WASHINGTON, September 2, 2021 — Federal Trade Commissioner Noah Phillips said at a Hudson Institute webinar on Monday that he’s concerned about the direction the competition watchdog is moving toward considering recent events.
Phillips said the left-leaning voices in Washington and the appointment of Lina Khan to chair the agency has left him wondering about the legacy of the last 40 years of competition regulation in America – which have been hallmarked by the Hart-Scott-Rodino Antitrust Improvements Act of 1976. That legislation effectively gave the FTC the ability to review mergers and acquisitions before they were finalized, rather than afterward, which governed pre-legislation.
Under Biden-appointee Lina Khan, Phillips described how the FTC has done away with the process of early termination. In the past, this process made it unnecessary for every single company to provide advanced notice and advanced approval for mergers. “Historically, parties have been able to come to the agencies and say, ‘You’re not interested in this, can we just go ahead and finish our deal,’ and the agencies have said ‘yes.’”
He said this is no longer the case, and that every single merger must provide advanced notice and approval. “What we’re introducing is an inefficiency in the market for transactions that we have no interest in pursuing, just for the sake of it. I think that’s a problem,” he continued. “My concern is that it is making merger enforcement less effective, less efficient, and less fair.”
Phillips pointed to left-of-center and leftist voices in Congress, such as Rep. David Cicilline, D-New York, Sen. Elizabeth Warren, D-Massachusetts, and Rep. Alexandria Ocasio-Cortez, D-New York, who, at the outset of the pandemic, wanted to ban all acquisitions and mergers—regardless of their merit. He described this view as falling outside of mainstream perspectives, but noteworthy nonetheless.
“I don’t think that is what most people believe,” Phillips remarked. “I don’t think that is what Hart-Scott-Rodino envisions.”
This webinar took place only a couple of weeks after Phillips spoke at the Technology Policy Institute’s 2021 Aspen Forum, where he voiced similar concerns, stating that he feared that this new direction would make it more difficult for the FTC to hear cases that it should, and defended the commission’s record against critics who said it was lax under the Trump Administration.
Public Interest Groups Urge Passage of Six Antitrust Bills Targeting Big Tech
Nearly 60 public interest groups signed a letter to House leaders to call a vote on six antitrust bills.
WASHINGTON, September 2, 2021 – Nearly 60 public interest groups signed a letter Thursday urging the House party leaders to push for a vote on six antirust bills that cleared the House judiciary committee in June.
The goal of the six bills is to rein in the power of Big Tech through new antirust liability provisions, including new merger and acquisition review, measures to prevent anticompetitive activity, and providing government enforcers more power to break-up or separate big businesses. They include American Choice and Innovation Online Act, H.R. 3816, Platform Competition and Opportunity Act, H.R. 3826, Ending Platform Monopolies Act, H.R. 3825, Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act, H.R. 3849, Merger Filing Fee Modernization Act, H.R. 3843, and State Antitrust Enforcement Venue Act, H.R. 3460.
The letter, which was directed at House Speaker Nancy Pelosi, D-California, and House Minority Leader Kevin McCarthy, R-California, were promoting a package of six bills that were the result of a two-year bipartisan investigation that included 10 hearings, featuring the testimony of the CEOs of the major tech companies, 240 interviews, 1.3 million documents and a 450-page report, the letter notes.
“We believe that these bills will bring urgently needed change and accountability to these companies and an industry that most Americans agree is already doing great harm to our democracy,” the letter said. Public Citizen was the first of the 58 groups on the letter.
America has a monopoly problem. Monopoly power lowers wages, reduces innovation and entrepreneurship, exacerbates income and regional inequality, undermines the free press and access to information, and perpetuates toxic systems of racial, gender, and class dominance,” the letter alleged.
“Big Tech monopolies are at the center of many of these problems,” it continued. “Reining in these companies is an essential first step to reverse the damage of concentrated corporate power throughout our economy. The bills that passed out of the House Judiciary Committee, with bipartisan support, do just that and it is imperative that they move forward in the House.”
