Antitrust Matters provides engaging and timely conversations about competition policy in the digital age. Antitrust has always mattered to consumers and businesses, and to antitrust lawyers and economists, but today it also is in the political and public discourse more than ever. From the prices we pay for food, travel, financial services, payments to the way we interact daily using digital apps and platforms, antitrust touches each and every one of us in ways we may not even realize. Antitrust Matters brings you you perspectives of experts and visionaries in the field who discuss where antitrust law has been, where it is going and why it is so important to our current political discourse.

In this episode of Antitrust Matters, Jeffrey Shinder and Taline Sahakian discuss current antitrust policy debates and enforcement trends with Diana L. Moss, President of the American Antitrust Institute.

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Episode Transcript and Show Notes:

Jeff Shinder:

Welcome to Antitrust Matters, the Constantine Cannon podcast where we have engaging in timely conversations about competition policy in the digital age. My name is Jeff Shinder, and I’ll be your host.

Antitrust has always mattered to consumers and businesses, but today it is also in the public discourse more than ever. From how we get our food on our plates to how we travel, to the way we interact daily using digital apps and platforms. Antitrust touches each and every one of us in ways we may not even realize. In Antitrust Matters, we bring you perspectives of experts and visionaries in the field who discuss where antitrust law has been, where it is going, and why it matters today more than ever before.

Hello, everyone. We’re back for another episode of Antitrust Matters, and we’ve got a terrific guest today to broaden and continue the discussion about why antitrust matters, why it matters so much today, where it is going, where it has been, or in some cases not been, and what it all means for competition policy and consumer welfare going forward. We are thrilled to have on the podcast Diana Moss. Diana Moss has been the President of the American Antitrust Institute since 2015. Her work spans both antitrust and regulation. Prior to joining AAI in 2001, Dr. Moss was a Federal Energy Regulator at FERC, where she coordinated the agency’s economic analysis for electricity mergers and worked on landmark open access rules. From 1989 to 1995, she consulted in private practice in litigation support for regulatory and antitrust matters. She’s adjunct faculty in the Department of Economics at the University of Colorado at Boulder.

Dr. Moss has spoken and published widely, testified before Congress, appeared before state and federal regulatory commissions, and made numerous radio and television appearances. She was named to the GCR’s Women in Antitrust in 2016 and 2021 and inducted into the ABA Antitrust Laws Section Hall of Fame-inism 2021. Diana, welcome to the pod. Would you prefer to be called Dr. Moss or can I call you Diana?

Diana Moss:

Oh, absolutely Diana. And thank you so much, Jeff and Taline for inviting me on your program today.

Jeff Shinder:

Well, thanks for coming.

Taline Sahakian:

Good to have you.

Jeff Shinder :

I’m joined by my partner, Taline Sahakian. So Diana, let’s start with the current debate about antitrust, antitrust law, antitrust policy. If you could just frame the discussion to start, and then we can go from there.

Diana Moss:

Absolutely. So great time to have this conversation. Antitrust is in an exciting period right now and has been for the last several years. It’s also a very chaotic period for antitrust. How the debate around declining competition, rising concentration, antitrust reform, competition policy is evolving in the US is very, very different than how it is evolving in other parts of the world, especially in Europe. So we’re dealing with a very interesting fact pattern and a very interesting spectrum of ideologies that are driving this debate.

So I think the whole motivation for concerns around declining competition and the importance of strong antitrust enforcement really stems from a mounting pile of evidence, economic evidence that shows that most likely 40 years of lax antitrust enforcement has contributed to a rising concentration in critical markets, growing gaps in wealth and income between different sectors of the economy and between consumers and corporations. We have seen the exploitation of labor as a result of the development of very powerful buyers of labor. So the list goes on and on.

We’re seeing lots of economic indicators and analysis coming out of labor economics, industrial organization economics, macroeconomics, all of which point in the direction that we have a competition problem in the United States. But that is not widely accepted to be true. So for example, detractors or critics of the proposition that we have a competition problem will say that, “Well, rising concentration could be the result of other factors. For example, technological change, economies of scale and scope, and globalization of certain businesses”. And those are all valid concerns and should absolutely be considered. But we now have enough evidence that lax antitrust enforcement, especially in allowing dozens, if not hundreds of thousands of mergers through, often successive mergers in the same markets has really eliminated competition sequentially over time where now we have certain markets that are just dominated by two, three, four competitors.

