[Senate Hearing 118-107]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 118-107

                 TRENDS IN VERTICAL MERGER ENFORCEMENT

=======================================================================

                                
                                
                                
                                HEARING

                               before the

                  SUBCOMMITTEE ON COMPETITION POLICY,
                     ANTITRUST, AND CONSUMER RIGHTS

                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 19, 2023

                               __________

                          Serial No. J-118-26

                               __________

         Printed for the use of the Committee on the Judiciary







[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]








                        www.judiciary.senate.gov
                            www.govinfo.gov 
                            
                                ______ 
                                
                   U.S. GOVERNMENT PUBLISHING OFFICE 
                   
53-502 PDF                 WASHINGTON : 2024 














                       COMMITTEE ON THE JUDICIARY

                   RICHARD J. DURBIN, Illinois, Chair
DIANNE FEINSTEIN, California         LINDSEY O. GRAHAM, South Carolina, 
SHELDON WHITEHOUSE, Rhode Island       Ranking Member
AMY KLOBUCHAR, Minnesota             CHARLES E. GRASSLEY, Iowa
CHRISTOPHER A. COONS, Delaware       JOHN CORNYN, Texas
RICHARD BLUMENTHAL, Connecticut      MICHAEL S. LEE, Utah
MAZIE K. HIRONO, Hawaii              TED CRUZ, Texas
CORY A. BOOKER, New Jersey           JOSH HAWLEY, Missouri
ALEX PADILLA, California             TOM COTTON, Arkansas
JON OSSOFF, Georgia                  JOHN KENNEDY, Louisiana
PETER WELCH, Vermont                 THOM TILLIS, North Carolina
                                     MARSHA BLACKBURN, Tennessee 
                                     
             Joseph Zogby, Chief Counsel and Staff Director
      Katherine Nikas, Republican Chief Counsel and Staff Director

   Subcommittee on Competition Policy, Antitrust, and Consumer Rights

                    AMY KLOBUCHAR, Minnesota, Chair
SHELDON WHITEHOUSE, Rhode Island     MICHAEL S. LEE, Utah, Ranking Member 
CHRISTOPHER A. COONS, Delaware       CHARLES E. GRASSLEY, Iowa
RICHARD BLUMENTHAL, Connecticut      JOSH HAWLEY, Missouri
MAZIE K. HIRONO, Hawaii              TOM COTTON, Arkansas
CORY A. BOOKER, New Jersey           THOM TILLIS, North Carolina
PETER WELCH, Vermont                 MARSHA BLACKBURN, Tennessee 
                 Erin Chapman, Democratic Chief Counsel
                  Wendy Baig, Republican Chief Counsel 
                  
                  
                  
                  
                  
                  
                  
                  
                  
                                                      
                  
                  
                  
                  

                            C O N T E N T S

                              ----------                              

                        JULY 19, 2023, 2:48 P.M.

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota..     1
Lee, Hon. Michael S., a U.S. Senator from the State of Utah......     3

                               WITNESSES

Witness List.....................................................    31
Delrahim, Makan, partner, Latham & Watkins LLP, and former 
  Assistant Attorney General, Antitrust Division, U.S. Department 
  of Justice, Washington, DC.....................................     7
    prepared statement...........................................    32
Rose, Nancy L., Charles P. Kindleberger Professor of Applied 
  Economics, and former department head of the Economics 
  Department, Massachusetts Institute of Technology, Cambridge, 
  Massachusetts..................................................     5
    prepared statement...........................................    38
Slaiman, Charlotte, competition policy director, Public 
  Knowledge, Washington, DC......................................     9
    prepared statement...........................................    61


 
                      TRENDS IN VERTICAL MERGER 
                             ENFORCEMENT

                              ----------                              


                        WEDNESDAY, JULY 19, 2023

                      United States Senate,
     Subcommittee on Competition Policy, Antitrust,
                               and Consumer Rights,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:48 p.m., in 
Room 226, Dirksen Senate Office Building, Hon. Amy Klobuchar, 
Chair of the Subcommittee, presiding.
    Present: Senators Klobuchar [presiding], Blumenthal, 
Hirono, Lee, Hawley, Tillis, and Blackburn.
    Also present: Chair Durbin.

            OPENING STATEMENT OF HON. AMY KLOBUCHAR,
           A U.S. SENATOR FROM THE STATE OF MINNESOTA

    Chair Klobuchar. All right. Thank you. The hearing is 
called to order, the hearing of the Subcommittee on Competition 
Policy, Antitrust, and Consumer Rights, on ``Trends in Vertical 
Merger Enforcement.''
    Senator Lee and I were noting that once again votes have 
been scheduled miraculously during our antitrust hearing. At 
some point, we'll begin to wonder. But we are going to work 
this out and make sure that any Senator that has a question is 
able to ask one.
    I think we all know that for years, competition policy has 
focused on mergers of two companies that sell the same or 
similar products or services. Those so-called horizontal 
mergers clearly impact competition. When two companies that 
previously competed to offer consumers high-quality goods or 
services at a good price merge, it makes the market less 
competitive and gives consumers fewer choices. We saw this 
after, say, T-Mobile and Sprint merged, when consumers were 
left with one less option for phone service. It's important 
that we continue to police mergers between competitors, but 
those mergers cannot be our only focus.
    For too long, I believe there's not been enough attention 
paid to another kind of merger that can greatly harm consumers: 
the vertical merger. Vertical mergers happen when a company 
buys a supplier, distributor, or retail locations above or 
below them in the supply or distribution chain. For years, 
companies have argued that this kind of vertical integration 
helps consumers by lowering their costs. But it's not really 
the story.
    Vertical mergers can also allow companies to amass market 
power and clout that they can use to unfairly leverage power 
against their competitors. These mergers can also create 
potential conflicts of interest by incentivizing companies to 
preference their own products over the products of competitors. 
Sounds familiar for those of us that have been working on tech 
legislation.
    There was a time when vertical mergers were a key part of 
antitrust enforcement. One of the most significant antitrust 
cases ever brought was the Department of Justice's suit against 
Standard Oil. DOJ argued way back then that Standard Oil used 
its power in the oil refining business to buy and expand its 
monopoly power from refining to other parts of the oil supply 
chain, including production, pipelines, and even gas stations. 
The DOJ won that case, and Standard Oil was broken up. Yet, in 
the last half century, we have forgotten that lesson.
    Since the 1980s, antitrust enforcers have largely ignored 
the way vertical mergers can entrench monopoly power. Instead 
of considering a merger's anticompetitive impact in the long 
run, enforcers have too often taken businesses at face value 
when they say that buying a company up or down the supply chain 
will lower prices for consumers.
    In January--and this is a good example of this--we held a 
full Committee hearing on how Ticketmaster's 2010 merger with 
Live Nation has allowed Ticketmaster to wield power over 
artists, venues, and consumers, which has resulted in high fees 
and botched ticket sales. It was a highly bipartisan hearing. 
Before the merger, Live Nation was primarily a concert 
promoter, but since acquiring ticketing provider, Ticketmaster, 
Live Nation has used its role as a concert promoter to force 
venues to sell tickets through its newly acquired platform. 
This has decimated competition in the ticketing industry and 
resulted in higher fees for consumers.
    Unfortunately, this is not a surprising result. At the time 
of the merger, DOJ was so concerned that something like this 
might happen that it made Live Nation promise not to retaliate 
against concert venues for using another ticketing company. But 
guess what? That didn't work. Live Nation's conduct created 
such an issue that in 2019, DOJ reopened the consent decree and 
strengthened the limits on Live Nation. So, that's one example.
    Another example, something Senator Lee knows well: Google 
advertising. In May, we held a hearing in this Subcommittee on 
Google's dominance in the digital advertising space. But 
Google's dominance in online advertising was no accident. 
Google was already a significant player in the online 
advertising industry when it acquired the largest online and 
publisher business, DoubleClick, in 2007. In hindsight, this 
merger effectively cemented Google's online advertising 
monopoly.
    The FTC cleared the deal largely because it assumed, 
contrary to what we know now, that vertical mergers are almost 
always good. One former commissioner, Bill Kovacic, who voted 
to allow the acquisition, recently told The New York Times, 
``If I knew in 2007 what I know now, I would've voted to 
challenge the DoubleClick acquisition.''
    It's beyond time that we stop ignoring the problems that 
vertical mergers pose for competition. That's why I have 
introduced, along with Senator Grassley, the American 
Innovation and Choice Online Act, to put in place some rules of 
the road. It is why Senator Lee has worked on the advertising 
issue with regard to Google, the AMERICA Act, to resolve many 
of the problems that have resulted from Google's DoubleClick 
acquisition, and I have been proud to join him on that bill.
    We are not the only ones who think that it's time to 
rethink how to approach vertical mergers. Just this morning, we 
got news that the DOJ and FTC have released new merger 
guidelines, including updated guidance on how enforcers should 
consider the harms posed by vertical mergers. These proposed 
guidelines take an important step toward ensuring that 
enforcers consider how markets, including digital markets, 
actually work before deciding to allow a merger to go forward. 
They acknowledge that it is not enough to assume that consumers 
will benefit when a company buys a supplier or a tech company 
acquires an up-and-coming technology.
    Under the new guidelines, enforcers must focus on the facts 
of the market in front of them rather than on outdated 
assumptions. These new guidelines will move us closer to 
addressing the problems that vertical mergers can create.
    I turn it over to Senator Lee for his opening remarks. 
Thank you.

