Maintain a competitive market. The Hudson Institute hosts the hourlong conversation from earlier this week. Good afternoon. My name is harold furchtgottroth. Im a fellow here at the Hudson Institute. Ill be your host for today. Thank you so much for joining us. We are very pleased and honored to have with us the honorable makan delrahim, assistant attorney general at the u. S. Department of justice. He needs no introduction. And he has been working in and 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 justices website. Before we get started, i have two requests. One is if you could take your cell phone and put it on silent mode so that we dont have unnecessary interpretations 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. You can write your questions. Theyll be collected. And ill sort through those. We particularly would like to welcome our cspan guests and our 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 guests, you too can submit questions, submit them to hudson hudsonevents, and those questions will be collected. Assistant attorney general delrahim, youve had an extinguished tenure at the Justice Department that i think has been noted by lots of innovations, lots of ways of looking and thinking outside of the box. One has to do with the review of Consent Decrees that have been in place since long before the people who signed the Consent Decrees have, unfortunately, passed away. Decades for some of these Consent Decrees, that havent 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. Well, first, let me thank you for inviting me to be here. Its always an honor to be with you and to discuss some of 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 1,300 Consent Decrees. These are basically settlements and judicial orders that are between the Justice Department and past defendants with whom weve had an enforcement action. And we began systematically reviewing all of them. You know, some of these involved piano roles and a cartel in horseshoes and some go to as relevant as todays theatrical move have you distribution or Performance Rights for music. So we began looking at them in a transparent way, asked for Public Comment. Take a look to see, are they still relevant . And the ones that were not, we wanted to we would go to the courts and file for their termination or modification as needed. So, we i think i want to say close to 70 have been reviewed, filed in courts and are in some process. And i think over half have already been terminated by various courts. Paramount is one of the ones that has gotten some attention i dont recall exactly how many Public Comments we got but we put those up. We got a lot of comments. And whats interesting about those decrees, as some of you may know, is that they i think they have been around since 1948, 49, if im not mistaken. A little over 70 years. And they have regulated, in effect, the way movies are distributed in the theatrical distribution. Initially, though, the antitrust action was against a number of studios who had conspired amongst each other and they also owned a theatrical business and they wanted to control that system. The settlement basically forced them to sell and not reacquire the theaters, if youre a studio, but it had a number of other conditions. For example, every movie had to be negotiated theater by theater basis. There have been changes. There have been circuits that have grown since then and does it make sense to do that. There are been bans on block booking. Block booking, can you have one movie and say if youre going to take star wars, you must also take hurt locker or Something Like that. And bans on resale price maintenance. A number of the bans the courts over the 70 years have found not to be, per se, violations, but also the markets have changed so we began looking at that. We reached a determination maybe two, three weeks ago. We filed with the Southern District of new york a motion to sunset those decrees other than a transition period for two of the practices, block booking and circuit dealing. And it was our determination that there was a lot of innovation that could have been prevented by these rules. And congress has not, you know, given us the authority, the Statutory Authority to be regulating these in perpetuity. Thats one of the reasons we have done that. Were waiting for the judge to take a look and see if they would. And were 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. So that is that is the process were in. We have put for Public Comment the two music apps. Were in the process of determining what to do there. There have been periodic reviews of these in the past or will it take another 70 years to have the antitrust Division Review those . Since 1979 all Consent Decrees have about a tenyear time period or shorter. Some are seven or five. But all of them expire. These that were looking at are the ones that predated 1979. 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 policy makers to step in. Have there been periodic reviews . On some of them. At ask at bmi there has been a review. I dont believe paramount in a public sense 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. So but it was not in a way that it was systematic through all Consent Decrees and, two, it wasnt one where we had the type of Public Commentary for that process. So, there hasnt been. People might ask, if these defendants are long gone and dead, why wait to do it . Part of that is the industry looks at these Consent Decrees to guide businesses. It is, in effect, regulating behavior. If it doesnt make sense, it should not continue on. Switching gears a bit, one of the innovations youve done is last year in an aluminum review, you had some of the issues resolved by arbitration rather than taking it to court. Can you tell us about the use of arbitration and merger reviews and whether you think this is something you might be able to do in the future as well . So, we are learning, this is the first time, i believe, in history that we have used the arbitration process to resolve a merger action. It was a transaction involving a merger aluminum Aluminum Manufacturing companies. We took a look and we got to an issue where there was a distinct issue where largely a lot of mergers fall into it is, you know, 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. Do they meet the standards for a separate and distinct antitrust market . In this one, the question was, you know, what we were talking about is aluminum body sheets whether steel was a close substitute or not. And the merger would have you know, our concerns would have risen and fallen based on that determination. So, we could have gone to court, got a judge, you know, litigated a matter for months, perhaps a year, and waited on the judge to determine theres no time clock for that. Another six, seven months, eight months, nine months, perhaps a year for this process. Instead of doing that, we said, okay, there could be a predetermined outcome depending on which way this market is defined. And i proposed to the parties, would they agree to submit this to arbitration . You know, the private sector arbitrates many issues. We could actually find an arbitrator who understands law and economics well. If they decide one way or the other, fine, we could live with 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 twoweek trial before the arbitrator. We can use the aaa rules to identify an arbitrator where were both comfortable or a panel of three or and theres a process where this is done every single day. And as we were searching this we also identified a statute, lo and behold, called the Administration Resolution act of 1996 and attorney general reno, my predecessor had issued some rules and commentary about it, even though