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Antitrust

T-Mobile/Sprint Merger Settlement Fiercely Criticized by Activists, and Dish Network’s Charlie Ergen is ‘Insulted’

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WASHINGTON, July 31, 2019 — The Justice Department’s recently announced settlement on the T-Mobile/Sprint merger has drawn widespread criticism, even though the agreement maintains four nationwide carriers by drawing Dish Network into the marketplace.

Dish has fiercely defended its ability to quickly emerge as a strong fourth competitor in the wireless market. The company plans to have a 5G broadband network reaching 70 percent of the country’s population by June 2023.

When the deal was first announced late last week, Dish Chairman Charlie Ergen pointed to the company’s past success in entering the pay-TV industry as a direct competitor to entrenched cable corporations.

“As we enter the wireless business, we will again serve customers by disrupting incumbents and their legacy networks, this time with the nation’s first standalone 5G broadband network,” Ergen said.

In a press call on Friday, representatives from several non-profit groups opposed to the merger urged state attorneys general to continue their suit against it in spite of the DOJ settlement and likely approval from the Federal Communications Commission.

“Rather than simply rejecting the deal, the Department of Justice has proposed a risky bet on creating a new facilities-based competitor,” said Philip Berenbroick, senior policy counsel for Public Knowledge. “This creates significant potential risk that consumers will be left with a substantially less competitive marketplace with higher prices, lower service quality, and less innovation.”

The behavioral conditions included in the settlement are at high risk of being ineffective, gamed, or unenforced, Berenbroick continued, adding that Sprint today is far stronger than any other fourth competitor in the foreseeable future.

“Based on what we know now, blocking the transaction remains the best way to preserve competition and prevent consumer harm,” concluded Berenbroick. “In the meantime, the FTC should put this new proposed transaction out for public scrutiny and comment.”

However, Dish Network challenged that assertion. In a second quarter earnings call on Monday night, Ergen said that he was insulted by people questioning the credibility of Dish as a competitor.

“This project is certainly challenging, but we have so much more infrastructure in place and we know what we’re up against,” he said. “It’s not our first rodeo and I think we will be a competitive threat in this business.”

Job loss fears, noncompliance history, and failures to meet buildout requirments

The merger is estimated to kill 30,000 jobs, according to Debbie Goldman, telecommunications policy director for the Communications Workers of America.

The divestiture of nine million prepaid customers does not replace the competitive loss of Sprint, which has 33 million postpaid subscribers and 12 million wholesale subscribers, said Goldman. Far from creating a new competitor, the deal gives T-Mobile its new biggest customer, since Dish will likely remain dependent on T-Mobile’s spectrum.

She said Dish has a long history of noncompliance with federal rules, including past failures to meet promised buildout requirements, and the company has never built or operated a wireless network.

“The DOJ has caved to political pressure and chosen to ignore the record evidence of the harm to consumers,” said Carri Bennet, general counsel to the Rural Wireless Association.

Calling the conditions “drastically insufficient” and the penalties “woefully inadequate,” Bennet warned that Dish would not be able to compete as a viable fourth nationwide network.

The proposed settlement will “degrade the choices available to consumers, degrade the options for network actions, and degrade the incentives to create better and more innovative service,” said George Slover, senior policy counsel for Consumer Reports.

Slover pointed out that the loss of Sprint means more than just the increased market concentration, since the network has historically made reaching rural areas and underserved communities a priority.

The Dish scheme is “needlessly convoluted” and “half-baked,” said Joshua Stager, senior counsel at New America’s Open Technology Institute, in a press release.

The remedy will require years of monitoring to ensure ongoing compliance, Stager continued, claiming that “no one who has followed merger enforcement over the past decade can seriously believe this will work.”

(Photo by Alonzo, used with permission.)

Development Associate Emily McPhie studied communication design and writing at Washington University in St. Louis, where she was a managing editor for campus publication Student Life. She is a founding board member of Code Open Sesame, an organization that teaches computer skills to underprivileged children in six cities across Southern California.

Antitrust

Former Federal Trade Commission Chairman Says Biden is Inappropriately Exhorting the Agency

Former Chairman William Kovacic said that Biden’s direction of the FTC raises expectations for the agency.

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Photo of George Washington University professor William Kovacic giving a lecture in 2017 from the university

WASHINGTON, January 28, 2022 – A former Federal Trade Commission chairman criticized the Biden administration’s direction of the FTC to accomplish the president’s antitrust goals.

At a Wednesday forum of the Mercatus Institute, former FTC Chairman William Kovacic criticized Joe Biden’s “instruction, direction, and exhortation” to the FTC, which is an independent agency and not part of the executive branch.

