Transcript of Conference Call with John Newman on Antitrust, AI and Current FTC Cases

Mar 19, 2024

Transcript of Conference Call with John Newman on Antitrust, AI and Current FTC Cases

On March 12, The Capitol Forum’s Teddy Downey spoke with antitrust and competition law expert John Newman about the current antitrust landscape in the US, including developments around AI and cases at the FTC. The full transcript, which has been modified slightly for accuracy, can be found below.

TEDDY DOWNEY:  Good afternoon, and thanks to everyone for joining us on our Conference Call with John Newman today on Antitrust, AI. And we’ll talk about some of the cases currently that the FTC’s working on or has brought litigation on.

I’m Teddy Downey, Executive Editor here at The Capitol Forum. And John Newman is currently a Professor of Law at Miami University. He has served with both the FTC as Deputy Director of the Bureau of Competition. And prior to that, was at DOJ Antitrust Division as a Trial Attorney. And thank you so much for doing this, John. I’m super excited to have this conversation.

JOHN NEWMAN:  Yeah, absolutely, Teddy. Thanks for the invitation. Happy to be here.

TEDDY DOWNEY:  And really quick, before we get going, if you have a question, you can submit it in the control panel. It should be on the right side of your computer. Or you can shoot us an email at

John, you’ve been at DOJ. You were at FTC. Now that you’ve had a little bit of time away, I would love to get your perspective on just where we are in sort of the pendulum swinging, regarding sort of laissez faire antitrust enforcement to where we are now with the anti-monopoly movement and just get your overall take of the change that you’ve seen and sort of take stock of where we are right now.

JOHN NEWMAN:  A tall order. All right. Well, let me take a swing at it, Teddy. And, of course, feel free to jump in at any point with follow-ups or if you want to drill down on any of this. But I think at a high level, the way I think about where we are right now is, it’s still pretty early days, if this is a new movement and I think it is. It’s only a couple of years in. So, it’d be kind of like asking in 1982 where the Chicago School was at. It would be early days. And it’s early days now. But it would have also been enough time that you could have sort of stepped back and taken stock of some early successes, some early lessons learned.

So, it’s like early days, but I think it is an appropriate time now for us to kind of start asking these questions of how far we’ve come and where we’re at. And I think we’re in a place where we’ve come far enough, and the conversation has changed enough, that we’re never going to go back. Things are never going to go back to the way they were when I got into this field, almost 15 years ago now. The conversation is different. The Overton window is bigger. And I think once that’s been expanded, once the terms of the discussion have changed, you just can’t go back, I don’t think.

So, I think that’s an early win. There are new voices in the field. We’ve seen interest from students that’s just off the charts, just unprecedented levels of interest from students. Hey, my family back home in rural Iowa, when I go back home to visit, they want to talk about this stuff in a way that it just wasn’t on the radar ten years ago, even five years ago, in the same way that it is now.

That’s a little bit intangible. So let me see if I can pick out a few more concrete data points. I think things like the DOJ’s book publisher merger case, that successful trial. Huge, right? First time, in over a century, agencies have ever challenged a merger based on labor type concerns. Now, that was a little bit of an unusual market. It’s not a sort of familiar labor market. It’s not hourly wage type workers. But still planting the flag that antitrust really is about more than just static, narrowly defined consumer welfare.

And then you look at FTC’s Kroger/Albertson’s case, obviously just dropped recently, builds on that, expands on that. It plows new ground. This is a workers’ worker market. So, I think that’s huge. You look at also things like the FTC’s actions against noncompete agreements, distributed cases and their non-compete rulemaking. Huge, right? Those are huge wins. We don’t know how that rulemaking is ultimately going to turn out. But even the fact that they’re trying to do it is enormous. That would be the first competition rulemaking in a long time. And again, labor focused, explicitly.

So those are some big wins. You know, there are a bunch of firsts that these agencies can already point to that haven’t grabbed as many headlines. You think of things like the first ever action under the Durbin Amendment provision that the FTC took against Mastercard. I teach antitrust. I didn’t even know the FTC had that authority. So, things like that, they’re really dusting off the entire statutory toolkit, trying to put everything back on the table. And I think that’s a direct reflection of a very real understanding that the harms from concentrated power are broader and more diverse, and harder to capture with a narrow lens than we thought ten, fifteen years ago.

And beyond that, I think it’s also a recognition that there is a lot of deep learning and a lot of democratically accumulated wisdom that went into those laws. Things like the Robinson Patman Act, I wouldn’t be surprised if we see an enforcement action soon on that front. Hey, that’s a democratically enacted law. Reflects a lot of deep learning, a lot of deep wisdom, that was kind of forgotten. So, they’ve done a lot. They’ve done a lot. I think there’s a long way to go, but a lot has happened already.