So that’s the lay of the land. And of course, AAI has been advocating for stronger enforcement for 25 years.

Taline Sahakian:

So, we hear often about the Chicago School. Can you talk a little bit about the ideological spectrum of how people are viewing this moment in time and how that affects their view of reform and what should be done, I guess, in the future?

Diana Moss:

So that’s a really good question to dovetail with what I was just speaking about. And I think the answer is the ideological spectrum in antitrust has really expanded over the last say five years. We used to have a two-ended spectrum. We had what I would call the far right, which was dominated by Chicago School thinking, mostly oriented around the proposition that most mergers are pro-competitive, most practices pro-competitive except for the per se illegal types of conduct that we worry about in antitrust, and that type conduct and mergers should really be evaluated on an ad hoc basis. And that really shaped a very light touch, a laissez faire approach to enforcement of the antitrust laws in the United States. And my view as an advocate, is that laxity in enforcement has really contributed significantly to a concentration problem that we see today. So we’re now seeing the fallout of 40 years of lax enforcement.

The other end of the spectrum used to be on the left end were the progressives, folks like AAI, and AAI started this whole advocacy movement in competition, policy and enforcement 25 years ago. We were the first ones out to be advocating for stronger enforcement because we were beginning to see evidence of concentration and declining competition problems. So the progressives took a very, very different view, but there was really no middle. And the fight was long and hard. And it was like pushing boulders uphill for two decades to shine the light on how enforcement, how important it is and how it can be improved both at the federal, the state and at the private levels. Those are all very important prongs of the antitrust enterprise.

We now have another voice on the spectrum, which is even further to the left. Those are the so-called Neo-Brandeisians, who interestingly are not folks that come in from the antitrust community. These are former journalists, former reporters, policymakers, who are very concerned about declining competition much like the progressives, but who have a very different view of the role of the antitrust laws in terms of an expansive view of the design of the laws to control political power, corporate power and its translation through economic power. So a very, very broad view of the role and the design of the antitrust laws.

And so the Neo-Brandeisians, who have injected a lot of liveliness in the debate and certainly a lot of proposals for antitrust reform, have really stretched the spectrum. So what has happened is the former left end of the spectrum has now been pushed more to the center left of center of the spectrum.

And it really all boils down to what are the asks. The far right is asking for nothing. The status quo, weak enforcement is great. The center, center left progressives like AAI are advocating for much stronger enforcement of the laws, more presumptions in the laws, horizontal presumptions, vertical presumptions, presumptions around acquisitions of nascent competitors, strengthening, modernizing, clarifying the laws. Very much along the lines of what Senator Klobuchar has proposed in her CALERA bills, and certainly preserving the vital role of private enforcement. The Neo-Brandeisians on the other hand are really calling for major overhauls of the antitrust laws.

Jeff Shinder:

Okay. So there’s a lot there that, Diana, that I want to follow up on, but before we actually follow up on some of the specifics, I want to put a finer point if you can and why this matters. To much of our audience or at least some of our audience may come off as a bit of an esoteric discussion. And you’ve said a few times we have a concentration problem. And the concentration problem, I believe summarizing you correctly, it’s your view that lax antitrust enforcement has contributed if not caused that concentration problem. And so my question is a simple one. What’s the problem with that? Big companies are better equipped to build mouse traps or scale economies are necessary, or big companies are necessary to compete in global markets. What’s wrong with a concentration problem? Why is it something that is a problem that’s causing all this ferment in terms of we need to amend the laws?

Diana Moss:

Yeah, that’s a good question, Jeff. And it’s one that we certainly tackle a lot in doing the work of the American Antitrust Institute. I think the first response is a lot of the counters or the pushback to concerns over rising concentration really are not based in good economics, business, legal theories.

So for example, the contention that companies have to be big to innovate, they need the deep pockets to be able to innovate and bring better more products to consumers. That’s just not true anymore. We have looked at research in multiple sectors, food and agriculture, for example, and elsewhere, that says that companies have actually cut back on R&D over time. In fact, total factor productivity in the US is generally on the decline. And so there is not a matchup between the pace of innovation and the growth in the size of companies. So that’s not really holding up either. The whole argument around global footprints and the need for companies to be larger, to be able to compete globally, that pushback doesn’t really hold a lot of water either because US antitrust laws, much like any other jurisdiction, are going to be focusing on harm to competition in well-defined antitrust markets, which absolutely can affect US consumers. So just a couple of examples that really shoot holes in some of these conventional rebuttals to concerns over rising concentration.