           OPENING STATEMENT OF HON. MICHAEL S. LEE,
             A U.S. SENATOR FROM THE STATE OF UTAH

    Senator Lee. Thanks so much, Madam Chair, and I know what 
everyone is thinking. Whenever you hear the words ``vertical 
integration,'' it immediately springs to mind, ``That sounds 
like a wonderful, exciting topic for a Subcommittee hearing''--
which it is. The question of how our antitrust enforcers and 
courts are to analyze, handle, and otherwise address mergers 
that involve partners who are combining business partners, is 
fundamental to the vitality of antitrust enforcement and the 
entire system of antitrust laws that we have.
    Now, look, there's no doubt that vertical integration--that 
is, when firms at different levels of the supply chain combine, 
it often leads to substantial efficiencies that, in some cases, 
can make businesses a lot more competitive and lead to better 
outcomes for consumers. And at the same time, when what you 
have is a dominant firm that acquires a supplier or a 
distributor, it has the ability to create the potential that 
it'll use its market power at one level of the supply chain to 
foreclose competition with the firm that it's acquiring.
    So this all sounds pretty technical, but in plain language, 
it becomes simpler, which is just, you can end up with a 
situation in which one or a few firms come to dominate or 
control entire industries within our economy by buying up their 
business partners within the supply chain. And when that 
happens, the efficiencies of vertical integration can become 
very unlikely to flow to consumers and instead are used to pad 
profits and further forestall competition to acquire or 
maintain dominance in the industry.
    We've seen this when Ticketmaster merged with concert 
promoter and venue operator, Live Nation. And even a DOJ 
consent decree, specifically prohibiting retaliation against 
non-Live Nation venues post-merger--those non-Live Nation 
venues that don't use Ticketmaster--even that hasn't prevented 
these repeated complaints that Live Nation is doing just that, 
that it's engaging in the very conduct that's supposed to be 
covered and taken off the table by the consent decree.
    This, of course, prompted the Department of Justice to 
extend the consent decree up to 15 years. Nor does it seem like 
Live Nation's vertical integration did anything to help the 
Swifties, who understandably still regard this merger, quite 
appropriately, as the proverbial ``nightmare dressed like a 
daydream.''
    But perhaps the most notorious example today is something 
involving Google's serial acquisitions of various ad tech 
companies, especially DoubleClick, which led to its complete 
domination in the digital advertising market. That business is 
now rife with conflicts of interests, and it's invited 
antitrust enforcement entities from the U.S. Department of 
Justice, 33 States and territories through their Attorneys 
General, the European Commission, and scores of private 
parties.
    In fact, former FTC Commissioner Bill Kovacic said, quote, 
``If I knew in 2007 what I know now, I would've voted to 
challenge the DoubleClick acquisition.''
    We hear those words sometimes years after the fact, and at 
this hearing, we'll be talking about ways that we can identify 
those sooner so that we don't have to rest assured simply with 
the ``I'm sorry'' explanation at the end of all of it.
    These kinds of concerns should be particularly recognizable 
to conservatives and to students of federalism. As I've 
explained to many captive audiences, including my infant 
grandson--who I think is 6 months old as of today, most members 
of my staff have also heard this talk, and also random people 
who have the misfortune of sitting next to me on a long flight: 
Our Constitution secures both horizontal federalism, meaning 
the separation of powers among the three coordinate branches of 
Government, as well as vertical federalism, meaning the 
limitation of Federal power and the protection of the 
sovereignty of the States.
    So in a way, Google buying DoubleClick would be like the 
Federal Government taking over State governments and dictating 
to their legislatures and their governors how they have to run 
their States. If you would be outraged by the latter, then the 
former ought to at least concern you.
    Now, I get it. It's not a perfect analogy, but it's a fun 
one anyway. In one, you have competing claims of sovereignty 
and a Constitution that establishes a perpetuation of that 
sovereignty. Nonetheless, the point remains clear. Our 
antitrust laws do, within our economy, some of the same things 
that our Constitution is set up to do with our Government. That 
is, they prevent--they protect the people against the otherwise 
dangerous accumulation of power, in one case political and the 
other economic.
    Unfortunately, in recent decades, far too little concern 
has been raised with these sorts of arrangements while there's 
still time to do anything about it in advance. In both the 
political and economic spheres, antitrust enforcers and judges 
have been too deferential, at times, to speculative economic 
claims of purported efficiencies from vertical integration, 
while also being too skeptical of the potential risks. They've 
also been, at times, too quick to settle for behavioral 
remedies that prove ineffective and leave the Federal 
Government managing, in effect, the affairs of private 
businesses. Something that we're not really well equipped to 
handle from Washington, DC.
    This was only magnified by the uncertainty created for 
litigants, enforcers, and judges, to say nothing of would-be 
merging parties, when the FTC in 2001 repealed the 2020 
Vertical Merger Guidelines without any replacement for almost 2 
years.
    So this hearing provides an opportunity to critically 
examine vertical integration, the new proposed Merger 
Guidelines, and to discuss how best to move forward with these 
issues, and I look forward very much to our conversation. 
Thanks.
    Chair Klobuchar. Thank you very much, Senator Lee. I'm just 
sort of having a flashback in the Ticketmaster hearing when the 
Live Nation CEO mentioned Garth Brooks. And your response was--
remember this?--You said, ``With all due respect, we all love 
Garth Brooks up there but I'm just not sure he's an expert on 
vertical integration.'' That happened. All right, so----
    Senator Lee. I'm sure he'll write a song about it one day.
    Chair Klobuchar. Yes, that's----
    Senator Lee. It's going to be a real hit.
    Chair Klobuchar. That's for sure. Okay. So I get to 
introduce our witnesses.
    Nancy Rose is the Charles P. Kindleberger Professor of 
Applied Economics at MIT, where her teaching and research focus 
on competition policy, the economics of regulation, and 
industrial organization. She served as Deputy Assistant 
Attorney General for Economic Analysis in the Antitrust 
Division of the DOJ from 2014 to 2016.
    Makan Delrahim, making a repeat appearance back before this 
Subcommittee, is a partner at the law firm of Latham & Watkins, 
and he previously served as the Assistant Attorney General for 
Antitrust during the Trump administration. He oversaw matters 
related to vertical mergers, including the AT&T-Time Warner, 
CVS-Aetna, and the extension of the Live Nation-Ticketmaster 
consent decree.
    Charlotte Slaiman is the competition policy director at 
Public Knowledge. She worked in the Anticompetitive Practices 
Division of the FTC and as a legislative aide to a former 
Member of this Committee, Senator Al Franken, focusing on 
Judiciary Committee issues, including competition, media, and 
consumer privacy.
    I'll now swear in the witnesses. If you could please raise 
your right hand.
    [Witnesses are sworn in.]
    Chair Klobuchar. Thank you. You can be seated. I will now 
introduce--allow for the testimony, for 5 minutes, of Dr. Rose. 
Thank you.