List of signatories:
- Public Citizen
- Accountable Tech
- Action Center on Race & the Economy
- ALIGN: The Alliance for a Greater New York
- Alliance for Pharmacy Compounding
- American Booksellers Association
- American Family Voices
- American Independent Business Alliance
- American Specialty Toy Retailing Association
- Artist Rights Alliance
- Cambridge Local First
- Center for American Progress
- Center for Digital Democracy
- Center for Popular Democracy
- Committee to Support the Antitrust Laws
- Decode Democracy
- Electronic Frontier Foundation
- Friends of the Earth
- Future of Music Coalition
- Gig Workers Rising
- Global Exchange
- Indivisible Georgia Coalition
- Indivisible Hawaii
- Indivisible Ulster/NY19
- Institute for Local Self-Reliance
- International Brotherhood of Teamsters
- Jobs With Justice
- Kairos Action
- Local First Arizona
- Louisville Independent Business Alliance
- Main Street Alliance
- Mainers for Accountable Leadership
- Media Alliance
- Metropolitan Washington Council, AFL-CIO
- National Employment Law Project
- New York Communities For Change
- New York Communities for Change
- North American Hardware and Paint Association
- Open Markets Institute
- Our Revolution
- PowerSwitch Action
- Public Knowledge
- Running Industry Association
- Secure Elections Network
- Service Employees International Union
- Shop Local Raleigh/Greater Raleigh Merchants Association
- SIMBA (Spokane Independent Metro Business Alliance)
- Small Business Rising
- Stand Up Nashville
- StayLocal, an initiative of Urban Conservancy
- Strategic Organizing Center
- The Democratic Coalition
- Venice Resistance
- Warehouse workers for justice
Antitrust Experts Zero In on Big Tech and Consumer Welfare Standard at Aspen Forum
At Aspen forum, a red-hot focus on Big Tech, antitrust and consumer welfare.
ASPEN, Colorado, August 17, 2021— The Biden administration is taking a much harder line against big technology companies than was done by previous presidents, and is doing so by looking beyond the traditional consumer welfare standard of antitrust economics.
But the antitrust and competition economists making these assessments at the Technology Policy Institute conference here on Monday disagreed sharply about whether antitrust law should move beyond that consumer welfare standard.
Some these experts – including sitting Federal Trade Commissioner Noah Phillips – disagreed with stances taken by Biden’s hand-picked FTC Chairwoman Lina Khan.
Others, including Harvard Business School Professor Shane Greenstein, said that it was absolutely necessary for the FTC and the Justice Department antitrust division to investigate the gargantuan sums of money exchanged between big tech titans Google and Apple.
Speaking on a spirited panel session in the morning, “How is the U.S. Reshaping Antitrust,” Greenstein said Google pays Apple approximately $8 billion a year to make the Google search engine the default internet browser on all Apple devices.
Though this may not have historically fallen under the purview of antitrust, Greenstein was accusatory in his evaluation of the situation: “I’m sorry, no.” As to whether the antitrust division should investigate the matter, he said, “Go for it, guys.”
‘Deconcentration’ is not the goal of antitrust policy
But Carl Shapiro, professor of business strategy emeritus at University of California at Berkeley, dissented from Greenstein’s broader antitrust perspective.
“The goals of antitrust should be to promote competition—full stop,” said Shapiro. Deconcentration is not the goal of the FTC. The agency will have to determine whether it would depart from this long-held view, he said, and decide whether it would opt instead to consider concentration itself as evil.
“That’s not a version of capitalism that I want,” said Shapiro.
The primary issue is how one chooses to define competition, said Howard Shelanski, professor of law at Georgetown University. The dominant perspective has viewed competition through the lens of price effects. Other schools of thought borrow a wider aperture, considering this like privacy, wealth distribution, political power, product quality, and product variety when determining whether something improves or diminishes competition.
The more metrics that are accounted for, the more issues present themselves.
To this, FTC Commissioner Phillips responded, “If you are trying to solve everything at once, you will solve nothing at all.”
While polite, Phillips disagreed with FTC Chairwoman Lina Khan
At the beginning of the panel discussion, TPI President Emeritus Tom Lenard opened the session by asking Phillips for his impression of Khan.
Phillips responded diplomatically, joking that this question had not been on the list he had been sent. Because Khan has only been on the job for two months, it is too early for him to give a fully fleshed out appraisal of her time as chairwoman. “It’s always exciting to get new blood,” he said.
While he said he was supportive of Khan’s efforts to improve transparency by holding public meetings, he was critical of the direction in which the FTC is heading.
Proposed rule changes would create “needless friction” by delaying mergers that do not present a danger to consumers. This will make the agency less effective and less efficient.
“I worry that we are needlessly impeding our ability” to hear cases, he said.
Successes by big tech firms are ‘not a failure of antitrust’
Shapiro added that, in his view, concentration within an industry should not be viewed as a negative thing and that it is merely indicative of the fact that bigger companies are often simply more efficient and can compete more effectively in their industry. “That is not a failure of antitrust,” he said.
