ABA Antitrust Spring Meeting11-13 April 2018, Washington DC

Contents

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IntroductionEuropeAmericas AsiaCross BorderCommentary

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Antitrust officials and lawyers gathered in Washington last week for the American Bar Association’s 66th Antitrust Law Spring Meeting as talk of a full-on trade war between the world’s top two economies reached a fevered pitch. Assessing litigation strategies at a time of shifting policy directives and evolving market structures, PaRR provided our readers with frontline coverage of the panels, fireside chats and exclusive interviews that make the ABA Spring Meeting the preeminent event on the global competition docket.

This year was no exception. The Department of Justice’s antitrust chief Makan Delrahim informed the gathering that “big is not bad” when discussing the world’s largest digital platforms. We also learned in real-time that US enforcers now view vertical mergers through a very different prism, as government lawyers fought the AT&T/ Time Warner deal in a nearby courtroom.

In the week that saw Facebook’s CEO Mark Zuckerberg defend the social media giant at hearings before the US Congress, the EU’s competition head Margrethe Vestager weighed in on the issue of data privacy. The Danish commissioner stressed the need for competition law and other regulatory issues to walk together hand-in-hand, as she lauded the imminent introduction of the EU’s General Data Protection Regulation.

Another contentious issue that sparked debate was China’s restructured antitrust regime. The newly formed State Administration for Market Supervision (SAMR) will see antitrust powers - previously spread across three agencies – brought under one roof. Watch this space for future coverage.

Antitrust officials from the UK, Brazil, New Zealand, Canada, Ukraine, Mexico and other nations also shared insights, a reminder to companies and their advisors that competition enforcement is a truly global issue.

We have gathered our coverage of the conference into a single report which we hope you enjoy. We welcome your feedback.

Raymond Barrett

Global Managing Editor

Introduction

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An upcoming European Commission (EC) proposal to regulate relations between platforms and their business users will complete the approach DG Competition has taken to the issue, an EC official told PaRR in Washington DC today (12 April).

On 25 April, the EC’s digital affairs commissioner, Andrus Ansip, is scheduled to propose a series of initiatives, including one on “promoting fairness and transparency for users of online intermediation services”.

The proposal follows years of preparation from the EC’s Directorate General for Communications (DG Connect) to address unfair clauses and practices in relationships between platforms and their business users.

“Together with Commissioner Vestager, we have worked very intensively with our counterparts and I am confident that the proposal will lead to a completion of our approach to the issue,” DG Comp’s Director General Johannes Laitenberger told PaRR on the sidelines of the ABA Spring Meeting in Washington DC.

A first draft leaked in December showed that the proposal would be light-touch, imposing transparency requirements for the platforms to inform their business users how their rankings are established and reasons for any de-listing, as reported.

A second draft seen by PaRR included search engines within the scope of the proposal, but only for the articles concerning ranking and collective redress.

by Simon Van Dorpe

EuropeEC official says platform regulation proposal will complete DG Comp’s work

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Excessive data extraction could be a theory of harm to emerge from Germany’s Facebook investigation, a European Commission (EC) official said today (11 April).

The Bundeskartellamt (BKartA) reached the preliminary conclusion in December that Facebook abused its dominant position in the German market for social networks by obliging users to allow it to collect data from third parties.

“Could we have a case of excessive data extraction?” Cyril Ritter, a lawyer with the EC’s DG Comp, asked, adding: “We’ll see what conclusions we can draw from the German case.”

The EC official noted that in the field of big data, the EU agency is usually concerned about cartel situations where the level of privacy is degraded.

Evidence that merging firms were previously competing on data protection could also raise concerns in a big data merger, he said.

In the US, the best example where big data raised competition concerns came in the context of a merger, according to Terrell McSweeney, a commissioner with the US Federal Trade Commission (FTC).

Speaking on the same panel, McSweeney said any degradation in the level of data privacy could be offset by a behavioural remedy.

Turning to the German Facebook probe, McSweeney said that the FTC takes a “very different approach” to this kind of case.

by Simon Van Dorpe

EC official flags ‘excessive data extraction’ in German Facebook probe

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An argument raised by the European Commission (EC) in a court challenge to the clearance of Microsoft’s acquisition of Skype contradicts the agency’s claims in the Google Android case, a former competition counsel with Google said in Washington today (12 April).

In October 2011 the EC cleared computer software developer Microsoft’s takeover of internet voice and video communications provider Skype without conditions.

California-based Cisco, which also offers online communication services, together with service provider Messagenet, appealed the EC clearance decision to the EU’s General Court.

There, the EC argued that there was no danger of foreclosure because it is easy to download competitive services, Julia Holtz, senior competition counsel at Visa said.

Holtz joined Visa in December after working for more than a decade as a“They now seem to have forgotten that [in the Google Android case],” Holtz said.

In April 2016, the EC charged Google with abusing its dominant position by imposing restrictions on Android device manufacturers and mobile network operators.

One of the Commission’s concerns was that Google required manufacturers to pre-install its Search and Chrome apps, in a similar way to that in which Microsoft previously pre-installed its media player.

Holtz noted that in the Microsoft case the court elaborated at length on how difficult it was for users to download media players.

“At the time that was true. If you had a dial-up connection, if it didn’t work, you needed to start from scratch… it was really difficult,” she said.

“But the Android case is about smartphones, I don’t think anybody would say it is difficult to download apps on a smartphone,” she said, raising the question whether there was any foreclosure danger in such a case.

by Simon Van Dorpe

Microsoft/Skype argument contradicts Google Android case

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EC official flags algorithmic collusion in ongoing RPM cases

Algorithms automatically matching retailers’ prices is a phenomenon the European Commission (EC) is looking at in the context of ongoing cases, an EC official said today (10 April) in Washington.

The EU agency considers that resale price maintenance (RPM) can spread from one retailer to another through algorithms, Cyril Ritter, a lawyer with the EC’s DG Comp, told a panel at the ABA’s Spring Meeting.

A producer might force a retailer to engage in RPM because other retailers are automatically matching the price of the RPM retailer, Ritter said.

“That is a phenomenon that is currently on our radar – we may have seen instances of that in ongoing cases,” he added.

Ritter noted two other instances of potential algorithmic collusion in RPM cases.

Producers using algorithms to monitor the effectiveness of retailers’ prices could lead to increased fines “if the violation is rigorously enforced and causes a lot of harm”, he said.

The EC official added that algorithms are also used to transform recommended prices into RPM.

Recommended prices are legal, but when producers verify the retailers’ implementation of the recommendations, that kind of pressure could be regarded as RPM, Ritter said.

RPM is prohibited per se in Europe.

Ritter noted the high degree of focus on future concerns for algorithms centred around autonomous collusion, but said “that seems quite far in the future”.

He said the instances of immediate concern related to algorithms used to implement classic current theories of harm.

by Simon Van Dorpe

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EC chief economist backs broader consumer welfare standard

The EC has tried to depart from narrowly defined static effects in recent antitrust decisions and look at the “bigger picture”, DG Comp’s chief economist Tommaso Valletti said.

Speaking in Washington, DC today (12 April) at the ABA Spring Meeting, Valletti said the EC is looking at more issues than just price in its consumer welfare standard, including concepts such as quality and innovation.

For example, when finding that Google abused its dominance in the search engine market by favouring its own comparison shopping service over those of competitors, the EC factored in consumer choice, he said.

In the Dow/ Dupont merger decision, the EC developed a theory of harm based on innovation, he said.

“We are not changing our approach towards anticompetitive effects, but we are making it broader,” he said.

Valletti said that he was very disappointed, however, by the legal community’s response to this evolution, which he described as “very aggressive”.

“Of course we should discuss the facts, but not the underlying economics, which is trying to address a real underlying concern,” he said.

by Simon Van Dorpe

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Belgium, Portugal look to ICN as post-Brexit solution

Brexit’s closure of UK interaction with other EU competition authorities through the European Competition Network (ECN) could be remedied though its membership of the International Competition Network (ICN), according to the competition chiefs of Belgium and Portugal.

During a fireside chat at the American Bar Association’s Spring Meeting in Washington, Jacques Steenbergen and Margarida Matos Rosa, the Belgian and Portuguese chiefs, both agreed on the importance of the ICN could have on post-Brexit relations.

ICN will become more directly important after Brexit, Steenbergen said, adding that the Belgian Authority interacts with the UK through the ECN. “I already obtained through our government that they will allow us to get bilateral cooperation agreements.”

While the Belgian Competition Authority has not formally cooperated with the UK through the ECN in the past four years, the authorities have had innumerable informal guidance phone calls, Steenbergen said.

Matos Rosa said that she was unable to provide precise details on how many times the Portuguese Authority had spoken with the CMA, but said such dialogue was frequent. “We discuss numerous cases, not necessarily because there are common companies involved, but because we share an interest in a similar market and in discussing our approach to the competition issues in a given market,” she added.

The UK currently benefits from ECN membership, which allows cooperation and informal discussions between members without the need for the agencies to sign agreements with each other.

A Brexit agreement as envisaged – which would mean the UK leaving the EU’s single market and customs union – would preclude ongoing ECN membership.

Competition and Markets Authority (CMA) head Andrea Coscelli has said previously that “ideally” there would still be a role for the authority within the ECN, however he admitted “it is not going to be my decision”, as reported.

by Jules Johnston

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The head of Ukraine’s antitrust agency, Yuriy Terentyev, told PaRR that a raid on his offices conducted last year was “oppressive” but resulted in no indictments against himself or any authority members.

On 31 March last year, the Kyiv offices of the Antimonopoly Committee of Ukraine (AMCU) were raided by the country’s prosecutor.

Terentyev discussed the raid with PaRR on the sidelines of a fireside chat during the ABA Spring Meeting in Washington DC (12 April).

The cause of the raid lay in a December 2016 AMCU decision to fine tobacco distributor Tedis Ukraine, formerly Megapolis-Ukraine, UAH 431.2m (EUR 15.73m) for abuse of dominance.

