendment.”

Despite his criticisms, Kennedy echoed other senators, both Republican and Democrat, who emphasized that they did not want the perfect to become the enemy of the good. “All we have done [for five years] is strut around, issue press releases, hold hearings, and do nothing. So, this is a start.”

Klobuchar also received push-back from members of her own party, with Sen. Dianne Feinstein, D-Calif., stating that she was critical of the bill because it is designed to specifically target large tech companies, many of which are based out of California (though she ultimately voted to advance the bill to the Senate floor).

Hawley rebuffed Feinstein in his comments, stating that he supports the bill for the same reason Feinstein refuses to. “[Feinstein] pointed out – I think rightly – that this bill is very specific and does target specific behavior – anti-competitive behavior – in a specific set of markets. I think that that’s a virtue and not a vice.”

The measure must be passed by the full Senate, as well as the House, before it goes to the president for his signature.

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Antitrust

CES 2022: Patreon Policy Director Says Antitrust Regulators Need More Resources

To find the best way to regulate technology, antitrust regulators need more tools to maintain fairness in the digital economy.

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Larent Crenshaw (left), head of Patreon's global policy team

LAS VEGAS, January 7, 2021 – The head of Patreon’s global policy team said federal regulators need more resources to stay informed about technology trends.

Laurent Crenshaw told CES 2022 participants Friday that Congress should provide tools for agencies like the Federal Trade Commission to enforce consumer protection standards.

“I’m not going to say that big tech needs to be broken up, but there should be appropriate resources for federal regulators to understand the digital marketplace,” he said. “We’re are still living in a world that is dominated by big actors, and we’re debating about whether to even give federal regulators the power to understand how the marketplace is moving toward digital.”

Crenshaw of Patreon said that more resources were necessary at the FTC in order to understand the digital marketplace. Patreon is a membership platform that provides a subscription service for creators to offer their followers.

Such resources would empower the agency to place appropriate safeguards for smaller technology innovators. “So in 10 [or] 20 years, it’s not just the replacements of the current Google, Apple, or Facebook, but something entirely new,” he said.

Panelists echoed Crenshaw’s point that consumer welfare should guide competition policy. Tyler Grimm, chief counsel for policy and strategy in the House Judiciary Committee, said that antitrust should bend to the consumer welfare standard. “Antitrust should leave in its wake a better economy,” he said.

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