The discussion began with revisiting the tragic siege of the United States capitol that took place on January 6, 2021. Before the siege, on many different platforms (Twitter, Facebook, etc.) President Donald Trump continued to post disputes about the presidential election, specifically mentioning voter fraud. With there being no evidence to verify these disputes, Trump’s campaign for president for a second term was over. Yet it took a violent storming of our nation’s capital to make the world realize that the words on social media and the internet do, in fact, have an effect and insight riots and violence. Any different social media platforms suspended or banned Donald Trump’s account from their sites including Twitter, Facebook, and Instagram. Thus began the great deplatforming.

Why this deplatforming is legal for big tech companies like Google and Apple is because these companies are not in affiliation with the government. This means that the First Amendment is not valid if not stated in their terms of service. If the said company feels that their terms of services have been broken by an individual or feels that said individual is a threat to others, companies have the right to deplatform them. When first signing up on the platforms, every user must agree to the companies terms of services, many just seem to not read them beforehand.

Using Twitter as an example, after being questioned about if it was legal to permanently suspend Donald Trump’s account, Twitter explains their terms of services and the reasoning behind these actions. After analyzing the tweets that Donald Trump was posting and how others were receiving them, they came to the conclusion that they would permanently suspend his account due to the risk of further violence that could be invoked.

With the first Amendment, it becomes very difficult to regulate the dissemination of information in the United States, especially since the government has not created regulations for tech. The only privacy regulator in the United States is the Federal Trade Commission, yet it does not have any real privacy authority. It focuses mainly on deception and unfair business practices.

Section 230 was created to allow internet platforms to grow and to protect platforms from lawsuits if a user posts something illegal with exceptions for copyright violations, etc. This section has also allowed for disinformation campaigns to be spread around the internet and push society apart. With the increased spread of disinformation, creating a privacy statute, revisions of antitrust laws, and reconsidering section 230 need to be on the table to help our society move forward in a positive light.

The question of what the future of technology and democracy will be like since the great deplatforming is still a mystery. Since the capital siege as well as President Joe Biden taking office, Congress has brought forward the idea of reevaluating section 230 to help avoid the further spread of disinformation.

Link to Facebook Live: https://www.facebook.com/georgetownlaw/videos/117256850273091

Lizzy Bensend

Doyle Barlow & Mazard PLLC

The notion that antitrust enforcement is motivated by politics has hung over the Trump administration since the Department of Justice’s failed attempt to block AT&T’s acquisition of CNN’s owner, Time Warner and some antitrust experts might point out that the Obama administration also influenced the DOJ’s decisions to sue or settle cases.

While politics has always played a role in setting the antitrust agenda, typically antitrust investigations and enforcement decisions are based on the facts.  Indeed, there is no credible evidence that the big tech firms have engaged in unlawful monopolization or that they have stifled innovation.  In fact, Iowa’s Attorney General Tom Miller, who is well known for his role of leading 20 states in the DOJ’s antitrust suit against Microsoft, said this past July that “[w]e are struggling with the law and the theory,” to bring a case against the big tech firms.

But, this didn’t stop the state AGs from entering the fray.  Republicans are concerned that the tech platforms have suppressed conservative viewpoints, Democrats are worried that these tech companies are simply too big and powerful.  But the announcements of the state AG investigations into Google and Facebook have two things in common: a lack of substance as they can point to no consumer harm and publicity to tout their efforts.

The latest announcement of the state AGs’ investigation of Google – from the steps of the Supreme Court no less – demonstrates just how political antitrust enforcement is becoming.  This type of high-profile activism may benefit state AGs’ political aspirations, but it could impose enormous costs on consumers.  Indeed, the mere threat of numerous investigations could have a chilling effect on innovation and competition for as long as these probes last.

Some state AGs appear to be conflating antitrust and other politically popular pet causes, raising the specter of using antitrust enforcement for political gain.  On the same day of his announcement of the Google investigation, Texas Attorney General Ken Paxton sent a fundraising request in an email to his supporters touting his efforts to take on “Silicon Valley titans.” And, according to a copy of the email shared with POLITICO, Paxton asserts “Texans are put at risk” by Google because of the company’s market dominance and privacy practices, and because its “executives clearly display anti-conservative and anti-Republican bias, subtly controlling what Americans see when they search for information about national political issues.”  But political concerns have no place in an antitrust investigation and using antitrust investigations to punish speech raises profound First Amendment concerns.