TEDDY DOWNEY:  I want to stay on the course for a second before we get into some of the specific stuff that you mentioned there. What is your take on how the courts are sort of coming along with the this movement? I mean, there have definitely been some ups and downs for the Kanter/Khan litigation. But from my perspective, I’m actually surprised sometimes at how often these new tools are being kind of, oh, yeah. That is a valid tool. Even as they lose. I think Meta is a good example of that. Or you mentioned the book case. There are a lot of times when these new tools, IQVIA, the case law is being dusted off and the courts seem to be responding pretty well. I think sometimes we get really caught up in these merger cases that lose or win and less on some of these. I want to get your take on that because I know you’ve talked a little bit about that and I’m curious to get your thoughts.

JOHN NEWMAN:  Yeah. You know, it’s a rich question, and we could attack it from a bunch of different ways. One way to think about it—and this is maybe a little bit of a hot take. I feel like I’ve got to come up with at least one hot take. It’s a little bit surprising how little, how rarely, these agencies have been losing. I mean, if you thought about the mandate that they came in with, which is total, total change, reinvigoration, almost from the ground up, man, they really haven’t lost as many cases as you might have thought they would have by now.

The FTC has lost, by my count, two merger cases under this entire administration. Previous administrations, under Chair Simons, they lost two merger challenges in one year, in 2020 alone. So, if you want to start comparing loss records, I think the most surprising thing is, first off, as you kind of hinted, is courts have kind of been going along with the program. And I think that reflects, as you said, the idea that these agencies aren’t trying to march into court and say, “The law is wrong. Judge. Please change the law.” They’re marching into court and saying, “Hey, there’s law on the books.” It may be three, four, five decades old at some points. But that doesn’t mean it’s bad law. That was just an ideologically motivated choice by previous political administrations to stop enforcing those theories or that strand of case law.

So, I think, in terms of dusting off legal tools, it’s been a pretty much run the tables kind of victory. You look at the FTC. They’ve got the Brown Shoe vertical merger framework now with a stamp of approval on it in the 21st century. That’s in the Illumina decision. They’ve got two potential competition theories with judicial stamps of approval on them—that’s Meta‑Within—that hadn’t been stamped “these are valid” in four or five decades. These are significant wins because it takes a big playing card out of the defendant’s deck.

Meta tried to play this card in Meta‑Within. “You’re going after us on theories that are so old that they’ve become bad law. They’ve been overruled by the Supreme Court in decisions like Trinko.” That was just wrong. We said it at the time. The judge said, “Yeah, you’re right. That’s wrong. These are dusty doctrines, but they’re not dead.” So, you look at that. You look at the IQVIA win recently where the FTC dusted off the old share-based presumption. That’s good law, right? That’s Philadelphia National Bank. It’s never been overruled. Still good law.

So, I think that’s been a pretty significant win. I think the Penguin/Random House case is another good example where you’re not trying a new legal theory, but you’re trying a theory in a new market, at least in merger law. The court said, “Yeah, that’s fine. Antitrust is flexible enough. It’s not limited to downstream consumers only.” So I think all of those are pretty significant. I’m trying to think if there’s anything else we might want to hit on this subject. That’s a pretty long string. That’s pretty good.

TEDDY DOWNEY:  Yeah, that’s a lot there. This is not a take. This is like a legit question. Which is should they be losing more mergers? Should they be losing more challenges? Like, should they be trying to actually go even bolder on like predatory pricing, like something where the law is like widely considered to be totally dead. Like, what’s the downside of bringing that predatory pricing case? Or are there other areas of antitrust law that are weak or dead‑ish? I know some people at the FTC are like, well, we’ll lose that case. That’s a loser case. But, from a strategic standpoint, there’s no downside, right? Like if the law is already dead, you might as well try to revive it. When it comes to those types of cases—predatory pricing comes to mind just because that comes up still a fair amount in our reporting. But I’m curious to get if there are other areas of the law that need to be dusted off or that are weak, where losing is not that big a deal if it happens? Or another way to think about it.

JOHN NEWMAN:  Yeah, I think it’s a good question. So, let me, if I could, answer it on two levels. So, the first one. First off, I totally agree with the premise of the question that making bad precedent alone shouldn’t be a single overriding factor that stops you from bringing a case. If the fear of possibly making bad precedent was enough to kill a case, there would be no more conduct cases ever brought out of either agency, right? You don’t have to look too far back, under Republican or previous Democratic administrations, to find conduct cases that made bad law and sometimes really bad law.

I worked on the Amex trial team back in 2014. We were delighted to win that case. I think it was a righteous case. I think it was a justified case. It’s the kind of case that probably wouldn’t have been brought under Republican administration. It was even a little envelope pushing for a Democratic administration at the time. But we all, on the trial team, thought it was a good, justified case. We made horrible precedent, right? We didn’t mean to. We made one of the worst antitrust cases of all time accidentally. You could blame Ohio if you want.

Look at a case like Qualcomm, right? FTC v Qualcomm, voted out under a Republican administration, ends up making some really nasty Ninth Circuit precedent. So, if you let that fear stop you, you’re just going to stop bringing cases altogether. I mean, I think it’s a factor to think about if you’re going to be a responsible enforcer. But I do think people overweight the fear of making bad precedent; any case can do that.