Terentyev said that it was ironic that the state prosecutor suspected the AMCU of supporting the monopoly it had punished.

“The idea of this raid was to see whether there was proof that the committeewas somehow supporting the existence of the monopoly distributor,”Terrentyev explained, adding: “Documents were taken by the state

prosecutors office and they asked us certain questions about certain previous merger clearances that were given five to ten years ago.”

Terrentyev said that there were no consequences following the raid. “There was no criminal case against myself and the current AMCU members,” he said, adding: “We continue our work and I would say that our daily relations with the state prosecutors service and the minister of interior are quite positive.”

However Terentyev said he was “quite concerned about what happened”.

“Definitely having a raid in the premises of an independent authority is something which you don’t really like and it’s a form of oppression of an independent authority and I would do anything to avoid such a thing in the future,” Terentyev said.

A European Commission (EC) spokesman told PaRR last May that the European executive was “closely following” events related to the raid through its Kyiv office, as reported.

by Jeremy Fleming-Jones

Ukrainian agency chief hails positive relations with prosecutors following ‘oppressive’ 2017 raid

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Lithuania, Albania look to investment opportunities post-Brexit

The competition chiefs of Lithuania and Albania said their countries see Brexit as an opportunity to boost investment from financial sectors that might depart the UK in Washington DC today (12 April).

During a fireside chat, Sarunas Keserauskas, the chairman of Lithuania’s Competition Council and Juliana Latifa, the chairwoman of Albanian competition authority both expressed expectations that Brexit could bring investment east.

“Lithuania and others are looking at how to benefit from Brexit,” said Keserauskas, adding that Lithuania is currently attracting fintech companies by creating flexible rules to allow the easy establishment of a company within the small country.

“If that means we will have lots of new fintech companies that could have some impact on the work of our authority as well,” said Keserauskas. New industries - such as fintech - could create competition issues that the Lithuanian authority has not faced before, he added.

Albania could also benefit from Brexit, said Latifa, explaining that it is possible there could be a rise in people seeking to invest in the Balkan state.

The main investors into Albania are Germany, Austria, Italy and Greece, but after Brexit these countries may increase their investment into Albania, she said. “It’s a small country – but our energy sector could have a lot [more] investment from abroad [post-Brexit],” she added on the sidelines.

However, Brexit may have a negative impact too, said Keserauskas. With the UK leaving the EU there is a certain risk that the “most liberal member of the club” would be lost, he added. It could lead to those member states who favour heavier regulation gaining more sway.

The head of the Ukrainian authority, Yuriy Terentyev, who was also speaking, said that he did not expect Brexit to have an impact on Ukraine.

by Jules Johnston

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Vestager to engage US law makers in September

EU Competition Commissioner Margrethe Vestager will meet with US lawmakers in September during her next visit to the US capital, she told reporters today (13 April).

Speaking at a press conference held at the EU representation to the US on the fringes of the ABA Spring Meeting, Vestager said she was only in the capital for two days.

“This is a very short visit so I came for the ABA Spring Meeting and then I am just here after lunch with [US Federal Trade Commission acting chairman Maureen] Ohlhausen and [US Department of Justice (DoJ) antitrust chief Makan] Delrahim,” Vestager – who turned 50 today – said.

The commissioner added that she is very much looking forward to come back in September for a full week.

“That will give me the chance to have meetings on Capitol Hill [The US House of Representatives and Senate] which is highly appreciated on my side… to have a deeper understanding of the discussions here,” she added.

by Simon Van Dorpe

Vestager says Gazprom document not from EC, not helpful

A leaked document allegedly discussing the European Commission’s (EC) view on the Gazprom case was not actually drafted by the agency, EU Competition Commissioner Margrethe Vestager said today (13 April).

Hitting back at stories citing a purported EC paper as claiming the agency considers Gazprom’s settlement offer would not prevent future abuses, Vestager denied that her agency was actually the source of such a paper.

In April 2015, the EC charged the Russian gas giant with abusing its dominance in Central and Eastern European natural gas markets by banning recipient nations from reselling gas to other countries and by using contracts that index gas prices to the price of oil.

Following market objections to the original commitments Gazprom offered in March 2017, Vestager told PaRR in February that the agency was still awaiting a renewed commitments proposal that would include further concessions by the company.

An article in today’s Daily Telegraph cited two leaked documents, one of which appears to be the 2015 statement of objections.

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The report also cites a document in which the Commission allegedly admitted that the acceptance of the offer by the EU would “be seen as a failure to exercise the EU law enforcement powers”. It is not clear whether the comments relate to the original or to a potential new set of commitments.

“This is not a [European] Commission paper – it would be obvious if someone reads the full paper that this is not the way the Commission writes,” Vestager told a press conference held at the EU representation in Washington DC on the fringes of the ABA Spring Meeting

“This is unfortunate as we’re not done with the case,” Vestager said, adding: “It is very tricky for us when people try to make a connection between our casework and the geopolitical situation.”

Asked whether current tensions between the West and Russia are affecting the negotiations, Vestager said: “Obviously we read the papers as well, but antitrust investigation is a market tool, not a political tool.”

Speaking to journalists on the sidelines of the ABA conference earlier that day Vestager said the EC remained in a “constructive discussion” with Gazprom on the case.

by Simon Van Dorpe

Vestager says RFI guidance to come shortly

European Commission (EC) competition chief Margrethe Vestager today (13 April) said the agency’s best practice guidelines for companies handling requests for information (RFI) on merger cases is set to be published “relatively soon”.

The guidance will deal with the type of information which parties should provide in great detail, said Vestager at a press briefing held at the EU’s representation to the US on the fringes of the ABA Spring Meeting in Washington.

The list of documents which could potentially be sent to the EC during a merger is growing, said Vestager. So is the agency’s capacity for going through the documents, she added.

It is important that documents provided are focused, as DC Comp is “no better than the information it receives from the parties”, she added.

“In the merger of Bayer/Monsanto I think we went through borderlining one million documents, of all kinds,” said Vestager.

The use of the "stop the clock" tool can also be taken as a sign there is a need for better guidance on RFIs, said Vestager.

“Stop the clock is not something the we want to do,” she added, saying that it is used when the EC does not have the information it requires to do the job.

by Jules Johnston

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Vestager says Facebook scandal timely for data protection

The Facebook data scandal came at a good moment for European consumers to recognise the value of new privacy rules entering into effect next month, EU Competition Commissioner Margrethe Vestager said today (13 April).

“One would have thought that we asked Facebook to have a scandal,” she told a panel of EU and US competition enforcers in Washington.

The Danish commissioner referred to recent reports that the US social network may have shared the profiles of 87m users without their consent to UK political consulting firm Cambridge Analytica.

“All of a sudden people have broken out to say: ‘wow, it is about me’,” Vestager said, noting that the timing of the EU’s new general data protection rules (GDPR) was fortunate.

Beginning next month, the citizens will have enforceable rights to be forgotten, and to move their data and there will be an obligation not to ask for more data than needed to provide services, she said.

Responding to questions about the effect of the implementation of new European data privacy rules on competition, the commissioner added that the new rules were important to stimulate innovation coming from big data.

"We expect people to start making services that help citizens enforce their rights and install privacy by design," Vestager said. “We take it as a great encouragement that Facebook said it decided to implement the EU standard as a global standard.”

This will promote competition and allow people to choose more, she said and noted that it showed how competition and regulatory approach need to go hand in hand.

by Simon Van Dorpe

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Use investment data in merger reviews, CMA chief says

The UK Competition and Markets Authority (CMA) is not using all the knowledge available to it when investigating a merger, CMA chief Andrea Coscelli said today (13 April).

“I worry at times that we are not tapping into the knowledge that capital markets and technology analysts have,” said Coscelli during an enforcers’ roundtable of the ABA Spring Meeting in Washington DC.

The authority needs to make sure it makes greater use of available data from analysts as part of its investigations, Coscelli told PaRR on the sidelines. There are billions of dollars being allocated to companies by investors, for a variety of reasons, said Coscelli, and analyst data can provide information on the motivations why.

“I just want to make sure we take this into account in our investigations,” he said. The guidance for mergers remains as it is, this is more about developing best practices in terms of process, he added.

Since he became chief, Coscelli said he had launched a “small exercise” to evaluate CMA remedy decisions taken over the past six years. This has involved looking at decisions in areas such as start-ups and dominant platforms to see if they were still “the right decision”.

There were times when the authority believed the market was very dynamic and acted accordingly, said Coscelli. In hindsight, that kind of fluidity is sometimes reduced, he added.

by Jules Johnston

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The head of Albania’s competition authority Juliana Latifa told PaRR yesterday that the country is hoping to receive an invitation “within the next five days” to begin the next stage in the process of becoming an official EU member.

Latifa discussed the hopes with PaRR on the sidelines of a fireside chat during the ABA Spring Meeting in Washington DC (12 April).

“We are expecting because always during this period (April) the EC takes the decision,” explained Latifa, adding that she believed Albania is ready to start membership talks.

Albania is currently recognised by the EU as a potential candidate country, as of June 2014, and had been working to bring their policy in line with the EU standard.

As part of this process, every year the Albanian authority reports to DG Competition on its progress made as a competition authority, said Latifa, adding that Albania is trying to move to be in line with the “EU standard” for competition. The country has already made structural changes to its competition authority and working to update its law too, she added.

“Our law is not quite at European (level) yet, but we are working to make it better,” she added.

EU membership would be good for Albania, explained the competition chief, saying that EU rules could help fight back against corruption in the country for the good of the people.

However, if the process does begin in the coming days, there is still a long way to go, said Latifa. “I think it will still be many years before we are a member, but the invitation would start the process,” she added.

by Jules Johnston

Albania hopes for EU membership process to start ‘within the next five days’

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An upcoming European Commission (EC) proposal to regulate relations between platforms and their business users will complete the approach DG Competition has taken to the issue, an EC official told PaRR in Washington DC today (12 April).

On 25 April, the EC’s digital affairs commissioner, Andrus Ansip, is scheduled to propose a series of initiatives, including one on “promoting fairness and transparency for users of online intermediation services”.