Shelanski said that he harbored serious reservations about expanding the consideration of antitrust. He noted that as it stands now, it is basically left to the FTC to decide how to pursue antitrust cases.
If the agency were to include considerations of value judgments, public health, environmentalism and wealth distribution, the country would need stronger democratic institutions to pursue this approach.
Former FTC Acting Chairwoman Maureen Ohlhausen, now with Baker Botts’s Antitrust and Competition Law Practice Group, shared Shelanski’s concerns about the ability of the FTC to make big, sweeping considerations on its own.
The public should not view the careful and deliberate approach to FTC decisions as lax. Indeed, she said, the commission has “done a pretty good job.”
Phillips agreed, stating that under the Trump Administration, the FTC had blocked more than 20 mergers—the most since 2001.
When asked if he felt whether antitrust guidelines should be revisited, he responded with skepticism, “There is a lot of promise of revisitation without much discussion of where [the FTC] is going.”
Daniel Hanley: Federal Communications Commission Must Block Verizon’s Acquisition of TracFone
Verizon sees an opportunity to acquire and neutralize an important competitor, but the FCC should stop that.
In late July, Democratic senators sent a letter to the Federal Communications Commission urging the agency to investigate the acquisition of TracFone, the largest prepaid carrier, by Verizon, the second-largest wireless phone carrier in the U.S. The FCC should use its broad merger review authority to block it outright.
With prepaid service, consumers pay for a set amount of cellular usage upfront rather than receive a bill at the end of the month. While such a service may seem like a relic of the 1990s, more than 74 million Americans rely on the service as a low-cost and accessible alternative to traditional cellular plans provided by Verizon, AT&T, and T-Mobile.
Verizon is one of the most dominant telecommunications companies in the U.S., occupying 30% of the entire cellular market. Up until now, the company has focused on its traditional postpaid service and almost entirely ignored the prepaid cellular market. Verizon now sees an opportunity to use its financial firepower to acquire an important competitor with its attempted acquisition of TracFone.
A staggering potential windfall for Verizon
The potential windfall for Verizon is staggering. If this deal were to be approved, the FCC would anoint Verizon as the largest wireless prepaid service operator in the United States and the company would obtain an additional 21 million customers. The merger would also allow Verizon to acquire the fourth-largest wireless company by subscribership in the U.S. The acquisition of TracFone by Verizon will also add $8.1 billion in revenue for Verizon and an additional 90,000 retail locations. Such a position will only continue the wave of consolidation in the cellular service sector and fortify Verizon’s market power as one of the largest wireless communications providers in the country.
The Federal Trade Commission and the Department of Justice review almost all mergers in the United States. However, the communications industry is so important that Congress also gave the FCC the authority to review and deny mergers and acquisitions in the sector. Unlike the legal standard set in the Clayton Act, which structures the merger litigation of the DOJ and the FTC, the FCC reviews mergers in the communications field under a “public interest standard.” The public interest standard is highly deferential to the FCC’s interpretation. As such, the FCC has broad discretion and can consider a range of factors when analyzing a merger under its jurisdiction. The Supreme Court has stated that the standard “no doubt leaves wide discretion and calls for imaginative interpretation” and that the agency has “comprehensive powers to promote and realize the vast potentialities” of communications technologies.
A merger of this magnitude will undoubtedly cause the traditional litany of harms derived from mergers, such as an increase in the barriers to entry for the communications sector and increased potential collusion between firms as a result of increased concentration. However, even a moderate review of the facts would show that Verizon’s acquisition of TracFone is not in the public interest and that the FCC should block the merger.
The FCC should not allow Verizon to acquire a critical competitor
First, as with most mergers by corporate monopolies, Verizon does not need to acquire TracFone to accomplish its operational goals. The FCC should not allow Verizon to use its dominant financial position to acquire (and subsequently neutralize) a critical competitor and market participant and forgo operational investments and other necessary market research to expand its network. Instead, the FCC can force the corporation to use its vast finances to develop its own rival prepaid network by blocking the merger.
Such a circumstance would increase competition in the industry and benefit consumers. Additionally, such a course of action would facilitate the kind of business conduct and investments in internal expansion the antitrust laws and other antimonopoly policies actively encourage, while increasing market competition and firm rivalry. The Supreme Court has consistently praised and encouraged growth from internal operations rather than acquisition. In Philadelphia National Bank, the Supreme Court stated, “[S]urely one premise of an antimerger statute…is that corporate growth by internal expansion is socially preferable to growth by acquisition.”