Axon, one of the worst, con[stitutional] law cases for the agency in recent memory. I mean, it’s sort of basically like a 2 to 1 horizontal merger. So, a slam dunk case, they probably thought. The facts were ridiculously strong. It’s a Republican administration, makes horrible precedent.

So, I totally agree. You can’t overstate the fear of making bad precedent. In a perfect world, I suspect these agencies would want to be a little more aggressive on this front. Trouble is that we aren’t in a perfect world, far from it. They’re dealing with two things that came into a lot of tension.

One, the mandate is not to stop bringing the—I’m going to use air quotes—boring 3 to 2 hospital mergers and instead shift your limited resources over to the new adventurous cases. The mandate is to keep doing it all and more. The FTC has a “boring hospital merger case” coming up next month. They haven’t stopped doing that. They can’t. And when that comes into tension with limited agency resources—and that was my reality for the two years I was at FTC every day, just thinking about like how are we going to do this with so few people, so little money? Then I do think you have to think a lot harder about is there enough of the law there to support a case, at least possibly? So, I think that’s the unfortunate reality we live in.

TEDDY DOWNEY:  Okay, great. And we’ve got a lot of audience questions here. So, I will get to my last question, which is, I know you’ve done some work on AI. You spent a lot of time doing tech while you were at the FTC. What is your view on what is the best approach to regulate or look into AI? And. in particular, I’m really interested in your thoughts on the scraping, the gathering, of the data side of it. There’s a lot of talk about generating images in Section 230 and something like that, but not as much on the copyright or how the scraping is done. And I’d love to get your take on AI generally and specifically on the sort of input side.

JOHN NEWMAN:  Yeah. Well, I mean, it’s obviously a really lively, still developing space. Maybe a couple thoughts, in no particular order. One is this could end up being an area where some of the early what I’ll call near misses from the agencies end up actually paving the way for action.

So, think about a case like Meta‑Within. One of the sleeper cases to come out of that case is the court’s analysis of dynamic markets and antitrust’s role that it should and does play in those markets. Although ultimately, the FTC didn’t win that case to try to block that deal, they got some really nice precedent on the book saying like, hey, even if the market is fast moving, you’ve got a lot of entry, you’ve got a lot of exit, you’ve got a lot of rapid churn, does not mean there’s no role for antitrust to play. That was pretty significant in another pretty lively, rapidly developing tech space.

So, you can see that kind of planting a flag for future enforcement action. What might that look like? I think of a couple of prongs just sitting here as an outsider, of course. And the EU’s made some noise about this as well. So has the U.K. Everybody is looking at this space.

One, the investment partnerships between big tech companies and some of the leading GenAI companies, they look an awful lot like kind of work arounds where you’re trying to do acquisitions without doing acquisitions. Probably due to a chilling effect that was caused by agencies actually being cops on the beat here. I think some of this stuff looks like something we haven’t seen since the bad old days of the conglomerates in the 60s. Stuff like reciprocal dealing where it’s like I’ll trade you this cloud compute which you need, in exchange for you giving me some kind of exclusive or quasi‑exclusive rights to your product. That kind of this for that. It’s like a double tie almost. I could see that potentially being grounds for enforcement.

You could also just think about this as a Section 7. These are acquisitions in all but name, I think, sometimes. The FTC’s obviously launched their 6(b) study to try to get a firmer grasp on those types of questions. That’ll be good to see though. They’ll probably publish something that we all can see.

But to your question then about scraping, we could see some enforcement on those deals. We could potentially see some hard looks being taken at the scraping itself. And I’ve written a little bit about this. To my mind, this looks like some of the old, like, “hot news” misappropriation that was going on around the turn of the last century, about 100 years ago. Companies were intercepting wire stories, basically slightly rewording them and then passing them off as their own. That at least rhymes with what companies like OpenAI are doing to my mind when they’re scraping up news stories and a bunch of other content. Sure, they’re changing it a bit, right? But sometimes not very much. But if you read the New York Times lawsuit, it’s like sometimes almost not at all.

And interestingly, what courts used to call that was unfair competition. You were usually speaking in state tort law terms instead of federal unfair methods of competition terms. But I think there’s some good precedent out there that could potentially support a federal unfair methods of competition action. And it would target the scraping itself, the misappropriation, rather than the outputs per se.

TEDDY DOWNEY:  Yeah, we actually sued someone over that hot news misappropriation. So, I would personally love to see that come back myself here to the extent that that ever happens to us. Full disclosure, full disclosure. So, we’ve got some questions from the audience here. One is really timely. I know you worked on the Amazon case. So, I’m not sure how much you can talk about that. But there have been some stories about Amazon actually raising their fees even more on sellers, third-party sellers. There are complaints about third-party sellers now that Amazon has pulled their financing arm for third-party sellers, that the business for third-party selling has shifted to China directly instead of having intermediary third-party sellers now.

