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Global Media and Communications Watch The International Legal Blog for the Tech, Media and Telecoms Industry
Posted in Policy & Regulation, Technology Michele FarquharEdith RamirezRyan ThompsonEugene Kim

2019 Winnik International TMT Forum: Fireside Chat with Makan Delrahim

Edith Ramirez and Assistant Attorney General Makan Delrahim

Last week, Makan Delrahim, Assistant Attorney General for the Department of Justice’s Antitrust Division, joined Hogan Lovells partner and former Federal Trade Commission Chairwoman Edith Ramirez for a fireside chat at the annual Winnik International TMT Forum hosted by Hogan Lovells. The discussion focused on the role of antitrust law in an age of media and technology convergence. Delrahim offered insights into recent antitrust decisions and the growing debate over treatment of technology platforms that blur traditional market lines.

What Standards Should Govern

The fireside chat began with an exploration of the consumer welfare standard. Delrahim noted that the consumer welfare standard is under attack for its narrow focus on price. Critics have called for a broader analysis that looks at qualitative factors and the effects on intertwined policy issues like data privacy, environmental protection, and employment. Delrahim welcomed healthy debate, but cautioned that efforts to incorporate broader policy goals into competition analysis “are misguided.” In his view, non-competition goals “should not inform antitrust law.”

According to Delrahim, the consumer welfare standard is flexible enough to address emerging concerns regarding the power and influence of the world’s largest technology companies. “That the consumer harm standard is inadequate for tech platforms is not a new argument,” noted Delrahim, recalling that similar arguments were made during U.S. v. Microsoft in 2001.

Fielding a question from the audience, Delrahim addressed Senator Elizabeth Warren’s proposal to break up large tech companies. He stopped short of dismissing the proposal, but offered that he would be disinclined to put artificial limits on growth.

Recent Antitrust Decisions

Addressing recent antitrust decisions and their impact going forward, Delrahim described the 2018 Supreme Court decision in Ohio v. American Express as “something we have to follow.” He was optimistic that the impact of the case might be limited because the decision was primarily a factual analysis, but he also said he expects many platforms will seek to be defined as “two-sided markets.” Delrahim cautioned that “there will be a lot of litigation over this.”

Delrahim also discussed the recent D.C. Circuit Court decision in U.S. v. AT&T, upholding the district court’s decision to allow AT&T’s acquisition of Time Warner to go forward. Although he disagreed with the outcome, Delrahim believed the decision clarified a number of issues. For example, it rejected the idea that vertical mergers are per se illegal and allowed qualitative proof in addition to price. “Ultimately,” remarked Delrahim, “the D.C. Circuit did not change the law much and will not change our approach on the law, but will probably affect how we try a case.”

Media and Tech Issues

The fireside chat explored some of the challenges that antitrust law faces as technology platforms challenge traditional market structures. Delrahim highlighted the issue of network effects and their impact on competition. As technology platforms capture a dominant market share, some fear these platforms will leverage network effects to foreclose competition. Delrahim noted that regulators must make sure that companies do not abuse their success to protect or enhance market power. But, he added, such concerns should be tempered by the fact that the magnitude of network effects can vary dramatically over time.

The development of technology platforms also creates issues for market definition—specifically, Delrahim suggested that it will be difficult to determine whether new platforms are substitutes or complements to incumbent industries. Delrahim also disputed the claim that Amazon and Netflix are vertically integrated like AT&T. Because consumers must still buy some sort of broadband service to access Netflix, there are competitive constraints that do not exist for facilities-based companies like AT&T.

Throughout the discussion, Assistant Attorney General Delrahim appeared generally optimistic about the state of antitrust law and its ability to address new and unforeseen anticompetitive harms. He also noted the importance of international cooperation in helping to address the increasingly global scale of technology markets. Finally, Delrahim announced plans to release new vertical merger guidelines later this year.