The reason why all of this matters is a really simple one. And I talk about it all the time when I speak publicly. And that is we have a market-based economy. The United States was the first market-based economy. It is the leader, continues to be the leader in many aspects of growth and innovation and expansion. And without markets, which are supported by robust competition, we will not have a market-based economy. And most important, we will not have or support the democratic principles that support markets. Markets are all about entrepreneurial freedom, consumer freedoms, the ability of trading partners to come to market, to strike deals, to bargain, to get high-quality, low-priced products and services.

And when you don’t have competition in those markets, it begins to erode the democratic principles upon which markets rest. And that, of course, goes to the entire political economy system in the United States. So when you have markets that are dominated by large firms and tight oligopolies of firms, you lose. In losing the competition, you’re also starting to peck away at the underlying democratic principles that support markets. That’s why every single consumer in the United States, every single small business should, and these are all voters, citizen voters should care about our market-based system and the enforcement of the antitrust laws.

So I always say the antitrust laws are really esoteric wonky part of the law, but they have an out sized impact and importance in our market system.

Jeff Shinder:

So you said something interesting that I think merits follow up, which is the relationship between a market economy and democracy, which has a long tradition in antitrust, which our listeners may or may not appreciate. Do you feel that something like Facebook or Twitter banning speakers off from the right, which has been something picked up by Senator Hawley in terms of his support for an antitrust reform? Do you feel those are examples of the relationship between decline in competition, market power and democracy, even if it is political speech that was implicated that, at least speaking for myself, I will not speak for you, Diana, I did not care for? Do you feel that’s a good example of that or are there better examples?

Diana Moss:

Yeah, I think there are better examples, Jeff, honestly. So I will say controversially that really the only reason why there is GOP support for some of the reform bills in Congress right now is because… Well, first of all, they’re all directed at big tech and we can talk about this later. Why are our antitrust reform bills almost all exclusively directed towards one sector and in particular, certain players in that sector. It’s a very unusual way to approach antitrust reform when we have so many other troubled sectors. Healthcare, pharmaceuticals, food and agriculture. So that’s one important point. But I think the answer is that the issues raised by big tech, don’t all fall into the antitrust bucket. Some are competition issues and some are not competition issues. We have privacy concerns. We have social impact concerns surrounding big tech, free speech issues. The reason why the GOP is supporting those bills is because of the free speech issues on the platforms during the last presidential election.

That is a very narrow focus for the GOP to have in supporting those bills. And so that’s why we watch those bills carefully as they make their way through Congress and getting or not getting bipartisan support. And that story is not over yet. The answer with big tech is antitrust can’t fix all the problems with big tech. We can certainly address issues around discrimination on platforms, frustrating the ability of app developers and third party rivals to sell on eCommerce platforms or to get placement and search results. There is definitely a role for antitrust in that, but there’s also a role, a big role potentially, for sector regulation. Digital tech has enough problems to lend itself to a sector regulatory approach, but there’s also privacy law. And so the whole free speech issue in my view is a section 230 issue where we need the FCC to really look very carefully at who is a content moderator and who is not a content moderator.

So unfortunately digital tech is not a great example of necessarily how the antitrust laws can address bigness. And I don’t think in the public debate that it has been made very clear to the public that antitrust cannot fix all problems in big tech. Now, if you go to another sector like the beef packing cartel, where we have four beef packers who are lowering prices to ranchers and jacking up prices to consumers, and if you go to the health insurance sector where we have only a few major health insurers, or if you go to the pharmaceutical sector where we’ve had massive consolidation, then you’re really talking about the ability of antitrust to more directly and more effectively address those competition issues.

Taline Sahakian:

So you talked to, Diana, about the lax enforcement leading to problems and consolidation. Are there any sectors in particular that you think are more troubled as a result of the lax enforcement and what do you see as the best reform paths for some of those? If you can give us some examples, whether that’s legislative or other types of reform.