The proposal follows years of preparation from the EC’s Directorate General for Communications (DG Connect) to address unfair clauses and practices in relationships between platforms and their business users.

“Together with Commissioner Vestager, we have worked very intensively with our counterparts and I am confident that the proposal will lead to a completion of our approach to the issue,” DG Comp’s Director General Johannes Laitenberger told PaRR on the sidelines of the ABA Spring Meeting in Washington DC.

A first draft leaked in December showed that the proposal would be light-touch, imposing transparency requirements for the platforms to inform their business users how their rankings are established and reasons for any de-listing, as reported.

A second draft seen by PaRR included search engines within the scope of the proposal, but only for the articles concerning ranking and collective redress.

by Simon Van Dorpe

EC official says platform regulation proposal will complete DG Comp’s work

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FTC director casts doubt on data valuation, algorithmic collusion

A senior Federal Trade Commission (FTC) official cast doubt on theories of data valuation and algorithmic collusion in a speech in Washington DC today (12 April) defending the regulatory status quo.

The acting director of the FTC’s Bureau of Competition, Bruce Hoffman, made the remarks in a lunch debate staged by the technology focused industry association CCIA on the fringes of the ABA Spring Meeting, titled “Competition Policy and the Tech Industry: What is at Stake?”

Hoffman addressed popular concerns about tech sector companies becoming too large, and the potential for algorithms to give rise to antitrust breaches.

Discussing tech sector deals – and specifically flagging Amazon's acquisition of Whole Foods Market – Hoffman said there is a notion that a merger that involves a firm gaining more data about its customers might be tantamount to a price increase or a quality decrease.

“Our view is that at the moment there is neither the theoretic nor an empirical basis for assuming that – the actual issue is more complicated than that and highly fact dependent,” Hoffman said.

Although Hoffman acknowledged that public perception can change quickly, he said: “It is not at all clear right now that most consumers place much value on data at all, there is simply not good work on that.”

He pointed to differences between cash and data, saying the latter could frequently be dispersed to a large number of users and was much more variable and transaction specific than money.

Addressing concerns that larger tech firms could foreclose competition by picking off start-ups, Hoffman said that was a real concern of the FTC.

“We take this issue very seriously, but it is bounded by our ability to predict,” he said, flagging the problem that the agency needed clear evidence that the start-up would likely be a competitor over a clear time horizon.

Americas

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He also flagged the side consequence that blocking deals for start-ups risked freezing the capital markets which stimulate them, since capital exit strategies are a key concern for tech start-ups.

Addressing conduct concerns about the potential for algorithms to give rise to antitrust abuse, Hoffman said: “We do not know currently know if algorithms will facilitate competition collusion or cheating.”

He said algorithms face “real world” problems revolving around the fact that with infinite gains there are an equal number of solutions, making outcomes difficult to predict.

He said there were associated problems for algorithms differentiating between “noise and signalling”.

Hoffman flagged research by former EU chief economist Kai Uwe Kuhn which found that it is difficult to collude – or do more than “get together and shrug” – without human interpolation.

by Jeremy Fleming-Jones

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Delrahim defends big digital enterprises

People try to make monopolies a populist issue, which is easy and political, but large companies are not a problem themselves, said Makan Delrahim today (13 April) at the ABA Spring Meeting’s Enforcers Roundtable.

“Big is not bad; big that behaves badly is bad,” said Delrahim, Assistant Attorney General for the Department of Justice (DoJ) Antitrust Division.

Regarding “some of those digital companies” Delrahim said they have, as a whole, added surplus to the economy. This does not mean that the digital companies have violated any antitrust laws, said Delrahim.

The DoJ would investigate if there was credible evidence against a digital platform of an abuse of market power, he added.

The DoJ is not against opening up an investigation, nor is it afraid of bringing a lawsuit in the right cases, where there is evidentiary and economic proof of harm, said Delrahim. Because of the potential harm that can occur from erroneous enforcement action, the DoJ has to be careful and make sure that the facts support taking such action, he said.

The DoJ has to look at the actual competition behind a complaint; it is not just a matter of competition existing, said Delrahim. A competitor operating more efficiently is not anticompetitive harm, explained Delrahim. Legitimate interests aligned with actual harm are issues like prices to consumers and harmful foreclosure by competitors, Delrahim continued.

Speaking more broadly, Delrahim continued to say that the DoJ has challenged vertical mergers in the past, which have been settled with either behavioral remedies or because the parties decided to abandon the deal. However, the DoJ has been questioning if behavioral remedies actually protect consumers from harm, said Delrahim.

Other priorities for the DoJ are antitrust and intellectual property issues and the importance of international engagement, he said.

When asked about the Ohio v. American Express trial that was recently heard by the Supreme Court (16-1454), Delrahim said he hopes the Supreme Court corrects the mistake made by the 2nd Circuit. It will be exciting to see the first opinion from new Trump appointee and former antitrust litigator, Supreme Court Justice Neil Gorsuch, an antitrust litigator, said Delrahim, as well as possible commentary in a case about an issue involving two-sided platforms in the digital space.

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The DoJ’s brief for Ohio v. American Express sets out the right test for when to consider procompetitive effects and at what stage, said Delrahim. It will be exciting to watch what the Supreme Court does and the justices’ interactions, said Delrahim.

In September 2016, the Second Circuit reversed district court Judge Nicholas Garaufis’s ruling in favor of plaintiff DoJ and stated that American Express’s anti-steering terms unlawfully restrained competition in violation of the Sherman Act. In its reversal, the Second Circuit concluded that the district court erred in its narrow definition of a relevant market as only applicable to merchants.

by Rebecca Shore

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The ongoing AT&T and Time Warner antitrust trial has led to a level of uncertainty in the context of vertical mergers, Sharis Pozen, General Electric Company’s vice president of global completion and antitrust, said in Washington today (13 April).

The lack of guidance on behavioral remedies in vertical mergers has left “a bit of a vacuum when negotiating sales and merger agreements”, Pozen said. She was speaking at a morning panel titled “A guide to remedies in global deals” at the ABA Spring Meeting.

Pozen hopes that once the AT&T/Time Warner trial is over, the public could learn more from the judge’s rulings and that practitioners will be better able to understand how to deal with behavioral remedies.

Without commenting on the situation, fellow panelist Dorothy Fountain, chief legal advisor of US Department of Justice (DoJ) antitrust division, said it is clear that the agency prefers structural over behavioral remedies.

Despite the preference for structural remedies, Fountain cited DoJ Assistant Attorney General Makan Delrahim saying there was scope for considering behavioral remedies in vertical mergers. Fountain said Delrahim had indicated such remedies would not be used unless they completely cure the anticompetitive harm arising from the merger. “That’s probably a very high standard to meet,” she noted.

Fountain added that while the general preference is for structural remedies, “we might have some behavioral aspects to divestiture remedies, to short-term supply agreements or transition agreements, or restrictions on contract terms that limit customers’ ability to change suppliers”.

The bottom line, Fountain said, is the remedies proposed should match the theories and the agency would be looking for remedies that could cure the entire anticompetitive harm, regardless of what type of deal is under review.

by Yiqin Shen and Freny Patel

AT&T/Time Warner trial raises uncertainty on upcoming deal negotiations

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A top consumer protection official said his agency is seeking to prosecute more privacy violators, while simultaneously helping small business to prevent data theft today (13 April) in Washington.

“The Federal Trade Commission (FTC) takes great pride in being the nation’s premier privacy agency,” the agency’s acting director of consumer protection, Thomas B. Pahl, said on a panel at the ABA Spring Meeting, adding: “The way we keep that role is by being active in bringing cases [against] people who don’t honor their privacy promises, and focusing on activities related to privacy that cause substantial injuries to consumers.”

Last month, Pahl announced his agency has opened an investigation into Facebook’s privacy practices.

Pahl told the panel that his agency is also looking to boost its relevance in the broader privacy policy debate. “That’s an ongoing project, and I think looking down the road it will be a major focus,” he said during the panel. This will include taking an approach to enforcement that is rooted in economics, he said, without expanding.

Since the Equifax breach in 2017, Pahl said Congress has looked to the agency for increased data security guidance, particularly for small businesses. The current legal standard is that data security measures must be “reasonable” but that companies with the least sophisticated resources often had extraordinary amounts of data, putting consumers at greater than normal risk, he said.

“A lot of what we’ve been doing is finding ways to distil information from our investigations and cases, and putting it out there,” Pahl said.

by Whitney McKnight

FTC official flags coming privacy enforcement, data security guidance

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FTC asks for civilian help finding conduct cases

A top antitrust enforcer called upon civilians today (13 April) for help in finding conduct cases to try.

“We’re open for business and looking for cases and we really appreciate your help,” Bruce Hoffman, acting director of the Federal Trade Commission's (FTC) Bureau of Competition, said during an update panel at this year’s ABA Spring Meeting.

Of particular interest are non-cartel level conduct cases that he said are harder for the agency to find and pursue.

“We don’t have the [Department of Justice’s] leniency program, we don’t have the FBI, we don’t have wire taps, so these are the cases that are more challenging for us to find,” he said.

Hoffman said that in the past year, his bureau has brought a number of conduct cases, including several pay-for-delay cases including pharmaceutical manufacturers Allergan [NYSE:AGN], Actavis and Biopharma.

“We are very interested in finding more conduct cases, so those of you out there who have ideas of, or are aware of any kind of conduct, that you think would fit into the FTC’s bailiwick, and it’s not a hard-core cartel case, my phone number is easy to find. Our anti-competitive and healthcare shops are pretty easy to locate,” Hoffman said.

by Whitney McKnight

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FTC Acting Chair touts agency’s performance

Hard data shows that the Federal Trade Commission (FTC) continues to be an “active protector of American consumers,” acting FTC chair Maureen Ohlhausen said today (13 April) in Washington.

Substantiating her claim with 23 merger challenges in the 2017 fiscal year at the ABA Spring Meeting, Ohlhausen said the Commission is keeping up the pace this year with 12 challenges so far.

