Antitrust Chief Likes DOJ Odds in States' Challenge of T-Mobile/Sprint

ASPEN, Colo. -- DOJ likes its chances of prevailing with its structural remedies on T-Mobile's buy of Sprint and a divestiture to Dish Network, said Antitrust Division head Makan Delrahim in an interview after a Technology Policy Institute Q&A. About a dozen states sued to block the deal. Also at TPI, Delrahim confirmed his department and several states are probing tech issues. He wouldn't object to a look by others at Communications Decency Act Section 230.

Delrahim noted the states' lawsuit was filed before Justice reached a settlement with the companies. "They have amended their complaint," he told us of the states, taking into account his agency's consent decree (see 1907260071). "I think they would have a hard time winning the case" with DOJ's remedies, he said of the case in U.S. District Court in Manhattan.

One TPI attendee noted Delrahim's handicapping may not be borne out. "His record of predictions in the AT&T trial pretrial, during the trial and prior to the appeal proved not to be accurate," said Blair Levin of New Street and the Brookings Institution, in an interview. "Like many predictions in Washington, they are judged not by their accuracy but whether they drive an agenda." After a trial and an appeal, AT&T succeeded in buying Time Warner.

Faced with the same T-Mobile/Sprint before his department's consent decree, he might have gone to court, too, Delrahim told TPI Tuesday. His issue with states participating in the litigation against the transaction is that there had been confidentiality pacts during the review: "It makes you wonder why they did that." Justice's settlement "is a great solution, ultimately pro-consumer and pro-efficiency," he said. States "now have to litigate not the underlying transaction, but the fix that we have" with the FCC and DOJ, he said.

The states' suit came after "a year-long investigation and careful consideration of the parties’ arguments and all the evidence," emailed a New York AG office spokesperson. The litigants sued over the deal "because of its impact on competition," he added. "We are acting under our capacity as independent states."

Tech Probe

On DOJ's look at the tech sector, perhaps a few dozen state AGs "have expressed interest in the subject matter," Delrahim said. "Where we can work in a cooperative manner with some state attorney generals, we do work together … so we attempt to operate in that mode." He's not disclosing a timetable for the probe. "We have an investigation," Delrahim said. "We will be taking a broad look, and we will be looking at it with no preset agendas."

Big tech isn't necessarily bad tech, Delrahim suggested: As U.S. AG William Barr says, "big in and of itself is not bad, it's big behaving badly." One wants tech companies "to continue to strive and compete," Delrahim said. Investigations can look at efficiencies, and whether better ability to compete and possibly lower prices to consumers and increase output springs from that, he noted. "I have no idea without doing an investigation" whether that's the case with the tech industry, he said.

Though some tech and other products are free to consumers, that doesn't mean no one pays, Delrahim said: "You don’t have a free lunch in this market economy." On broadcast TV, he noted, "who pays for that is the advertiser." And "when you look at a social media product, is it really free?" he asked. "It might be free to you but not somebody else." Antitrust laws aren't limited to only prices, he added.

The CDA's Section 230 isn't an antitrust issue, Delrahim noted, though it might be worthwhile to look at that law. He said the portion of the 1996 Telecom Act didn't anticipate the type of online services available now: "A review of Section 230 by people who care about it is perfectly appropriate." Some want it expanded to give tech companies less safe harbor, which came up earlier at the conference (see 1908190021). "To the extent that companies internalize externalities of their offerings and that makes them improve and be more responsible, that can be a positive thing," Delrahim said.

"CDA 230 makes the best parts of the internet possible. Americans rely upon user reviews, ratings, and more -- which exist thanks to CDA 230 -- to make safer, better decisions online," emailed an Internet Association spokesperson. "CDA 230 is also the law that allows companies to moderate and delete content that everyone agrees has no place online without facing liability for making platforms a safer place for all."

"CTA has always been a supporter of Section 230," said Jamie Susskind, vice president-policy and regulatory affairs, on a later panel. (See Notebook below in this report). The section helps small businesses that might lack money for content monitoring systems, and may have helped the U.S. get internet investment, Susskind said: "Section 230 is a very essential protection" for tech innovators.

DOJ + FTC = OK

Some may have the mistaken impression DOJ and the FTC divided up their reviews of aspects of tech by company, Delrahim suggested later in Q&A with reporters. "It's never company by company," he told us. "It's conduct by conduct." He cited instances where the agencies reviewed different deals involving tech companies: "If you look through history, you have largely the same process."

It's also not correct that there's much tension between the antitrust agencies, though some areas of differences have surfaced over many years, Delrahim told reporters. Some 99.9 percent of the time, DOJ and the FTC don't have such issues, he estimated: "The differences between the two agencies have been going on for some time, going back decades. I don't think anything is new."

