Washington Week
MLex reports live from the capital for the American Bar Association's 71st Antitrust Spring Meeting
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Read on for a sample of the invaluable insights published by MLex this week, as thousands descend on Washington for the American Bar Association's Antitrust Spring Meeting, the largest annual gathering of competition, consumer protection and data privacy professionals.
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US DOJ, FTC consider revising investigative process over worries at firms' takeup of messaging apps
Increased use of messaging platforms at companies is causing significant concern to US federal antitrust enforcers, spurring the Department of Justice and Federal Trade Commission to embark on a joint exercise to consider revisions to the investigative process, a senior DOJ official said today.
Speaking at an event* in Washington, DC, Manish Kumar, deputy assistant attorney general at the DOJ’s antitrust division, said the DOJ is “definitely observing the increased use of messaging platforms” with the kind of functionality where messages are automatically deleted in a short span of time.
“From the perspective of enforcers, it is something that causes us to have a considerable amount of concern because of implications that the use of these technologies have for the subjects of investigations to appropriately preserve and produce responsive communications, and documents,” Kumar said.
Kumar said he hopes that recipients of investigative process from the DOJ and other agencies would really take the appropriate steps to turn off functionality in messaging platforms that introduces “ephemeral” messaging capability, so that they can ensure that they're appropriately able to respond to investigating process.
“In addition, I think it's important for this audience to note that the DOJ and FTC are working together in order to do take appropriate steps to ensure that the integrity of our investigations is not harmed by the use of this technology,” Kumar said.
The DOJ and FTC have formed working groups in order to ensure and consider revisions to their investigative process “to ensure that these types of communications and documents are appropriately captured,” he said.
This includes materials requested through grand jury subpoenas, civil investigative demands, and second requests, Kumar said.
This week, a California federal judge sanctioned Google for failing to preserve evidence from internal chats sought by US states, Epic Games, Match Group and consumers in litigation over its control of the Android app-store market.
The DOJ is also seeking sanctions against Google in a separate search monopolization case. The agency has accused the tech giant of destroying years of potentially relevant evidence by training and encouraging employees to use "auto-delete" or “history off” functions when conducting sensitive business discussions over internal chats.
*American Bar Association Antitrust Spring Meeting 2023. Washington, DC. March 29-31, 2023.
Redraft of EU dominance guidelines gives economics more 'appropriate' role, Mundt says
Upcoming changes to the European Commission's policy on investigating dominant companies shows a move away from a "very effects-driven approach" to a place where economics plays a more appropriate role, Germany's top antitrust enforcer said.
Andreas Mundt played down the use of an economic test that measures a dominant company against equally efficient rivals, and said cases would go faster without such modelling.
This week, the EU executive said it was withdrawing a 2008 guidance document that set out a policy choice that gave economic tests and market effects greater prominence in enforcement. But court rulings have dented some of the commission's biggest cases, leading to a rethink.
Mundt, who heads Germany's competition authority, said his office was "always very critical of this paper," questioning the use of a so-called "as efficient competitor" test.
This is an economic model that allows a dominant company to say it hasn't abused its power. Rather, a rival left the market because it was simply less efficient.
The commission's new policy seeks to restrict the relevant of the AEC test. Instead, investigators want to look more at the overall competitive structure of a market when looking at potential harm, not specific effects based on prices and profits.
Problems with such a test have led to court defeats involving Intel, Google and Qualcomm.
Mundt told a conference* in Washington DC that the policy announcement showed the "commission is getting away, a little bit, from this very effects-driven approach, very economic approach."
He said the Intel and Google rulings showed it had become "extremely difficult to win these kind of cases." With the commission's shift, the "pendulum is swinging back a little bit," he said.
“That does not mean that we do not do economics in the future. That is absolutely not the point. It only means we must get it back to an appropriate and accurate manner. This is the point. This is why the commission is about to redraw the paper on [dominance abuse].”
Mundt argued there would be little change at his office due to the ways their own enforcement had developed over the years.
The Bundeskartellamt president said he preferred cases that were more clear-cut where an AEC test would have little importance.
"It is too complex. It is too long. You need too much data," he said.
"If you really want to speed up proceedings to a certain extent, you must get away from this highly-sophisticated application of competition law."
*Noerr Breakfast Reception, ABA Antitrust Spring Meeting, March 29, 2023.
UK sees invigorated antitrust focus on labor-market curbs
The UK’s competition enforcer has jettisoned historic caution on intervening in labor markets and is reinvigorating its focus on employers who might be limiting the ability of individuals to work freely for fair wages, according to a top enforcer.
Martin Coleman said the UK’s Competition & Markets Authority was making it a priority area for the coming year, given concerns about market power, the effects on productivity, and the need to protect workers going through a cost-of-living crisis.
While US agencies have moved hard against companies limiting workers’ freedoms through restrictive contracts, regulators in Europe have moved more slowly, noting labor relations are different given different traditions in some European countries.
Last week, the CMA published its annual work program, putting an emphasis for this year and next on “identifying potential competition issues within UK labor markets.”
Speaking at a conference* in Washington DC, Coleman, who is a non-executive director at the CMA, noted the agency had opened its first antitrust probe into the issue — an investigation of freelance contracts in broadcasting — and it was providing guidance of wage-fixing agreements. He also said there would also be economic research undertaken within his agency.
Coleman said there was an “increasingly blurred line” between what constitutes an employee and what’s an independent contractor. He said in situations where there is a single buyer — or a simple employer — this can reduce the demand for labor.
