Transcripts For CSPAN2 Hudson Institute Discussion On U.S. A

[inaudible conversations] good afternoon. My name is harold furchtgottroth, senior fellow at the Hudson Institute and i will be your host today. Thank you so much for joining us. We are very pleased and honored to have witnessed the honorable makan delrahim, the assistant attorney general at the u. S. Department of justice. He needs to introduction, and he has been working around issues related to antitrust for a great deal of time. He has a very distinguished resume which you can find at the department of justice website. Before we get started i have two requests. One is if you take your cell phone and put it on silent mode so that we dont have unnecessary interruptions of that sort. The second is for the q a session we will have cards that you can write questions, and those cards are going to be passed around and you can write your questions. They will be collected and i will sort through those. We particularly would like to welcome our cspan guests and or other guests that are watching through various video links as well as our online guests who are watching at the hudson website. For our online and for our video guess, you, too, can submit questions, submitted to hashtag hudson events and those questions would be collected. Assistant attorney general delrahim youve had noted by lots of innovations, lots of ways of looking and thinking outside the box. One has to do with the review of Consent Decrees that event in place long before the people who signed the Consent Decrees have fortune passed away. Decades for some of these Consent Decrees that have been reopened or reviewed and youve taken the step of reviewing some of these. Can you tell us, last summer the paramount Consent Decree was being reviewed. Can you tell us about where you are in reviewing some of these aging Consent Decrees . Sure. First, let me thank you for inviting me to be here. Its always an honor to be with you and to discuss the most important issues that we deal with in the antitrust division. The Consent Decrees, its an interesting one because its an area where most people were not even aware that we had close to 1300 Consent Decrees. These are basically settlements and judicial orders that are between the Justice Department and passive defendants with whom weve had an enforcement action past we began systematically reviewing all of them. Some of these involve piano rolls and a cartel and horseshoes, and some of them go to things that are as relevant as todays theatrical Movie Distribution or Performance Rights for music. We began looking at them in a transparent way, asked for public, take a look to see if theyre still relevant and the ones that were not, we wanted, we would go to the courts and file for their termination or modification as needed. We, i think i want to say close to 70 of the Consent Decrees have been reviewed and filed with courts and pending in some process. Paramount is one of the ones that is gotten some attention. I dont recall exactly how many Public Comments we got, we put those up. We got a lot of comments from folks, and whats interesting about those decrees as some of you may know is that they have been around since 194849. So a little over 70 years. They have regulated in the fact the way movies are distributed in in a theatrical distribution of the exhibitor system. Initially the antitrust action was against a a number of studs who had conspired amongst each other and also on the theatrical business and he wanted to control that system. The settlement basically forced them to sell and not reacquire the theaters, if you were a studio, but it had a number of other conditions. For example, every movie had to be negotiated theater by peter basis. Theres been a lot of changes in the marketplace. Movie theaters, theres been circuits that have grown since then and doesnt make sense for you to do that. Theres been bans en bloc booking, circuit dealing and block booking is can you have one movie and say that if youre going to take star wars you must also take hurt locker or Something Like that. And bans on recent price magnets. A number of the bands have found to be not per se violation but also the markets have changed so we begin looking at that peer we reached a determination maybe two or three weeks ago we filed with the Southern District of new york a motion to sunset those decrees other than a transition for two of the practices, block booking and circuit dealing. It was our determination that theres a lot of innovation that couldve been prevented by these rules and congress has not given us the authority, the Statutory Authority to be regulating these in perpetuity. So thats one of the reasons weve done that. We are waiting for the judge to take a look and see if they would, and we are excited about the overall project. Its really part of the deregulatory mission where antitrust enforcement is actually standing in the way of competition and innovation that could be occurring. That is the process we are in. We have put for Public Comment that two music degrees, recent of eight and 50 comments. We are in the process of determining what to do there. Have been periodic reviews of these in the past, or will it take another 70 years to have the review aging Consent Decrees . Whats interesting is that since 1979 all Consent Decrees have about a ten year time period, some are seven or five, but all of them expire. These that we are looking at are the ones that predated 1979 so hopefully as a matter of course we wont have any more pending for 70 years. If theres a real market failure that should be something for other policymakers to step in. Have been periodic reviews . On some of these that have