 STATEMENT OF NANCY L. ROSE, CHARLES P. KINDLEBERGER PROFESSOR 
    OF APPLIED ECONOMICS, AND FORMER DEPARTMENT HEAD OF THE 
 ECONOMICS DEPARTMENT, MASSACHUSETTS INSTITUTE OF TECHNOLOGY, 
                    CAMBRIDGE, MASSACHUSETTS

    Professor Rose. Thank you, Chair Klobuchar, and Ranking 
Member Lee, and Members of the Subcommittee, for this 
opportunity to testify before you today. As has been alluded, 
it's a major day for antitrust enforcement, with the release of 
the proposed revised Merger Guidelines this morning, which I've 
done a quick skim of, but if you've looked at them and the 
appendices, there's a lot there, so it's just been a skim, but 
I'm sure those will come up.
    Antitrust enforcement is a subject near and dear to my 
heart. I've taught antitrust and regulatory economics to MIT 
students for more than 35 years, devoted my academic research 
career to competition regulation and competition policy issues, 
and, as Chair Klobuchar mentioned, worked for 28 months with 
the incredible career staff who serve the public in the DOJ 
Antitrust Division.
    I've been increasingly concerned about the rise of market 
power due in no small part to the erosion of antitrust 
enforcement capabilities, as I had the privilege of speaking 
with this Subcommittee about in 2021. There are many 
contributors to this erosion, including chronically under-
resourced enforcement agencies, but the body of increasingly 
anti-enforcement caselaw is a substantial roadblock and 
explanation, I believe. This is especially apparent in the 
context of vertical merger and vertical conduct enforcement.
    Vertical acquisitions in oligopoly markets, such as mergers 
of a dominant video content provider with a video cable/
satellite distributor; the merger of a popular--perhaps the 
most popular video gaming franchise with the dominant--a 
dominant platform or console provider; the combination of a key 
provider of an innovative input by 1 of the 3 users of that 
input in semiconductor equipment manufacturing--all of these 
types of mergers create the incentive and ability for a firm to 
foreclose competition or raise rivals' costs, advantaging that 
firm against its competitors and harming consumers.
    To be fair, as Senator Lee noted, vertical integration may 
also create efficiencies in production or pricing that benefit 
both competition and consumers. But, as in horizontal mergers, 
experience has shown that firms frequently overpromise and 
underdeliver on those efficiencies. The economic literature, 
the empirical literature on vertical mergers, more precisely, 
provides little comfort for the notion that vertical mergers 
are always or even almost always are on balance procompetitive. 
I think one need only look at the debacle over the years 
following AT&T's acquisition of DirecTV and Time Warner, Inc. 
to appreciate this failure.
    In 2017, the DOJ's suit against AT&T's acquisition of Time 
Warner was heralded as the first litigated vertical merger 
challenge by DOJ in 40 years. Many commentators spoke of the 
need to update caselaw. Well, agencies have been pursuing that 
agenda and now have amassed a very deeply concerning library of 
opinions that continue to express skepticism of market power 
motives, excessive deference to claimed efficiencies, and naive 
credulity of assurances by executives not to act on the 
incentives and ability that the vertical merger creates to 
increase their shareholders' value at a cost to American 
consumers and to the value of market competition.
    Enforcers increasingly face litigating too often inadequate 
remedies that are proposed by parties that further weakens 
deterrence and enforcement, even when, as in AT&T-Time Warner, 
there was no binding commitment to even adhere to the proposed 
fixes. While the new Merger Guidelines seem to provide an 
effort to increase the guidance to parties and to courts to 
facilitate better decision-making, I have to say that I'm 
skeptical that these alone will be sufficient to reverse the 
recent course on vertical mergers. Judges and Justices may need 
to hear from Congress that our Nation is committed to 
preserving competitive markets through vigorous application of 
antitrust law and that the costs of underenforcement are too 
high to continue, particularly in this area of vertical mergers 
and vertical conduct.
    My experience as a regulatory economist highlights the 
urgency of this. When we fail to prevent the excessive 
accumulation of market power through mergers and exclusionary 
conduct, there is an inexorable push for intrusive regulation 
that frequently follows, with all of the costs and challenges 
that that poses. So I thank you for this Committee's interest 
in this topic, and I look forward to your questions.
    [The prepared statement of Professor Rose appears as a 
submission for the record.]
    Chair Klobuchar. Very good. Thank you.
    Mr. Delrahim, you know how much I appreciated your work 
when you were in your job, and both Senator Lee and I have a 
really good relationship with you. So, welcome back to the 
Committee.

STATEMENT OF MAKAN DELRAHIM, PARTNER, LATHAM & WATKINS LLP, AND 
  FORMER ASSISTANT ATTORNEY GENERAL, ANTITRUST DIVISION, U.S. 
             DEPARTMENT OF JUSTICE, WASHINGTON, DC

    Mr. Delrahim. Thank you, Senator. Chairman Klobuchar, 
Ranking Member Lee, and distinguished Members of the 
Subcommittee, it's an honor to be back here before you today. 
My testimony is animated both by my practice over the last 
close to 30 years--I used to work with Ms. Slaiman's father, 
who was also a staff member here on the Antitrust Subcommittee, 
and I'm feeling much older today. But also by my experiences, 
as you mentioned, as an enforcer, as Assistant Attorney General 
for the Division.
    I speak today solely in my personal capacity and, needless 
to say, not on behalf of any of my firm's clients or the 
Department of Justice, for some of the matters I was involved 
with personally.
    I will dispense with a description of vertical mergers as 
you have well described them, but needless to say, many 
transactions have both horizontal and vertical elements. It's 
not a mere coincidence. Businesses of all shapes and sizes have 
long recognized that there are efficiencies and procompetitive 
profit opportunities to be realized through integration.
    One way to think about so-called vertical transactions is, 
when we hire a pool cleaning service, we outsource that 
activity to the pool service. I could buy that pool service's 
business and incorporate it into my home business, or I could 
go and purchase the equipment and train one of my children to 
do it. Each will have the same objective--getting my pool 
clean--but each one comes with different economic costs and 
efficiencies for me and the parties involved.
    The interplay between horizontal and vertical theories of 
harm to competition is not as simple as labeling them 
``vertical'' or ``horizontal.'' There are, however, different 
analytical methods and economic policies that guide antitrust 
merger enforcement practices, depending on whether a 
transaction presents horizontal or vertical theories of harm. 
The guiding principle for evaluating all the mergers is whether 
the proposed transaction will substantially lessen competition.
    I want to share quickly just some of the legal framework, 
some of the experiences, as you've mentioned, at the DOJ, and 
what challenges, practically, folks like Professor Rose and I 
have faced as enforcers in the court system, and why, perhaps, 
there hasn't been as much success on the enforcement side.
    Unlike the horizontal mergers, the Division and the FTC 
cannot rely on legal presumptions of anticompetitive effects by 
simply showing that a challenged vertical merger would increase 
market concentration above a certain threshold. Of course, the 
agencies rely on these presumptions, and these presumptions 
have been the outgrowth of ever-evolving antitrust common law. 
They're not in the text of the Clayton Act. I wondered, as an 
enforcer, I feared, what if the current Supreme Court was 
presented with that question? Would it still read any 
presumptions in Section 7 of the Clayton Act?
    For vertical mergers, courts have agreed that there is no 
presumption of harm based on market shares or market 
concentration. Instead, the legal framework asks whether, 
despite a vertical merger's procompetitive effects, the 
Government has met its proof in demonstrating that the 
particular transaction, given the fact-specific evidence at 
issue, is likely to substantially lessen competition. And, of 
course, with the burden-shifting framework that we have, once 
the Government meets its burden of proof, the burden shifts to 
the defendant to prove if there's procompetitive benefits and 
then back to the Government.
    Many scholars, including Professor Salop and others, have 
mapped out several efficiency benefits arising from vertical 
combinations, including costs, quality efficiencies, increased 
incentives, product design, and production improvements, and 
many others. Calibrating the enforcement of vertical mergers 
can create complex policy decisions. I had to face them. On the 
one hand, blocking vertical merger may deprive consumers of the 
procompetitive benefits of the very kind that the antitrust 
laws should support. On the other hand, competitors sometimes 
argue that the vertical merger forecloses a firm from having 
the necessary input or raises that competitor's costs.
    Of course, 5 years ago, as you've mentioned, the Division 
was forced to bring the litigation in the AT&T-DirecTV-Time 
Warner merger. There were many attempts to try to reach a 
remedy, but sometimes you have to litigate. Nobody likes to 
lose a case, and nobody should resort to litigation if there 
are remedies available to resolve a dispute. In that case, we 
were not able to, and of course the Division did not prevail. 
That case and its history--it's in my submitted testimony--
nevertheless present a learning opportunity for enforcers and 
for merging parties, and I think it's helpful for your 
oversight duties here and which you're engaging in with today's 
hearing.
    And, you know, I have not had--it took the Division of the 
FTC a valiant effort for 2 years to come up with the Merger 
Guidelines that they issued this morning. I have not had the 
chance to fully digest them. I'm sure we'll see a lot of 
commentary over the coming weeks. I'm happy to discuss some of 
the challenges in the questions and answers as you have today 
for the benefit of the Committee. But one of the--I think one 
of the most important things--and I know I'm over my time--is 
that merger enforcement, in general, is a predictive exercise, 
and it is even more challenging when the enforcement is in the 
context of vertical mergers. Judges are not quite comfortable 
dealing with them.
    That's just reality. The courts have said that. They want 
real-world examples of alleged harms. A theory alone will not 
win a case. And, of course, in that AT&T case, we had no 
guidelines to point the court to. The 1984 guidelines were 
woefully inadequate and not useful, which what--is what led us 
to work toward the 2020 Merger Guidelines with the FTC, which 
were issued and replaced today. Thank you.
    [The prepared statement of Mr. Delrahim appears as a 
submission for the record.]
    Chair Klobuchar. Thank you very much. Ms. Slaiman?