During the Enforcers Roundtable, the last event of the Spring Meeting, Ohlhausen was asked whether there is a monopoly problem in the US.

“The better question is whether the US has a competition problem,” she answered.

She listed three subsequent questions to address this: are the current antitrust laws the right tools to address this issue; are they being used sufficiently; and what else can be done outside of antitrust enforcement to foster more competition? Answering her first question affirmatively and saying the second one was debatable, Ohlhausen expressed the need for more advocacy efforts.

“Some of the [regulatory] analyses have data problems,” she said, adding that broad categorisations could lead to monopolies falling “into the errors that the structure of conduct performance people have found to suggest are not paying attention to aspects like economies of scale.”

by Victoria Turner

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DoJ official cites pros of parties involving state AG in merger review

Merging parties involving state attorneys general (AGs) in merger reviews can help streamline the process, a senior official at the Department of Justice (DoJ) said today (11 April).

The relationship which the state AG will have with on the ground parties can make the deal move faster to the benefit of all, said Ryan Kantor, the assistant chief in the healthcare and consumer products section, DoJ. The AG understands the points of the case such as limits on distribution of product, location of businesses and the general market.

He made the comments at a panel titled “Merger Mania” during the ABA Spring Meeting in Washington DC.

The state AGs can investigate deals with more detail than the FTC and the DoJ as they can give the attention to what is often a resources-heavy exercise, Kantor said, adding that at a time of reduced government resources this extra assistance is a good thing.

Mark Seidman, deputy assistant director, Mergers IV, Bureau of Competition, Federal Trade Commission (FTC) speaking at the panel, agreed with Kanto. “It can be important to show the witness that this isn’t DC sweeping in on a local issue," he said, adding that having the state AG on the phone can sometimes alleviate these types of concerns.

“The sooner you get us involved the better,” agreed Beth Finnerty, an assistant antitrust section chief in the office of Ohio’s Attorney General. She added that the states often have information on local angles of the merger.

However, parties saying that several state AGs have already approved the deal is not a persuasive argument for clearance at a federal level, said Kantor.

by Jules Johnston

26

Different priorities, not lack of interest, is why state attorneys general (AGs) did not enter into the Department of Justice’s (DoJ) battle against the Time Warner /AT&T merger, an AG said at an enforcers roundtable today [12 April].

“I wouldn’t read too much into the fact that the states didn’t join in this matter,” Victor Domen, chair of the National Association of Attorneys General Antitrust Task Force, told attendees at the ABA Spring Meeting event. “We aren’t walking away from that. But there are so many cases that we evaluate, and we have to determine where to put our resources.” This case had such a national scope that the DoJ could take care of it, he added, allowing us to focus on things of greater local concern.

That does not mean AGs are not paying attention to the case, especially to how the vertical deal might impact any future healthcare mergers such as CVS Health and Aetna, he said. “I think AT&T/Time Warner is going to give us a road map for how to approach a vertical deal or not,” Domen said.

“States are extremely active when it comes to healthcare. It affects all consumers, and AGs are highly informed about these areas,” Domen said. He cited several examples of the AGs having shown a willingness to use antitrust enforcement tools and theories to protect healthcare consumer choice.

As examples, nearly all 50 states are now either investigating or litigating generic drug price fixing, and a coalition of more than 40 states and the District of Columbia have subpoenaed drug manufacturers to determine their role in the national opioid crisis.

If the DoJ -- which is reviewing the proposed merger between the pharmacy and insurance giants -- does sue to block, then AGs are likely to look at lessons learned from the failed Anthem /Cigna and Aetna/Humana deals. “In those matters, there were local issues impacted by the mergers. In an upcoming deal, that is what we’d have to see,” he said.

Both of those deals came apart last year over antitrust concerns, including that competition would have been eliminated on the Affordable Care Act insurance exchanges in 17 counties in three states, and for customers in the open marketplace in hundreds of counties in 21 states.

Domen told this news service that states will look at vertical deals, but will evaluate them a little differently. States have not thrown out the idea of joining a vertical challenge, but the choice is made by the front office, so each state’s antitrust bureau will have to follow the rules of the AGs, he said.

by Whitney McKnight

Time Warner/AT&T: Do not read into states standing down, says task force chair

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FTC’s Ohlhausen not rushing out the door

The acting chairman of the Federal Trade Commission (FTC), Maureen K. Ohlhausen, will not immediately step down when a new slate of commissioners is installed, according to a top agency official.

“She asked me to make the point that she may be around for a while --hopefully not for a while if the Senate does the right thing and makes her a judge -- but she would not immediately depart on the Senate voting out the current slate of candidates,” said Thomas B. Pahl, acting director of the FTC's Bureau of Consumer Protection.

The comments came during an agency update at this year’s annual ABA Spring Meeting in Washington, DC today (13 April).

Ohlhausen’s term is currently through September 2018. She is a holdover from the Obama administration, and has along with Terrell McSweeny, also an Obama appointee, served as the only commissioners overseeing the agency since President Donald Trump took office.

A Senate panel approved four new appointees in September. They are expected to take office within the next two months. In January, President Trump put forth Ohlhausen’s name for appointment to the Court of Federal Claims.

As for the direction the agency will take when the new commissioners arrive, Pahl said to expect more of the same focus on competition and protecting consumers, but that “on the margins, there will be more focus on law and economics. Don’t expect any radical changes.”

by Whitney McKnight

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International cooperation between antitrust agencies worldwide can prevent cartel over-deterrence, according to Michelle Rindone, Acting Director of Criminal Enforcement at the Antitrust Division of the U.S. Department of Justice (DoJ).

Rindone said at a panel this morning [13 April] that “we strive to work with other agencies in a way that we are not at cross-purposes with one another and we don’t create conflicting obligations for companies and individuals”.

According to Rindone, this is beneficial not only to companies and individuals but to the antitrust division and other agencies as well.

The DoJ works to maintain close working relationships with its counterparts, Rindone said, noting that the DoJ has 15 formal cooperation agreements with foreign jurisdictions.

A formal agreement is not required, however, for cooperation between the DoJ and other agencies to take place, she said.

Rindone cited the Nishikawa auto parts case as an example of high degree of cooperation between the antitrust division and the Competition Bureau of Canada. In July 2016, Nishikawa agreed to plea guilty and pay a USD 130m fine for participating in a conspiracy to fix prices of auto parts used in cars sold to US consumers.

After Nishikawa agreed to plea guilty in the US, the Competition Bureau of Canada announced that upon entry of the plea agreement it decided not to pursue charges against the company, because the conduct primarily targeted the US and they believed the fine imposed was an effective remedy in US and Canada, Rindone explained.

The Nishikawa can serve as a template for future cooperations, Rindone said. This was not a joint investigation with Canada – it’s important for each jurisdiction to reach their own decision – but "we can have one jurisdiction deferring to the judgment of another jurisdiction", she added.

Under the right set of circumstances, the DoJ will consider the reverse outcome of Nishiwaka, said Rindone, explaining that the DoJ “would exercise its discretion not to pursue criminal charges in lieu of actions taken by other jurisdictions.” However, Rindone cautioned that since the US market is affected by many international cartels, the US has a strong interest in making sure that companies and individuals are held accountable.

Alexandre Cordeiro, the General Superintendent of the Brazilian Competition Authority CADE, stressed the importance of international cooperation in cases where international cartels have indirect effects in Brazil. Sometimes a company implicated in a cartel is not operating in Brazil, he said: an international cartel can be based in Asia and selling products used as an input for another product that is sold in Brazil.

International cooperation can prevent cartel over-deterrence, DoJ official says

29

In such cases, CADE has to consider how important the input is in the final product, Cordeiro said, adding that if there is an indirect effect in Brazil, CADE “moves towards the rule of reason” and analyzes situations in a case-by-case basis.

With international cooperation in these cases, CADE may consider that “if we have enough enforcement in another country and we have a lot of doubt about the effect in Brazil maybe the deterrence is already good enough so we don’t need to go for a case in Brazil”, Cordeiro said.

Cordeiro answered in the negative to the question posed by the panel: “international cartels – are they being overdeterred?”. Fines and settlements enforced in Brazil last year reached approximately USD 300m, he said, and CADE does not believe that that amounts to overdeterrence.

Cordeiro also noted that, under Brazil’s law, cartel fines are based on a company’s gross sales in the year prior to the opening of an administrative proceeding, meaning that if cartel conduct lasts for 20 years, the fine will still be based on the gross sales of a single year. “It doesn’t look like that’s overdeterrent”, he said.

by Camila Pavanelli de Lorenzi

30

Time Warner/AT&T: FTC’s Moiseyev thinks Shapiro can carry DoJ

Antitrust cases are not typically won on the strength of an economist’s testimony alone, according to a Federal Trade Commission Section Chief—unless that economist is Carl Shapiro.

“It’s very hard if the economist is the star witness,” Michael R. Moiseyev, head of Mergers I at the FTC, said during a panel on market definition at this year’s annual American Bar Association meeting at the Marriot Marquis in Washington DC, while Shapiro testified mere blocks away at the E Barrett Prettyman Courthouse. Shapiro’s econometrics are critical to the DoJ’s case against AT&T’s USD 85bn proposed acquisition of Time Warner.

“Carl is a fabulous witness. He is super compelling,” Moiseyev told this news service in an interview.

The “raising rival’s cost” plot featured in the proposed vertical merger between the two entertainment giants is, according to Moiseyev, “a very technical kind of story. How you articulate what the harm is depends on a

complicated model where having an economist explain what the implications are, might be more important than in a case where you put on 15 customers who talk about how they’re injured. You have to show there is going to be fairly substantial diversion from cable to DirectTV in order for this whole equation to work out.”

Shapiro, a well-published professor of business strategy at the Haas School of Business at the University of California, Berkeley, who received his PhD in economics at MIT, also served as antitrust Deputy Assistant Attorney General for Economics under the Clinton and Obama administrations.