been. Theres been couple of times over the years that there has been a review. I dont believe paramount in a public since has been but there was one that im told maybe about 11 years ago where the division took a look and wanted to take a similar action but decided not to. But it was not in the way what it was systematic to all Consent Decrees, and two, it wasnt one where we had the type of Public Commentary for that process. One of the reasons one might ask if these are defendants are long gone, dead, why waste the time to do it . Part of that is the industry looks at these Consent Decrees to provide guidance to businesses. So it is in effect regulating behavior, and if it doesnt make sense it should not continue on. Switching gears a bit. One of the innovations youve done last summer and aluminum review, you had some of issues resolved by arbitration rather than taking it to court. Can you tell us about the use of arbitration in virtue reviews something you think this might be something you can do in the future as a . So we are learning, this is the first time i believe in history that we have used arbitration process to resolve a merger action. It was a transaction involving a merger of aluminum come some Aluminum Manufacturing companies. We took a look and get an to ie where there was a distinct issue where largely a lot of mergers fall into is, can you determine what the market definition is . What is the Product Market . And you as a trained economist know exactly what im talking about, is that due to meet the economic standards for the separate and distinct antitrust market . This one, the question was what we were talking about was aluminum body sheets come whether steele was a closeup student or not. The merger would have, our concerns would have risen fo based on determination. We could have got to court, got a judge, litigated the matter for months, perhaps a year and and waited on the judge to determine, theres no timeclock for that, another six, seven months, eight months, nine months, perhaps a couple of years for this process. Instead of doing that we said okay, there could be a predetermined outcome, depending on which way this market is defined. I propose to the parties, with a agree to submit this to arbitration . Private sector arbitrate many issues. We could actually find an arbitrator to understand what an economics level. If they decide one way or the other, fine, we could live wih that. Two, we could put very certain time limits on the process. We could agree to the discovery process. We could decide amongst ourselves that this will take a two week trial before the arbitrator. We can use the aaa rules to identify an arbitrator where we are both comfortable, or a panel of three, and theres a process where this is done every single day. As we were searching this we also identified a statute, lo and behold, called the administrative dispute resolution act of 1996, and attorney general reno and my predecessor bingaman had issued some rules and commentary about it even though it had never been used, so a protected the rights of the parties, for example, to get thirdparty discovery, which is really important to defend against it. And it preserved that. We filed the case and we are going to that now. We have learned as have the parties to this, a brandnew process, but i think what it will do is, if successful, again i think any couple of months once we have gone through it our staff and the parties will also learn, as was the arbitrator, about how good this be even more efficient or more direct, which aside could benefit from it . The idea is really just some certainty and get a fair look, rather than sometimes a generalist judge who has had two years of multibilliondollar transaction is dumped on them and they are expected to rule. This could provide that in some of the more technical areas. If youre in the business world, if youre in the private equity and looking at a transaction, a lot of times you want to know what are the risk factors, what other reagan toward risk . Can we get to this . A lot of time the merger break up these are determined by the assessment of the wrist. You can say we can do this, however, there is this issue we can either sell this plant or this asset, depending on what the market definition is, or whatever the potential issue could be. If they could be cabined to something that is manageable im hoping arbitration is the way we can save taxpayer money and get better results ultimately for the taxpayer. Antitrust law as an institution has grown. 60 years ago there were really just a handful of countries that it antitrust authorities and antitrust laws. Today, over 100 countries as well as just about every state in the United States have antitrust laws and enforcement. An increasing challenge is two challenges, one is harmonization across countries with the antitrust laws and enforcement, and the other is shelley say the propensity of some of countries to use antitrust law as part of industrial policy. How do you think about this . I have joked in the past that at the trust has been our most successful export out of the United States. We have now 140 agencies give or take that enforce antitrust laws. Overall i think its a positive outcome in the sense if you have more free markets, more Economic Freedom out there, whether fre from Government Intervention or from monopolists and anticompetitive conduct by private sector, its a good thing for consumers or its a great thing for investment. Its a great thing innovation. It does present a challenge for making sure that you have consistent application and common understanding. We dont have a chapter to the wto dealing with antitrust. We have common understanding over various