Chinese companies are directly putting more things on listings, listing more items, using AI to fix any language issues they have. And so, the percentage of direct Chinese selling is going up. Third‑party sellers are getting squeezed. Their financing is being squeezed. There was a document put out, 40 plus pages, of how to navigate all the seller fees. What is your take on the ground developments around the reality of being a third‑party seller? How does that play into a live case like we have at FTC against Amazon? It’s going to take years to play out. But how does new information like that make its way into the case going forward?

JOHN NEWMAN:  Well, yeah. Like you said, this is one I worked pretty closely on. So, I can talk about it, as with all this other stuff, just as an outsider, based on public information. But I think you’re right. I think this one’s going to be years to resolution. Trial is going to be a couple years out, at least it sounds like. The complaint, I think, is set up broadly enough that it lays the groundwork to take account of new developments like that. So, it really, I mean, I may be a little bit biased here, but I think the complaint does a really nice job of just laying out, in pretty painstaking detail, just step by step by step, Amazon’s repeated—I would call it abuse really, abuse of its power against its sellers. And it abuses its power against shoppers too. Sometimes it isn’t as obvious to us, in part because Amazon is like almost the only place to go if you want a one stop shop online.

But sellers in particular seem to bear a lot of the brunt of this power. And the complaint is, I think, pled in an open-ended enough way that if there are new developments, if Amazon is going to be brazen enough to keep jacking its seller fees when, according to some reports, they’re already charging up to 50 percent for some of these sellers right off the top—which unbelievable, it’s almost unheard of in the modern economy—that’s going to be relevant, right? That’s going to be able to be taken into account going forward.

It’s not out of the realm of the possible that the FTC could amend its complaint. If some of this new conduct starts to sound like additional antitrust violations, you could see an amended complaint. But at the very least, I think evidence of power could become relevant, could come into play, even if it’s stuff that’s happening after the complaint was filed.

TEDDY DOWNEY:  I know I’m interested to see how this plays out. One more quick thing. Is there also room for, I mean, first, I was like why is this going to take two years? But then I did start to think, well, that case was initially started by the Trump administration. There does seem to be room for additional discovery as well. Is that part of all of this? Like, there’s also going to be more—we’re going to get more detail potentially. I mean, there was already a lot in there. But just given how much time there is, given how broad it was, given that there were seemingly some sort of like open questions a little bit, it seems like there could be more meat. There could be more examples of this. I mean, it’s a lot of stuff is redacted still. But is there room for discovery as well to get deeper into some of the things that are alleged? Or can you not talk about that? I was curious about that.

JOHN NEWMAN:  No, it certainly looks very likely that there will be a fairly significant discovery period. Of course, Amazon’s going to argue, hey, we haven’t had the chance to do discovery on everyone we’d want to do discovery on. And if the Meta breakup case is any sort of indication, Amazon may try to go extremely broad and just turn this into a war of attrition, right? Hey, they’ve got all the money in the world, all the lawyers in the world. So, at the very least, it seems pretty likely that Amazon is going to be trying to push for pretty extensive discovery. So, I think we’re going to see a substantial discovery period. That would be pretty normal on a case like this. And it won’t just be one-way. It won’t just be Amazon doing discovery, if that happens.

TEDDY DOWNEY:  Okay, great. And now we’ve got a lot of questions from the audience. Hopefully, I’ll get to all of them. Here’s a specific one on Albertsons. On the horizontal theory of harm, how did parties prove in court that store overlaps are not 750, but 450? I don’t exactly know what this is saying. But I guess it’s how do they prove market definition or the store overlap issue? Any thoughts on Albertsons generally, the case that might make this listener happy to hear your thoughts?

JOHN NEWMAN:  Yeah, it sounds like the question may be about sort of quibbles that I would actually absolutely expect over whether the number of overlaps identified by the FTC is actually accurate. And also, relatedly—and this is probably going to be the single biggest point of Kroger’s and Albertsons defense if this thing goes all the way through litigation—whether the divestiture package is enough to cure all the competitive harms. That may be what the numbers, the 750 versus 450, is getting at. Is this divestiture package big enough?

Here’s kind of how I think about divestitures in light of some of the new learning that we were trying to take into account during my time at the agency. And this is based on work by John Kwoka, really excellent, thorough retrospectives—and others—on past experiences with mergers and divestitures and whether divestiture packages worked.

Divestiture packages are a double-edged sword. You might think in a kind of surface level way that, oh, the bigger the divestiture package, the more stores the companies are selling off, the better for competition. Because that would make the competition concerns lesser. But what some folks have found is the bigger and more convoluted the package, actually, the bigger the risk that that divestiture is going to fail. And I suspect that will be FTC’s primary response. In fact, they already set that up in their complaint, right? To say, look, this is an enormous amount of stores. Even if theoretically it could cure all the competitive overlaps we’ve identified, the risk of this divestiture package would fail is just too high to put it on American consumers and workers. This is selling hundreds of stores to some company that’s never ingested anywhere near that number of stores at once. It’s an immense managerial problem, and there’s way too high risk that this company just isn’t going to be able to do it.