Diana Moss:

Right. So again, Matt, the solutions are going to have to be part of a bigger public policy approach. Public policy problems are by definitions, such big problems that affect so many people that a government response has to be a coordinated response across different policy tools. And this is what we heard in the President Biden’s executive order. This whole of government approach, where there would be coordination across different prongs of government to promote competition. But what we’ve seen generally over the last 40 years is really incredibly lax merger enforcement. Deals have gone through at an incredible rate. The government does not have the resources to litigate very many deals. So what we have seen in merger challenges over time is the government has settled more mergers with consent decrees containing remedies like divestitures or conduct remedies versus dealing with challenge mergers by going to Federal Court to get a preliminary injunction.

So there’s this gap between how challenged mergers that raise concerns as a violation of section seven of the Clayton Act are dealt with by the government. And that’s a resource concern, but it’s also the result of conservative ideology really hijacking the enforcement process for many, many years. Certain sectors have been really impacted by this lax enforcement. So for example, in pharmaceuticals, AAI did a big study. The FTC is approved 67 pharmaceutical mergers of branded and generic drugs, subject to divestitures. Many of those divestitures have failed. And what we have found is a shrinking group of branded drug manufacturers, a shrinking group of generic manufacturers, many of which are now defendants in public, federal and state, and private antitrust litigations. And some of those violations are criminal indictments in price fixing cases. Okay, so the pharmaceutical industry and the FTCs merger policy is very, very broken.

In food for example, especially in the middle part of the supply chain in food processing, whether it’s grains or proteins, in food manufacturings, in manufacturing retail grocery, we’ve seen an incredible amount of consolidation. The FTCs policy in retail grocery, not a great policy. The divestitures in Safeway, Albertsons failed and all the stores reverted to the original owners. We are down to four beef packers. I think, as I mentioned earlier, those packers are now the subject of investigations in private cases. And the impacts of that consolidation are enormous. We have thousands of ranchers who are getting lower prices for their fed cattle and consumers who are paying high prices for a box beef.

We’re down to two PBMs, Pharmacy Benefit Managers, that account for over 50% of the market. That directly affects drug prices for consumers. We’re now looking at a merger on deck for yet another airline merger between the two ultra low cost carriers, Frontier and Spirit, which would follow on the tails of already massive consolidation in the airline industry. So I think the bottom line is lax merger policy has really drives a lot of competition problems. And when you have lax merger policy, that’s how tight oligopolies are created. That’s how dominant firms are created. So section seven is really the first line of defense in protecting against monopolization and conspiracies.

Jeff Shinder:

Okay. Before we get to what do we do about all of this, Diana, you just did a fantastic job dissecting and discussing some important industries that touch everyone that have been affected by lax merger enforcement. Forgive me for this, but I still want to pick at what hasn’t happened before we address what should happen. And so you focused understandably, to offer my own views, on lax merger enforcement. But I’m curious to hear whether you think lax antitrust enforcement has permeated other aspects of the antitrust laws. For example, we have not had a lot of section two jurisprudence of any consequence, really since Microsoft in the late nineties at a time when some dominant companies have arisen that arguably could have been subjected to section two enforcement. And there may be other examples where you think antitrust enforcement at least public has failed and has contributed to the situation we find ourselves in today.

Diana Moss:

Yeah. So if you were to unpack the three major areas of enforcement, it would go something like this. The most troubled area of enforcement, I actually think is section two. As you just pointed out, Jeff, you can really count the number of section two cases, public cases on two hands over the last couple of decades. Section one cases, conspiracies. DOJ has an active criminal cartel enforcement program. That was the subject just recently of AAG Kanter’s speech at the International Competition Network Annual Meeting in Germany. There’s a lot of cross border coordination on cartel enforcement and leniency programs, but that’s very low hanging fruit. Smoking gun conspiracies to fix prices and allocate markets, that does not pose enormous evidentiary types of burdens on plaintiffs. Merger control, section seven has been, as I have explained, pretty weak.

We’ve now seen more section two cases filed, public cases. The state’s case against Facebook. We have federal cases against Google and Facebook. DC filed a case against Amazon. I think that was just recently dismissed. So we are seeing more section two cases. Section two law is very troubled. The standards for showing monopolization are extremely difficult. Extremely difficult. The hurdles are incredibly high, and that is a theme that permeates all of antitrust. How the standards for plaintiffs, whether it be the government or private plaintiffs to show violation are rising, rising, rising. We see this even in section one cases, private cases. We follow the decisions and the court decisions very carefully and courts are absolutely pushing up the standards for showing collusion in private cases. That is supposed to be one of the easiest areas of antitrust law to bring cases in. So that’s not a good development, either. The section two cases that we’re seeing, especially the big tech cases, those are going to take a long time to work their way through the courts.