 STATEMENT OF CHARLOTTE SLAIMAN, COMPETITION POLICY DIRECTOR, 
                PUBLIC KNOWLEDGE, WASHINGTON, DC

    Ms. Slaiman. Thank you so much, Chairwoman Klobuchar, 
Ranking Member Lee, and Members of the Subcommittee. I'm 
Charlotte Slaiman, competition policy director at Public 
Knowledge, a nonprofit working in the public interest.
    It is an honor to be testifying today at this historic 
moment. The new Merger Guidelines published this morning truly 
represent a watershed moment for antitrust enforcement and the 
American economy. These new Merger Guidelines will be 
incredibly valuable for courts, antitrust practitioners, 
business leaders, and advocates. The guidelines lay out clearly 
the types of mergers that risk substantially lessening 
competition in violation of the Clayton Act.
    The Department of Justice and the Federal Trade Commission 
have completed the Herculean task of bringing together the 
relevant precedents, up-to-date economics research, and 
distilling it into clear explanations of the law. These new 
guidelines were written by experts in the field, interpreting 
the law clearly and fairly. Together with the increased 
enforcement that we've seen in recent years, these guidelines 
can be an inflection point.
    It has been exciting to witness the revitalization of 
antitrust enforcement that is currently underway at the FTC and 
DOJ. In the past, courts narrowed antitrust law, and Congress 
cut antitrust budgets. In response, antitrust enforcers 
narrowed their view of what they can achieve. Though Congress 
charged them to protect competition and consumers, caution and 
formalism sometimes held our enforcers back from using the 
tools at their disposal to promote a competitive economy where 
corporations compete for customers and workers.
    Today, Congress and antitrust enforcers recognize the 
importance of preserving competition and open markets through 
aggressive antitrust enforcement. In particular, we've seen a 
marked increase in our Federal enforcers suing to block 
vertical mergers. This is something that Public Knowledge has 
been calling for, for a long time. The FTC and DOJ are to be 
commended for this impressive and important shift.
    Vertical integration leaves consumers with fewer choices, 
less innovation, worse products, and, yes, even higher prices. 
Unfortunately, it appears that the courts have not yet come 
around to this perspective. Antitrust law was written broadly, 
which has allowed courts the flexibility to incorporate new 
economic learning over time. This has given courts a lot more 
power in this area of the law than in many others. The consumer 
welfare standard wasn't built in a day, and fixing it purely 
through litigation will take some time, as well.
    The new Merger Guidelines published today can help 
immensely. Courts should look to the new guidelines for the 
most up-to-date understanding of competition law and economics, 
but Congress can and must do its part, as well. Americans 
cannot wait decades for their antitrust laws to slowly catch up 
with the market needs of today. The Competition and Antitrust 
Law Enforcement Reform Act, CALERA, from Chairwoman Klobuchar 
and others, would update the standard for merger review to help 
our antitrust enforcers stop more mergers. Sector-specific 
tools, like the American Innovation and Choice Online Act, the 
Open App Markets Act, and the AMERICA Act, are critical to 
addressing the problems of vertical integration in digital 
platform markets.
    Congress has already begun to support the increased 
antitrust enforcement effort by passing the Merger Filing Fee 
Modernization Act last year, giving more funding to our Federal 
enforcers. Thank you for passing this important legislation. 
However, I fear our Federal enforcers are still resource 
constrained, facing more anticompetitive mergers than they have 
the resources to stop. We call on Congress to authorize more 
funding for Federal antitrust enforcement at the DOJ and FTC.
    Our antitrust enforcement agencies are doing their part to 
promote competition throughout the economy. They are bringing 
the cases we need to stop anticompetitive mergers. Consumer 
advocates have been sounding the alarm for years, saying that 
existing antitrust law is not where it needs to be to address 
the harms of consolidation. We need Congress to do its part in 
this fight. Thank you.
    [The prepared statement of Ms. Slaiman appears as a 
submission for the record.]
    Chair Klobuchar. Very good. Thank you very much, Ms. 
Slaiman. Senator Lee has come back from another hearing of some 
kind. We also were joined by Senator Hirono and Senator Tillis, 
who I know went to vote.
    But I thought I'd start with you, Mr. Delrahim. As 
Assistant Attorney General, you voted for the Department--you 
advocated, I'm thinking of votes, you advocated for the 
Department to stop waiving through harmful mergers based mostly 
on promises from the company.
    Can you explain why, in your view, it's important to block 
anticompetitive mergers instead of just rely on promises?
    Mr. Delrahim. Thanks for that question. I think a general 
view is, what is exactly the design of the agencies. My view of 
antitrust enforcement is, in its best form, it's really a law 
enforcement function and not a regulator with the central 
planning type of tools for ongoing interference with the 
market. I viewed if there was a problematic part of a merger, 
there should be a remedy--a structural remedy would be 
preferred--and the Government gets in, the Government gets out. 
But with that, it also means that you do not slap yourself on 
the back with some promise where there's not a problem in a 
merger just because merging parties are willing to pay that tax 
and get a merger through. So, it was a two-sided effort to 
create efficiency.
    You know, I think there are times, but rare instances, 
where behavioral remedies, if there's no other--if there's not 
a structural remedy available that could preserve the 
procompetitive benefits of a merger, it should be accepted, but 
otherwise, you know, it should be litigated. AT&T, we had--I 
think this is a matter of public record, you know, either 
selling control of DirecTV or Tribune were on the table. Had 
those been accepted, and I'm sure the executives wish they had 
now, that transaction would not have posed the foreclosure 
concerns----
    Chair Klobuchar. Mm-hmm.
    Mr. Delrahim [continuing]. And raising rivals' costs that 
we thought it had.
    Chair Klobuchar. Mm-hmm. While you were Assistant AG, you 
stated that the risks from vertical mergers are heightened in 
digital markets, especially if data plays a role in designing 
products or services for consumers.
    Can you explain why some experts believe digital markets 
may be especially vulnerable to harm from vertical mergers?
    Mr. Delrahim. As, you know, I think has been shown, one of 
the concerns is potentially the network effects that could be 
caused, but it's not present in every transaction. Every single 
one is fact specific, and we have to take a look to see is the 
transaction intended to block somebody who is going to disrupt 
the market power that the underlying digital platform may have. 
With that, you know, you would hope that preserve the 
competitive forces rather than them--and we had, I think, 2 
days of hearings at Stanford Business School to look exactly at 
that, and there's a body of record about that. That was one of 
the reasons I had made that comment.
    Chair Klobuchar. Mm-hmm. Okay. Thank you. Dr. Rose, can you 
talk about why many economists now accept that vertical mergers 
in concentrated industries can be harmful?
    Professor Rose. Sure. So, I think, let's look at a kind of 
simple situation where you've got a firm that is participating 
in a concentrated market. And let's assume that it's got, you 
know, a reasonably sizable position in that market, and now 
it's thinking about buying someone else either upstream or 
downstream. And the concerns that economists have raised, first 
from a theoretical perspective--and this goes back to 
literature in the 1980s and 1990s and forward--and, 
increasingly, in empirical analyses, is that that type of 
merger may give the firm, the combined firm, the incentive and 
the ability to exercise its market power through something like 
raising its rivals' costs, so making its rivals less effective 
competitors and enabling that firm to increase its profits, and 
in the process of doing that, raise prices to consumers, or 
foreclosing rivals from competing altogether.
    And it's not just price. It can hurt consumers through 
innovation, as well. So I give an example of a merger--a 
vertical merger, that came to DOJ when I was there, between 
Lam, a semiconductor equipment manufacturer, and KLA-Tencor, a 
company that produces the metrology equipment that's needed to 
make sure that your equipment manufacturing--your manufacturing 
equipment is really capable of meeting the very precise 
tolerances that the chip manufacturers--the innovative chip 
manufacturers, like Intel, need.
    You know, that was a merger where the companies came and 