Cases in which the neoclassic economist Shapiro has prevailed include the U.S. v. Bazaarvoice, Inc, a post-merger trial where presiding Judge William Orrick’s opinion in favor of the DoJ was not informed by customer testimony. In fact, Zero of 104 customers deposed on record in the case complained of harm. This left the government almost entirely dependent on Shapiro’s economic analysis (aided by the parties’ internal business documents) in its trial against the tie-up of rival ratings and reviews platforms.

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Putting econometrics in plain English is important to complicated cases, said panelist Dr. Christine Siegwarth Meyer, a managing partner at NERA

Economic Consulting. “Judges are consumers, too, so bringing it down to an analogy the judges can understand helps,” she said during the panel, adding that most judges aren’t concerned with the theories of “dead French economists” and could resent being spoken down to.

Moiseyev believes Shapiro will navigate the tone just fine. “He is among the best at what he does. I think he can help the government win their case,” he said.

by Whitney McKnight

32

DoJ official says US antitrust policy consistent, non-partisan

US antitrust policy has been consistent over the last 40 years even if there are some policy changes at the margins, a senior Department of Justice (DoJ) said.

Speaking at the ABA Spring Meeting in Washington DC on 12 April, Andrew Finch, principal deputy assistant attorney general at the DoJ, said the department’s work is driven by facts and economic analysis.

This does not change from administration to administration or depending on which political party is in power, said Finch.

An example of a changed DoJ policy is favoring structural remedies over behavioral remedies, said Bernard Nigro, DoJ deputy assistant attorney general.

Predictions about antitrust enforcement under a Trump administration are “interesting to read” but not very accurate, said Finch. The Trump administration’s policy, such as with merger remedies and consent decrees, is

driven by experience, not partisanship, said Finch.

The DoJ does not have an affirmative agenda but the Antitrust Division chief Makan Delrahim does have priorities, said Finch. These include remedy modification, consent decree provisions, the amicus program and the intersection of antitrust and intellectual property, said Finch.

The DoJ is also prioritizing consent decrees, and it has implemented new provisions so that consent decrees will be more efficiently and effectively enforced, said Nigro. An example of a new provision is the burden of proof for violations, specifically shifting the burden once it is successfully established that a defendant has violated a consent decree, said Nigro.

The DoJ’s focus on antitrust and intellectual property policy focuses a lot on standard setting organizations (SSOs) and how to “rebalance the dialogue” to preserve the incentive to innovate, said Finch.

Standard setting organizations should strike a balance between innovators and implementers so that agreements are not one-sided, said Finch. The DoJ is enhancing its awareness of how patent policy is practiced, especially when it comes to decision making within an SSO, said Finch.

33

For instance, if decisions are usually consensus driven, the DoJ will examine whether an SSO has “gone off the rails” and exhibits behavior that raises questions and warrants further investigation, said Finch.

The DoJ is also putting more energy into its amicus program and is “looking for more opportunities to file amicus briefs,” said Nigro.

Alford said that the DoJ is implementing its renewed commitment to international engagement both internally and externally. According to Finch, Delrahim has prioritized having an international law expert at the DoJ who can build relationships with agencies around the world and that expert is Alford.

Finch departed the panel 40 minutes early to attend the AT&T trial while another panelist Donald Kempf, DoJ deputy assistant Attorney General, did not attend as he was at the AT&T trial.

by Rebecca Shore and Justin Zacks

34

Aetna/CVS: Tough to develop data to support vertical deals

While vertical mergers are oftentimes observed to be pro-competitive, it can be challenging for merging companies to present enough quantitative data as evidence compared to in horizontal transactions, panelists said during the ABA Spring Meeting.

During then panel titled “Views from the trenches: Anthem/Cigna and Aetna/Humana” on Wednesday, panelists reviewed two large health insurance transactions that were blocked by Department of Justice last year and discussed issues around the proposed USD 69bn merger between CVS and Aetna.

Peter Mucchetti, a DoJ official who heads the healthcare and consumer products antitrust division did not directly comment on the CVS/Aetna situation, noting DoJ is currently reviewing the transaction. The antitrust agency has filed an antitrust lawsuit to block the proposed vertical merger between AT&T and Time Warner.

Melinda Hatton, the general counsel of American Hospital Association, said

on the panel that the recent news on health insurance companies tying up with pharma benefit manager (PBM) providers and retailers is likely a result of the lapse of the insurance transactions, which pushed the insurance companies to look for alternatives.

Hatton said that CVS/Aetna could invest in mini clinics to allow customers to receive flu shots and other healthcare services in the drug stores. The question, however, is how far the pharmacy and PBM group could go with a merger with a major health insurer.

“Even with Aetna partnership, I don’t think you will want to have your children’s broken arms fixed in your local CVS,” she said. There may be some value traditional drug stores can provide, but it is unclear what Aetna adds to it, or distract from it, Hatton said.

35

CVS announced plans to acquire Aetna late last year in part to develop new models for providing care. Health insurer Cigna responded this year with a bid for PBM Express Scripts. UnitedHealth Group already operates as a vertically integrated healthcare services and insurance company.

Jonathan Orszag, a senior managing director with economic consulting firm Compass Lexecon, said that vertical mergers call for economists to do a better job “quantifying the data” to assure enforcers have the evidence to believe these types of deals actually benefit consumers.

Quantitative data evidence is usually used in addition to standard sources of evidence such as documents and witness testimony to predict outcomes of mergers. The challenge for vertical mergers is that there are fewer quantitative theoretical models that can be used to attempt to predict outcomes, while models that exist have a far shorter track record than those used in assessing horizontal mergers.

Fellow speaker Aviv Nevo, a professor at University of Pennsylvania Economics Department, agreed that assessing the impact of vertical mergers could be more complicated than in horizon merger deals, in a way that “we might can provide many models, but that’s different from other evidences.”

In retrospect, Muchetti noted that the trials of the two health insurance deals were the first time in 20 years of healthcare insurance merger history that have cases that went to court. The decision and opinions from the court

revealed how courts think about the definition of product markets, the assessment of difficulty of entry and efficiency issues.

“These shall lay foundations for us to think about health care transactions in the future”, he said.

by Yiqin Shen

36

“After-the-fact” enforcement can be slow, uncertain and expensive, said Joel Marcus, deputy general counsel for litigation at the Federal Trade Commission (FTC).

During a 12 April panel at the American Bar Association’s (ABA) Spring Meeting in Washington, DC, Marcus contrasted the FTC’s recent assumption of net neutrality enforcement to the “overbroad, upfront rules,” which allows for more economic flexibility. However, post-enforcement does address certain overlooked public policy issues, said Marcus.

His comment came in response to Department of Justice attorney Scott Scheele’s hypothetical question about Comcast [NASDAQ:CMCSA] blocking news networks it does not own from its internet subscribers. Marcus and Christopher Yoo, professor at Pennsylvania Law School, discussed the anticompetitive implications the hypothetical would present. Timothy Wu, professor at Pennsylvania Law School, said it was important to note that they did not mention the issue of speech and news.

Wu said that the problem with antitrust law is its narrow view of net neutrality.

“This is the problem with antitrust,” added Wu, explaining that it thinks about things very narrowly. Having coined the term “net neutrality,” Wu said the recently abandoned regulations were advantageous in that they addressed broader issues like the First Amendment and free speech, which are not taken into account under antitrust law.

Marcus added that the complexity of market forces in the net neutrality space, such as consumer models or business arrangements, “does not lend itself to the simplification that often happens in the public debate.”

During the panel’s Q&A, former FTC Chairman Jon Leibowitz of Davis Polk agreed with Wu’s assessment that the substantive change from net neutrality regulations to competition enforcement has narrowed the scope of concerns addressed and said that an ex ante regime should be established.

by Victoria Turner

FTC counsel presents downside of after-the-fact net neutrality enforcement

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Canada, Mexico antitrust chiefs promote hard convergence

The heads of the Canadian and Mexican antitrust authorities called for hard regulatory convergence during a fireside chat yesterday (11 April) at the American Bar Association’s (ABA) Spring Meeting in Washington, DC.

Coming to the end of a 34-year career at the Canadian Competition Bureau (CCB), commissioner John Pecman said his “Swan Song” for the Bar would be to continue the efforts in international cooperation through hard convergence and comity, and to work with antitrust agencies to “spread the gospel of antitrust.”

Pecman added that the “three amigos” [US, Mexico, Canada] had “upped the game” during the latest North American Free Trade Agreement’s (NAFTA) competition chapter by ensuring that the laws are more compatible.

NAFTA is an example of a vehicle for the type of hard convergence between the countries that was necessary, said Alejandra Palacios, chairwoman and commissioner of Mexico’s Federal Economic Competition Commission (COFECE), explaining that COFECE worked with CCB and US counterparts innegotiating the revisions on the chapter for competition.

As co-chairs of the International Competition Network’s (ICN) working group for Agency Efficiency, both Pecman and Palacios work on evaluating the effectiveness of the global efforts on competition policy.

Pecman said that the ICN could assist in the task of convergence.

In order to put together hard data, which would help in making the case for harder regulatory convergence, the ICN is taking a new approach by surveying younger and underdeveloped agencies to evaluate the use, relevance and effectiveness of the ICN products, said Palacios.

by Victoria Turner

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China's three antitrust agencies to start consolidating on 20 April

The physical consolidation of China’s three antitrust enforcement bodies into one will formally kick off from 20 April, according to Yang Jiajia, an official at the National Development and Reform Commission (NDRC).

Speaking during a fireside talk at the ABA Spring Meeting today (11 April) in Washington DC, Yang said the date was internally set as the first step for the antitrust units under the NDRC and the Ministry of Commerce (MOFCOM) to transfer to the State Administration for Market Regulation (SAMR), a newly established agency that combines the State Administration for Industry and Commerce (SAIC), the General Administration of Quality Supervision Inspection and Quarantine (GAQSIQ) and the China Food and Drug Administration.

A plan for the function and personnel of the internal SAMR divisions will be finalised by the end of June, said Yang.

The State Commission Office for Public Sector Reform (SCOPSR) is in charge of drafting and finalizing the plan, according to Huang Yong, a member of the Expert Advisory Board to the Antimonopoly Commission (AMC) of the State Council.

