- January 21, 2021
- Posted by: Stratford Team
- Category: Tech
Over more than three years at the helm of the Justice Department’s Antitrust Division, Makan Delrahim has ventured to define antitrust enforcement as much by what it is not as by what it is.
It is not only about whether prices go up or down for consumers — a yardstick that would make enforcement of tech platforms offering their services at zero cost to consumers virtually impossible to pursue.
It’s also about the quality of services for consumers and whether they have viable alternatives to turn to if they’re not up to par.
It is not, however, a “panacea” for all social ills, he often says.
Under Delrahim’s leadership, which ended Tuesday, the Antitrust Division has investigated some of the biggest tech companies in the world, brought the first major monopoly case in about 20 years against Google (from which he was eventually recused, having long ago lobbied for Google’s acquisition of DoubleClick), attempted (unsuccessfully) to block AT&T and Time Warner from merging, endeavored to block Visa from acquiring a nascent competitor in fintech company Plaid (and saw the two abandon the merger before it went to trial) and updated decades-old vertical merger guidelines in conjunction with the Federal Trade Commission.
During his time at the DOJ, antitrust enforcement became an unusually fashionable topic outside of tight-knit academic circles as progressives and conservatives alike called for the break-up of Big Tech companies including Apple, Amazon, Facebook and Google. The House Judiciary subcommittee on antitrust spearheaded a major investigation into the four companies culminating in a more than 400-page report concluding they held monopoly power and that updates to antitrust law could help the government hold them to account.
The bipartisan push for vigorous antitrust enforcement put pressure on federal agencies to take on the tech companies. More recently, the omnibus spending bill also included some extra cash the agencies had long asked for to support their efforts.
Still, Delrahim rejects notions even from his own party that certain issues with the tech platforms can be dealt with through antitrust enforcement. After tech companies took dramatic steps to limit further harm stemming from their platforms in light of the Jan. 6 insurrection at the U.S. Captiol, some suggested the actions, like other content moderation decisions, showed those companies had gotten too powerful.
In the days after the riot, Apple and Google both removed Twitter competitor Parler from their app stores, saying it hadn’t done enough to prevent messages inciting violence. Shortly thereafter, Amazon pulled its cloud services from Parler, effectively de-platforming the service until it could find another provider to host its data. Around the same time, Twitter banned Trump permanently and Facebook did so indefinitely.
Delrahim said in an interview with CNBC Tuesday he “condemn[s] any acts of violence, but I think that the actions laid pretty bare the market power that some of these companies have.”
Still, he sees the question of how to deal with that as one of policy, not necessarily antitrust regulation.
Delrahim said he comes from the “Robert Bork school of thought,” referencing the conservative jurist whose writing influenced a major shift in antitrust enforcement in the late 20th century by emphasizing a focus on consumer welfare. But when it comes to an enforcement ideology, Delrahim said that is separate from partisan politics.
“There are some people who think any enforcement of the antitrust laws is interfering with the marketplace, and they claim to be conservatives. But I don’t view that,” he said. “I think conservatism means the free markets decide rather than the government stepping in to decide. And when you have a break, when you have a failure in the marketplace, the government steps in.”
That’s not to say Delrahim always opted for bringing enforcement actions. He did not seek to block the merger between T-Mobile and Sprint, even as a group of Democratic state attorneys general claimed it was anticompetitive. A judge in that case ultimately allowed the deal to go through.
Delrahim worked to study market imbalances during his time at the division.
In February 2020, he hosted a public workshop with Stanford University exploring questions about “killer acquisitions,” deals that could cut off emerging competitors from growing into potential threats to dominant companies. The department’s lawsuit against travel booking platform Sabre‘s attempted acquisition of software company Farelogix tested that notion. In its complaint, the DOJ claimed the acquisition was “a dominant firm’s attempt to eliminate a disruptive competitor after years of trying to stamp it out.”
A district court ruled against the government, applying a court precedent in a way Delrahim later said in a statement he was “disappointed.” But the firms soon after abandoned their plans to merge after a UK regulator moved to block the deal.
On his way out, Delrahim said he believes Congress should work to clarify court precedents that have made it difficult for the government to prevail in enforcement matters and misinterpret the original statutes. One of those precedents Congress should revisit, Delrahim said at a Duke University event Tuesday, should be the Supreme Court’s 2018 Ohio v. American Express opinion, which was applied in the Sabre case.
That Supreme Court ruling, in a 5-4 conservative majority opinion, essentially said that the government failed to prove harm against both sides of American Express‘ two-sided market, which includes both consumers who use their credit cards and merchants who accept them. Delrahim said in his speech Wednesday that the ruling “incorrectly raised the standard for plaintiffs to prove antitrust cases by paving the way for defendants and courts to wrongly assert that every market is a two-sided platform. This is a classic example of bad cases leading to bad law.”
Without reform, it’s easy to see how such a ruling could impact cases against the major tech companies the government is already pursuing. Both Google and Facebook, for example, serve both consumers and advertisers on their platforms who may be impacted differently by the companies’ competitive behaviors.
Still, Delrahim said he didn’t think such a change (or others he suggested at the event, like shifting the burden of proving a deal will be procompetitive to defendants when they hold more than 50% market share) would have changed the outcome in another unsuccessful merger challenge by his division: AT&T and Time Warner. He largely chalks that one up to having a “difficult judge.”
“Sometimes different judges could reach different conclusions on the same exact set of facts. So I’m convinced we might have had a different outcome if we had a different judge in that case,” he said.
During the challenge, Democrats wondered if Trump had exercised influence on the case due to his notorious distaste for Time Warner-owned CNN. Delrahim said definitively that he “never” spoke with Trump about the case during the investigation or trial, nor did he hear from other White House officials.
Another suggestion Delrahim offered in his final speech was the creation of a public-private rulemaking board to implement technology standards more quickly than trials will be able to bear out. The trial of the Justice Department’s complaint against Google is set to begin in late 2023, and litigation could extend for several more years if there are appeals.
This “Digital Markets Rulemaking Board” would be modeled off of the Municipal Securities Rulemaking Board, which writes rules to protect investors in the municipal bond market. Delrahim said he believes the DMRB would be able to more efficiently and effectively deal with complex regulatory questions than either full government regulation or self-regulation could do alone. He envisioned the board would have members from academia and technology companies alike, acknowledging that while talented technologists are necessary to include, the board would need to ensure rules would not unfairly advantage dominant companies.
As for what’s next for the division, Delrahim said he’s “pleased” with its direction and praised Biden’s choice of attorney general, Merrick Garland, as “one of the most thoughtful and highest integrity to be leading the department at this time.”
Biden’s yet to announce a successor to the role of assistant attorney general of the Antitrust Division, but Delrahim said Garland’s background studying antitrust law assures him it will be a highly qualified pick.
“I look forward to supporting them in any way that I can in the enforcement mission,” he said.
As for himself, Delrahim said in the same breath that he was both taking time off and beginning to teach as an adjunct professor at the law school at the University of Pennsylvania on Wednesday, the day after he stepped down from the division. He’ll teach a course on mergers and acquisitions and the role of government, drawing from case studies he lived through during his time leading the division.