said, well, this integration is going to create all these 
efficiencies and innovation and make it more effective. And 
what we realized as we looked at this is that it gave the 
combined company the ability to deny access to the KLA-Tencor 
metrology equipment, not necessarily permanently. Maybe all it 
had to do was deny access to the Lam competitors for a few 
months, but that would be enough to disadvantage those 
competitors, leaving them behind in the race to produce 
equipment that could manufacture the new generation of chips, 
and that there, to Mr. Delrahim's point, was really no way that 
you could write a conduct remedy that would prohibit the 
company or exclude the company from denying that access in 
something as simple as just--you know, maybe it was just a 
little slower to tell rivals about this new measurement 
equipment that was available.
    I think that's the problem that we face, is that when the 
company has both the incentive and ability, through its 
acquisition of an upstream or downstream firm, to disadvantage 
rivals, it's compelled to use that market power. And I think 
that's the understanding that economists now have of many 
vertical mergers. Not all, but many----
    Chair Klobuchar. Not all.
    Professor Rose [continuing]. Especially in oligopoly----
    Chair Klobuchar. Yes.
    Professor Rose [continuing]. Markets.
    Chair Klobuchar. I think that's an important point. Okay. 
Live Nation, Ticketmaster, brought it up at the beginning. Ms. 
Slaiman, in 2010, the DOJ allowed Live Nation to acquire 
Ticketmaster after Live Nation promised not to use its music 
promotion business to force venues to use Ticketmaster for 
ticketing services. Nine years later, the DOJ had to step in 
and set new terms for Live Nation after the company repeatedly 
broke those promises. And earlier this year, The New York Times 
reported that the DOJ is investigating Live Nation for 
continuing its unlawful conduct. And we hope that our hearing 
and the information that we gathered at that hearing will be 
helpful for that reported investigation.
    Ms. Slaiman, in instances like the Live Nation merger, 
where a company later reneges on an agreement that was key to 
the decision to approve the merger in the first place, even 
though many of us raised issues with it at the time, I'd just 
like to note for the record, but when the company later reneges 
on an agreement that was key to the decision to approve the 
merger in the first place, how are consumers generally harmed?
    Ms. Slaiman. Well, it very much depends on the details of 
the situation. It became so clear in the Ticketmaster case that 
consumers were not well served by the lack of competition 
against Ticketmaster.
    I think Taylor Swift felt the need to talk about why this 
terrible consumer experience happened to her fans, and one of 
the things that she mentioned was, she likes to take as much of 
this process in-house as she can. And with Ticketmaster, that 
wasn't an option. I think that's because of these exact 
agreements, because Live Nation has such strong control over 
the venues. As someone doing a nationwide tour--the Eras Tour 
is happening across the country--she needs a lot of different 
venues. She has to work with Live Nation, and, as a result, she 
had to work with Ticketmaster.
    Chair Klobuchar. Right. And as you know, during the 
hearing, it's not just her. It's everything----
    Ms. Slaiman. Of course.
    Chair Klobuchar [continuing]. The examples from Bad Bunny 
to Bruce Springsteen to Clyde, who was our witness, of the 
Clyde Lawrence Band. So, I mean, the point is, even for the 
smaller bands, it's actually a lot harder because they aren't 
making that kind of money.
    And we learned in the hearing that Ticketmaster is, like, 
90 percent of the venues for the largest events, for things 
like the NFL, NHL, 80 percent when you break it down to the 
next large events, and 70 percent of events overall. This is 
just by memory, but I believe that's what it was.
    So, do you agree that the Ticketmaster-Live Nation merger 
has ended up harming consumers, and if so, how? And then I'll 
turn it over--I'm going to go vote and turn it over to Senator 
Lee and return.
    Ms. Slaiman. Yes. It has ended up harming consumers, and I 
believe that that was foreseeable at the time, as it sounds 
like you did, as well. So what's important here is that the 
result is that it's very difficult to compete in ticketing, so 
we don't have alternatives to Ticketmaster, and there isn't 
that competitive pressure on Ticketmaster to provide a better 
service to consumers.
    Chair Klobuchar. All right. Thank you very much.
    Senator Lee [presiding]. Thank you, Madam Chair. Mr. 
Delrahim, I'd like to start with you, if possible. Back in 
2020, you were the head of the Antitrust Division at the 
Department of Justice, and in 2020, you issued, along with the 
FTC, of course, the 2020 Vertical Merger Guidelines, while you 
were there. Tell me why you thought that was important.
    Mr. Delrahim. Thank you, Senator. So, as we litigated the 
AT&T transaction, we saw that the courts were generally not 
comfortable. It was, as mentioned, it was the first case, not 
the first enforcement case. Professor Salop has got a great 
paper of the number of enforcement matters that have either 
ended in a consent decree or abandonment. But it was the first 
one litigated because we couldn't get to a resolution.
    Then there were several other transactions that we were 
involved with, and when we looked at the guidelines, one of the 
benefits of the guidelines when you have them--and I think, you 
know, they've generally served, in a bipartisan way, well both 
agencies, and they have been updated periodically with the 
benefit of the expertise of experts like Professor Rose and 
Professors Shapiro, Carlton, and others who have come to the 
Division--is that it provides transparency to the public, to 
the enforcers, about how the law is, and that's really 
important--and to the judges.
    When there is support, both in the law and the economic--
accepted economic thinking, those guidelines have value. If 
they do not, they do not have any value because the courts will 
say this is aspirational. You want to change the law, go to 
Congress. This is the right place to do it. If there isn't 
support for them, what I fear is the courts will begin 
dismissing them, and they really don't have any value.
    What we wanted to do was provide a guideline, a 
transparency document, at the Justice Department and the FTC--
fortunately, we were able to do that--and, you know, synthesize 
the body of the law and economic thinking on vertical mergers 
to serve as a recipe book for both business community, 
enforcers, practitioners, and, most importantly, judges, so 
they can rely on that.
    I thought, you know, it was unfortunate when the Federal 
Trade Commission unilaterally withdrew those without replacing 
one, and then they brought several cases. Frankly, I think, you 
know, had they had a guideline that they could have pointed to, 
it might've helped them in some of the litigations which they 
lost and have created, you know, a law on the other side of 
what their enforcement objectives were.
    Senator Lee. I assume you were a little surprised when they 
did that, when they walked away from those, when they withdrew 
them.
    Mr. Delrahim. To be honest with you, it was less surprised, 
but, you know, saddened. I was very glad that the Justice 
Department did not do that.
    Senator Lee. Yes.
    Mr. Delrahim. And, you know, Assistant Attorney General 
Kanter kept them in place until there's a replacement because--
--
    Senator Lee. It was----
    Mr. Delrahim [continuing]. Frankly, it was one that's 
widely recognized, and they should--they're acceptable, and--
you know, those guidelines, the 2020 Guidelines. So it was--it 
was unfortunate, but such is life.
    Senator Lee. Now, we've--as of this morning, we've got a 
new set of guidelines in place. I assume you've had at least a 
little bit of chance to take a look at them. To the extent that 
you have, are the new guidelines, in your view, sufficiently 
robust to cover the nuances presented by vertical mergers and 
the lessons learned from recent losses in enforcement actions 
in that area?
    Mr. Delrahim. I really don't know. I haven't had the time 
to digest those guidelines. The one thing I do hope is that, 
you know, as we look and unpack those guidelines and look at 
them, is that they are supported by current economic thinking, 
recent--most importantly, recent cases, because without that, 
it is less useful. The one thing I can say about them is that I 
think they recognize the efficiencies of merging two guidelines 
into one, and that's a good thing for the Government.
    Senator Lee. Right, because historically, it's not been 
done that way. Right?
    Mr. Delrahim. Right. We've had the Horizontal Merger 
Guidelines, and then from 1984 until 2020, we had the Non-
Horizontal Merger Guidelines. That was the DOJ. So, we now have 
one comprehensive guideline, which as an administrative matter, 
is good.
