The Trump Administration has released its new internal guidelines for how the relevant agencies will review vertical mergers, with an eye toward better identifying and challenging competitively harmful mergers, though critics of the process say the guidelines still keep a thumb on scale for such mergers. 

Vertical mergers are ones that combine different parts of the same supply chain, an AT&T with its video services and Time Warner with its content production, for example, which DOJ tried unsuccessfully to block.

The Justice Department and Federal Trade Commission divvy up merger antitrust reviews, with Justice usually getting the media mergers. This is the first time they have issued joint guidelines and the first major revision since 1984. 

The two have been working on a draft of new rules for some time, including putting them out for public comment. The FTC vote to release the new guidelines was 3-2 along party lines, with Democratic commissioners Rohit Chopra and Rebecca Kelly Slaughter voting no. 

Related: DOJ, FTC Schedule Vertical Merger Workshops

Historically, vertical mergers have not frequently been challenged, but Department of Justice antitrust chief Makan Delrahim has made it clear there remain antitrust issues with vertical mergers, as was evidence by Justice's attempt to block the AT&T-Time Warner deal.  

“These new Vertical Merger Guidelines provide transparency in the important area of vertical merger analysis,” said Delrahim.

FTC chairman Joe Simons called them "an important step forward in maintaining vigorous antitrust enforcement," and said they "reaffirm our commitment to challenge vertical mergers that are anticompetitive and would harm American consumers." But he also said they essentially reflect current enforcement policy, and in that sense are a transparency move to give businesses a heads up. 

In her dissent, commissioner Slaughter said one reason she voted "no" was that the guidelines refused to explicitly disavow the "false assertion" that vertical mergers are almost always pro-competitive. 

She did say there were positive changes including eliminating the "quasi-safe" harbor based on market share. The draft guidelines had signaled that a vertical merger is unlikely to be challenged if the merged parties have less than a 20% share of the market, as well as its discussion of raising rival's distribution costs as a potential competitive harm, which was a key point in DOJ's attempt to block AT&T-Time Warner, as well as its discussion of the purchase of firms that are the most likely potential competitors. That has been a key DOJ concern with Big Tech firms and whether they had bought themselves up to monopoly by purchasing potential rivals early, before it raises antitrust review. More than one venture capital-backed tech startup has launched in hopes of getting bought out for big bucks. 

Where the guidelines fell short, she said, were "(1) the over-emphasis of the benefits of vertical mergers; (2) failure to identify merger characteristics that are most likely to be problematic; (3) the treatment of the elimination of double marginalization (“EDM”); and (4) the omission of important competition concerns including buy-side power, regulatory evasion, and remedies." 

Related: DOJ, FTC Spar Over Roles in Antitrust Reviews

Delrahim signaled this week that the revision is basically updating the guidelines to square with its investigative practices and approach over the past few years, as a way to provide "greater predictability." 

Joshua Stager, senior counsel for New America’s Open Technology Institute, agreed with Slaughter that the guidelines were underwhelming, calling it a missed opportunity for real change. OTI opposed the Comcast/NBCU, AT&T/DirecTV and AT&T/Time Warner deals, all of which passed muster, either with the relevant administration or the courts. 

“These guidelines haven't changed since 1984, during which time competition has waned and inequality has worsened," Stager said. "We hoped the FTC and DOJ would use this process to make our antitrust laws work better for the American people. Unfortunately, the new guidelines miss the mark. Rather than refresh outdated thinking, the new guidelines gloss over critical issues and ignore the risks of vertical mergers, particularly in digital markets."

Federal Trade Commission chairman Joseph Simons told a CES audience in Las Vegas that the FTC was still investigating Facebook for antitrust violations, and that the FTC's $5 billion settlement with the company is the thing he is most proud of over the past year. The other was the $170 million settlement with Google/YouTube over kids privacy. 

That came in an interview with Consumer Technology Association president Gary Shapiro at CTA's CES 2020 techstravaganza in Las Vegas Tuesday (Jan. 7). 

Related: FTC Installs New Competition Leadership 

The FTC is currently investigating Big Tech and Simons said it would be issuing guidance on how the FTC would be evaluating them under antitrust law, though he did not say whether that meant a new approach.  

Simons renewed his call for Congress to pass comprehensive privacy legislation, but does not favor a Democrat-backed proposal to create a new, separate, privacy enforcement agency. He said that would be a huge mistake and that the FTC has been enforcing privacy aggressively and creatively and has the experience, expertise and morale to do the job, with some help from Congress. 

