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Antitrust

FTC Commissioner Phillips Warns About Shifting Direction of Agency

Noah Phillips voiced concern about the scope and practices of the Biden administration’s FTC.

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FTC Commissioner Noah Phillips

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.

Reporter Ben Kahn is a graduate of University of Baltimore and the National Journalism Center. His work has appeared in Broadband Breakfast, Washington Jewish Week, and The Center Square, among other publications. He primarily covers Big Tech and spectrum policy.

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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