TEDDY DOWNEY:  Can I just get generally your reaction to the strength of that case as well? I mean, the case comes out, you know, a lot of it’s about price. You know, one of their main, I mean, I just thought from talking points, one of their main talking points to defend the deal is like, actually, this is good for our union workers. And then the unions are against it. The whole thing, it doesn’t seem like it has a very good coalition of support. And I know these judges, a lot of judges are sort of in a vacuum. But you had Republican Senators coming out. Their failure locally in the supermarket divestitures, it just seems to me just as watching all the dynamics around it, even if you think the merits are 50/50 or something, it doesn’t seem like a good position. The divestiture buyer having all these problems. It doesn’t seem like a very strong position for the merging parties. I’d like to get your take though. I mean, that’s just kind of my reaction. But I want to get your overall take on what you’re hearing on that merger.

JOHN NEWMAN:  Yeah. Well, first, I’ve got to say, I’m probably like honor bound to say there is no such thing as an easy antitrust case these days for enforcers. And that’s certainly true of this one. I mean, people can lose three to two horizontal merger cases. They can and they have. DOJ took a couple real stinging losses. I think of that sugar merger. That looked strong, felt strong, ended up being a loss. Super frustrating.

So, this one is not an open and shut case by any stretch of the word. It’s not an easy case. I think there are going to be some not totally laughable arguments these defendants lob out there. And couple that with the, you know, it’s a pretty at least lower “c” conservative judiciary even today. There’s a non-zero chance that this one won’t succeed. But I do think the complaint tells a really strong story. I think the defendant’s big arguments are probably going to be “Look at Amazon.” Look at Walmart. They’re eating our lunch, right? Walmart is way bigger than we are. We’re just a little fish swimming around here.” They’re going to quibble about things like geographic market and say, “Hey, you’ve got to draw the lines bigger or smaller in some areas.” And then they’re going to fight the labor market thing tooth and nail, right? I do think they’ve got a bit of an uphill battle there, given that the unions themselves oppose this one. But if they go forward, it’s going to be a stiff battle. They’re not going to take it lying down.

TEDDY DOWNEY:  Yeah. No, that’s great perspective. And we’ve got a couple other questions here. There is this big merger in a consumer market, Tapestry/Capri. That is ongoing, this review. I mean, this is kind of one of those mergers where it is kind of almost like your boring consumer welfare case in some respects. It’s like you’re getting consolidation in this kind of narrow price band of particular types of purses. We’ve written about some other issues as well beyond that, but that’s kind of about the core issues. How does the FTC think about, like, retail deals, things that are like people just think of it as like, oh, well. That’s the old way of thinking about it. But, like you said, they’ve got to do that and all this other stuff now too. How should we be, as outsiders, looking at a merger like that and the potential problems, and like how this FTC staff would look at some of the issues there?

JOHN NEWMAN:  Yeah. I mean, they really are being asked by the American people to walk and chew gum. Nobody’s saying, hey, you can stop challenging the horizontal deals and focus only on these new, or in some cases old, but new again, theories. That one reads to me like a horizontal deal too. And it’s kind of, as I understand it, like a mid-range handbag market, if there is such a thing.

How does the FTC think about that stuff? They’re still looking at horizontal deals, right? They’ve got a hospital merger coming up that’s a pure horizontal theory. It sounds kind of, reading between the lines, like the FTC was putting some pressure on, I think it was Choice and Wyndham Hotels. And that one would have been a horizontal merger and maybe another kind of band, like budget friendly hotels or something like that. So not out of the realm of the possible that they’re taking a hard look at this one. And if the facts are there and the economics are there, and if you’ve got some actual market participants who are willing to stand up and say, yeah, this is going to cause some problems, then you could see a merger challenge there. Even if it is, even if it would be, kind of a boring 2010 horizontal merger guideline style case.

TEDDY DOWNEY:  And how important are the economists for even like a deal like this? I sort of would have expected economists, at this point, at the FTC, not playing that big of a role in decision making. But you mentioned how—is there still a lot of like getting the economists, when it comes to pricing like this, onboard? And is that still a thing? I’d like to get your take on that also.

JOHN NEWMAN:  Yeah, totally. One of the interesting distinctions between the two agencies now that I’ve been at both, DOJ at the Antitrust Division and FTC, is at DOJ it always felt to me like the economists were super, super closely embedded. Like, we were joined at the hip. There wasn’t much of a distinction to be made between EAG and rest of the ATR sections.