He said that the FTC Act, which is 100 years old, should instead be updated, and that Congress should also clarify that the FTC can recover monetary damages, something a court decision put in some doubt. 

Simons said Congress needed to do privacy law in a way that does not discourage competition by entrenching large companies, as some have suggested Europe's GDPR privacy regime is doing. 

Shapiro said he appreciated that, and that his "big company" members also support smaller members having room to enter the market with a new idea. 

Related: House Continues Digital Antitrust Deep Dive 

Simons talked about the tools the FTC has to enforce privacy, which includes power to pursue deceptive advertising, in this case the privacy plans tech companies are encouraged to publish. It also includes the FTC's current review of big tech and whether it has gotten that way via anticompetitive methods. 

Shapiro pointed toward the "amazing things" those large U.S. platforms have done. 

Simons said he was not suggesting the government was going after companies just because they were big and successful. He said they have to have done something anticompetitive. He pointed out that given that the FTC encourages competition, if a company as a result becomes big, even to the extent of monopolizing a market, they should not be penalized for that success. "We don't just break them up because they are big," he said. "That would be bad policy." 

Federal Trade Commission chairman Joseph Simons told a CES audience in Las Vegas that the FTC was still investigating Facebook for antitrust violations, and that the FTC's $5 billion settlement with the company is the thing he is most proud of over the past year. The other was the $170 million settlement with Google/YouTube over kids privacy. 

That came in an interview with Consumer Technology Association president Gary Shapiro at CTA's CES 2020 techstravaganza in Las Vegas Tuesday (Jan. 7). 

Related: FTC Installs New Competition Leadership 

The FTC is currently investigating Big Tech and Simons said it would be issuing guidance on how the FTC would be evaluating them under antitrust law, though he did not say whether that meant a new approach.  

Simons renewed his call for Congress to pass comprehensive privacy legislation, but does not favor a Democrat-backed proposal to create a new, separate, privacy enforcement agency. He said that would be a huge mistake and that the FTC has been enforcing privacy aggressively and creatively and has the experience, expertise and morale to do the job, with some help from Congress. 

He said that the FTC Act, which is 100 years old, should instead be updated, and that Congress should also clarify that the FTC can recover monetary damages, something a court decision put in some doubt. 

Simons said Congress needed to do privacy law in a way that does not discourage competition by entrenching large companies, as some have suggested Europe's GDPR privacy regime is doing. 

Shapiro said he appreciated that, and that his "big company" members also support smaller members having room to enter the market with a new idea. 

Related: House Continues Digital Antitrust Deep Dive 

Simons talked about the tools the FTC has to enforce privacy, which includes power to pursue deceptive advertising, in this case the privacy plans tech companies are encouraged to publish. It also includes the FTC's current review of big tech and whether it has gotten that way via anticompetitive methods. 

Shapiro pointed toward the "amazing things" those large U.S. platforms have done. 

Simons said he was not suggesting the government was going after companies just because they were big and successful. He said they have to have done something anticompetitive. He pointed out that given that the FTC encourages competition, if a company as a result becomes big, even to the extent of monopolizing a market, they should not be penalized for that success. "We don't just break them up because they are big," he said. "That would be bad policy." 

Federal Trade Commission Chairman Joseph Simons has assured Congress that its review of how the antitrust laws should apply to high-tech conduct is not a one-off task force, but a new litigation division ready to pursue anticompetitive conduct by the edge, including getting at digital platforms through their impact on privacy.

He made it clear that antitrust issues are raised not only by pricing but by reductions in product quality, which could include privacy, he said.

That came at a budget hearing in the Senate Appropriations Financial Services and General Government Subcommittee May 7 and after questions have been raised about the possible need for a new antitrust approach to social media, whose cost to the consumer may seem to be zero, but is in fact in data privacy and control.

Related: Delrahim Says FAANG Monopoly May Not Necessarily Be Bad

Subcommittee chairman Sen. John Kennedy (R-La.) pointed out that there has been some debate over whether edge providers have avoided antitrust scrutiny over their conduct and growth through acquisitions because as a free service there are not issues with pricing and that perhaps the FTC has not been sufficiently attuned to other consumer harms other than raising prices.

Simons said the FTC's new high-tech antitrust task force, which is part of the bureau of competition, is not temporary, but is basically another litigation division in that bureau. He said its mission was to focus on high tech, particularly digital platforms, looking at both transactions and conduct.

Related: Sen. Klobuchar Looks to Tighten Clayton Act Triggers

He said he expected the division would be bringing cases, which would just continue if and when it found more such cases.

