Merger Policy with 2020 Foresight: Merger Guidelines and Structural Presumptions: Matching Antitrust to Market Structure

Below we have provided the full text transcript from the first panel of our live-streamed conference, Merger Policy with 2020 Foresight, from June 6, 2020.

Diana Moss:

Good morning all. I’m Diana Moss the President of American
Antitrust Institute. It’s a pleasure to be here today as the CPI Live Event
with these esteemed talent of economic experts. The title of our panel is the
Merger Guidelines and Presumptions Matching Antitrust Market Structure. Today
we are going to focus of key questions that are now front and center in the
competition a merger policy and antitrust and competition reforms proposals
moving forward. Our goal in the next 45 minutes is to illuminate the way over
how the courts approach the structural presumption and the role of economics in
that process, and we will use thesis to highlight various issues in three
rounds of questions to the panelists.

First, we will set the table so to speak with some remarks
on the debate over the rising concentration regarding what happens with the
relationship between market structure and adverse competitive effects. We’ll
then move on to discuss the challenges around the structure presumption and
what it means for merger control moving forward, and then we’ll finish with
some comments on the prospects for other types of perspective presumptions, for
example, for vertical mergers and acquisitions of potential rivals. I’m joined
here today by three noted economists, Sean Ennis, he’s the Director for the
Center of Competition Policy and Professor of Competition Policy at the Norwich
Business School, University of East Anglia. He has extensive experience in
government work and competition law and policy and served in various roles in
the OECD, with the Competition Commission of Mauritius, the European
Commissions.

Aviv Nevo is with George Weiss and Lydia Weiss, University
Professor in the Economics Department at the University of Pennsylvania. His
extensive research focuses on empirical industry organization and marketing,
antitrust and competition econometrics. Larry White is the Robert Kavesh
Professor of Economics at New York University, Stern School of Business.
Professor White has authored numerous books and widely published in academic
journals and he’s co-editor with John Kwoka of the Antitrust Revolution. He has
co-edited the recent work Regulating Wall Street: CHOICE Act vs. Dodd-Frank. So
with that introduction, I would like to move on to some framing remarks for our
panelists. I think it’s safe to say a lively debate in the background about
rising levels of concentration particularly in the US, but there’s also
mounting evidence about the effects of declining competition and the role of
antitrust enforcement in it.

So I’d like to start off with some questions for panelists
about the connection between the rising concentration debate and the evidence
around market structure and evidence of adverse effects. So let’s start with
Larry, Larry the economic evidence is growing for sure, and my question to you,
is it compelling for how antitrust enforcers and the court’s view of the
mission of competition and antitrust enforcement? Is one analytical approach
better than the others, and what other types of approaches might we want to
consider?

Larry White:

Whoa, let’s see how many hours have you given us for this
one. Those are good questions. Let me start, I’m going to be bit of a dissident
on this rising concentration issue because a lot of the evidence that we see in
the market may well be local and I want to come back to that and very broad
categories of the Council of Economic Advisors Report of 2016 I think provides
a good example where they plotted rising levels of seller concentration, but it
was all at the national level, it was all at a very broad level, and in some
instances, the largest, I’m not making this up, 50, five-zero companies,
insurance, for example. So really for any trust purposes as I think most of
the, if not all of the viewers, know you need to focus on relevant markets.
Sometimes those markets are national. They might even be international but for
some instances they are local and you have to really think about local levels
of concentration.

And in this regard Esteban Rossi Hansberg has really
compiled some very interesting, I think, compelling data that even though we
see rising concentration at the national level, if you look at products
services that really are local, there’s not that evidence of rising
concentration. I’m familiar with banking and for sure, we have had rising
levels of banking, concentration, largest four, largest eight, whatever number
you want and that’s been going on for 25, 30, 35 years. But Robert Adams at the
Board of Governors Federal Reserve has compiled an equally long series of
metropolitan area, rural County area of banking concentration, which shows no
change if anything, a decrease. So I think you need to be really careful and examine
relevant markets. And of course that’s what we expect in a merger context.
Trying to figure out the relevant market, that’s what the horizontal merger
guidelines are all about. And they’ve been in, I think, a robust form for 38
years. They’ve been modified. I think they’ve been made better over time, but
that’s where we ought to be focusing our, if we’re concerned about
concentration relevant markets.