    Senator Lee. Okay. So you----
    Mr. Delrahim. But substantively, I really have no comment. 
It took, you know, the two agencies 2 years of a lot of work 
with dedicated folks. I don't think I would do them any service 
making any comments about them in the last few hours when I 
haven't had the chance to look at them.
    Senator Lee. One thing I've noticed is that, generally 
speaking, these guidelines tend to cite older cases, mostly 
pre-1977 cases, generally, but that's especially true, 
glaringly so, with respect to the parts dealing with vertical 
mergers specifically. And so, as a result of that, the new 
guidelines don't cite, much less aggressively address, cases in 
which the U.S. Government lost, cases involving AT&T-Time 
Warner, UnitedHealthcare-Change, and Microsoft-Activision.
    Can enforcers--first of all, what do you make of that? And 
I assume this is not something that should be taken as an 
indication that enforcers can just ignore these cases that are 
binding precedent, including precedent from the D.C. Circuit.
    Mr. Delrahim. My understanding is these guidelines are up 
for comments. I'm hoping that they will be updated with newer 
caselaw. Just, you know, not citing them do not go away in 
future litigation. Litigants will cite them. They're precedent, 
and I think the courts--I mean, you've had courts that have 
ruled against the Division and the Federal Trade Commission.
    By the way, these are not, you know, Judge Bork courts. 
These are appointed by President Obama, President Clinton, 
President Biden, very recently. And I'll add one more case to 
the list that you've mentioned, another vertical one, which was 
the Meta-Within litigation. That's another one that the 
agencies lost and has vertical components.
    Senator Lee. Right. I mean, it seems pretty significant to 
cite those recent cases, especially recent cases in which the 
Government lost. I'm not quite sure what to make of that. Now, 
you mentioned Judge Bork a minute ago. Am I supposed to read 
anything into that, the fact that they didn't cite any pre-1977 
cases--well, very few, generally, but definitely none in the 
part of the guidelines that deals with vertical mergers in 
particular. Is that a Bork thing?
    Mr. Delrahim. You know, I don't have any insight into that. 
I doubt it. I think there's also just less--one of the reasons 
Congress wrote the Hart-Scott-Rodino Act was, before that, you 
had parties merge, then the Government came and enforced, and 
had to unscramble the egg. It was not a clean process, and 
because of that, you had a lot of cases published.
    People think that you don't have a lot of published 
opinions because the Government has not been enforcing the law. 
That's not the case. It's because Congress put in this Hart-
Scott-Rodino regime, where before you merged, you had this 
period of time not to get approval, but at least give the 
agencies a chance to take a look at it, and that's, I think, a 
large reason. Of course, we've had cases since because the 
parties have disagreed, but I think that's the large reason why 
we haven't had as many published opinions over the years as we 
did prior to the Hart-Scott-Rodino regime.
    Senator Lee. Right. Now, I'm not someone who likes per se 
rules. I'm glad, for example, that Dr. Miles is no more. I 
agree with Judge Bork that per se rules generally are to be 
avoided, in part because they miss out on a number of things. 
Historically, merging parties in a vertical merger would point 
to efficiencies and procompetitive benefits presented by the 
would-be vertical merger.
    For example, the elimination of double marginalization. 
It's known as EDM, not the EDM that's a genre of music. That's 
cool, too, but this kind of EDM is also very important. They 
don't talk about this kind of EDM at raves, as far as I'm 
aware, but that's a different thing.
    [Laughter.]
    Senator Lee. Do you--do you expect that the DOJ and the FTC 
are going to credit or not credit these arguments as they've 
previously credited them, even if we have recent caselaw that 
credits EDM?
    Mr. Delrahim. You know, I would assume courts will demand 
that. So, again, I was on the losing side of the AT&T case. In 
that litigation, Professor Shapiro was our testifying expert. I 
made the decision, and I think everybody agreed, that, in 
court, we have to admit the efficiencies from the elimination 
of double marginalization that occurred in the AT&T case. Now, 
you know, the court took that into account to try to find it. 
We had a case despite the efficiencies, but I thought that was 
the right thing to do. That's the--you know, we're not just 
private litigants at the Justice Department. It was, I think, 
the honest thing to do there, and I hope that the future 
guidelines reflect the efficiencies that have been well 
accepted amongst economists as well as in courts.
    Senator Lee. Thank you. Senator Blumenthal.
    Senator Blumenthal [presiding]. Thank you. Thank you, 
Senator Lee, and thank you all for being here on this very 
important topic. I'd like to ask the other two witnesses today, 
Professor Rose and Ms. Slaiman, whether you have a preliminary 
opinion on the Merger Guidelines that have just been issued.
    Professor Rose. So, like Mr. Delrahim, I have not had time 
to digest what is a quite lengthy document, especially if you 
go to the appendices. I do think this approach of trying to lay 
out, in terms that are easier to understand, the various 
theories of harm and concerns that mergers might raise should 
be of enormous support for courts that are struggling with some 
of these issues, often with judges who have never had an 
antitrust case before a merger case from the DOJ or FTC lands 
on their docket. So, I think that that's helpful.
    In the context of--specifically of the vertical provisions, 
I've had a chance to look through, quickly, Sections 5 and 6, 
which are really the core areas that kind of articulate the 
potential problems with vertical mergers. I think they're quite 
clear with respect to this discussion about double 
marginalization and efficiencies. I think these guidelines take 
a balanced approach to them, which is to say, you know, just as 
parties will always assert in vertical--in horizontal mergers 
that the merger is going to create efficiencies--I've yet--at 
least when I was there, yet to hear one where that wasn't an 
argument--and the agencies are appropriately skeptical and ask 
the parties--to really push them hard to support that with 
evidence, I think these also take that view with some of the 
vertical efficiencies that are claimed, and I think that's 
appropriate.
    You know, to go back to--we keep talking about AT&T-Time 
Warner, but, that was something where the Department of Justice 
credited the EDM. The court then said, well, the profit 
maximization that gives you, with this integrated entity, the 
elimination of double marginalization, we think that will 
happen, but we don't think the profit maximization--that's 
exactly the same process, that creates the raising rivals' 
costs and foreclosure concerns. I don't think that's going to 
happen, because the executives said, oh, I--we never maximize 
profits that way. That tension is fundamental in evaluating a 
vertical merger. I think it's important that the guidelines, I 
think, are trying to explain to courts some of that.
    Senator Blumenthal. Ms. Slaiman?
    Ms. Slaiman. Thank you. I wanted to respond, in particular, 
to Mr. Delrahim's comments about referring to old caselaw. I 
think that that caselaw is still good caselaw. That's still 
good law. What we're trying--what the goal of guidelines, I 
think, always is, is to merge the law with the up-to-date 
economics. One of the problems that we face in antitrust law is 
that old economics is getting enshrined in caselaw, and I think 
that is not how antitrust law is supposed to function. We're 
supposed to be using the most up-to-date economics and merging 
that with prior judicial decisions. So that's what these 
guidelines are doing, and I think that's exactly right. That's 
what we need. So I was very glad to see that perspective in the 
guidelines.
    Senator Blumenthal. Good point. Mr. Delrahim, welcome back 
to the Committee.
    Mr. Delrahim. Thank you, Senator.
    Senator Blumenthal. Thank you for your service. In 2019, I 
think, as you know, the Department of Justice said about the 
consent decree on Live Nation-Ticketmaster, and I'm quoting: 
``Live Nation repeatedly and over the course of several years 
engaged in conduct that, in the Department's view, violated the 
final judgment,'' end quote. I know Senator Klobuchar has asked 
you about Ticketmaster-Live Nation.
    Coming right to the point, the Department of Justice 
reportedly has an investigation underway about the potential 
violations of the consent decree. Assuming that it finds there 
has been yet again--I think it's the third time--a violation of 
that consent decree, isn't it time to break up that merger, to 
roll it back, to admit it ain't working out for consumers, as I 
think most consumers will tell you in very graphic terms. 
Talking about remedies, wouldn't, in effect, breaking up the 