The consolidation process is slated to be completed by the end of September, she revealed on the sidelines of the conference.

The transition will attempt not to influence ongoing antitrust enforcement as much as possible as a matter of principle, according to Yang. Personnel moves will be graduated, she added. Ongoing cases will continue to be dealt with, but after 20 April they will be handled under the SAMR’s roof, she said.

The SAMR commenced operations at the office building of the former SAIC yesterday (10 April) with 12 officials appointed as deputy chiefs or equivalent level.

by Lisha Zhou

Asia

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China's NDRC deputy DG says leniency guideline to come by year-end

A senior official from China’s National Development of Reform and Commission (NDRC) said the leniency antitrust guidelines are expected to be published by the end of this year.

Li Qing, deputy Director-General of the NDRC’s Price Supervision and Antimonopoly Bureau, was speaking during a fireside chat at the American Bar Association’s Spring Meeting in Washington DC today (11 April).

The NDRC is charged with drafting China’s leniency program guidelines, together with four other antitrust guidelines related to the auto industry, commitments, exemptions, and illegal gains and fine calculations. The NDRC sought public comment on its leniency program guidelines in February 2016 and has since sought feedback from various parties.

The guidelines have already been submitted to the Antimonopoly Commission of the State Council (AMC), but are yet to be passed. But Li said she is very optimistic the guidelines will be published and implemented quickly despite the ongoing consolidation of the three agencies.

It will serve to benefit companies, she added, since they will be offered a series of “dos and don’ts”.

by Shangjing Li

40

In the upcoming consolidation of China’s three antitrust agencies, it is important to strengthen the power of the Antimonopoly Commission (AMC) office so as to retain China's achievement in Antimonopoly Law (AML) enforcement acquired over the past decade, Huang Yong, a Chinese academic has told PaRR.

A member of the Expert Advisory Board to the AMC, Huang told PaRR on the sidelines of the ABA Spring Meeting in Washington (12 April) that the AMC’s office is currently located at the Ministry of Commerce (MOFCOM), a component department of China’s State Council. After consolidation, the AMC’s office will move to the State Administration for Market Regulation (SAMR), which has been newly established as a department directly subordinate to the State Council.

Such a direct subordinate department ranks slightly lower than a component department in terms of China’s bureaucratic hierarchy, and the AMC office will need enhanced powers better to continue coordinating between all the State Council agencies, according to Huang.

After 10 years’ enforcement of the AML, China now has become one of the three greatest antitrust jurisdictions in the world, which is difficult for companies to bypass, Huang said. China’s most significant competition policy achievement is that AML is now accounted for within consideration of the country’s top-down design of economic policies, Huang said.

Although competition policy is still yet to be recognized as a cornerstone of the country’s economic policies, its position in China has been significantly improved especially following the establishment and implementation of the fair competition review system (FCRS), he said

The FCRS, established in 2016 with the aim of ensuring China’s new and existing policies do not include anticompetitive elements, is an important tool for China to use in the fight against administrative monopoly, which forms a unique chapter of China’s AML and accounts for China’s transformation from a planning to a market economy, Huang said.

However, the FCRS is currently still in the process of bedding down and requires a unified, independent, authoritative and professional agency to further promote and implement the system, said Huang.

Chinese academic calls for boosted power for Antimonopoly Commission office

41

Without such an authoritative agency, it will be difficult to coordinate between the different strata of government agencies (from State Council component departments to provincial level government agencies) as well as with large state-owned enterprises, encouraging these to conduct fair competition reviews of new and existing policies and to correct administrative monopolistic behaviour, said Huang.

The consolidation of the three agencies is simply the first step to establishing such an authoritative and independent antitrust authority, said Huang, adding that there is still some way to go.

To enhance its power, the AMC office requires the allocation of head count and the grant of substantial administrative power, he said. Currently the AMC office lacks its own personnel and relies on the manpower of MOFCOM's Antimonopoly Bureau to handle its daily work. Ideally the office should be led by a chief of ministerial level, Huang said.

Currently the AMC is supervised by a Politburo member and vice premier. Huang said that he expects a similar degree of hierarchical clout to be retained following the consolidation.

by Lisha Zhou

42

Chinese lawyers are planning to test the water by filing with the new merger control regulator a deal driven by companies structured as variable interest entities (VIEs), two sources close to the situation told this news service.

Currently, companies with VIE structure have difficulties successfully filing mergers and acquisitions (M&A) with the Ministry of Commerce (MOFCOM), because VIE structure is deemed illegitimate in China.

The two sources both told PaRR that they decided to attempt such a filing to see how the new agency will react and deal with such a request.

Internet-related M&A is trending in China but most deals are completed without obtaining MOFCOM antitrust clearance. VIE structure enables offshore investors to control Chinese onshore assets usually off limits to foreign capital through a series of contracts rather than equity holdings.

The past three years have witnessed several major e-commerce M&A transactions including Kuaidi/Didi, Meituan/Dianping, Qunar/Ctrip, 58.com/Ganji.com, and Uber China/Didi. The latest deal involved Ele.me’s takeover of Baidu’s food delivery business in 2017.

While MOFCOM said it would investigate Didi’s acquisition of Uber China in August 2016 following many public complaints over the deal, it has yet to disclose a result.

The third lawyer said the consolidation of the three antitrust agencies offers a great opportunity to deal with the VIE issue, which has been an issue for decades.

The consolidation will give the new bureau the opportunity to look at the issue from a new perspective, the lawyer said, especially at a time when China is seeking to attract internet unicorns back to be listed in the A-share market through issuing China Depository Receipts.

The first lawyer told PaRR that companies with VIE structures now constitute a huge part of China’s economy. While China's antimonopoly law has extra-territorial effect on global M&A deals, it will harm the authority of China's merger review if internet giants’ M&A activities are not covered by the country's AML.

by Shangjing Li and Lisha Zhou

Chinese companies set to test water on VIE merger filing amid agency consolidations

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New Zealand chief says public benefit drove NZME/Fairfax block

The public benefit that media plurality brings to society played an important role in the New Zealand competition authority’s decision to block the NZME/ Fairfax merger, the agency’s chairman said.

Speaking during a fireside chat as part of the ABA Spring Meeting in Washington, DC on 12 April, Commerce Commission Chairman Mark Berry set forth the agency’s reasoning behind its decision to block the proposed merger between New Zealand’s main providers of online news.

A key impetus for the merging parties to pursue the deal was that Facebook and Google are cannibalizing online advertising revenues in the country, Berry said.

In May 2017, the Commerce Commission declined the merger on the grounds that it was likely to substantially lessen competition in advertising and reader markets. The commission also determined that it would concentrate New Zealand news media ownership and influence to an unprecedented extent.

While the market shares of the two companies are confidential, Berry did say they were “exceedingly high”.

A New Zealand court will hear in June NZME and Fairfax’s appeal of the High Court’s decision to uphold the rejection of their proposed merger.

In a 2 March stock exchange statement, Fairfax Media said the hearing in the Court of Appeal will be held from 5-8 June. If the appeal is successful, the parties have announced their intention to negotiate a new merger agreement.

The situation is unfolding as the news industry across the globe looks for innovative solutions to deal with a dramatic drop in revenue and the growth of the digital economy.

In the US, a group of news organizations is seeking a limited antitrust exemption from Congress to negotiate with the largest online platforms.

by Raymond Barrett

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China’s consolidation of three antitrust agencies into the State Administration for Market Supervision (SAMR) is expected to reduce duplicate investigations and enhance efficiencies as companies face a single agency, several lawyers told this news service during the ABA Spring Meeting in Washington DC.

Two antitrust lawyers told PaRR that at least two cases are currently under concurrent antitrust investigations with both the National Development and Reform Commission (NDRC) and the State Administration for Industry and Commerce (SAIC). This remains rare since traditionally a company would only be probed by two agencies looking at different angles.

After the consolidation, such duplicate investigations will become impossible, both lawyers told PaRR.

“I would say efficiency is the key word, in summary,” Susan Ning, a Beijing-based antitrust lawyer from King & Wood Mallesons told PaRR in an exclusive interview, adding that the new agency’s team will combine officials with a vast range of investigatory experience.

She said that the former situation – in which the NDRC targeted price-related antitrust behaviour while SAIC takes on non-price related conduct – could be confusing to companies.

Sometimes the two agencies interpret specific legal terms differently, Ning said, adding that such discrepancies are not expected to exist following consolidation.

Meanwhile with joint ventures in China, even if a JV is notified to the Ministry of Commerce (MOFCOM) and receives clearance, that does not preclude clauses including non-competition wording being probed by the other two antitrust agencies, Michael Han, a partner from Fangda Partners said during a panel discussion on the ABA Spring Meeting on Wednesday (11 April).

This situation is likely to change after the consolidation of the three agencies, Han told the audience.

Meanwhile more antitrust investigations can be expected after the consolidation especially at the local provincial level, as the SAMR will have more resources with which to conduct dawn raids locally, Han said.

by Shangjing Li and Lisha Zhou

China’s consolidation of antitrust agencies expected to enhance efficiency

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China will see more companies bring antitrust disputes to court this year, several lawyers told PaRR during the ABA Spring Meeting in Washington.

Huang Wei, a Beijing-based antitrust lawyer from Tian Yuan Law Firm, said litigation has become a key strategy for companies resolving antitrust disputes this year, and will increase during the transition period of the three agencies merging into one.

“For parties needing to resolve antitrust disputes, going to court has become a better option,” Huang said.

Speaking to PaRR on the sidelines of a fireside chat, an official at the National Development and Reform Commission (NDRC) said that ongoing antitrust NDRC investigations will be handed over to the new State Administration for Market Regulation (SAMR), adding that the SAMR will also issue antitrust administrative penalties in the future.

The physical consolidation of China’s three antitrust enforcement bodies into one will formally kick off from 20 April, and is slated to be completed by the end of September, as reported by PaRR.

