WASHINGTON – U.S. Senator Amy Klobuchar (D-MN), Chair of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, today questioned a panel of witnesses on the state of competition in the U.S. economy and need for antitrust reform. During questioning from Klobuchar, Massachusetts Institute of Technology Professor Nancy Rose testified that she believes our country needs a “recalibration” of our antitrust laws and that it shouldn’t be “impossible to successfully bring a predatory pricing or predatory behavior case.” Professor Rose went on to note that “If you believe in competitive markets, if you believe in small businesses, if you believe in the kind of entrants that some here today have talked about, you want to give them a fighting chance and you don’t want to allow incumbents to drive them out of the market before they even have the chance to compete.”
A high-resolution video of questioning is available for download HERE.
Senator Klobuchar: Thank you very much. I’m going to go through these issues just one by one. I guess I’ll go to maybe you, Mr. Lynn, first. When Mr. Rybnicek was talking about the fact that there’s not really concentration, he acknowledged that there was by sector but not locally. I just looked at all this literature Professor Rose talked about and I think there is a lot of concentration going on. I think people feel it out there. It’s everything from walking into the Senate and hearing from some pretty conservative Republicans about how their cattle ranchers are feeling right now, to hearing from regular people who are trying to buy things and find competitors and they can’t. Could you give me 30 seconds on, even outside of tech, what you’re seeing with concentration?
Mr. Lynn: This is one of the most important things that’s happening throughout American society which is the concentration of power at the local level. Just one example is in hospitals, in healthcare, and in clinics. We’ve seen massive concentration in particular regions. In Baltimore, in Pittsburgh, in Cleveland. Wherever you see that kind of concentration, prices skyrocket and the delivery of services in many ways goes down. We’ve seen the stripping out of clinics at small hospitals across America. Rural areas have been especially hurt. As you mentioned, this is something that is affecting heartland communities all across our country. It’s retail, it’s agriculture, it’s wherever you look. There’s not a single sector where you’re not going to see significant concentration, sometimes extreme concentration over the last 20 years.
Senator Klobuchar: Yeah, one of my favorite moments of this is John Oliver did a segment and he went through all of the concentration examples from cat food to online travel and he ended the segment by saying “if it is enough to make you want to die, good luck, because now there are only three casket makers”. He showed them and since then, one has bought the other, so there’s only two. Next thing, we talked about the need for the agencies to be as sophisticated as the people they’re trying to regulate and challenge, which is a big task, given that these are the biggest companies the world has ever seen and you don’t want to neglect other areas outside of tech because of the understandable focus. Just to see where people are philosophically… These suits were brought by the Trump Administration, Makan Delrahim, who Senator Lee and I worked with extensively. Chairman Simons, these are Republican appointees. They brought these suits at the end, as was pointed out by Mr. Lynn, joined by Democratic Attorney Generals, at least in the FTC suit, with others interested of course in the Justice Department suit against Google. Do you think it was a good idea to bring those suits? Just yes or no. Mr. Slover?
Mr. Slover: Absolutely, yes.
Senator Klobuchar: Okay, Ms. Baker?
Baker: Overall, yes, I’m in favor of enforcement.
Senator Klobuchar: Okay, Mr. Lynn?
Mr. Lynn: Yes.
Senator Klobuchar: Okay, Mr. Rybnicek?
Mr. Rybnicek: I’m not going to opine on this. Antitrust is a fact-intensive exercise so I think that —
Senator Klobuchar: Okay, that’s fine. Professor Rose?
Professor Rose: Clearly.
Senator Klobuchar: I think she said “clearly”, in a very professorial way. I say that because I think there is some widespread agreement across the country and across the aisle on these suits. And so if you do that, as I said you can’t take them on with bandaids and duct tape. And I really did appreciate, outside of your views on those lawsuits, Mr. Rybnicek, that you support funding these agencies. I don’t know if you want to take this Mr. Slover, as having someone that’s worked extensively at agencies in the past. These agencies right now, the numbers are a shadow of their former selves, when you look at even the Reagan administration. Yet, we’re going to be asking them to take on these major cases that we tend to agree with as a country need to be taken on exclusionary conduct. Senator Grassley and I have a bill that he’s very devoted to, to change the fee structure that hasn’t been changed since Hart Scott Rodino passed, for major mergers. So that we can get some more funding to be able to better adequately take on these major companies. Can you comment on that?
Mr. Slover: Sure. We think that additional resources are clearly needed. I stated that in my testimony. I think the bill that you have with Senator Grassley is a good way to help get more of those resources to the enforcement agencies. It’s essentially a user fee on the biggest mergers that create the most work for the agencies. The companies can clearly afford to pay it.