merger now be the right remedy?
    Mr. Delrahim. As you noted, that enforcement action was 
during my tenure, and I was personally involved. I've been 
advised by the Department's ethics officials to not speak 
publicly about the matter while it's still pending. I can't 
even use it in my class at University of Pennsylvania, so----
    Senator Blumenthal. Even though we're 4 years later?
    Mr. Delrahim. Until, you know, they tell me okay, I will. 
That's one area of the law that I don't want to violate.
    Senator Blumenthal. Okay. Professor Rose, Ms. Slaiman, 
maybe you can comment.
    Professor Rose. I'd be happy to weigh in on that. I think 
that what we have learned over 40 years of vertical merger 
enforcement through consent decrees that are almost always 
behavioral remedies is that they don't work. As has been 
alluded to, the courts are not regulators. The enforcement 
agencies are not regulators. And the companies understand, when 
they're negotiating those decrees, sort of what they can agree 
to that will still preserve their ability to exercise the 
market power that was often the target of that vertical merger, 
the goal of that merger. So I would have to say I think if you 
want to remedy this problem in this particular context, that 
probably divestiture is the only solution that will give you a 
lasting remedy to it.
    Senator Blumenthal. Ms. Slaiman?
    Ms. Slaiman. Well, I'd like to speak more generally about 
the idea of behavioral remedies because I absolutely agree with 
many of the criticisms that we've heard today of behavioral 
remedies. They are frequently not enforced well. They are 
frequently time limited for too short a time limit. But I am 
hopeful that we can set to improving our system of behavioral 
remedies because I think there are times when behavioral 
remedies can be an important solution. We talked about the 
resource constraints that the agencies are facing today, so I 
think there may be times when settlement is necessary, and it 
would be great if we had a better system of behavioral 
conditions that could actually be enforced quickly and 
effectively. So, I think we should work to improve behavioral 
conditions.
    Senator Blumenthal. I'm not going to ask you the next 
question, which is, tell me a behavioral remedy that has 
worked. Tell me a consent decree that has been effective. I'm 
going to give you a little time to think about it, mainly 
because my time has expired. It certainly hasn't worked for 
Live Nation-Ticketmaster.
    Ms. Slaiman. Absolutely.
    Senator Blumenthal. And it's made a mockery of the idea of 
consent remedies. It runs circles around the enforcers. They 
deluded the public, and I don't want to prejudge the result of 
the Department of Justice investigation, but if it does what it 
should do, then I think that some structural remedy here is 
absolutely appropriate.
    Senator Blackburn.
    Senator Blackburn. Thank you, and welcome to each of you. 
We are glad that you are here, and I have to tell you, I'm 
pleased to see conversation about the Ticketmaster issue. I'm 
from Tennessee, and needless to say, there was quite a bit of 
conversation around this, and it was not just the Taylor Swift 
concert. There were several last year.
    And I think, Professor Rose, to your point, it just points 
out how widespread this is. It's not a single issue. It is 
something that, when you look at this, you have to say, is 
divestiture what is going to work, and to separate this.
    And, of course, we do have some artists that are moving 
forward and are saying they will not sell through Ticketmaster 
and then negotiating separately with venues, and doing a good 
old-fashioned private-sector solution to this without the 
Government. They're opting to change the way that they do 
business because of Live Nation-Ticketmaster and the control 
that they have.
    Mr. Delrahim, welcome back to Committee.
    Mr. Delrahim. Thank you, Senator.
    Senator Blackburn. Yes. I want to talk with you just a 
moment about some of the mergers and the trend we've seen out 
of the FTC blocking mergers. We've been through a situation in 
this administration with an entity out of Tennessee trying to 
buy another entity, and the process was laborious and did not 
serve the marketplace well because of the demands that were 
coming from the FTC. And, of course, the overreach that we're 
seeing there from the FTC really came to light just recently 
with the Microsoft-Activision. They failed to be able to block 
that merger. But there seems to be this attitude that any 
merger is bad, and I have found that so interesting because 
they're not all bad. They're not all good. But there should be 
proper wait and review that is given to this.
    And one of the things that has interested me as we've 
talked to Tennessee companies is how they view some of these 
actions as having such a negative impact on the marketplace, 
and I'd love for you to speak to that for just a couple of 
minutes as to what you're seeing and how you're viewing that.
    Mr. Delrahim. Sure. Thank you, Senator. You know, it's a 
good point. I have been critical of some of the procedures, and 
I think we need to look at Government design, and that's 
perfectly appropriate for this Committee. We have two Federal 
agencies, plus 50-plus other antitrust agencies with the State 
AGs, all who do great work. The Federal Trade Commission has 
incredible public servants, great folks, but the procedures--
just as Justice Kagan noted in the Axon case, this past term--
--
    Senator Blackburn. Mm-hmm.
    Mr. Delrahim [continuing]. You know, which said agency--the 
Federal Trade Commission may know something about competition, 
but it certainly doesn't know anything about separation of 
powers where the parties were not allowed to sue until the end 
of the administrative process, but now they do have an ability 
to go to court and seek redress.
    The due process is really important, and when you have an 
agency that brings--again, without commenting on any particular 
transaction, just procedurally, you have the review process. 
They have a different legal standard than the Justice 
Department without any statutory, you know, direction from 
Congress of what agency reviews what transaction, but 
arbitrarily, you know, some of them--I was involved in them 
because of the clearance process.
    The legal standard to get an injunction in court is 
different for the two agencies, you know, arguably a lower 
standard for the FTC, one. Two, when they bring administrative 
litigation before an administrative law judge in their FTC 
Commission, when they lose, you appeal back to the Commission. 
Well, guess what? It's the same Commission who reported out a 
complaint. Again, procedurally, it makes no sense, because in 
40 years, guess how many times they have lost an appeal of 
their own loss? [Vocalization sound.] Zero.
    Senator Blackburn. Yes.
    Mr. Delrahim. Then you go to court. So in the real world 
where parties are dealing with ticking fees, high interest 
rates of deals, you now have to factor in 2 years to now go to 
a circuit court to seek your legal redress. And I think when 
you have an overreach by the Government, the Supreme Court--I 
don't know, how many 9-nothing decisions, but Justice Kagan's 
decision just last year in the Axon--is just one, and I--you 
know, and there's more cases of those.
    Senator Blackburn. Mm-hmm.
    Mr. Delrahim. That's not good for the enforcement of the 
law.
    Senator Blackburn. Yes. Let me ask you this, also. The 2020 
Guidelines that we've already discussed here today, why do you 
think FTC and DOJ was moving so aggressively to remove those 
guidelines?
    Mr. Delrahim. You know, I don't know. I don't want to 
guess. The DOJ did not. To their credit, they did not withdraw 
those guidelines because they, I think, recognized there was a 
lot of work that went into it. It was widely accepted. Many 
experts, including Professor Rose, Professor Shapiro, Salop, 
and others, provided comments, and it was well regarded. And I 
think the statement of the commissioners who withdrew the 
guidelines speaks for itself.
    It was a fundamental misunderstanding of the law about the 
burden shifting, and the difference between procompetitive 
effects and efficiencies, I think, is one of the reasons. But 
they withdrew them without having another one in place to 
provide some guidance for the courts, and my question is, some 
of the litigations may have been more successful had those 
guidelines remained there.
    Senator Blackburn. Well, and I think that the way Mr. 
Kanter and Ms. Khan moved forward aggressively to move away 
from those guidelines is something that was not lost on a lot 
of people. My time has expired, Madam Chairman. Thank you.
    Chair Klobuchar [presiding]. Well, thank you very, very 
much, Senator Blackburn, for all your work in this area, and 
thank you for being here. Next up, Senator Durbin, the Chair of 
our Committee--the real Chair.
    Chair Durbin. Thank you, Real Chair Klobuchar. Makan, it's 
good to see you back in this room where we've spent much time.