As the federal antitrust authorities and the state AGs begin their investigations, they must be mindful that companies like Google and Facebook have delivered a tremendous amount of innovation enabling the launch of new products and services that have resulted in many benefits to consumers such as free online search, email, messaging, and artificial intelligence services all while competing in a highly competitive advertising market with the likes of AT&T, Disney, CBS, and Comcast/NBCU.  These multichannel competitors have been locked in the stone age for years, are now finally innovating to compete against the new digital advertising entrants such as Google, Facebook, and Amazon.

In addition to competing with the large entertainment companies for users’ eyeballs and time, Google fiercely competes with Facebook, Amazon, and Apple in various ways, including the development and launch of new products and services such as digital assistant devices, internet of things platforms, and virtual reality products, providing consumers with an abundance of choices and convenience.  In short, the big tech platforms are not successful because they are big and powerful – they are big and powerful because they have been successful.  And that success stems from the nature of a free market economy that provides incentives of firms to innovate and grow.

Without question, this type of efficiency and competition should be preserved.  What’s more, utilizing antitrust enforcement as a political tool is a threat to the rule of law.  Antitrust enforcement should not be turned into a political enterprise to police unrelated, and unsubstantiated, “harms” based on subjective moral and social judgments.  Instead, it must continue to be primarily based on sound theories, objective economic criteria, and evidence of consumer harm.  For years, enforcement decisions were based on the consumer welfare standard – not on populist standards that change with the political winds.

Remember the antitrust laws are focused on consumers and whether any company is disadvantaged by Google’s business practices is not at issue – the central issue to a court will be, do consumers pay more.  And although there may be pockets of disgruntled rivals, there is little to no evidence that consumers have paid more because of the way that Google conducts its business.

Andre Barlow

202-589-1838

On the same day, Assistant Attorney General Makan Delrahim of the Antitrust Division of the U.S. Department of Justice (“DOJ”) said the DOJ is working with a group of more than a dozen state attorneys general as it investigates the market power of major technology companies.  Delrahim said at a tech conference that the government is studying acquisitions by major tech companies that were previously approved as part of a broad antitrust review announced in July of major tech firms with significant market power.  “Those are some of the questions that are being raised… whether those were nascent competitors that may or may not have been wise to approve,” he said.

On July 23, the DOJ said it was opening a broad investigation into whether major digital technology firms engaged in anticompetitive practices, including concerns raised about “search, social media, and some retail services online.”  The investigations appear to be focused on Alphabet Inc.’s Google, Amazon.com, Inc. and Facebook, Inc. (“Facebook”), as well as potentially Apple Inc.

More than a dozen states are expected to announce in the coming weeks that they are launching a formal probe.  “I think it’s safe to say more than a dozen or so state attorneys general (that) have expressed an interest in the subject matter,” Delrahim said.  In July, eight state AGs met with U.S. Attorney General William Barr to discuss the effect of big tech companies on competition, and various antitrust actions.

On August 19, the New York Attorney General’s office said it is continuing to “engage in bipartisan conversations about the unchecked power of large tech companies.”  North Carolina Attorney General Josh Stein is also “participating in bipartisan conversations about this issue,” his office said.  The DOJ is looking not only at price effects, but also at innovation and quality, and the next steps in its broad antitrust review would be seeking documents and other information.  Delrahim also said that after the July announcement, the companies under investigation “immediately reached out to work with us in a cooperative manner to provide information that we need as far as the investigation.  In June, the FTC told Facebook it had opened an antitrust investigation.  Last month, the FTC resolved a separate privacy probe into Facebook’s practices after the company agreed to pay a $5 billion penalty.