At FTC, you’ve got actually it’s separate bureaus. So, like there’s a Bureau of Competition and there’s a Bureau of Economics. And it felt at times, I think, like there was a bit more of a divide at FTC, just a formal divide between the lawyers and the economists. And I talked to some folks who kind of said, yeah, that seems right. That was something that everybody at the front office and on up, I think, felt pretty strongly about changing, about coordinating much more closely, if anything, with the Bureau of Economics. And so, my good friend, Aviv and I, worked pretty closely together while he was there and I was there, you know, at times talking every day. And so, I think much the contrary, Teddy, there’s actually a really strong emphasis on sort of close, close, close coordination and really treating these two groups less as separate, distinct entities and more like, hey, we’ve got a bunch of different expertise here. Let’s bring it all to bear and get the right answer.

TEDDY DOWNEY:  We’ve got some other merger questions here. How do you think the FTC will analyze AI’s potentially competitive effect on tech deals like Synopsis/Ansys? That’s the question. I don’t know if I can add any additional color, and I’m not sure how familiar are with that deal.

JOHN NEWMAN:  I’m not. I’ll confess, I’m not familiar with that particular deal. But to the extent we do see actual outright M&A activity in this space, I would be thinking really hard about the potential competition theories that we dusted off in Meta‑Within. It’s not out of the realm of the possible that you could see some straight up horizontal theories here, and also some vertical ones. But anytime you’ve got a space this new, and you’ve got these big tech companies who are at this point kind of notorious for facing that buy versus build decision just saying, oh, let’s just buy, over and over and over. I could see some potential competition theories bubbling up. The facts have  got to be there. But now the law is there at least.

TEDDY DOWNEY:  I’ve got another question about, data issues regarding the Walmart/Vizio deal and how could those be antitrust issues? I guess this is kind of one of the areas of—I’m curious to get your thoughts about, you know, you’ve got these really expansive merger guidelines. Here’s a merger where you’ve got a Chinese company that makes, you know, has a lot of, I mean, they’ve got TVs that sort of collect a lot of data on you. You’ve got Walmart wanting to get into this kind of, for lack of a better word, surveillance data business. The FTC is saying we really don’t—we are literally considering like some kind of ban on the rulemaking on surveillance advertising ongoing. We’ll see when that comes out, what shape it takes when that ruling ultimately comes out. But how would the FTC think about a deal like this, the data concerns? Are those antitrust issues? Or can those be dealt with separately later as consumer protection issues? I would love to get your take on that.

JOHN NEWMAN:  So, I’ll confess again that’s not a deal I’ve taken a hard look at. The thing that scares me most about the smart TV space from an antitrust perspective is not so much, strictly speaking, a data concern. It’s more that there’s right now a smart TV operating system market that’s actually, relative to other operating system markets, pretty competitive. Like there’s more than two players, which counts as competitive when it comes to OS’s.

And I think my concern would be maybe it’s more of a vertical one or a kind of entrenchment type concern. But you’ve got players pretty clearly eyeing this space. I mean, Amazon is as well, of course. That one of these big companies is going to decide, hey, operating systems can be an extremely lucrative business to be dominant in. And it can be a pretty sticky and powerful monopoly that gives you a lot of different levers to wield against a lot of different players. I’d be concerned if you start to see evidence that one of these players—I don’t know if it’s Walmart. I don’t know if it’s this deal. But that one of these players is going to take what looks like actually a fairly competitive space and turn it into another duopoly or monopolized one.

TEDDY DOWNEY:  So, sort of putting the thumb on the scale to make Vizio kind of like the winner in the smart TV market and kind of like that. That’s interesting. That’s an interesting angle. We’ve got another question here. Following the FTC settlement of Horizon, Amgen and Pfizer merger—decision not to litigate I should say—what kinds of issues do you think the FTC looks for in pharmaceutical deals? Is it necessary to have horizontal overlaps? How important is a buyer’s past behavior, thinking about which deals get challenged? I know that Pfizer deal was a really close call. Or they’ve looked at it really closely to see if they could come up with a theory. We’d love to get your take on the overall environment around pharma, to the extent I know you were a tech there, but just get your thoughts.

JOHN NEWMAN:  Yeah, I’ve never claimed to be an expert on pharma. But let me see if I can at least throw out a few thoughts that might be worth something. But take it with that initial caveat. First off, no, I don’t think you’ve got to have horizontal overlaps to see a challenge, in this space or any other under, this FTC. Yes, that would have been true under previous agencies. That was a political leadership choice, not a staff choice. Now we’ve got staff recommending non‑horizontal deal challenges at times and political leadership who are willing to act on that.

So, you think of something like Sanofi/Maze, there’s a bit of a horizontal overlap there I guess. But it’s also it was a very dynamic, almost a potential competition type story that emerged from that complaint. Vertical challenges have been filed in like four or five different markets now from defense, semiconductors, cancer detection tests, videogames. So that pretty much runs the gamut of digital, non-digital, old school industrial type stuff, high tech stuff.

So, I think you could see a vertical challenge easily if somebody tries to lock up a key, like manufacturing source or something like that, key input. Horizontal challenges are still the most, I think the easiest story to tell, how about that? But I don’t think that this agency is at all limited to horizontal theories.