Moss:

Thanks, Larry, Aviv let’s turn to you and talk about the
background debate over rising concentration and evidence of a strong connection
between market structure and competitive effects. Do you think any of this is
likely to influence the courts where the antitrust game really is at? And is it
easy necessarily to make that connection? Can you tell us about any particular
industries where making that connection between market structure and competitor
effects can be a challenging process and is there a strong connection between
what’s going on in the academics literature, for example, and how the courts
are working these issues?

Aviv Nevo:

Thank you, Diana. Those are great questions. Well, first
off, thanks for actually having me on the panel. It’s great to be here as my
fellow panelists know I’m actually out at home because of a storm. So I’m speaking
in a parking lot and hopefully you can hear me. Okay. So thanks for having me.
Let me actually, before answering your question, just briefly comment on some
of the stuff that Larry said. Larry said he was going to be the dissident, but
maybe not solely on this panel because I generally actually agree with Larry’s
comments. There is a lot of evidence on increased concentration, but one has to
be very careful at how we evaluate that for the reasons that Larry said and
many others that we don’t really have time to talk about.

Larry talked for example on the CA report that talked
about concentration of the top 50 firms, and that’s going to up and share the
combined share of the top 50 firms. My view is any industry that has 50 firms
is pretty close to being the textbook competitive model. So I think that’s not
the industry we worry about. It’s the industry that have three, four or less
it’s not the 50 firms. That said there is evidence and markups and profits
going up the markup side evidence especially if somewhat controversial in terms
of how it’s measured and there was a long debate that we don’t really have time
to talk about it. To me, the most concerning fact is some facts that’s been out
there that I think have not been pushed as hard as they can be about dynamics
and dynamic effects and entry and so forth.

If you look at the CA 2016 report, it actually talked
about decreased entry, not increased, which we would expect if profits are
going up, we’d expect to see more entry. We actually see less. To me, that’s
really the biggest red flag that we really should look at. Okay. But now going
from the academic into the policy realm if someone who has foot in both worlds,
I find it often quite frustrating you go to an academic conference and there
could be a very lively debate typically leaning towards there’s not enough
enforcement, there’s all this rise in concentration markups, all this stuff
that we just talked about. And again, there could be some debate as to how
meaningful it is but generally the feeling is, look we’re not quite sure how to
measure things, but the marketplace, the economy is becoming less competitive
and a lot of pressure on agencies that actually bring more cases. Okay. So
that’s the one side.

On the other side, what you see as agencies reaching out
trying to make cases, one could say maybe they’re pushing them but trying to
really follow up on this call to doing more that are coming from academia and
from policy makers, and they’re having a hard time getting courts to go along,
right? So just to think of a few cases, the AT&T-Time Warner case in
January this year, the Evan K case that the FTC brought in chemicals, the Sabre
Farelogix case that I was involved with working with the DOJ. Those are all
cases where the agencies put together cases that are potentially going towards
some of these claims and courts in all cases.

The courts on all three cases. The courts, the district
courts at least rejected the arguments. Some of those cases, for example, the
Sabre one’s under appeal. So we’ll see how that all ends up. So there seems to
be a bit of a disconnect here between what the academics are saying and what
courts are willing to accept, and to some extent, the agencies, the DOJ, and
the FTC in the US and maybe to a lesser extent, the European agencies are stuck
in the middle and since there’s a claim to bring more cases, but the case law
is the case law and courts are seen in a very particular way.

White:

And the lawyers at justice and FTC really don’t like
losing cases. It doesn’t feel good. They don’t like to go in and get a loss
that is certainly my opinion.

Nevo:

I don’t think that just lawyers at the DOJ because see, no
one likes losing cases.

White:

Yeah. That was my experience at DOJ as well.

Moss:

All right, so Sean, let’s turn it to you for some insight
on this. I guess one argument is that, one question rather is, do we even need
the courts to recognize accumulating evidence on concentration and the
relationship between market structure and competitive effects? I mean, I can
say to any number of cases that occurred in 10 years, 15 years ago that were
highly concentrated mergers, for example, Heinz Beech-Nut merger were great
opinion on that. It was just a slam dunk highly concentrated merger. The
shifting of the burden was not an effective way to rebut that and by the way
this is the case in The Antitrust Revolution. But that was 10 years ago, if not
longer, but now we’re in an era of rising concentration and concerns but do we
even need the courts to recognize this debate to advance the case for the
structural presumptions?