Senator Klobuchar: Very good. Next thing, so we’ve got the funding for the agencies and then we’ve got exclusionary conduct. I asked a lot about this because people say, okay’s let’s say we do something to make it easier to go after mergers in the future, but what are we doing about what’s happening right now? I mean we don’t even have the data anymore at the FTC that actually Caspar Weinberger started having collected decades ago. That’s part of our bill, to start to collect that data again. But people see this as intractable. What can you do about conduct that’s going on right now like predatory pricing where you try to drive your competition out of business with extremely low prices so you can raise them later. That’s what predatory pricing is. It seems real good at the beginning and then it’s a monopoly and they can just jack up the prices. Exclusive dealing where you can force your customers to agree not to deal with your competitors, or strategies to cripple your rivals. I read again from Mr. Zuckerberg’s exact words from his email, in which he said that “These businesses are nascent but the networks established, the brands are already meaningful, and if they grow to a large scale, they could be very disruptive to us”. And then he goes out and buys them with the words, “It is better to buy than to compete”. I guess I would go to you, Professor Rose. Exclusionary conduct, I know you see it as a problem, but can we actually do something about it?
Professor Rose: I think we can, Senator. I believe that what we need, however, is a recalibration of what the antitrust laws mean and what Congress intended when it passed them. We’re seeing poor decisions that are really nullifying that Congressional intent and even a basic understanding of what exclusionary conduct is and a business judgment. The examples you gave are terrific. Basically, I think it’s almost impossible to successfully bring a predatory pricing or predatory behavior case at this point. And that shouldn’t be. If you believe in competitive markets, if you believe in small businesses, if you believe in the kind of entrants that some here today have talked about, you want to give them a fighting chance and you don’t want to allow incumbents to drive them out of the market before they even have the chance to compete.
Senator Klobuchar: When Mr. Rybnicek has his argument that “oh, hey, they won 85% of their cases in court so there must not be a problem”. I get this but to me, it means that they’re not bringing all their cases — one, they don’t have the resources, and two, they know how the courts are going to rule.
Professor Rose: I think that’s right and I think that the third factor is that when you got a legal environment, a judicial environment, that’s as hostile to considering exclusionary conduct as the present environment is, you worry a lot that if you bring a case, not only will you lose (the agencies can take a loss - that’s not a problem). You worry that you will create a bad precedent, bad case law. The shining example of that from recent years is the American Express case. The DOJ won at the district court level, went all the way up to the Supreme Court, and we have a truly terrible Supreme Court decision that not only meant we couldn’t enforce against those anti-steering provisions in the credit card market, crippling competition in the credit card market, but also now means that lower courts are using that to mean basically anything is fair game in a platform industry or a two-sided market. That’s really devastating.
Senator Klobuchar: I’m going to go back to you Mr. Slover on a second round. I know you want to answer this and I know you also want to talk about mergers. But I thought I’d end in shifting the burden on mergers and how that could be helpful. But I wanted to lead with exclusionary conduct just because we can’t pretend we don’t have a monopoly problem right now. And that is the bill that I just introduced with Senator Kennedy to give an even playing field for our journalists. And I know that you and I both agree, I’ve been on forums with you, for the need for looking at consolidation in the media and that a vibrant and independent free press is vital to our society and our democracy. You’ve been a journalist, yourself. I’m the daughter of a journalist. Our free press right now is under threat. We saw this play out in such a big, global way in Australia, where we realized even a company the size of News Corp that rose up and was trying to challenge this, and literally, these tech companies threatened to just take their marbles and go home and leave an entire country with basically no search engine and losing their entire platform. Obviously, that didn’t work as the world looked and regulators across the world started looking at this. But this is the philosophy of this bill that we need to have an even playing field and allow people to negotiate. Can you comment on that?
Mr. Lynn: I think that it’s a very important bill, it’s very important that we even the playing field. I think it’s also important for us to look ahead and actually begin to plan how do we reconstruct the entire marketplace for advertising in the United States. From the founding of this country, advertising has played a fundamental role in creating the environment in which the free press can operate. Advertising is what allowed publishers not to depend on government handouts, advertising allows publishers and journalists to not depend on philanthropy. Advertising is what allows publishers and journalists to be free thinkers and say what they want. The advertising that exists out there should be attached to publications. It should not be captured by and diverted by intermediaries. That’s what we’re seeing today is we’re seeing intermediaries, gatekeepers, chokepoint corporations exploiting their power to steal other people’s money. They’re starving the free press in the process and they’re starving our democracy.
Senator Klobuchar: To the point, thank you. With that, I turn it over to Mr. Lee.