TEDDY DOWNEY:  And we have one last merger‑specific question and then kind of an overall question I think. On Exxon Pioneer, how might the FTC approach a wave of consolidation or a trend toward consolidation among U.S. oil and gas producers or producers in areas like the Permian Basin. This is in the merger guidelines, that sort of want to nip the merger wave in the bud, you know, get at concentration in the incipiency. But I would love to get your take on how that plays out in a real live example of that happening as all these Permian operators are being rolled up.

JOHN NEWMAN:  Yeah, the way I tend to think of that is if you’ve got an ongoing trend toward consolidation in an industry, whether it’s at its very beginning or whether it is nearing its very end, that’s a thumb on the scales in favor of challenging any deal in that space that would be part of that trend. That’s just good law. That’s sound law. The Supreme Court has said that. Lower courts have applied that thumb on the scales to cases where it’s like, man, we’re at the very beginning of a trend. They’ve applied it. This is the next to last domino to fall before we’ve got a totally locked up industry. The trend toward concentration is a strike against a merger. It not the end all/be all. But it is a thumb on the scale. Why? There’s two answers to that at least.

One is the purpose of the law, right? Why did Congress enact the Clayton Act in the first place? And in particular, why did they pass the Celler‑Kefauver Antimerger Act in 1950? It was in part because they were looking out at the world and they saw a lot of industries undergoing a trend toward concentration. And the Sherman Act alone was not enough to stop it. The Clayton Act, Section 7, is meant to do just that. So, it’s just good law.

It’s also good economics. It’s just like a good way to think about merger review. You know, you talk to people who are analysts, right? You talk to Wall Street folks. Talk to people who pay close attention to mergers. Like, Teddy, you and your crew at The Capitol Forum. And they would tell you that it makes zero sense to like narrow the lens. Just look at, okay, Company C is buying Company D. That’s the deal. That’s the effect. Done.

Instead, the way these deals often happen, both the deal driver and the ripple effects are relevant, right? The deal driver is often, hey, Company C and D are looking at A already bought E. Then that triggered B to buy F. And now C and D are doing their own almost defensive lock up.

So, thinking about things like a trend toward concentration actually can help you understand why a deal is happening in the first place. And then (b) it can also help you understand like the full ramifications of letting a deal go through. If you let this deal go through and it causes three more deals to happen, you’ve effectively not just passed on this amount of consolidation, but you’ve also said, all right. We’re okay with letting those happen and maybe challenging one of those down the road. So, there’s some good economic and just sort of almost strategic management type reasons to be thinking this way. I think this is, as the merger guidelines suggest, top of mind for the agencies.

TEDDY DOWNEY:  We’ve got one more question, actually two more questions. I’ve got one more. So, I’ll, let you go after that. So, one is you mentioned earlier, you—this question is mostly about what are your overall takes on any deals being reviewed by the FTC right now or even DOJ? Do any stand out as deals that should be litigated? I’m curious if there are any that you’ve taken a close look at and what your take is on that?

JOHN NEWMAN:  I’d be hesitant to weigh in on particular deals. A lot of them, since it hasn’t been that long since I separated from the FTC, a lot of them are probably pending. Even if I had no idea they were pending because they weren’t in my wheelhouse at the agency while I was there.

I would say, stepping back, we might think about like sectors. I think there definitely is work to be done in the health care sector. Again, can’t stop bringing the 3 to 2 hospital merger challenges. But I think there’s room to be done there. There’s room to work there. Going after things like vertical consolidation. I think DOJ has announced a couple of interesting investigations or else it’s been reported that they have. I can’t remember.

In the health care space, I think FTC has some work to do still in the health care space. So I’d be keeping an eye on that sector. I think pharma, too, is another one where the FTC has been really active. They hadn’t challenged a pharmaceutical merger or acquisition, to my knowledge, ever until Chair Khan’s tenure. They’ve sent out the message pretty loud and clear, like, hey, we’re on the on the job here. I would keep an eye on the pharmacy space as well.

So, without calling out any particular deals, I’d kind of think about those as sectors where there’s strong bipartisan support. Hey, we’ve got a full bipartisan agency all of a sudden. There’s bipartisan support for enforcement in those areas.

TEDDY DOWNEY:  And you’ve touched on the last question, which is how do you think the two Republicans coming in are going to affect how things go at the FTC?

JOHN NEWMAN:  It’s going to be good. At least, I’m optimistic that it’ll be good. Some of my favorite times at the FTC were when I was there, for at least a while, under a full-strength commission. And it only makes you stronger to kind of present cases and present theories to people who may disagree with you. And don’t get me wrong, I had some pretty deep disagreements at times with my Republican friends. But it always sharpened my thinking. It was always worthwhile. And I think these two in particular, they bring some antitrust experience to the table. I don’t see either one as being sort of bog-standard, I’m-going-to-just-recite-the-boring-talking-points type people. I think they’re going to bring some unique perspectives to bear.