it had never been used, so it protected the rights of the parties, for example, to get thirdparty discovery, which is really important to defend against it and it reserved that. We filed the case and were going through that now. We have learned, as have the parties through this since it was a brandnew process, but i think what it will do is if successful, and again i think, you know, in a couple of months, once weve gone through it, our staff and the parties will also learn, as well as the arbitrator about how could this be even more efficient or more direct, which side could benefit from it. The idea is really to have some certainty and get a fair look rather than sometime, you know, a generalist judge two years of multibillion dollar transaction is dumped on them and theyre expected to rule. This could provide that in some of the more texas technical are. If youre in the business world, the private equity business, youre looking at a transaction, a lot of times you want to know, what are the risk factors . What are the regulatory risks . Can we get through this . Sometimes the breakup fees are determined by the assessment risk. You say, we can do this, however, there is this issue. We could either sell this plant or this asset depending on what the market definition is or whatever the potential issue could be. If it could be capped to something manageable, im hoping arbitration is a way we can save taxpayer money and get better results ultimately for the taxpayer. Antitrust laws in institution has grown. 60 years ago there were really just a handful of countries that had antitrust authorities and antitrust laws. Today over so 0 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, sal hall we say, the propensity of some countries to use antitrust laws as a part of industrial policy. How do you think about this. So, you know, i have joked in some in the past that antitrust has been our most successful export out of the United States. We have now 140 agencies, give or take, that enforce the antitrust laws. Overall, i think thats a positive outcome in the sense that if you have more free markets, more economic freedom, whether from government interventions or monopolyists, its a good thing. For consumers, its a great thing for innovation. However, it does present a challenge for making sure that you have consistent application and a common understanding. We dont have a chapter to the wto dealing with antitrust. We have some common understandings over, you know, various tariffs and standards and intellectual property, but we do not have a common understanding of what and how to analyze an antitrust. One of the greatest things weve this is this dialogue through the International Competition network, icn or eced where we engang with our partners or colleagues. I was in paris and spent a week and we have many discussions, but that does not prevent, you know, a party from whether its a merger conduct to apply the antitrust laws in a way that we dont recognize it or we recognize perhaps in the 50s and 60s and economics taught us, those were actually harm consumers. Its a challenge we face every single day but i think the whole International Community is is committed to an approach to antitrust law that has actually focused on competition. Weve had some recent challenges. I think the leaders in france and germany have both called for an application of antitrust w law test test. And the commissioner from the European Commission withstood the calls. And, and blocked that transaction in a similar way that we had raised concerns, and i commend that approach, but that doesnt mean that there is not a concern that, you know, there could be 50 whacks of the pinata at the merger that folks are trying to take and extract the vest churvestitures, and on that we tried to do from the procedural act is to get a multilateral agreement on the basic fundamentals of the due process, and these are the rights to counsel and transparency, and conflict of interest, and in the broader review, and so even if we dont have agreements on the substantive standards, the process that we afford parties national treatment, and most favored nations treatment, and so you cannot treat a foreign company, and any worse than you would your own subject. And i was pleased that after a lot of work, and a lot of give and take that occurred, we terned into the agreement, and in carta of last year we have countries who have signed into the commitment on the Multi Lateral front, and it is called, and part of the icn, but you dont have to be an International CompetitionNetwork Member country to join this commitment. It is called the c. A. P. , the Competition Agency procedures agreement, and so we are in the process of reviewing those and reviewing various country, but it is probably one of the most Significant Developments on the International Community since the creation of the icn. On the daytoday practice, do you find a lot of coordination of other countries that go across the International Boundaries . Everyday. We have the case teams with the counterparts coordinating and the transactions that crosses borders or has effects on and various different countries, and so we are seeing that. We also engage at the leadership level with our counterparts. We have in february for example the icn has different working groups and Merger Working Group that is having the annual meeting in australia. And the actual meeting of the icn for the First Time Ever is going to be held in the United States and los angeles in may of this year, the second week in may, and all of the agencies will be coming here and we will focus on digital competition, and that is on the campus of ucla. So there is a lot of discussion going on everyday as well as Technical Assistance and we send the economist, and the case handlers and the prosecutors abroad on the cartel front and the mergers on the new platform of how do we look at it, and we hope that through this communication we have greater and greater convergence on the substandards, and you are mentioning the political leaders and you are wanting to inject standards that are not the consumer welfare standard. You have spent a lot of talk in america in the past two to three years about what is now popularly called hipster antitrust and see if you have any thoughts about the hipster antitrust, and the folks who have not heard of it refers to the 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, you know, for example should we look at sustainability as part of the Competition Analysis, and look at labor as part of the Competition Analysis and the way to address perhaps shortcomings of the other policy goals, and that is at one level, it might be a misconception that the general antitrust standards only deal with price effects which is just not true, and over and over, and the courts have said that the general antitrust laws as applied, apply to not only price but quantity, quality and innovation, and so, those are all factors that we need to be discussing more. So does the transaction low ter quality of the product, and therefore address the antitrust laws. And so there is also calls about, you know, having an absolute moratorium in the certain sectors or the completely shifting the Legal Standard that we have become familiar with in a merger review which is the substantial lesson of a competition, and some type of Public Interest desk, and what does it mean that you can imagine the Public Interest, and the merger of the Public Interest, and now you are getting into the potentially vague and constitutionally vague standard if we go there. And we have an agency that goes there. And although, the agency is going to have some case law that cabins it into a way that is cognizable. It would be dangerou