Kennedy wanted to know when such cases against digital platforms might be coming, but then adjusted the question to when Congress would know what the FTC's policy toward edge providers and antitrust would be.

Simons said antitrust policy was irrespective of the task force, which is to "stop anticompetitive conduct and anticompetive mergers that either result in price increases, reductions in product quality, which would include privacy, and reductions in innovation. 

Federal Trade Commission chair Joseph Simons told Congress that he does not want Congress to give his agency broad rulemaking authority.

Simons was testifying at a House Energy & Commerce Committee Consumer Protection Subcommittee FTC oversight hearing.

He has said the FTC needs more rulemaking authority, but also said that should be targeted authority to implement federal privacy legislation currently being considered by Congress.

"Please do not do it. Do not give us broad rulemaking authority. Give us targeted rulemaking authority," he said when asked by full committee ranking member Greg Walden (R-Ore.) to clarify what authority he was looking for.

Simons told the Senate Consumer Protection Subcommittee last fall that the Federal Trade Commission needs three things to better protect consumer privacy, 1) rulemaking authority; 2) civil penalty authority—currently it can only try and make consumers whole for losses, not penalize the conduct responsible; and 3) jurisdiction over nonprofits and common carriers.

The FTC once had more rulemaking authority but Congress pulled that back after the agency became politicized, Walden pointed out. Simons said he was similarly concerned with the politicization of the commission.

Related: Privacy Groups Propose New Government Data Protection Agency

Simons said what he wanted was for Congress to come up with bipartisan privacy legislation, define it "fairly well"--perhaps looking at the Children's Online Privacy Protection Act as a model, and "give us targeted rulemaking authority so we can keep it up to date and make technical changes for developments in technology or in business methods."

He said the last thing they wanted was to dump the "big, broad question" on us, which he said was better the province of elected officials.

Walden said that too often, Congress will put the onus on agencies when it can't figure something out, then Congress complains when it doesn't agree with the agency. Walden agreed that it should be on Congress' shoulders to provide as "defined and targeted" authority as possible.

FTC's Simons: We Are Cop on Privacy Beat

The FTC is under pressure from Capitol Hill to enforce consent decrees with edge providers and to look hard at whether the size of Facebook, Amazon, Google, Apple and Twitter--have antitrust implications the FTC may have missed in the rise of those companies from scrappy garage startups to companies trying to mine the world's data and with market caps on par with the GDP (rather than GDPR) of some countries.

Facebook has signaled it expects to pay up to $5 billion to settle an ongoing Federal Trade Commission investigation into its privacy practices, but Democratic Sen. Richard Blumenthal (D-Conn.) and Big Tech basher Josh Hawley (R-Mo.) have teamed up to tell FTC Chairman Joseph Simons they want more, and not money, but instead a shot heard round the tech world.

The pair wrote Simons Monday (May 6) to ask that he wrap up the investigation and to compel "sweeping changes" given what they say has been its "pattern" of misuse and abuse of personal data.

Related: OMI Seeks Hill Investigation of FTC

They said the expected settlement will be a defining moment for the FTC, and one they want defined by tough action. "The FTC must set a resounding precedent that is heard by Facebook and any other tech company that disregards the law in a rapacious quest for growth."

"This investigation has been long delayed in conclusion – raising the specter of a remedy that is too little too late," they said, adding: "The [2011] Facebook consent decree violations have been blatant and brazen, an offensive defiance that adds insult to injury."

Blumenthal telegraphed his desire for more than just money in a tweet last week after Facebook revealed in a financial statement that it would have to be ponying up $3-5 billion to settle the FTC investigation.

[embed]https://twitter.com/SenBlumenthal/status/1121183762505662464[/embed]

Hawley has come into the Senate--he is a freshman--swinging a hammer at Big Tech in general and social media in particular. 

It was a year ago last March that the FTC confirmed it was investigating Facebook over its privacy and data security practices, saying it has "substantial concerns." Those have likely only increased with subsequent revelations, including congressional concerns about its research project that incentivized teens and others to give up info (Project Atlas) and news that the company was sharing data with big tech and is planning to integrate WhatsApp, Instagram and Facebook Messenger.

The FTC investigation followed the revelation that Cambridge Analytica had used Facebook user data without their knowledge to build profiles it then sold to political campaigns, including the Trump campaign. Analytica reportedly used the information with most users having not given their permission for Facebook to share it with a third party.