So that raises a question about whether antitrust, especially in digital tech, certainly an important tool, but it could be bootstrapped by other tools like sector regulators of regulatory regime, to look at discrimination problems on the platforms. And so it puts us in a mode where, “Yep, we’re getting more section two cases. The standards are still very high. We have promises of stronger merger enforcement from the Biden enforcers. We have rising standards for showing collusion in private section one cases”. None of these are very good developments, or at least we don’t have enough data points yet to really indicate if progress is being made.

Taline Sahakian:

So in terms of promises of, or more enforcement, we have seen an uptick in filing of merger challenges. There was the book publishers, there was another merger in the sugar industry, another… So do you see any light at the end of the tunnel in terms of section seven enforcement, or do you think those cases are going to face some difficulties in court?

Diana Moss:

So the question of whether we’re going to see more section seven enforcement in terms of movement by public enforcers to seek a preliminary injunction is really a function of a lot of variables. I call it a multi-variate optimization problem. The government has to really think carefully about this, and I’m sure Lena Khan and Jonathan Kanter are thinking carefully. So the government’s calculus when it comes to challenging allegedly illegal deals is a function of the cost of litigation, litigation risk. The government doesn’t like to lose in Federal Court. And that has been a longstanding concern and problem for the FTC and the DOJ. It’s also a function of bringing states onto federal complaints in merger cases. If DOJ challenges the spirit frontier merger, it’ll be very interesting to see which states sign onto that complaint. It is a function of other cases that the government could be potentially moving to block and the likely success rate versus other cases that might have a lower success rate.

But the bottom line is it takes time and money to litigate. And unless the budgets of the agencies are increased significantly, and I think there have been some, there’s obviously been requests for higher budget, it’s going to take a lot of money to litigate these cases. And so we’ll see. We’ll see what happens, but I think it all boils down fundamentally to a willingness for the current Biden enforcers to assume more risk tolerance to litigate cases. That means losing cases in Federal Court. Under the Obama administration for example, I think DOJ won most of its cases it went to court to litigate and that’s good. That’s good strong enforcement. We saw the Obama, the OJ block, Anthem, Cigna. They forced the abandonment of Baker Hughes, Halliburton. FTC for Cisco US foods to be abandoned. There of course, they litigated the fixing court. But I think the real measure, this sounds weird, but one of the real measures of a change in enforcement policy is bringing more cases, but also losing more cases in Federal Court.

I mean, you guys are the expert litigators on the private side. So you know this calculus very well from your side of the equation. My only concern is time is running out. It’s now May of 2022, the Biden enforcers were not installed for quite some time after the Biden administration came in. Who knows what’s going to happen at the midterms with Congress. Who knows what’s going to happen in the 2024 election. But time is running out. Cases take time to litigate and to work their way through the courts. So it really is, time is of the essence in terms of shaping the Biden administration’s enforcement program.

Jeff Shinder:

So let me follow up on that, Diana. You seem, and if I’ve characterized this inaccurately, I know you well, you’ll correct me. So feel free. You seem skeptical perhaps, that public enforcement is going to change things. Maybe skeptical, but hopeful would be a better way to put it. And if that’s accurate, then what is the most likely ways we will see fundamental change to the antitrust landscape that can improve, that can de-consentrate if concentration is the root problem, introduce more competition, more choices for consumers?

Diana Moss:

I think the characterization is right, Jeff. We are very hopeful. As competition advocates, we are very hopeful that the Biden enforcers take a more aggressive approach and it looks like they are absolutely. There’s been a lot of signaling out on merger control. There is the request for information out on the merger guidelines, revising the merger guidelines. That comment date has passed, long past, and they are now going to be processing thousands of comments from individuals, but also advocacy organizations like AAI. Those horizontal merger guidelines are badly in need of some updating and clarification. And we’ll see what comes out of that process. We badly need vertical merger guidelines that are geared towards acknowledging and preventing harmful vertical mergers. So agency guidance is an important part of the whole package. What the agencies do on the litigation front is an important part of the package.