“Both agencies have the good fortune of talented lawyers who are passionate about great cases and enforcing the law," said FTC Chairman Joe Simons in a statement Tuesday. "I view each agency’s eagerness to pursue the investigations as a positive.”

Delrahim disagreed with some of Colorado AG Phil Weiser's earlier comments at TPI about politics possibly playing role at DOJ. "I don’t agree with it, and I think it's really dangerous when we start questioning, not that we shouldn’t do proper oversight and checks and balances ... if you start questioning the motives, just for political gain, of institutions like the Justice Department," Delrahim said. "It starts to be problematic" if people believe what DOJ does may include political motives, he added. Moderator and CNBC anchor Brian Sullivan noted Weiser had said similar.

Colorado's Weiser recounted now that he told TPI Sunday of his worries about the department and the Affordable Care Act. "My concern with the DOJ’s conduct during the ACA litigation is that, instead of defending the law as required, it is making the highly questionable argument that the entire law is invalid based on the invalidity of a single provision," he emailed us. Some attendees said they took his remarks as criticizing Justice for being too politicized.

On advice to the audience of tech, telecom and media executives on what they and their lawyers should keep in mind when dealing with his department, Delrahim said to be forthright, generally reflecting what another Justice official told the conference last year (see 1808200056). Get data to DOJ that may be relevant as early as possible, Delrahim advised. "We have no qualms about going to court to try to enforce our" civil investigative demands, he continued. "We’re fully prepared to enforce our process to preserve the integrity of our investigation." He suggested looking at court documents on Sinclair's abandoned deal to buy Tribune. "That complaint shows what not to do, if you are a merging party" and dealing with DOJ's front office, he said. Sinclair had no comment.

TPI Notebook

Tech and content stakeholders differed, some along historic fault lines, about how easy it is for new, small entrants to get traction in the music market, including scoring wide distribution. At a TPI panel Tuesday (see page 6), RIAA CEO Mitch Glazier said "the market will work." Jean Prewitt, CEO of the Independent Film & Television Alliance, wasn't so sure, saying not to be distracted from this analysis by the next shiny object. There are hundreds of music services, Glazier noted. He pointed to Amazon's Alexa letting a user order by voice command various music services and bundles as "a great example of differentiation." He identified "a huge amount of competition" in the U.S., with varied services often having similar music. "There’s a fierce competition for global markets both within big companies" and local ones, he added. Distribution remains powerful, said Prewitt, as content producers need those "pipelines." It's "much more about who gets close to the consumer and in the winner-takes-all analogy, you sort of ignore the fact that consumers are famous from walking away from today’s form of distribution. So I think the jury is really out on how this all plays out," she said. "You make the best content you can" is her suggested strategy. Entertainment Software Association Senior Counsel-Tech Policy Delara Derakhshani noted tech platforms are releasing transparency reports, and mentioned "the importance of collaboration and cooperation" in this sector. Prewitt said such disclosures, which can include information on IP/royalties, "don’t actually tell you how your product performed, which is what we really want." In industry self-regulation, Derakhshani said the videogame sector's Entertainment Software Rating Board is held up as a good example.

Current U.S. trade issues can affect startups and other companies, a TPI panel was told Tuesday (see page 7). With the current focus in Washington on China, "what’s important in terms of what’s happening in Washington is our relationships with other countries," said BigID CEO Dimitri Sirota. "We really see ourselves as an international company, even though we are only three years old." CTA continues to have concerns about the administration's duties on products from China, said Jamie Susskind, vice president-policy and regulatory affairs. She said about 600 of CTA's roughly 2,000 members are startups, and many levies taking effect in September and in December may affect consumer tech products: "For us, the results are tangible and they are real." Though the association is "sympathetic to what the administration is trying to do" on China and its IP practices, "we don’t prefer to see tariffs imposed," which the group likens to taxes, Susskind continued. On privacy, CTA has concerns about California's law. "Consumers have a right to know" what data is being collected, but that state's law could "hurt innovation," she said. "We’ve been advocating for a federal framework. Our hope is that Congress will get it done." The association prefers "a framework that isn’t" like the EU's general data protection regulation and lets companies "use data in ways that provide benefits to consumers," she said.

Regulatory systems need to change because of artificial intelligence, including as applied to machine learning for financial-sector AI, an economics professor told TPI. "The expertise has got to be there," said Stanford's Susan Athey. "I think each regulatory agency is going to have to hire people" with the appropriate expertise in this realm, she said. "We have to change our regulatory structure to accommodate a world where firms" can show what's an acceptable error rate, Athey said. "The regulatory scheme has got to adapt" to "actually accept errors," she continued. "You cannot be error-free. ... A machine learning model makes mistakes. You can’t hide that it makes mistakes. You have to demonstrate the error rate." Athey spoke separately Monday from a panel where she and others said government faces challenges measuring tech's impact on the economy (see 1908190038).