Related: OMI Says  Multi-BIllion Dollar Facebook Fine Is Not Enough

Facebook is under an FTC consent decree dating from its 2011 settlement of FTC allegations it deceived consumers by not keeping its privacy promises. The FTC is authorized to enforce such pledges under its Sec. 5 (unfair and deceptive practices) authority. The commission was investigating whether Facebook had violated that agreement

That consent decree required Facebook to obtain a users' permission before sharing data, so that Cambridge Analytica data dump appeared to be a violation of the agreement.

Sen. Ted Cruz (R-Texas) waded into Big Tech big time in a Federal Trade Commission oversight hearing that featured much edge-provider critiques.

Cruz was arguably the most pointed critic during the Senate Consumer Protection Subcommittee hearing Tuesday (Nov. 27), which dealt primarily with online privacy and data protection and what additional authority the FTC needed to protect it. 

During questioning the FTC chair suggested the FTC should not be getting into the issue of censorship of speech by platforms, suggesting perhaps that was an area for the FCC.

Sen. Cruz, a former FTC staffer himself, got assurances that the commission was looking into what he called Google's "deceptive and intrusive collection of location information on Android smart phones, its tracking of in-store purchases and its "deceptive by design" user privacy settings.

Cruz asked if the FTC had investigated those claims and what it had found. 

While he said that he could not talk about the specifics of any non-public investigation, which in itself seemed to signal there was one, FTC chair Joseph Simons said that "if you read about it in the press"—Multichannel News was among those who wrote about those issues—or "if there's a congressional letter that points out a potential problem, we're on it."

That appeared to satisfy Cruz. But he was far from done.

He pointed to an Esquire article about how Facebook and Google are together worth $1.3 trillion dollars, and compared that to the companies often cited for their dominance.

To put that in perspective, he said, "you could merge the world's top five advertising agencies [WPP, Omnicon, Publicis, IPG and Dentsu], with five major media companies [Disney, Time Warner, 21st Century Fox, CBS, Viacom] and still need to add five major communications companies [AT&T, Verizon, Comcast, Charter and Dish]" and still only have 90% of what Google and Facebook are worth combined. 

He asked FTC chair Joseph Simons whether the FTC was concerned about the "massive accumulation of power" by Big Tech and how antitrust law should approach that massive concentration. 

Simons said the FTC was worried about the exercise of market power, not the fact of that power. He cautioned that the fact that they are big does not mean it is a problem unless "they got big by being bad"—through anticompetitive conduct—or remain big through such conduct, that is something the FTC needs to stop.

Democratic commissioner Rohit Chopra suggested there might be some competition issues in that very size. He said that if you talk to investors, many say they won't fund a new startup unless they can see the payday of it eventually being bought by a Google or Facebook. He told Cruz he wasn't sure there could be a competitive market or innovative economy "where investors are putting money only into ideas that they can sell to an existing incumbent. 

Cruz called those "good and important" concerns.

But he was not done. He wanted to talk about the issue of Silicon Valley censoring conservative speech. He said they were using their market power to silence discourse in the public space that they disagreed with—he cited Twitter banning a conservative speaker, apparently a reference to conservative Jesse Kelly (coincidentally, he has since been reinstated, Fox News reported Tuesday. Cruz said there was virtually no transparency about what Twitter, or Google or Facebook, might be doing to censor speech. He asked Simons what the FTC could and should be doing about that. 

Simons signaled it was not clear to him that the FTC should be doing anything in the area of speech. He said what Cruz was talking about was similar to the FCC's "fairness Act"—he meant Fairness Doctrine, under which the FCC enforced balanced speech on the airwaves. 

He said "maybe there is an FCC angle there that is appropriate for either the Congress or the FCC to pursue." Cruz was unlikely to be in favor of that, since Republicans long railed against the doctrine as itself a way to repress conservative speech. Simons said that unless it related to a competition issue, or is unfair or deceptive, "then I don't think we have a roll."

Democrat Chopra again signaled he was thinking more along Cruz's lines. He said that he agreed with Cruz that the public knows very little about how edge providers make those content decisions. While he conceded there were free speech issues that might not be in the FTC's wheelhouse, the FCC has [6B) authority to compel information about business practices and to vote to make some of that info public. 

Chopra said the FTC was in a position to reveal some of that information and that he would think hard about those speech issues. Cruz encouraged him to do so. 

Cruz said the FCC had ample authority to provide transparency if platforms were holding themselves up as neutral public squares, but were not. That, he said, would be false and deceptive, something the FTC can address not through antitrust authority but through its Sec. 5 authority.

Chopra, who clearly has his own issues with Big Tech, pointed out that the FTC's authority also extends to enforcing consent decrees with "several of the largest tech companies on the planet," including Google and Facebook. "We expect that those orders are followed. They are not suggestions."