And so we’re very hopeful and very supportive of the agencies. We have a really long history of working with the agencies and the states and private enforcers in a very collaborative supportive way. But I don’t think antitrust is the be all and the end all. It plays a really important role, but the competition problem is significant enough, for all the reasons we’ve discussed that from a policy standpoint, and I’m talking about lawmakers, policy makers, enforcers are going to have to start thinking about the toolkit approach, which is what set of tools are best combined and deployed and harnessed to really get some results in terms of improving the competition problem. And we just haven’t seen that approach in the United States. So I’m talking about strengthening antitrust enforcement through comprehensive reforms. I’m talking about, thinking about sector regulation for digital technology. Not talking public utility regulation, we’re talking access regulation to prevent dominant platforms from exercising market power.

We’re talking about the need for a privacy law in the United States that’s much more coherent than what we have right now. We’re talking about intellectual property reforms. The fact that patent holders can go out after their patent expires and tweak their original patent and get another 20 year patent, that’s wrong. And we’ve seen that in agricultural biotechnology, for example, on transgenic seeds. And so all of these different tools are really important and they all have a bearing on promoting competition pro competitive outcomes. We need labor law in that mix as well, but that’s not an approach that’s been taken in the US. And unfortunately, and this is where sort of some Neo-Brandeisian advocacy comes in. Antitrust is being loaded up with lots of expectations to perform in ways that the laws were not designed to perform in. And one very real concern is that if you load up the laws to achieve outcomes for which they were not originally intended, unless you rewrite them completely and have a massive overhaul of the antitrust legal framework in the United States, that could actually create some significant damage.

Remember all this has to go through the courts. So antitrust ends up in the courts in terms of creating the case law and the precedents and the courts already struggle with antitrust. They struggle with burdens of proof, burden shifting, evidence. They struggle with all of this. So there is a risk that a poorly framed antitrust reform approach will actually create more chaos in the courts than we already have. And so a way to temper that, I think, there is two ways. One is we encourage reform proposals that are truly comprehensive to strengthen, clarify, modernize the antitrust laws. And second, legislators and policy makers really think about deploying these other tools that are available. And we have good examples of that. Digital tech is one sector where that combo toolkit approach would work really well. Agriculture is another sector, USDA has a tremendous amount of authority under the Packers and Stockyards act to prevent things like discrimination and vertical foreclosure of smaller producers like ranchers, for example.

Taline Sahakian:

So there are a lot of bills that are pending in Congress, and there are also some state laws, including in New York, which would significantly overhaul antitrust laws in New York State. Are there any of these that you think are more likely to pass or that we should be watching more closely?

Diana Moss:

Yeah, I’m always reluctant to speculate on the probability of bills passing or not passing, but I do think it’s helpful to put this conversation in the context of the importance of comprehensive coherent antitrust reform at the state and the federal levels. And by comprehensive reform, I’m talking about things like burden shifting. Shifting burden onto defendants to show that for example, in highly concentrated mergers, that there are pro-competitive justifications for that, that would outweigh or counter reveal competitive concerns. Too much burden is on plaintiffs to prove something that hasn’t even happened yet. And mergers haven’t happened yet, but plaintiffs are routinely burdened in federal cases with essentially proving that a merger will be harmful. I’m talking about increasing the number of presumptions about illegal mergers. So we have a horizontal structural presumption. We also need a vertical presumption in vertical mergers. We also need a presumption involving the acquisition of nascent competitors.

Think about all the sectors where firms are getting larger and larger by acquiring their way to largeness. We see this in digital tech. That is the business model. It is growth through acquisition. A lot of those smaller companies that are being acquired, don’t even fall within the HSR reporting thresholds. So it’s all flying under the radar screen and it’s this pretty unrestrained acquisition cycle that we see the digital platforms going through. And the record of merger enforcement and digital tech is dismal. One deal has been challenged out of hundreds of reportable deals, and that was Google ITA in the late two thousands. Okay. So we need burden shifting. We need stronger structural presumptions. We need a private enforcement to be protected, strongly protected, and the ability of private plaintiffs to bring cases and to litigate those cases. The cost of litigation, as you know, are skyrocketing. Standards are increasing.