Thoughts

The states joining the DOJ’s and FTC’s investigations are not a surprise.  As many as 39 states have been raising antitrust concerns about the big tech firms with both the DOJ and FTC.  They have similar concerns regarding big tech as the federal antitrust agencies.  The issues relate to whether the markets for online advertising, search, social media, app sales and certain retail sectors are currently competitive.  The state AGs involvement in these investigations adds another layer of complexity for Google, Facebook, and Amazon.  This action by the state AGs should remind everyone that sound antitrust enforcement is not just a federal affair.  Indeed, many of the seminal antitrust cases including cases creating key principles of monopolization and merger law were brought by state attorneys generals.

State attorneys generals use the power under federal and their own state statutes to protect consumers against anticompetitive and fraudulent conduct in credit card, pharmaceutical, computer and many other markets crucial to consumers.

States have significant advantages over federal enforcers.  They are closer to the market and consumers and recognize the direct harm to consumers.  They have the ability to secure monetary damages.  States are often customers and victims of anticompetitive behavior.  State enforcers can bring combined antitrust and consumer protection cases.  And although each state has limited antitrust and consumer protection resources, states increasingly are using multi-state task forces to investigate and prosecute unlawful conduct.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

Speedy Antitrust Approval

DOJ’s announcement of the settlement agreement is noteworthy because of the speed at which Disney was able to negotiate a remedy to a combination that raised a number of antitrust issues.  Though the parties received second requests on March 5, 2018, and Disney had only recently entered into a new agreement with 21CF on June 20, 2018, the DOJ and Disney were able to negotiate a divestiture worth approximately $20-23 billion within 6 months of review and 4 months after issuing information requests.  The dollar value of the Disney/21CF divestiture will likely double what the DOJ characterized as the largest divestiture in history in Bayer/Monsanto.

Disney was in a hurry to obtain antitrust approval because it is involved in bidding war with Comcast for the 21CF assets.  Indeed, Disney upped its offer on June 20^th because Comcast had started a bidding war for the 21CF assets on June 13^th.  Comcast has its own antitrust issues with its acquisition, but it was hoping to be on a level playing field with Disney in terms of the antitrust reviews at the DOJ. Indeed, Comcast said as much when it made its bid as it indicated that it had already provided documents and information to the DOJ in response to its civil investigative demand regarding the acquisition of 21CF assets.

Comcast was banking on the DOJ conducting a long drawn out second request investigation for Disney’s deal.  But, rather than conducting a lengthy review of the Disney/21CF deal, the DOJ entered into a quick settlement agreement.  This was surprising because the Disney/21CF deal raised a number of horizontal and vertical issues including increasing the size of its motion picture business, content library and cable programming, which would increase its bargaining leverage in negotiations with movie theatres and TV programmers on licensing fees, Multichannel programing distributors (MVPDs) and virtual MVPDs over affiliate fees for its channels, and video streaming services over licensing fees.  Moreover, Disney is taking control of Hulu and launching a number of subscription streaming businesses with the intent on foreclosing its content from rivals such as Netflix.  It could be that none of these issues amount to actual antitrust problems, but certainly they warrant some investigation.

Despite all of these other issues, the DOJ quickly focused on the overlap in cable sports programming.  The DOJ said in its Press Release that “to streamline agency clearance, Disney agreed to divest the 22 RSNs rather than continue with the Antitrust Division’s ongoing merger investigation.”  Anyone who has visited Disney World knows the value of fast passes.  Disney understands the value of time so it used a cooperative approach to get the greenlight for what appears to be the largest divestiture in history without an upfront buyer in record time.

Understanding that the DOJ’s major concern was the overlap in cable sports programming, Disney decided not to challenge that contention or negotiate a lesser divestiture, which would have lengthened the second request investigation many more months.  Disney likely could have argued that ESPN channels and local RSNs really do not compete head to head at all.  ESPN has market power as do the local RSNs to obtain increases in affiliate fees already.  Moreover, watching ESPN is no substitute for watching your home town team on the local RSN.  Disney, however, gave up on those arguments and agreed to a hefty structural remedy that took the issue off the table.