Another Beijing-based lawyer told this news service that he has received more antitrust lawsuits this year, as companies are finding it more difficult to lodge complaints with NDRC during the transition period.

In the run-up to September when the consolidation completes, it will be harder for antitrust law enforcement agencies to focus on antitrust investigations, Huang added.

by Shangjing Li

China expects more antitrust litigation this year amid agency consolidation transition

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Consolidation of China’s three antitrust agencies will smooth communication and coordination between the Chinese antitrust agency and the International Competition Network (ICN), Yu Jiamu, a division deputy director of the Ministry of Commerce (MOFCOM) said in Washington today (11 April).

This also shows the necessity of the consolidation, Yu added during a fireside talk at the ABA Spring Meeting.

Under existing international cooperation frameworks, Chinese antitrust agencies attempt to actively participate in various international antitrust organizations and platforms so as to learn from other jurisdictions, Li Qing, Deputy Director General of the Price Supervision and Antimonopoly Bureau of the National Development and Reform Commission (NDRC), said during the same fireside discussion.

Discussing the possibility of Chinese agencies participating in ICN, Li said she had discussed the issue with current ICN president Andreas Mundt, the president of Germany's Bundeskartellamt (BKartA).

The outcome was that China’s participation into the ICN should be coordinated by MOFCOM because the Antimonopoly Commission of the State Council is located in MOFCOM which coordinates among the antitrust agencies, according to Li.

by Lisha Zhou

Chinese antitrust agencies’ consolidation will smooth China’s participation in ICN

47

A Ministry of Commerce (MOFCOM) Antimonopoly Bureau official said the bureau aims not to be interrupted by the ongoing agency consolidation, and is still hoping to be more efficient.

Yu Jiamu, Deputy Director of MOFCOM Antimonopoly Bureau was speaking during a fireside chat at the American Bar Association’s Spring Meeting in Washington DC today (10 April).

As reported previously by PaRR, the former antitrust divisions of State Administration for Industry and Commerce, National Development and Reform Commission, and MOFCOM will function as one unit under the State Administration for Market Regulation.

Yu said she believed the consolidation of the three agencies will help increase quality and efficiencies within the merger review process.

Yu acknowledged that MOFCOM was short staffed with around 30 people working in the Antimonopoly Bureau, and fewer than 20 working on merger filings. But MOFCOM has tried to improve the situation by through enhancements to legislation, simplifying procedures and engaging in closer international co-ordination during high-profile merger cases, she said.

In 2017, MOFCOM received 400 case filings, formally reviewed 353 cases and closed 344 cases, up 5.8% compared with the total number of cases received in 2016, according to Yu.

Of the 344 cases, seven were approved with conditions, compared to only two approved with conditions in 2016. And companies were asked for make either structural or behavioural remedies in those nine cases to guarantee fair market competition, she added.

She said the fact that more cases were approved with conditions was not an enforcement trend but rather a market trend, as 2017 saw active merger activities in many industries such as chemical, agriculture and semiconductors, amongst others. Large companies in those industries were experiencing business difficulties consolidating in order to survive, she said.

She added that MOFCOM increased penalties on gun-jumping deals, imposing fines on six deals which failed to file last year, most of which were initiated by third party complaints.

She said third-party complaints have become a major trigger for MOFCOM investigations on gun-jumping deals. The increase in penalties on gun-jumping reflected the growing reach of China’s anti-monopoly law (AML) and competition policy, she said, adding: “We do see AML has played a more and more significant role in Chinese companies’ compliance work.”

by Shangjing Li

MOFCOM official says agency consolidation aims to leave merger review unaffected

48

A Ministry of Commerce (MOFCOM) Antimonopoly Bureau official said the bureau aims not to be interrupted by the ongoing agency consolidation, and is still hoping to be more efficient.

Yu Jiamu, Deputy Director of MOFCOM Antimonopoly Bureau was speaking during a fireside chat at the American Bar Association’s Spring Meeting in Washington DC today (10 April).

As reported previously by PaRR, the former antitrust divisions of State Administration for Industry and Commerce, National Development and Reform Commission, and MOFCOM will function as one unit under the State Administration for Market Regulation.

Yu said she believed the consolidation of the three agencies will help increase quality and efficiencies within the merger review process.

Yu acknowledged that MOFCOM was short staffed with around 30 people working in the Antimonopoly Bureau, and fewer than 20 working on merger filings. But MOFCOM has tried to improve the situation by through enhancements to legislation, simplifying procedures and engaging in closer international co-ordination during high-profile merger cases, she said.

In 2017, MOFCOM received 400 case filings, formally reviewed 353 cases and closed 344 cases, up 5.8% compared with the total number of cases received in 2016, according to Yu.

Of the 344 cases, seven were approved with conditions, compared to only two approved with conditions in 2016. And companies were asked for make either structural or behavioural remedies in those nine cases to guarantee fair market competition, she added.

She said the fact that more cases were approved with conditions was not an enforcement trend but rather a market trend, as 2017 saw active merger activities in many industries such as chemical, agriculture and semiconductors, amongst others. Large companies in those industries were experiencing business difficulties consolidating in order to survive, she said.

She added that MOFCOM increased penalties on gun-jumping deals, imposing fines on six deals which failed to file last year, most of which were initiated by third party complaints.

She said third-party complaints have become a major trigger for MOFCOM investigations on gun-jumping deals. The increase in penalties on gun-jumping reflected the growing reach of China’s anti-monopoly law (AML) and competition policy, she said, adding: “We do see AML has played a more and more significant role in Chinese companies’ compliance work.”

by Shangjing Li

MOFCOM official says agency consolidation aims to leave merger review unaffected

49

EU, US enforcers say variety of evidence key in innovation-based merger reviews

Enforcers should not rely too heavily on single sources of evidence when investigating innovation-based theories of harm in merger reviews, an EU and US official said today (12 April).

Speaking during a panel titled “Innovation and Merger Control” at the ABA Spring Meeting in Washington, DC, the EC’s Carles Esteva Mosso and the Department of Justice’s Patricia Brink both agreed on the importance of not relying heavily on one form of evidence.

Key evidence includes whether the parties are active in the same space, said Esteva Mosso, the EC deputy director-general for mergers, emphasizing a broad analysis of all evidence.

Forward-looking evidence is best, said Esteva Mosso, adding there are also a number of “backward methods” such as assessing how many patents a company has developed in the past, or the number of products the company has developed over previous years.

All of this information can help you identify if a particular merged company was a good or successful innovator, he said.

From an enforcement point of view, it is important to look holistically at many types of evidence, Brink said. The DoJ official said while R&D expenditure is an assessment tool, it does not necessarily sum up all of the innovation and development in a single product market. Patents are another area antitrust agencies look into, but again it does not always line up with the actual market.

Brink said enforcers would like to see evidence of future research plans which helps them assess the innovation and competition.

by Jules Johnston and Yiqin Shen

Cross Border

50

EC official weighs in on US patent policy shifts

The European Commission (EC) supports the patent hold-up views that Terrell McSweeny, a commissioner at the US Federal Trade Commission (FTC), laid out in a recent speech, an EC official said.

Nicholas Banasevic, head of the internet and IT unit at the EC’s Directorate-General for Competition, said “we would subscribe to [McSweeny’s view] in its entirety.”

Patent holdup involving SEPs occurs when an IP holder that has made a commitment to a standard-setting organization to license its patents on fair, reasonable and non-discriminatory (FRAND) terms but instead charges technology users a higher royalty than would have been possible before its patent was included in an industry standard.

The comments came during a panel at the ABA Spring Meeting in Washington today (11 April) on intellectual property (IP) rights and antitrust enforcement and at a time of uncertainty over the direction of US policy on the issue.

Enforcement of these issues should not be abandoned by US competition agencies, despite an apparent change in US antitrust policy toward standard-essential patents (SEPs), McSweeny told PaRR recently.

The US Department of Justice (DoJ) antitrust chief Makan Delrahim has marked a change in direction in several speeches, alleging that his predecessors had strayed too far in accommodating the concerns of patent licensees at the expense of patent holders.

“There is a clear shift in policy in regards to the view that…[patent] holdup is not an antitrust issue – there appears to be a willingness to look not only at process but also beyond,” former FTC chair and Hogan & Lovells partner Edith Ramirez said during the same panel.

Ramirez added that it would be interesting to see what direction the FTC will take on this issue now, adding that acting chair Maureen Ohlhausen’s views are more in line with what Delrahim is saying.

by Simon Van Dorpe

51

The US starts analyzing mergers by looking at possible competitive harm while the EC is more focused on market definition, panelists said today (11 April) during the ABA Spring Meeting.

US antitrust agencies would not necessarily build a case based on market definition, said Caroline E. Laise, assistant chief of the transportation, energy and agriculture section at the Department of Justice Antitrust Division.

Joshua H. Soven, partner in the Washington, DC office of Gibson, Dunn & Crutcher, also speaking on the same panel, said that the US antitrust agencies tend to "start from the end" in most cases to see whether there is harm.

The market definition issue then takes care of itself through "reverse engineering," he added.

The panelists discussed how the recent spate of mergers have created challenges when it comes to price discrimination and market definition based on customers. Markets that the parties may see as being highly fragmented may be defined more narrowly by agencies.

In the EU, markets are defined “more and more narrowly,” said Axel Beckmerhagen, European counsel at Sullivan & Cromwell in London, citing the EUR 5.2bn blocked acquisition of Dutch firm TNT Express by US delivery giant United Parcel Service Inc (UPS), which was blocked by the European Commission.

The EU blocked the deal on grounds that UPS failed to offer sufficient concessions to allay concerns that the merger would harm consumers.

The EU has a tendency to define the market based on the features of the products, allowing for less substitutability, Beckmerhagen said. Based on this narrow market definition, the EU has been asking for more assets to be included when it comes to divestitures, he added.

by Freny Patel

US, EC approaches to market definition highlighted

52

EC, ex-FTC economic heads see rising margins differently

A former Federal Trade Commission (FTC) economics director and the EU's chief economist showed different leans as each called for more data on concentrating markets and on margins, during the ABA Spring Meeting today (12 April).