Second, prepaid providers like TracFone provide critical competitive pressure to larger carriers like Verizon. Prepaid carriers like TracFone often rent the communications infrastructure from postpaid carriers like Verizon to provide their service. Thus, rather than focusing on expanding and maintaining network infrastructure, renting it provides prepaid carriers the ability to provide lower-cost service, more tailored service, and a better customer experience overall.
Third, mergers like Verizon’s acquisition of TracFone are harmful to consumers. In this case, potential price increases are not only likely, but they would also be exceptionally harmful. Concerning TracFone specifically, the company provides a critical service to vulnerable sectors of the population that are extremely sensitive to price increases – particularly low-income consumers and people of color who live within the geographic area which TracFone serves.
Importantly, TracFone participates in the federal Lifeline Program, a crucial government program that provides low-income individuals subsidies to afford phone service. If Verizon were allowed to acquire TracFone, Verizon would obtain full control of TracFone’s 21 million customers consisting of a population it has historically ignored. Moreover, because of the increased market concentration, which would thus deprive customers of one less carrier to switch to, Verizon would face significantly fewer incentives to keep its prices low for such a vulnerable population.
Additionally, cell phones are a critical and vital tool for the public, particularly during the pandemic. Indeed, 37% of Americans use the internet only via a mobile device. Low-income students as well are now heavily reliant on cell phones for online education during the COVID-19 pandemic. In a 2020 survey, between 29 and 43 percent of parents said their children will have to do their schoolwork and engage in online learning from a cell phone. Access to low-cost cell phones is thus imperative for a large fraction of children to remote learning, which some states are considering for the fall 2021 semester.
History does not bode for Verizon’s claims of consumer benefit
Verizon has asserted that “when TracFone’s customers become part of Verizon, they will benefit from the enhanced choices, better services, and new features that follow from Verizon’s investment while still enjoying the flexibility and control that they have come to value with TracFone’s prepaid plans” and that it “will not require any TracFone customers to move to a more expensive plan when the transaction closes.”
However, history does not bode well for Verizon and its claims that its acquisition will benefit consumers. The economist John Kwoka found that 80% of studied mergers led to higher prices and even reduced output. Other comprehensive studies have found that acquisitions cause “significantly increase[d] markups on average” and reveal “no evidence for efficiency gains.” As New York University business professor Melissa Schilling has stated, most mergers “do not create value for anyone, except perhaps the investment bankers that negotiated the deal.”
Concerning the communications industry specifically, when telecommunications giant AT&T was acquiring Time Warner, the corporation stated that “the evidence overwhelmingly showed that this merger is likely to enhance competition substantially, because it will enable the merged company to “reduce prices, offer innovative video products.” Judge Richard Leon, who oversaw the litigation challenging the merger, was ultimately persuaded by AT&T’s statements holding that AT&T’s acquisition of Time Warner would “lead to lower prices for consumers.” Despite these claims, subsequent evidence revealed that AT&T did raise prices on consumers.
Although Verizon has committed to supporting TracFone’s presence in the Lifeline program for three years, the company has made no concrete promises to keep their prices at current levels for TracFone customers or to increase customer incentives to move to a higher-cost plan after the transaction closes. Like most mergers, Verizon’s asserted efficiencies and promises to improve competition as a results of the merger are likely theoretical and dubious.
A worrisome wave of acquisitions by telecom giants
Lastly, due to certain aspects of the market, such as the high infrastructure costs of cell towers, prepaid phone carriers tend to reduce to one or two carriers in a geographic area. Even more worrisome is that there has been a wave of acquisitions by the telecommunications giants over the past decade. In the prepaid industry, AT&T acquired Cricket Wireless and T-Mobile acquired MetroPCS in 2013.
Other blockbuster mergers among the group are the acquisition of Sprint by T-Mobile and the acquisition of Time Warner by AT&T. All these mergers went unchallenged by the FCC. Moreover, since AT&T and T-Mobile have already acquired firms to enter the prepaid industry, Verizon is the last remaining national carrier that could enter this market and likely the only wireless carrier with the finances to do so meaningfully.
The FCC has clear discretion to block this merger. Given the harmful effects of similar mergers, the sheer number of acquisitions that have already taken place in the communications industry that the agency has previously failed to stop, and the potential harms that could result directly from this merger, the FCC should review Verizon’s acquisition of TracFone with extreme suspicion and block it outright. The agency has the authority and must use it.
BroadbandBreakfast.com accepts commentary from informed observers of the broadband scene. Please send pieces to email@example.com. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.
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