Makan Delrahim’s Editorial in the Washington Times Defending DOJ’s Fast Review

On July 12, 2018, Makan Delrahim wrote an editorial defending the speed in which Disney was able to negotiate a divestiture with the DOJ.  He noted that the divestiture agreement was a “victory for American consumers and should be heralded as an example of merger parties working effectively with Division investigators to resolve antitrust concerns.”  Delrahim noted that “each merger poses unique facts requiring unique market analysis.” He correctly stated that the pace of any review is largely in the hands of the merging parties, who control the timing of their Hart-Scott-Rodino (“HSR”) filings, as well as the pace and timing of compliance with the Division’s information requests.” He added that “parties can accelerate the review by pointing the Division to relevant information early in the investigation, promptly scheduling interviews, and remaining open to timely divestitures that resolve antitrust concerns.”

Competition Concern

The DOJ alleged that without the divestiture the acquisition would likely result in higher prices for cable sports programming licensed to MVPDs in each of the local markets that the RSNs serve.  As the DOJ explained, Disney (ESPN properties) and 21CF’s (RSNs) cable sports programming competed head to head.  The DOJ alleged that the ESPN properties and the 21CF’s RSNs compete to sell cable sports programming to MVPDs in various local markets across the United States.  Because of this competition, the complaint alleges that the proposed acquisition would likely result in MVPDs paying higher prices for cable sports programming in those local markets.

No Allegation of “Must Have” Programming

Interestingly, the DOJ did not allege that Disney or 21CF had “must have” programming.  Arguably, ESPN channels and RSNs would be considered “must have” programming for MVPDs and VMVPDs.  It could be that given Judge Leon’s Opinion in AT&T/Time Warner that the DOJ has given up on being able to prove that certain programming is “must have”.

No Upfront Buyer

Another interesting point is that the DOJ did not require an upfront buyer.  There could be good reasons for why no upfront buyer was necessary. Upfront buyers are usually required when the DOJ is not sure that any appropriate buyers exist or if all of the assets need to be divested to one buyer.  Here, there are numerous buyers and the DOJ decided that the RSNs can be sold to multiple buyers not to a single buyer.  In that scenario, Comcast could be a buyer for some RSNs located in geographic areas where it is not the incumbent cable provider; AT&T and Charter have very little in the RSN space and may want to buy other properties to gain a larger footprint; Discovery has international sports rights so they may be interested in some RSNs; Liberty Media has owned RSNs in the past; Youtube, Facebook, and Amazon may want to dip their toes into the RSN space; and Sinclair, which has a strong local presence in many markets and currently owns the Tennis Channel could be interested in some of the RSNs.

Lessons Learned

The DOJ’s quick settlement demonstrates that the DOJ is willing to streamline investigations if merging parties propose substantial structural fixes upfront.  The settlement and Mr. Delrahim’s editorial reminds merging parties that they control the timing and length of merger investigations.  Merging parties control how fast they file their HSR submissions and when they comply with the DOJ’s second requests.  Some merging parties take their time to comply, hold back submission of documents and information and delay offering any real significant divestitures until exhausting all of their economic arguments.  While the government gets a lot of blame for long antitrust reviews, merging parties are always in control of the timing.  This settlement agreement also demonstrates that the DOJ is willing to work with merging parties that are willing to cooperate in negotiating  a complete solution to a competition concern.  Consistent with its recent enforcement action in Bayer/Monsanto, the DOJ is willing to approve deals with significant divestitures.  Here, the divestitures are worth approximately $20-23 billion—more than double the size of the Bayer divestiture.  Finally, the settlement shows that the DOJ is willing to approve settlements without upfront buyers in situations where multiple buyers can acquire the divested assets, a single buyer is not necessary, and a number of potential buyers exist.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

It is expected that a lot of time will be devoted to the dominant digital two sided platforms (Google, Facebook, and Amazon) as well as the associated network effects.  The FTC is interested in learning more about how their conduct hinders competition and innovation or how their services actually benefit consumers and enhance competition and innovation.

The hearings and public comment process will provide opportunities for FTC staff and leadership to listen to interested persons and outside experts representing a broad and diverse range of viewpoints.  Additionally, the hearings will stimulate thoughtful internal and external evaluation of the FTC’s near- and long-term law enforcement and policy agenda.  The hearings may identify areas for enforcement and policy guidance, including improvements to the agency’s investigation and law enforcement processes, as well as areas that warrant additional study.