In July, President Biden directed regulators to craft rules preventing manufacturers like Microsoft and Apple from restrict consumers’ ability to fix their own devices. After the FTC voted unanimously to increase its enforcement against “right to repair” restrictions, both Microsoft and Apple announced plans for consumers to repair their own products.

Kovacic said that Biden almost appears to have the attitude that he “gave [the FTC and DOJ] an assignment” to advance the Biden administration’s consumer protection goals.

Then imagining that he was arguing from the perspective of the Biden administration, Kovacic said Biden could argue that he gave the FTC “an assignment to work on those guidelines and an exhortation to the FTC to get the work done,” as opposed to specific marching orders on the topics.

Mismatched capabilities at the FTC

Kovacic, who served as a commissioner at the FTC beginning in 2006, and who chaired the agency from 2008 to 2009, said the FTC has a history of mismatching its commitments with its capabilities.

In developing consumer protection programs, currently a professor of law at George Washington University, said the FTC often fails to ask “basic questions about who would do it, how long it would take, how much it would cost, and whether or not the institution has the credibility or capacity” to administer successful programs.

Kovacic said that in order to achieve a successful regulatory agenda, there must be a “stability of perspectives” that will endure across administrations.

Policymakers should be mindful not to abandon the resistance from total regulatory overhaul that he said “afflicted” his predecessors as chairs of the agency.

“Everybody will step forward and say, ‘I have my list.’ I suspect the Commission already is getting a letter each day from members of Congress saying, ‘here’s another one.’”

Recalling the many prior presidents’ push for regulators to control petroleum prices – including by President Biden in November – Kovacic said the FTC can’t always deliver.

“Whenever there’s going to be a problem the new leadership, seen as competition policy superheroes, will be exhorted to do something, and it will not be an adequate response to say, ‘we’ve already got a lot on the agenda, we’ll get to it when we can.'”

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Antitrust

Consolidation, Bloat, and a Waning American ‘Brand’ Hurt the Economy, Says Tim Wu

He argued that fundamental changes must be made to restore peoples’ faith in an American system that works for everyone.

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Photo of Tim Wu from January 2017 on Wikipedia Day used with permission

WASHINGTON, January 26, 2022 –White House Special Assistant Tim Wu said Wednesday that the U.S. economy is over-consolidated and bloated in the middle.

Speaking at an event hosted by the Institute for Local Self-Reliance, Wu, a member of the National Economic Council with a portfolio over Technology and Competition Policy, argued that that the “American dream” has suffered major setbacks in recent decades.

Wu, who is credited with coining the term “net neutrality” and a longstanding critic of telecom monopolies, has more recently become an outspoken critic of big technology companies.

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“We can see very vividly how fragile this concentrated economic system we built has been and how poorly it is working for the whole country,” Wu said.

“Our country has become too centralized. It is too national in its character – in terms of where businesses are location – too centered on consumption, as opposed to production.

“Too many of the [economic] returns go to too few people who often live very far away from the communities they serve.”

Hearkening to the post-World War II decades in which Western nations endorsed significant government intervention in the economy as part of social democracy, Wu said that America is “relearning the virtues and merits of a mixed economy – that is the truer American tradition of small and medium business – market structures where [people] can all survive and prosper; what [President Joe Biden] calls ‘an economy that works for everyone.’”

Can elements of a new form of social democracy be revived in a technology-drenched age?

Wu distilled his criticisms to three primary points: Too many industries have become too consolidated, a bloated “middleman” economy has emerged, and the “American brand” has diminished.

“We have all seen so many industries consolidate into just the ‘big three’ or ‘big four,’” Wu said. “That is a traditional problem that I think extracts a lot from the economy.”

Wu went on to explain the “middleman” economy – a rise of a “highly concentrated middle layer” across many industries. This bloat on the processing end takes place somewhere between the inception of a product or service and the consumer is extracting too much revenue, Wu said.

“When you think about monopoly – which is just high prices – it leads to this problem where the middlemen have power over their suppliers and are able to squeeze their suppliers and also often able to squeeze their employees,” Wu said. This is “a new kind of problem for the economy, and one that we need to face.”

ILSR’s Stacey Mitchell and Tim Wu.

What is the ‘American brand’?

Wu’s final point related to what he referred to as the “American brand.”

“There has been a real sense that the sense of opportunity that has been the ‘American brand’ has diminished,” he said. “The statistics are a little depressing that confirm this.”

75 percent of U.S. industries are controlled by fewer companies than they were 20 years ago, Wu said. He pointed to mergers that skyrocketed in the 1980s and predicted that 2022 will feature a record number of mergers.

“These are real challenges and I just want to assure you that the administration of the White House is very focused on [them] and we see it not just in terms of the economy, but in terms of the Democratic soul of this nation,” Wu said. “Freedom and opportunity are not trivial things when it comes to describing what democracy is all about.

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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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