Sean Ennis:

Well, I really think that these are independent matters.
Structural presumptions are worth considering whether or not there’s rising
concentration or decreasing concentration, structural presumptions give a lot
of a certainty to firms, to external lawyers, they’re advisors to the enforcing
agencies as well to help, to narrow down what the zone of questioning is
structural presumptions can be at a high level that can be at a low level of
concentration. So I think it’s worth thinking about structural presumptions
being independent of economic evidence. Having said that I do think it’s worth
just discussing what the role of economic evidence is. And often I feel like
it’s very important within the agencies themselves when they’re making
decisions about whether to bring a case. They look, especially whether the
economic evidence makes sense and is strong before deciding to bring a case,
recognizing that the judge might not place as much weight on it as the agency
does.

And for an example of some, the agencies and the judges
will look for confirmatory supporting evidence. I think Staples Office Depot is
a good example of that with the newspaper supplements that showed different
prices for different cities, depending on the level of competition in the
cities. I think that was a nice piece of confirmatory evidence. I sometimes
think about the challenge that judges face that it’s really particularly tricky
for them dealing with all sorts of cases when they come to a merger case to
reach a strong decision to stop a privately decided action because judges are
most accustomed to dealing with provable facts and market definition itself is
very complex exercise and so absent clear rules about how to do that. Judges
have to make predictions in merger cases and I think would often be reluctant
to do so.

You mentioned the Heinz Beech-Nut case, and that’s good
example, ultimately appeals court accepting presumption of increased
concentration being harmful, but it’s also worth mentioning that at the
district court level that the case had a different outcome. So it’s one of
those maybe cases where on appeal the merger was stopped not the other way
round. And so yeah, the perspective nature of that decision that you could
think of it as a three to two merger. And so perhaps there’s some presumption
against three to two mergers. My favorite case though, about how economic
evidence could influence an outcome in a merger case is the Evanston Hospital
merger, right? Where the economic evidence was post consummation and it was
very rare phenomenon to have this case anywhere I think.

Where the agencies went in after the deal and sought to
scramble eggs and it was challenged by the FTC after, after having then
consummated. And the court decision of the breakup was rather dramatic, I
think, very and perhaps changed the flow of hospital merger challenges after
that time as well. So that, for me, that was a very interesting example of how
economic evidence can ultimately influence not just one case, but probably a
course of cases afterwards.

Moss:

Thanks Sean. So let’s unpack the structural presumption
and look at some of the challenges that are faced in the process of making the
arguments that are embedded in the presumption through the economics lens. So
you heard Steve Salop say this earlier in the discussion, the Fireside Chat,
but it pays to refresh on what the presumption is. So the presumption is
essentially where concentrated mergers are so likely to be anti-competitive
that they should be presumed so unless proven otherwise. And that’s where the
burden shift comes in, for the defendants to prove up efficiencies that would
have countervailing effects, but as John Kwoka points out, the reality is guarded,
the reality is that the plaintiff typically bears almost the entire burden of
predicting how a merger will have competitive effects.

And so they support the full case for blocking it. Aside
from the fact that a good merger control has a deterrence effect to prevent
other future concentrative harmful mergers. Let’s talk about where the
challenges are in the presumption. So first to Aviv, the question I have for
you is, at what stages in setting up the structural presumption, walking
through that analysis, is it left in the dust? What stages of analysis
particularly those that use a lot of economics do we see that happen? Market
definition comes to mind, efficiencies come to mind. Can you give us some
examples, and how are the courts dealing with these types of issues?

Nevo:

Okay. Yeah, so I find the whole discussion of the
structural presumptions, I mean, it’s very interesting. It used to be not very
long ago that complaints about structural presumptions were really coming more,
I would say from the more domain of the conservatives that were very openly, I
mean, if you look at some the speeches of Josh Wright has given over the years,
very openly daring the agencies to bring cases without the use of any
structural presumption or structural case at all. So why present HHI, let’s go
straight to how the academic literature would like to see competitive effect we
should skip over that. And it was really more progressive pro enforcement types
who were going to try and to really push and say, “Look, we want to stay with
these structural presumptions.”