terrorist in standards and intellectual property now, but we do not have a common understanding of what and how to analyze and antitrust. One of the greatest things weve had is this dialogue to the International Competition network, where we engage with our partners, with our colleagues. I was just in paris the week before last, spent a week, and we have many discussions, but that does not prevent a party from, whether its a merger enforcement or conduct, to apply the antitrust laws in a way that we dont recognize, and we reckon is perhaps in the 50s and 60s and economics taught us those were harm to consumers. A challenge that we face every single day but i think the whole International Community is committed to an approach to antitrust laws that has focus on competition. Weve had some recent challenges. I think the leaders in france and germany have both called for an application of antitrust law, it is not the antitrust, but the political leaders, to apply them in a in a way that their national champions. And anticompetitive merger of the way should be approved if it creates a french or german or european champion. I wholeheartedly reject it. Thats a bad idea. The austin seems merger was one without was potential address and the commissioner from the European Commission actually withstood those calls. And block that transaction in a similar way we had raise concerns. I commend that approach. It doesnt mean there isnt a concern that there could be 50 wax at a pinata for for a mergr were folks are trying to take an take the vestiges from country. To try to address procedural aspects of this, we announced an approach to try to see if we could at least get a multilateral agreement on the most basic fundamental principles of due process. These are the rights to counsel, transparency, topics of interest, and the broader review. So even if we dont have agreements on the substantive standards, the process, national treatment, mostfavorednation treatment, so you cant treat a Foreign Company any worse than you would your own subject. I was pleased after a lot of work, a lot of giveandtake that occurred, we entered into that agreement in carla hayden inmate early this year and i think last week must have told me with 72 countries all apply for those principles which allow for consultation. Alisa the First Step Towards the commitment of the multilateral front cartagena. Its called the icm but you dont need to be an icy International Competition Network Member country to join this commitment. Its called the cap, Competition Agency procedures agreement. So we are in the process of implement in those in reviewing there is countries. I think that is probably one of the most Significant Developments in the International Community since the creation of the icn. Just on a daytoday practice today, do you find a lot of coordination with other countries on mergers that go across National Boundaries . Every single day. We have our case teams with their counterparts. They are coordinating any transactions that crosses borders or has effects in various different countries. We are seeing that. We also engage at the leadership level with our counterparts. We have in february the icn has different working groups. So a Merger Working Group that is having its annual meeting in australia the actual meeting of the icn for the First Time Ever will be held in the United States in los angeles in may of this year, the second week in may. So all the agencies are going to be coming here and we are currently focusing on a number of things including digital competition. That will be on the campus of ucla. Theres a lot of discussion going on every single day, as most technical assistance. We send our economists as well as case handlers and prosecutors abroad on the cartel front, on mergers, on the new platform, how do we look at it, and we hope that through this communication we have greater and greater convergence on standards. You are making some political leaders and you wanting to inject theres been a lot of talk in america the past two or three years about what is now popularly called hipster antitrust. What if you could give us some thoughts about hipster antitrust . Well, a hipster antitrust of folks for folks who have not have heard it referred to twisting the antitrust laws away from the common understanding of Industrial Organization economics, and it is a way to begin looking at other societal goals outside of competition. And competition, for example, she should we take a look at sustainability as part of competition . Question we look at labor as part of Competition Analysis . A way to address or at shortcomings of other policy goals. And that is, at one level it might be a misconception that the general antitrust, and it only deals with price just just not true. Over and over the courts have said the general antitrust laws as applied, polite and that only price but quantity, quality, innovation. And so those are all factors that we need to be discussing more. So does the transaction flow with the quality of the product and, therefore, address the antitrust laws . Theres also been calls about having an absolute moratorium in certain sectors, or completely shifting the Legal Standard that we have become a millionaire with in a merger review, which is a substantial lesson, what does it mean, which education i can just a Public Interest, is his merger in the Public Interest and now you are getting into a potentially vague standard if we [inaudible] you might recall all the agency has at least had some case law that cabins it into a way that is at least it would be dangerous because we wont have predictability of the law which is really what we need to do. So i think the current laws are fl