In advance of these hearings, public comments on any of the following topics may be submitted to the FTC:

(1) The state of antitrust and consumer protection law and enforcement, and their development, since the Pitofsky hearings in 1995;

(2) competition and consumer protection issues in communication, information, and media technology networks;

(3) the identification and measurement of market power and entry barriers, and the evaluation of collusive, exclusionary, or predatory conduct or conduct that violates the consumer protection statutes enforced by the FTC, in markets featuring “platform” businesses;

(4) the intersection between privacy, big data, and competition;

(5) the FTC’s remedial authority to deter unfair and deceptive conduct in privacy and data security matters;

(6) evaluating the competitive effects of corporate acquisitions and mergers;

(7) evidence and analysis of monopsony power, including but not limited to, in labor markets;

(8) the role of intellectual property and competition policy in promoting innovation;

(9) the consumer welfare implications associated with the use of algorithmic decision tools, artificial intelligence, and predictive analytics;

(10) the interpretation and harmonization of state and federal statutes and regulations that prohibit unfair and deceptive acts and practices; and

(11) the agency’s investigation, enforcement, and remedial processes.  The FTC will invite public comment in stages throughout the term of the hearings:

The FTC will accept public comments through August 20, 2018.

The hearings will begin in September 2018 and are expected to continue through January 2019, and will consist of 15 to 20 public sessions.  All hearings will be webcast, transcribed, and placed on the public record. A website for information about the hearings including the schedule as it evolves can be found at www.ftc.gov/ftc-hearings.

If you are interested in filing comments and need help, let me know.

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com

Delrahim noted that outside of flat out price fixing and naked restraints of trade, which are clearly illegal, “antitrust demands evidence of harm or likely harm to competition, often weighed against efficiencies or procompetitive justifications.”  He added that “taking an evidence-based approach to antitrust law should not be mistaken for an unwillingness to bring enforcement actions.” He said that if there is clear evidence of harm, the antitrust enforcers should vigorously prosecute the antitrust laws. He noted that antitrust enforcers that failed to take action when they had credible evidence and accepted behavioral “band-aid” fixes to anticompetitive mergers should accept some blame.  Delrahim noted that “the Microsoft case proved that an evidence-based antitrust enforcement approach can be flexible in its application to new types of assets and markets—in that case, the computer code and software markets.”

His message was that the U.S. and international antitrust agencies should not simply go to war with digital platform companies rather a more effective approach would be grounded in evidence.  He added that “in certain platform markets involving network effects, there may be barriers to entry or a tendency toward a single firm emerging as the sole winner” and in those situations, “antitrust enforcers may need to take a close look to see whether competition is suffering and consumers are losing out on new innovations as a result of misdeeds by a monopoly incumbent.”

While Delrahim said it should be a high bar to condemn charging a lower price than one’s competitor, he noted that antitrust officials should be “open and receptive” to evidence that some incumbent monopolist tech firms may be engaging in exclusionary conduct, such as below-cost pricing aimed at driving out competitors, to gain control of a market.  Though Delrahim does not share the same views as Lina Khan’s regarding how predatory pricing or other exclusionary conduct claims might apply to digital platforms, he gave her some props.  Lina Khan wrote a paper which outlines the threats Amazon poses to competition, and argues that the framework used by U.S. antitrust enforcers is ill-equipped to take on today’s dominant online platforms.  “Her note surely has been subject to some criticism,” Delrahim said, “but we should encourage fresh thinking on how our legal tools apply to new digital platforms.  We need more thinking – diverse thinking – about these questions.  And, we need a civil discourse on this topic.”

While the Trump Administration has its eye on Facebook and Amazon, Delrahim’s remarks were really about having a measured approach to enforcing the antitrust laws, one based on economic evidence.  He basically said if there is “clear evidence of harm to competition in digital platforms, enforcers must take vigorous action and seek remedies that protect American consumers, so that free markets or consumers don’t instead bear the risk of failure.”

Andre Barlow
(202) 589-1838
abarlow@dbmlawgroup.com