More and more though, I think you’re going to see a more
an attack if you wanted to structure presumptions from both sides and the
reason you’re going to see that is there are cases where the fight over trying to
get the structural presumptions, which is directly tied to market to
definition, and I’ll get back to that in a second, that directly tied to market
definitions, in some sense, obscures the real goal and the real issues. Again,
we should really be about competitive effect. So it almost gets to the point
that many of the cases and there’s a lot of discussion of potential competition
and nascent competition and various other types of competition that you see
again in the academic literature and others pushing agencies to make, those are
cases that are going to have a hard time relying on presumptions.

And so there’s a little bit of a double edged sword for
pushing and saying, “Look, we got to have the presumptions, have them in place.
You have to be careful. Well, then what happens in cases where you don’t have
them in place, right?” Because it becomes a standard that, okay, once you have
the presumption almost over unless the efficiencies can be improved. Well,
what’s going to be cases where you don’t have the presumption? And if anything,
what I think is happening recently is there is too much weight I would say put
on market definition. So if you look a big change in the 2010 merger guidelines
was to not drop market definition at all. I mean, there’s big discussion of it,
but follow really the economic thinking which puts a lot more weight on
competitive effect and less weight on market definition as the be in and be all
aspect of winning cases.

And I find it interesting that there was that moving the
guidelines, it’s not clear that courts have gone with that, and yes, courts are
willing to consider competitive effects above and beyond the presumption, but
it’s almost like if you don’t have the structural case you’re almost not going
to get there because without the structural case what’s going to happen is
courts are going to look and say, “Well, these are economic theories and that’s
all that they are and how do we go how do we prove it?” So what that means is
and I’ve talked recently about several cases in which the agencies lost
recently, market definition was front and center and all of those.
Unfortunately, I can’t talk about the Sabre case. I worked with the DOJ on that
case, and it’s an appeal so I can’t really going into the details.

You can read your decision to make your mind, but if you
look at the Evan K Case, which I can talk about because I wasn’t involved in
there, it’s very clear that market definition was the key, right? And that was
the fight and the essence is without marketing finish and you’re not going to
have a structural gauge or a structural presumption because how can you talk
about HHI is crossing a threshold, or going from five to four or four to three,
whatever threshold you want to put unless you have a market and that’s where
things fail. So what the problem is, I think right now is the courts are
putting too much weight on the market definition aspect and if you can get
beyond that and in some cases you need to get beyond that.

Again, for either side here, I’m not even necessarily
saying if you want to be more for enforcement or against, it’s going to come
from both sides, you’re going to have to go to competitive facts. But when you
go to competitive facts, yeah, it’s great, when you have Staples like evidence
or to bring another reason case at Humana where I testified for the DOJ and
then we did one, we’ll tell you state of the art econometrics estimated fairly
sophisticated models and merger stimulation and the courts got it. They went,
but it’s not every case that you have that data and that ability to do that,
actually, that was probably the exception rather than the rule. And the
question is how are we going to have more run of the mill cases if you don’t
have that econometric evidence? And you’re not going to have the struggle
presumption and I think that’s going to be a tough, a tough thing to do.

Moss:

Thanks Aviv. So Sean let’s try and bring in some examples
from other jurisdictions. If people really raises really good points about how
the courts are being well advised to consider market structures, but I mean,
we’ve had some disasters lately, right? We had the Sprint T-Mobile Case. It was
four to three highly concentrated merger with lots of precedent for a block but
yet the federal enforcers in the US let that through, fortunately, the States
stepped up, but again, that case did not have a great outcome. Recently we’ve
had the mobile operators in the UK, that decision was overturned in the Three
UK and O2 merger. So what’s going on here highly concentrated mergers that are
going through where we’re seeing judicial opinions come out the other way? What
can you tell us about that?

Ennis:

Well, I think, I’ll focus on the European element of this
if I may. And there I’d say the factors are really quite different from in the
US because in Europe you’re moving from a merger regime that was especially
focused on dominance and establishment of dominance to a new one in 2004 that
talked about the significant impediment to effective competition test. It was
an effort to move to towards a substantial lessening of competition type of
standard by the European commission, but it’s and also to mop up some cases
that were considered to be gap cases that wouldn’t be addressable under the old
standard. But you could see that that change as being a result of some
annulments and around 2002 by the courts in Europe of merger decisions.