And you always want that five-zero vote when you’re in the Bureau of Competition or Bureau of Consumer Protection. So, you’re always trying to, like, navigate those different voices. You’re trying to respond to all the concerns you hear. You aren’t just saying, oh, forget about them, they’re a minority, right. It’s very, very relevant. It’s sharpened, I think, complaints that come out of there. And that’s true even in times when you see like a three to two vote. There’s still a lot of engagement that happens behind the scenes right before that happens. It’s still going to improve things. It’s still going to sharpen things. So, I view it as a very positive development overall.

TEDDY DOWNEY:  I actually want to quickly follow up. You mentioned Robinson‑Patman before. And I’d love to just get your take on Robinson‑Patman. Because the way I see it is a potentially very powerful coalition of people who want to see more of it. You know, even the people who could get sued. Like, like there’s an investigation of Kraft, Heinz, Coke, Southern Glazer’s. At least on the producer side, I’m curious how much they like being under the thumb of Walmart. You know what I mean? Or whatever.

So, you’ve got these people who are part of the investigation who might not mind the law getting enforced. You’ve got a lot of independents that want it to be enforced. We’ve got Republicans in the House saying that that’s what they want to focus on. They haven’t done it yet. It just seems like a pretty big political constituency behind this, even though it is a very weak or sort of like not enforced law. And I want to get your take on that. Is that an area you could see bipartisan focus on?

And also, am I right to think that, like there’s this kind of interesting dynamic where you’ve got this anti‑chain store bill, but that target of it is not that mad about it. Like if you look at Southern Glazer’s, total line is really pissed, right? Like, they’re the ones suing. You know what I mean? So, I just would love to get your take on Robinson‑Patman and sort of the politics there. Since we are talking about the Republicans joining.

JOHN NEWMAN:  Yeah. I think it’s a good law. It’s not the best drafted law. You know, it’s a little murky when you read it. It doesn’t jump off the page in the same way that the Sherman Act does, for instance. But I think it’s a good law. It’s got good economics behind it. It’s got good policy. It’s, I think, going to be among the, if not the, most challenging stories to tell if and when the FTC decides to get back on the beat and bring a case here.

So, that’s going to be the trick. If they want to bring a case and if they want to have strong support for it, I think they’ve got to tell a crystal-clear story. This case, whatever it is, is not about low prices. It’s not about somebody offering low prices being bad. And that’s how the defendants are going to want to spin it, right? They’re going to want to say, oh, this is just about us offering low prices to somebody. I think the story has to be, no, this is not about offering low prices to one person. This is about you offering high prices to everybody else.

So, if you can make that narrative stick, this is not a case about giving a big buyer a break because they’re efficient. This is about whether somebody should be able to charge higher prices to small companies just because they’re small. That’s a story that could stick and resonate. But it’s got to be super, super clear and consistent.

TEDDY DOWNEY:  One of the things we’ve been looking into with Robinson‑Patman is these franchisor agreements with the producers to the sort of exclusive agreements for their franchisees. And, you know, there is that kickback language in the Robinson‑Patman statute. And they’re actually negotiating exclusive deals basically for their franchisees. And often, those are not lower prices. Even that deal is a higher price with a kickback to the franchisor. I mean, we’re interested in it because it seems like kind of you don’t even have to deal with that price because they’re not even offering a lower price to anybody. Have you looked at any of those kind of more novel or kind of off the wall contracts or Robinson‑Patman issues? Or would that be a promising avenue? You know, this is very selfish. I’m trying to figure out how much I should be paying attention to this.

JOHN NEWMAN:  You know, I personally haven’t. But don’t read anything into that necessarily. Because, again, my portfolio is pretty strictly big tech stuff. I would say this. That anti-kickback provision of the Robinson‑Patman Act, it is low key, one of the most powerful parts of the law. It’s one of the muddier parts. And I think the case law is a little bit muddy around it. And it has only gotten more so over time, unfortunately.

But if there’s a part of the law that could be the biggest political winner, I think it’s the anti-kickback provision. Because almost intuitively people sense the unfairness there. They sense that that’s just not good for anybody, other than the powerful companies that engage in it. So, yeah. I mean, just speaking off the cuff again, as somebody who hasn’t looked at the agreements, hasn’t really thought about it super deeply, I do think that part of the law is a powerful one. It could be ripe for a revival.

TEDDY DOWNEY:  Well, John, I put you through a very wide-ranging gamut of issues. I can’t thank you enough for doing this. It’s always great to chat. Enjoy the nice weather down in Miami. I’m deeply, deeply jealous of you. But thanks so much for doing this.

JOHN NEWMAN:  Absolutely, Teddy. It is my pleasure, as always. And hey, you’re welcome down here anytime.

TEDDY DOWNEY:  I’m going to take you up on that. All right. Thanks everyone, for joining us today. This concludes the call. Thanks again, John. Bye‑bye.