It is difficult to bring and litigate antitrust consumer class action cases. And by the way, most private cases are section one cases, as you well know. I think almost 90% of private antitrust cases are section one cases, price fixing conspiracies, market allocations. A very small percentage are section two cases. So there’s a lot of things that comprehensive reform could look like. And again, I’ll sight to Senator Klobuchar’s CALERA bills. We have some real concerns about reform proposals, as I said earlier, that simply target one sector and target just a few players in that sector using. For example, in the Senate Bill 2992, the Online Innovation Act basically determines whether a company will be subject to the law based on their market capitalization. How many users? Yeah. And I could list dozens of companies who don’t have market caps of $500 billion, but they do have market caps of $300 billion or $350 billion, who are growing rapidly through acquisition, who would not fall within the net that is cast by that law.

So I think we have to ask ourselves from a policy perspective, do we want comprehensive reform that will strengthen, modernize across the board and across all areas of the antitrust laws? Or do we just want to target specific sectors and players in those sectors? And if we’re going to go that second route, then how about having bills? I mean, this could go on at infinitum. We could have bills that target the largest beef packers. For example, we could have bills that target the two largest pharmacy benefit managers. So that list could go on and on and on, versus reforms that generally clarify and strengthen and modernize the laws.

Jeff Shinder:

Diana, we could go on and on and on, but we cannot. We will have you back though. There’s just too much to follow up on, but I want to close with actually two questions. The first is, you said something to the effect of, “We need to protect private enforcement and being a private enforcer. And we take pride in our private enforcement track record here at Constantine Canada”. I’m curious to know exactly what you mean by protecting private enforcement. So I just want to start there. And then the second question which we will close with is you’ve articulated a dizzying, and I say that in a complimentary way, array of comprehensive options to modernize, reform, improve the antitrust landscape. If you had to pick one, if Diana Moss were in charge, and you had one thing you could do to improve the competitive landscape in the United States amongst the array of options you’ve articulated, which one would it be? So let’s start with private enforcement and I’m dying to know how you would protect our ability to continue doing what we do.

Diana Moss:

Well, you guys are the experts. So I am just here to lend a perspective from the advocacy world. Every six months, AAI and I would really commend this report. We produce what’s called a class action update where we unpack developments in major antitrust consumer class actions. And we identify the issues and trends in the issues that we see over time. For example, class certification issues, standards for showing collusion, which I alluded to earlier, class action waivers, as you know, are a big issue. I mean, the list goes on and on. And the concern over the long term is that these restrictions and constraints on private enforcement are going to reduce the effectiveness of private enforcement as a major, the major vehicle for getting restitution for victims of antitrust violations. As you know, the feds, they can get dis discouragement, they can take penalties, they have a number of remedies at their disposal, but trouble damages is where the real pain is felt in private cases.

And so that mechanism, that mechanism of private enforcement is vitally important to deterrents of future anti-competitive conduct. And so that’s why AAI has for almost 25 years now been a huge supporter of private enforcement. We would also like to see, and we follow this very closely, follow on cases, reverse follow on cases related to public and private enforcement that complementary we think is very important to monitor and to foster. I would also say to anybody out there who’s listening that declining competition, rising concentration is really opening up some important potential avenues for private enforcers. So again, most private antitrust cases involve section one offenses. I would expect and would really encourage people to think about bringing more section two cases. But I would also note that after one big success, in the Dorskins case that private enforcers think hard about consummated section seven challenges.

Again, we have highly concentrated markets. We have tight oligopolies, we’ll just call them domestic cartels, operating in some of those markets and dominant firms that have been created. Say, take Live Nation Ticketmaster. It was a really good example of a merger that reinforced a monopoly in the ticketing market. So I would really encourage folks in the private enforcement community to think about consummated section seven challenges. So we monitor all of this very carefully and we have very strong advocacy on the importance of private enforcement and certainly commend all the work that you and others are doing in this area. It all boils down to providing restitution to victims of pretty significant antitrust violations and promoting the welfare of consumers and of workers and small businesses.

Jeff Shinder:

I can’t let you get off the hook. I asked the second question. One thing, what is the one thing that you would do if you could, amongst everything you’ve talked about today or anything else?