But, I guess the big point is that the courts did not
necessarily endorse that 2004 change in rules. And so as there’s already been
some discussion earlier with Fred Jenny talking about this case, but I wanted
to mention a few others. There’ve been some other four to three mergers in
certainly in Europe that have gone through and there was one in particular that
is interesting. It’s the T-Mobile-Orange deal in the Netherlands, which was
approved by the European Commission without modification basically on the grounds
that consumers switching behavior was suggesting there was relatively little
competition or that it wasn’t, these weren’t the most direct competitors and
then what’s interesting is that the European Commission published a study in
2015, that was an ex-post study of looking at what happened after the
T-Mobile-Orange deal went through.

And that suggested that prices increased by between 5% and
15% after that deal in a way that might be related to it. So why that’s
interesting is that the UK case of Three-02 was in 2016, so it was one year
after this report came out that seemed to show that you could have a harm
basically coming out of these deals where it wasn’t the most direct competitors
who were merging. And then in the Three-02 decision that’s just been issued
last week there’s a very clear statement that the court does not necessarily
endorse basically the new guidelines. It’s not required to follow the
guidelines and that when it was considering whether there was an important
competitive force it wouldn’t find that where there were roughly equivalent or
even three, perhaps being in some ways, acting differently from the other three
mobile phone providers.

Okay. So in that, in that case there’s, there’s been some
discussion, but I just say it’s a general court decision. So it would be it’s
the first, maybe one of the first real tests in the courts of this new merger
regulation, oddly enough in this type of case in a purely unilateral case where
the firms were not the closest competitors and it might take a courageous court
to move away from the past history of the European Court of Justice on this to
assert on its own, “Yes, these new rules are fine.” So the game might not be
over yet. I guess that’s the point. If it’s a general court decision, it could
potentially be appealed up to the European Court of Justice and that might be a
more natural place to have the final outcome.

But I think it’s a stunning decision and it really
suggests that the rules in Europe could be very different from the US. It might
be that a three to two merger would be fine as well. If the two firms that are
merging are not the closest competitors. I mean, that would be my
interpretation just my personal interpretation of this decision. So there’s a
strong move away from presumptions but also perhaps because the standards are
really different in the old European cases from the US and so I hope there
might be more developments on this front, but if not, I’d be, I’d be worried
about even the setup in Europe and whether it’s appropriate to handle merger
cases with presumptions.

Moss:

Thanks Sean. So I know Larry…

White:

Can I leap in here on the structural presumption and
follow up on a couple of things that Aviv said. First, there’s a deep irony in
the T-Mobile-Sprint case and outcome, which is in a sense the structural
presumption is alive and well. If you look at the Justice Department complaint,
it says, “If this industry goes from four to three, there are going to be
adverse competitive effects.” They are really clear on that. Where in my view,
the case and the Department of Justice went off the rails is by thinking that
they could bring in a dish which is not been in that market at all in with the
market and somehow preserve the four firm structure. That’s where they made a
big mistake alas the courts blessed it and that’s what we’re going to have to
live with. But there was going in the strong belief in the structural
presumption, four to three is not going to have a good outcome.

The other thing, let me just build a little bit on what
Aviv said which is once we get to the world of unilateral affects, then we’re
basically in a world where competitive effects are everything. If the two firms
are the first choice and second choice of a significant number of customers and
then they merge the restraints of competition with respect to those customers
are going to be lessened because now when, if you like Firm A raises its price
the customers can’t go to Firm B, which has now merged because they are part of
the – or they do go but the firm is the – merged firm is capturing the
additional profits. So competitive effects are everything. And unfortunately
there has not been enough education of even economists but especially lawyers
and judges on the reality. If you have significant competitive effects, a
significant upward price pressure that isn’t going to get offset by mergers
specific efficiencies.

Then in essence, those two firms have become the relevant
market and this is a two to one merger. Now I can’t think of any more
straightforward way of stating that. You’ve got significant competitive
effects. Prices are going to go up for a nontrivial number of customers. There
isn’t going to be an offset from efficiencies that from the merger guidelines
perspective, that makes those two firms, a hypothetical monopolist. It’s a two
relevant market for these purposes and it’s a two for one merger. So Aviv is
absolutely right. You need good evidence to be able to tell that story, but
when we do have the evidence, somehow we need to tell it more effectively. This
is a two to one merger, your honor. We’re creating a monopoly here and to be
looking at other similar firms that produce similar products unless you think
they’re going to significantly restructure, realign their products move the
products around and product space. That’s a distraction. It’s a two to one
merger, your honor.