“This is likely to reduce a firm's output and could have an adverse effect on consumers downstream,” Coleman said.
“There's a concern about market power on the labor markets, reducing productivity growth, through less efficient allocation of labor across firms and industries.”
He added that the cost-of-living crisis which impacts consumers, also impacts workers, and so increased the need for scrutiny.
*American Bar Association Antitrust Spring Meeting 2023. Washington, DC. March 29-31, 2023.
Meta counsel says exclusive content can drive success of new devices
Making content exclusive can be an effective way for new devices to achieve success in competing against other hardware, a senior counsel at Meta Platforms said today.
Samantha Knox, director and associate general counsel for competition, noted that VR fitness app Supernatural was built specifically for Meta’s VR Quest headsets, and that the appeal of buying the company in the face of US FTC opposition was partly because of the opportunity it presented to grow the audience base for the new devices.
The FTC failed in its bid to block the deal following a trial in December. Knox was speaking on a panel today in Washington, DC, which focused on antitrust issues in the video game market.*
Knox took aim at the FTC's case. “The FTC did not have any third-party developers testify in their case,” Knox said, and had tried to exclude testimony from such developers which was supportive of Meta's case. If regulators want to effectively address competition issues in the video game world, “I'd suggest that case selection is critical,” Knox said. “You do need some actual facts to support your theory.”
Knox briefly reviewed the history of gaming consoles and the competitive dynamics of the market. “The edges on which the major players are competing are constantly changing,” she said. Nintendo was first successful with a closed system giving it strict control over third party developers, but then Sony took the lead in the market by making it easier for them to create content for the PlayStation.
Later, facing competition from Xbox and its popular console exclusive Halo, Sony leaned back into vertical integration and exclusive content, Knox said.
Her comments come as Microsoft seeks approval from regulators around the world to buy developer Activision Blizzard. Critics argue the deal risks removing essential video game content from rival consoles and devices.
Within’s Supernatural is an at-home fitness app. In its proposed findings of fact in the case, Meta didn't argue that it competed with VR video games, instead asserting that a key driver behind the purchase was that such apps have broader appeal beyond the typical audience for VR video games.
Knox noted that the FTC did not argue a theory of harm that Meta would make Supernatural exclusive to its own devices – rather that it killed Meta’s incentive to build a competing fitness app.
US District Judge Edward Davila concluded that Meta's move to buy Within was partly motivated by Apple's interest in Supernatural. Apple is expected to launch its own VR hardware soon.
“Take a step back, let’s think about the role that exclusivity can play in driving competition at that platform level,” Knox said.
“Platform owners have a strong incentive in investing to develop first party content or in acquiring content that will help distinguish their platform from other platforms,” she said. “And I think it’s important to note that exclusive content can play an especially important role for new platforms.”
Knox drew up a slide prepared by her colleagues which showed the role that exclusive video games have played in console sales between 1995 and 2016. The results, she said, showed that exclusive title can particularly boost sales during the first five to six years of the console’s life cycle.
*American Bar Association Antitrust Spring Meeting 2023. Washington, DC. March 29-31, 2023.
Amazon pricing litigation turns on price floor versus price ceiling question, US FTC official says
Amazon, which is facing lawsuits from US state attorneys general and private plaintiffs over pricing provisions that restrict sellers from offering lower prices elsewhere, will need to demonstrate that the provisions operate as a ceiling on prices within its store rather than a floor on prices outside of its store, if it is to emerge victorious, a US Federal Trade Commission official said today.
“This is the quintessential question” that links cases against the tech giant in California, Washington, DC, and Washington state, said Ricardo Wooley, attorney advisor to FTC Commissioner Rebecca Kelly Slaughter.
The FTC is itself preparing a major antitrust lawsuit against Amazon which could address numerous aspects of its business, including its pricing policies for third-party sellers on its marketplace.
Speaking in a personal capacity today at a conference*, Wooley discussed the three main lawsuits filed against Amazon over its pricing policies.*
The Washington, DC, attorney general filed a case over Amazon’s most favored nation clauses, but the case was thrown out and is under appeal. And the California attorney general filed a lawsuit in September in state court, arguing that Amazon has continued to enforce illegal policies through less direct means after removing them in 2019.
A case brought by private plaintiffs is also ongoing in US District Court for the Western District of Washington.
What is common between the cases, Wooley said today, is the question of whether a platform such as Amazon is pushing prices up or down for consumers by ensuring that sellers do not offer lower prices elsewhere.
On the one hand, some argue that ensuring Amazon customers get the lowest prices around keeps the platform competitive with other retailers. “But on the other hand, you have folks who take the position that 'no, the [most favored nation clauses] actually create an artificial floor, below which suppliers and other sellers and manufacturers would happily go,' ” Wooley said.
Wooley also addressed the FTC's failed bid to block Meta's acquisition of virtual-reality app developer Within following a trial in December, reiterating a point previously made by his colleagues that the judge's legal and theoretical findings in the case still represent a step forward for the agency, even if it didn't win the case.
There was, he said, “significant precedential value” in the judge's confirmation of the theory of harm to 'potential' competition — the idea that a vertical acquisition can harm competition because the acquirer opts not to launch a competing product.
“The actual precedent set here can be applied to other factual circumstances where they are relevant,” Wooley said.
*American Bar Association Antitrust Spring Meeting 2023. Washington, DC. March 29-31, 2023.
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