The ascending debate over how to respond to these trends came more sharply into focus for antitrust experts after the 2016 release of a Council of Economic Advisors (CEA) brief indicating that aggregate concentration indices—such as profit margins—have risen sharply over the past two decades.

The trends have coincided with greater levels of income inequality and barriers to entering the labor force, according to a top European antitrust official, Tomasso Valletti. Speaking on an ABA panel, he said that the CEA’s findings are similar in Europe. Wage and labor trends are also similar in Europe and the US.

“However you cut the data, the concentration is increasing across many industries, and in many it has increased a lot,” he said. Valletti is the chief economist for the European Commission. “There has been a debate over the suitability of the data, but it should not stop us. There is a wider political debate.”

“My hair is not on fire about it,” said Howard Shelanski, partner at Davis Polk and former FTC economics director.

Since the CEA brief’s publication, a wave of other supporting studies have come forth, according to session moderator William E. Kovacic, professor of law at George Washington University. The nascent literature leaves antitrust enforcers with three discrete options, according to Kovacic: increase enforcement, change statutes, or conduct more studies.

Shelanski, who handled his bureau’s antitrust portfolio and co-authored the agencies Horizontal Merger Guidelines, added a fourth: fine tune the tools of measurement.

“We need to find out what is really happening. What is the cause for the rising profit margins? How are they being distributed? We need to know that before we condemn [the companies] and enforce more strongly under antitrust laws,” Shelanksi said in the interview.

In cases where companies are extracting high margins, the nature of the industry and the baselines for measurement need consideration, according to the former FTC enforcer. “Over the long haul, things could be in the consumer’s favor. Returns to capital, which Tomasso emphasized, are not necessarily bad things.”

by Whitney McKnight

53

Enforcers should not rely too heavily on single sources of evidence when investigating innovation-based theories of harm in merger reviews, an EU and US official said today (12 April).

Speaking during a panel titled “Innovation and Merger Control” at the ABA Spring Meeting in Washington, DC, the EC’s Carles Esteva Mosso and the Department of Justice’s Patricia Brink both agreed on the importance of not relying heavily on one form of evidence.

Key evidence includes whether the parties are active in the same space, said Esteva Mosso, the EC deputy director-general for mergers, emphasizing a broad analysis of all evidence.

Forward-looking evidence is best, said Esteva Mosso, adding there are also a number of “backward methods” such as assessing how many patents a company has developed in the past, or the number of products the company has developed over previous years.

All of this information can help you identify if a particular merged company was a good or successful innovator, he said.

From an enforcement point of view, it is important to look holistically at many types of evidence, Brink said. The DoJ official said while R&D expenditure is an assessment tool, it does not necessarily sum up all of the innovation and development in a single product market. Patents are another area antitrust agencies look into, but again it does not always line up with the actual market.

Brink said enforcers would like to see evidence of future research plans which helps them assess the innovation and competition.

by Jules Johnston and Yiqin Shen

EU, US enforcers say variety of evidence key in innovation-based merger reviews

54

The Flash: Notes from the ABA

The Flash spent Wednesday and Thursday of last week (11 and 12 April) at the American Bar Association (ABA) Antitrust Law Spring Meeting in Washington, D.C., the largest competition and consumer protection law conference in the world. And it was a truly global conference. Competition authority officials from all over the world were in attendance. Younger agencies, often understaffed and lacking in specific knowledge, were there to pick up knowledge from the larger, more developed agencies.

It is worth noting that the presence of antitrust regulators in most countries is a relatively new phenomenon, as one ABA panelist pointed out that in 1990 there were only two countries with merger clearance regimes, now there are 120. With a trade war looming, questions regarding China’s stance on merger review were highly sought after. China’s sole Ministry of Commerce (MOFCOM) Antimonopoly Bureau representative, Yu Jiamu, was absolutely besieged, so much so that you couldn’t even see Jiamu amid the crowd of hedge fund sharks surrounding her wanting more information about the aforementioned NXPI/QCOM deal. They were largely out of luck as she remained tight lipped.

This news service did report yesterday that China’s merger review regime is expected to remain largely unaffected as antitrust review is handed over to the merged State Administration for Market Regulation, according to Jiamu’s comment during a fire side chat. On the U.S. side, the Department of Justice hosted a panel discussion and their message was similar to that of China: US antitrust policy is basically the same under Trump as it was under Obama and that any changes going forward will be at the margin. Panelists urged the need for more interagency cooperation both domestically and internationally, a theme that was stressed in several panels throughout the conference.

On enforcement, the panelists remarked that criminal prosecution, including jail time for c-suite executives, is certainly on the table for no poach cases that occurred after the agency’s October 2016 guidelines on naked wage-fixing.

Regarding merger review, the DOJ said it will not hesitate to review closed transactions if it feels there is a harm to the consumer and it urged the lawyers in attendance to open a dialog and be forth coming with documents and potential antitrust problems early in the HSR process to avoid a second request.

Commentary

55

In another panel on market concentration, a panel of regulators and economists debated whether markets have become more concentrated over the past 20 to 25 years and if antitrust litigation was a good way to mediate anti-competitive effects. The general consensus was that markets are indeed becoming more concentrated, but that more data is needed on the micro level about specific industries and firms. The evidence surrounding the prevalence of higher margins and the decline of new market entrants was seen as more conclusive.

There were questions as to efficacy of antitrust regulation of market concentration to prevent anti-competitive effects and what could be done going forward. Again, the common theme of changes at the margin were suggested. The more nuclear option of breaking up existing firms with large market concentration was universally shot down by all of the participants.

There was also a consensus that regulators need to take the broader public interest to heart. The European Commission (EC) is taking the lead in this regard as this news service reported on EC’s chief competition economist Tommaso Valletti comments that quality and innovation issues must be taken into account. There was also a call for more public disclosure around deals that are passed through by regulatory agencies as well as more involved ex-post testing of said deals.

by Justin Zacks and Kevin Ketcham

56

Public Comment is a weekly column that offers editorial commentary from our Washington DC Bureau Chief Joseph Tipograph on the US antitrust agencies and the top deals under merger review.

This week, amidst high-profile economist courtroom testimony and the largest annual antitrust conference in the world, I had the privilege of running point for our first annual video series.

Over Wednesday and Thursday of the ABA Spring Meeting, we filmed interviews with high-ranking antitrust officials from across the globe.

Officials from the European Commission, the US Mexico, Canada, Brazil, United Kingdom, Japan, Portugal, Hong Kong and Belgium discussed issues such as policy convergence, harmonization and the digital economy.

We asked Brent Snyder, CEO of Hong Kong’s Competition Commission, and former Department of Justice (DoJ) criminal enforcement head, what lessons he would bring back to the US, now that he has had the opportunity to lead another competition regime and compare. He said he sees room for the US to improve its advocacy and public education work, suggesting the agencies make more of an effort to generate engaging video content for dissemination on YouTube. We could not agree more.

One agency that is particularly dedicated transparency is CADE in Brazil, where commissioners freely speak their minds in language that everyday citizens can understand, whether in media interviews or regularly scheduled public proceedings. We chatted with CADE President Alexandre Barretto de Souza, who was willing to answer very specific questions about how the agency plans to allocate its budget and provided a more lucid explanation of what cross-border agency coordination entails than what we typically get from enforcers in the US.

In the global competition policy debate, the US may have no ally more important than Canada. The Canadian Competition Bureau’s head John Pecman, walked through how Canada's antitrust laws and policies closely track those in the US and in fact were passed a year prior to the US's Sherman Act of 1890. Among other things, Pecman told me about Canada's recognition of an efficiencies defence and the issues this raises.

Belgian Competition Authority President Jacques Steenbergen noted off camera that with only 3,300 attendees at its largest annual policy conference, the global antitrust community is relatively small. He proposed that we investigate the total size of the global antitrust bar. Given how much commerce is affected by the decisions that get made, we just might need to accept that challenge.

Public Comment – A Spring Meeting of the Minds

57

The European Commission’s chief economist Tomasso Valletti weighed in on how growing profit margins may reflect undetected market power that has been amassing over the years as a result of insufficient remedies to problematic mergers.

The Federal Trade Commission’s (FTC) International Bureau Director Randy Tritell chatted about the important work of the International Competition Network and the FTC's role.

Antitrust lawyers from China weighed in on the recently announced agency consolidation in Beijing and the ongoing trade tensions with the US. Florida Law professor Danny Sokol even provided an exhilarating lesson on the history of antitrust, tracing its origins to ancient religious texts.

The Price Supervision and Antimonopoly Bureau of China’s National Development and Reform Commission (NDRC) agreed to provide an exclusive interview through email, in which it said the agency will further enhance experience sharing and technical exchange with other jurisdictions and improve its ability in handling cross-border monopoly cases.

Stay tuned for these videos and articles to be published in the coming weeks.

58

A popular topic of conversation at the post-meeting parties was unsurprisingly the Department of Justice's (DoJ) lawsuit against the proposed Time Warner / AT&T merger. The majority view--although not a consensus view--among those we spoke with is that the DoJ is not faring well and that Carl Shapiro's economic testimony failed to resonate with presiding Judge Richard Leon.

Of course it should be noted that the majority, but non-consensus view at last year's Spring Meeting was that the deal would go unchallenged.

I spoke with one antitrust lawyer who had predicted the lawsuit who believes that the DoJ will prevail. His view was that the judge wants to rule in favor of the government and will conform his analysis to arrive at that result. However, he admitted that he was a little unsettled by the reports that Shapiro's testimony may have missed the mark.

A couple of trial lawyers from the FTC, meanwhile, expressed confidence that their agency will be insulated from any leanings of the White House when the new commissioners are empaneled.

Speaking at a fireside chat, a Chinese MOFCOM official said that this would likely be the last Spring Meeting that MOFCOM will attend.

by Joseph Tipograph with contributions from Jeremy Fleming Jones, Lisha Zhou, Freny Patel, Rebecca Shore and Camila Pavanelli

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