Moss:

Thanks Larry. So we have about 10 minutes left and I want
to make sure that we have a closing discussion about what the future looks like
based on what we’ve seen thus far with the challenges and that some of the
successes and losses with the structural presumption. And the reason why I say
that is because at least in the United States, we’re in a very active period of
legislative reform proposals. In fact, the 116th Congress has seen over a 100
antitrust and monopoly styled reform proposals. They’re, all over the map. Some
are comprehensive, some are very targeted, some are targeted to specific issues
in antitrust enforcement, others are targeted to particular industries. So
we’re that’s going on in parallel to what’s happening in the enforcement world.

We also have the agencies issuing guidance for proposed
vertical merger guidelines, which don’t in fact put forth any presumption but
rather a safe Harbor, which is a whole another conversation that we’ll leave
for a different time. But I want to get everyone’s view on what does the future
look like in terms of reform proposals or different ways to inform the courts,
whether it’s judicial education or whether it’s channeling different forms of
economic analysis in different ways. So Sean, let’s start with you. So what is
the appetite in Europe right now? We’ll let you focus on Europe for reform and
for any additional presumptions and say vertical mergers or potential competition
mergers.

Ennis:

I guess the first point to note is that there are some
vertical merger guidelines already in Europe and they recognize very well that
vertical mergers are just a completely different beast from horizontal mergers.
That if you’re going to look at some of their impacts, there’s no loss of
direct competition necessarily vertical relationships can have some inherent
efficiency characteristics that just as a default, that you wouldn’t
necessarily expect to find in the same way in horizontal mergers. And then they
established some, some safe harbors. But I think Europe is moving, especially
in a new direction related to digital cases. They did have in their Cremer
report, I think a suggestion basically that there was not necessarily a need to
change the merger framework.

It might be worth watching what was going on in some
specific jurisdictions before doing that. But I think in the UK specifically,
you’d certainly find a very strong appetite in the Furman Report which may have
some relations to the CA 2015 work that there has been a problem with digital
deals and now just as of the last couple of days, the European commission is
consulting on two proposals and one of them is to establish what they’re
calling a competition tool to ensure fair and competitive markets. And it’s not
very clear what that would include. And they’re also focusing on a part of a
digital services act package that would include ex-ante rules to, as they say
ensure that markets characterized by platforms would remain fair and
contestable.

So they’re really interested in these platform markets.
And I think it’s an open question to see what’s going to happen in the future.
I think there’s probably been more close reviews of mergers in this area since
some of the criticisms have come forwards. I think we should be very careful
about changing merger standards. People have said there’ve been more than 500
mergers involving some of the top internet companies and if you think about it
they’re just a few of them that people mentioned is problematic or likely
problematic. And so that would mean to me, the vast majority of them are okay,
so when there’s a proposal, so you have a default rule that such mergers would
not be allowed or that the burden of proof on those cases would switch
automatically to the merging parties seems like a pretty big change, but it may
also, well, it may be that if there have been some problematic mergers the
Europeans are going to take action to find a way to address those in the future
that would pass judicial muster and it’s not clear what that way would be.

Moss:

Thanks Sean. Larry, what are your thoughts on big issues
moving forward in terms of reforms or more guidance from the agencies for
strengthening enforcement?

White:

First I’m not happy with the proposed vertical merger
guidelines that Justice and FTC put out four or five months ago. I hope they
will get better but I think it is terrifically important that there be a
sensible set of vertical merger guidelines. It’s hard as Sean just said on the
issues can often be difficult and but having guidelines helps the agencies,
helps the private bar, and over time will help the judiciary. When the
horizontal merger guidelines the new version first came out in 1982, there was
a lot of questioning, a lot of head scratching over time. It’s taken a while,
but the general purpose Article III judges of the American judicial system have
basically come to accept the framework. That’s encouraging if we get a good set
of vertical merger guidelines, I’m hoping over time, we can get the same.