Diana Moss:

Right. That’s a very tough question. I thought I was going to get off the hook on that one. I think if you’re talking about policy changes that would really have out sized impact in terms of competition outcomes… Well, there’s a couple things. You said one thing, but I’m going to say two things, and I know this sounds very wonky and esoteric, but it’s enormous. One is the burden shift. This gets back to the out sized burden that is placed on government plaintiffs, especially in merger cases to essentially prove harm from an anti-competitive merger. And again, merger activity drives concentration. And that’s where we get to the section two cases and the section one cases, because of highly concentrated markets that have become that way largely through M&A. So shifting the burden, I think is really critical. I think if there was a legislative burden shift, putting more burden on the defendants to show that their mergers are not harmful, we would actually see the government prevail in more merger cases.

And there’s a really interesting reason for that and it is this. Most claims of efficiencies in merger cases, whether they’re cost savings or whether they’re more dynamic, consumer benefits and longer term types of benefits that are claimed to come out of mergers, most of that doesn’t see the light of day until the government goes to court because once the government has filed a complaint and they’ve born their burden of showing anti-com effects, then the burden switches to the defendant to roll out these efficiencies claims. And a lot of times defendants prevail in cases on efficiencies claims. A good example is AT&T Time Warner. The judge was very good about putting everything in the footnotes, but it’s pretty clear reading that opinion that the defendants prevailed on an efficiencies claim, and that has happened many, many times in litigated cases. And that threshold is too low for the defendants.

So if the burden shift is made more clear and stronger, and there’s a higher hurdle to get over, I think we would start seeing some really important success on the merger front. And then I think the second wish that I would have is to get more codified presumptions in merger cases. And that’s more than just a horizontal structural presumption. That’s as I said earlier, the vertical presumptions and also the acquisitions of nascent competitors. And I’ll just finish with one last comment and AAI’s comments on the merger guidelines, RFI. We talked a lot about evidence and the importance of evidence, and that is going to be a really important area to watch when revised guidelines come out. The whole business of evidence, it can be very confusing and can be very muddled. There’s direct evidence. There’s indirect evidence. There’s there’s circumstantial evidence.

There’s all sorts of evidence. And AAI is really making the case for developing a more clear, workable lexicon of what kinds of evidence are considered in these cases. But even more important, we believe very strongly that public enforcers need to consider the record of past antitrust violations when it comes especially to merger control. And that includes remedies. So for example, divesting assets to a known cartelist should not be good policy for the DOJ and the FTC. Looking at the record of past antitrust violations, especially criminal violations for example, in a merger proceeding should be important information for public enforcers to consider. So you asked me for one and I gave you three.

Jeff Shinder:

Well, that was fabulous, Diana. Thank you very much for a fascinating conversation. We had a lot to follow up on. So we’d love to have you back. Before we can conclude today, you have your own podcast over at the AAI, and I’m happy to have our listeners go discover it. There’s no better place for antitrust thought leadership than the AAI, which should have been dramatically demonstrated to everyone in the last hour. So if you want to put in a plug, please do so before we can conclude and tell people where to find it.

Diana Moss:

Absolutely. AAI’s podcast, which right now is top ranked in competition podcast out of, I think about 10 or 12. And I’m sure your podcast is on there as well, Antitrust Matters. We have been around with our podcast for about two years now and we cover everything. I just did a recording with the Texas Corn Growers Association and somebody from Texas A&M on rising fertilizer prices. There is a fertilizer cartel, and that directly affects prices of corn and raises other competitive issues. We’ve done podcasts on beef. We’ve done podcasts on litigation funding. I have interviewed Senator Klobuchar and Bill Behr on these podcasts. There’s really something for everyone on there. And I’m just thrilled that you guys are doing this because I think it adds an important voice and very important perspective and expertise to this big conversation we’re having in the United States about the importance of competition in the antitrust laws. So the more the merrier.

Taline Sahakian:

Thank you.

Jeff Shinder:

Touche. Thank you very much. And we’ll talk to you soon. Thanks Diana.

Diana Moss:

Thank you both. It’s been a pleasure.

Jeff Shinder:

That’s all for our show today. If you like the podcast, make sure to subscribe to Antitrust Matters and leave us comments on how we were doing or on the topics you would like us to cover going forward. You can also follow us on Twitter, or follow the Constantine Cannon antitrust team on LinkedIn. Until next time, be well, and remember antitrust matters.

Read Antitrust Matters Episode 7: Discussion with the AAI’s Diana Moss at constantinecannon.com