Anything else, now you’re putting me into the world of
political predictions and not my strong suit. So rather than talk about in the
language we’re all familiar with positive economics, normative economics, what
I’d really like to see is more resources being devoted to the enforcement
agencies of course more economists, but also more good smart lawyers who will
learn from the economist. The economists of course, will learn from the lawyers,
more resources.

Moss:

Thanks Larry. Aviv, what are your thoughts on what
economists, not only in their academic role, but in your role is as experts in
cases. What are your thoughts on how economists can help support and push
forward the notion of stronger enforcement? Where are the fertile areas for
economist to be thinking and working?

Nevo:

So I know we’re a little bit out of time and I have plenty
of comments here and a lot of what was said before. So let me try to combine
many of my comments. So I think one area this was just a talk and some of the
previous comment on vertical mergers. I do think that is an area where
economist and economic thinking could really help. I actually somewhat disagree
with some of the comments that were previously made. We don’t have time to
fully go through them, but I don’t know that we should treat vertical mergers
as completely a different beast. I think you have some of the same type of
incentives, some of the same type of concerns, except now you might be talking
to maybe competition between some vertical silos or various elements of it but
there’s a lot of horizontal elements in ‘vertical mergers.’

And another aspect that I think was implicit in what Sean
was saying was that I think there’s a school of thinking that vertical mergers
automatically have an efficiency built in. I would agree with that as long as
we put might have a build efficiency in it and it really depends on the
contractual framework that the industry’s in. So I don’t have time to go
through it, but I actually gave quite extensive comments in a DOJ workshop,
just before we all went on shutdown, it was literally as we started and that’s
online, you can see that that as well. So that’s one area where I think
economists could help. More broadly, I think economists could help by just
bringing good economics, good solid economics based on good theory when we have
it and more importantly when possible use empirical work.

Because I think economists all too often tend to stop just
with the theories. Now, sometimes that’s all you can do because the data is
just not there, right? I mean it’s either an industry that’s not rich in data
or we’re talking about some future fact or something like that are very hard to
quantify. But I think we’re economists have had the most success is when they
were able to take the available data and that’s the key and I think courts also
have to realize that the data available is going to differ from industry to
industry. So when you’re looking at healthcare like within Humana, yes, we
could do a full blown market definition in six different ways, right? And I
think the court reading the decision appreciated what we did, but it’s also
needs to be an understanding that cannot be the bar, because if that’s the bar,
we’re not going to meet it in a large fraction of cases, just because the data
is not there, but that doesn’t mean that we should stop and just say, “Look, I
got a theory.”

Larry gave an over simplified idea of unilateral effects,
but we have that theory. That’s what I can do. You need to actually bring
evidence and I think that’s where we’ve been successful. In order to do that,
in order to do to the careful analysis, not just at courts, but even before
that the key issue is, and this is touching on something that Larry said, if
the politicians are serious about increased enforcement we’ll know that they’re
serious about it, not just talking about it, when we start seeing money going
in. The number of cases that are coming up, I mean, there have been exploded
and Nany Rose has put together some intriguing statistics on that and funding
is if anything going down, but definitely not going up. And there’s no way that
you can say keep up with the normal load and bring more of these, let’s say
innovative cases, more of the challenges cases unless you’re going to give more
funding for more economists, for more lawyers, for more ability to do the
things, right.

Moss:

Thank you Aviv. So I would add to those very coaching
comments that the role of evidence is not limited simply to merger retrospectives,
to industry evidence, to what’s uncovered in investigations. It also goes to
the growing record of failed remedies that we see in some merger cases.
Retrospectives now are burgeoning. That type of work is burgeoning and I think
will play a very important role. I would also know that you the Achilles Heel
of merger control really is the efficiencies defenses, where there is no way to
hold the party’s feet to the fire to prove up these efficiencies post-merger,
but there’s again a very growing literature on the failure of mergers to prove
up efficiencies, whether it’s cost savings or consumer benefits. So we’re
talking about different buckets of economic evidence that are really growing
and can be tapped into to improve and strengthen merger control. So I want to
thank everybody, we’re out of time, it’s been a great discussion, lots of food
for thought. Thanks again to Larry, to Sean and to Aviv, and thank you to CPI
Live for hosting this event.

White:

Thank you Diana. Thank you CPI.

Nevo:

Thank you.

Moss:

Thanks.