    Mr. Delrahim. Great to see you, Chairman.
    Chair Durbin. Thank you, Professor Rose and Ms. Slaiman, 
for joining us today. Mr. Delrahim, in a speech you gave at 
Duke in 2021, you noted several court precedents that proved to 
be particularly challenging as an antitrust enforcer. One of 
those cases was the 2018 decision, Ohio v. American Express, 
which you said was a classic example of bad case leading to bad 
law. How did the decision in that case impact your ability to 
challenge proposed mergers?
    Mr. Delrahim. That decision--thank you, Chairman Durbin, 
for that question. That decision was one that was cited in 
the--I think erroneously, at that time, cited in the Sabre-
Farelogix challenge, where the Division brought, and an 
incredibly bright judge looked at that, and it's a complex 
case, looked at the market definition, and made it very 
difficult for the Division, as a matter of law, to go into 
court, say, you know, you should look at the definition on one 
side of the market rather than the two sides of the market.
    It's a decision where, when I mentioned bad case bringing 
bad law, and when I came in, I tried to settle that because I 
saw the train wreck going to happen at the Supreme Court, the 
uncertainty of the bad law being made. Unfortunately, it was a 
case that was--even though it was the Justice Department's 
case, the State of Ohio was the one that ended up seeking cert, 
and I was not able to get all the parties involved. The 
challenge with it is that now you have a law on market 
definition with two-sided markets that's very difficult to 
administer, and, you know, it's a great precedent to litigate, 
but it's just very difficult for enforcers because it doesn't 
have clarity.
    Chair Durbin. Is the clarity lacking in terms of law and 
precedent or the complexity of the case?
    Mr. Delrahim. The complexity of the case. I mean, how you 
address that, you're going to have to litigate. I believe the 
judge in Delaware with the Sabre-Farelogix--I believe he's been 
elevated now in a court of appeals. Incredibly bright judge. He 
just looked at it. He said, as a matter of law, I have 
difficulty. Here's how I have to interpret this market or 
define this market, and that was one of the challenges.
    These are difficult for the Supreme Court to--you know, 
two-sided markets are difficult to understand. To really 
appreciate why two-sided markets are important, sometimes you 
have to engage in perhaps restricting some output on one side. 
For example, Uber is one where, if you don't have enough 
drivers, there's not going to be demand on the consumers who 
want it. If you have enough drivers, then--so, the two sides 
are really important. There's an interplay between the two, and 
you have to factor those both in, as the Court mentioned. You 
can't just say because you're limiting output on one side, you 
now have an antitrust violation.
    And in that case, it was against American Express, who, for 
many years tried to enter into the market against Visa, 
Mastercard, it couldn't. It set up its own separate network, 
exactly the type of thing we would like somebody to invest. 
They got, I think, 24, 25 percent of the market, and there was 
enforcement actions against Visa and Mastercard. And then we 
sued for an antitrust against American Express by saying that, 
you know, if you're using my network that I invested in, you 
can't, you know, direct consumers over--that I brought to you 
to the other side. And I think that was just a mistake in 
enforcement.
    Chair Durbin. Professor Rose, in an interview with the 
Harvard Gazette, 2021--I missed that issue, I'm sure it was 
sent to my home--you said the caselaw relating to vertical 
mergers was too lenient and decisions have too frequently been 
based on misunderstanding the economics. Could you reflect on 
that comment based on the exchange Mr. Delrahim and I----
    Professor Rose. Sure. That's a--I'm interested that someone 
found that article. That was when I was at Radcliffe. Yes. So, 
here's, I think, what I was referring to. So first, with 
respect to the economics, there was this, I'll just call it, a 
very naive and formulaic view about vertical mergers that 
focused on the potential efficiencies of vertical integration 
and made the erroneous economics argument that in any vertical 
chain of production, there was, at most, one monopoly profit, 
and so it didn't really matter whether that profit was earned 
at one level or another level--by combining the two levels, you 
weren't going to increase the amount that a firm could earn.
    And what we understand as we look at markets where there 
are relatively few competitors that interact, is that that 
model is just wrong, that, in particular--you know, I described 
earlier foreclosure effects. If I can combine, say, the 
upstream manufacturer and the distributor, and I can foreclose 
access to, say, the distributor network to my upstream rivals, 
and they've got to go through some more costly way--you have to 
go back to this discussion of Ticketmaster--they've got to go 
through some more costly way of selling tickets because they 
don't have a low-cost ticket option anymore--then I'm able to 
raise prices kind of at the expense of these rivals who have 
lost because their costs are higher.
    And so we understand now that vertical mergers can create 
the ability for firms to exclude rivals or to raise their 
costs, advantage themselves in competition, and harm consumers 
in that way. And I think the problem is that--we talked a 
little bit about the caselaw in the Merger Guidelines. I think 
they're just citing to Supreme Court. I haven't gone through 
them with tooth and comb, but I think they're just citing to 
Supreme Court cases, and there just haven't been many merger 
cases that have hit the Supreme Court, in general, over the 
last few decades, and really nothing in the vertical context 
since this economic understanding has become better accepted 
and understood. And so I think the problem is that judges are 
still disproportionately inclined to say, as the decision in 
Microsoft-Activision was, to cite to, you know, quotation after 
quotation about vertical mergers are almost always 
procompetitive or vertical mergers create efficiencies, without 
recognizing their ability to harm competition and, therefore, 
our need to enforce against them.
    Chair Durbin. Thank you. Thank you, Madam Chair.
    Chair Klobuchar. Thank you very much, Mr. Chairman. I'm 
going to ask a few additional questions, then at some point, I 
think we'll all--and Senator Blumenthal does, and then 
hopefully Senator Lee will return for a bit, but then we have 
to go back so we don't hold up additional votes.
    I'd start with--I know you, Ms. Slaiman, mentioned the bill 
that we passed, the Merger Filing Fee Modernization Act, which 
I appreciated Mr. Delrahim, when he was in his old position, 
was advocating within the administration to get this done, and 
we finally got it done with a little drama, I will say, the 
bill that Senator Grassley and I had for a long time, at the 
end of last year. We also passed a bill that Senator Lee had 
about the venues of cases, that they stay--supported by nearly 
every Attorney General in the country, from liberal to 
conservative--that the cases stay in the States where they are 
supposed to be--stay. That was a bill that Senator Lee and I 
did.
    But if we could go back to the funding that we had then 
take effect immediately after some debate, and we actually had 
a floor vote and got nearly, I think, 90 of the Senators to 
vote for that.
    How do you anticipate that the agencies, what they will--
they got their support. Why is it helpful with regard to 
vertical mergers, and what steps do you recommend Congress--
additional steps that Congress should take to support vertical 
merger enforcement? So it's kind of like, how can this be 
helpful with vertical mergers, the additional funding which, as 
you know, is done by charging more on the large mergers and 
less on smaller mergers? How can that Congress--that funding be 
helpful, and then what else do you think Congress should be 
doing?
    Ms. Slaiman. Great. Thank you very much, Madam Chairwoman, 
for the question. So the agencies may be able to bring more 
cases as a result of receiving additional funding. There are 
many more mergers that need to be examined today than we have 
had historically, and so I think that is really testing the 
capacity of our antitrust enforcement agencies. The funding has 
not been keeping up with the increase in mergers that need to 
be examined, so making that change in the Merger Filing Fee 
Modernization Act is hugely helpful for that. I do think, as a 
next step, that they actually need even more funding, even more 
resources. I fear that they will still be resource constrained 
even after----
    Chair Klobuchar. And is it true that these--from what I 
recall, they bring in funding. They bring in money from 
bringing these cases because of either remedies, payments, 
filing fees, and the like.
    Ms. Slaiman. Right. So on mergers, I think that comes from 
the filing fees, but certainly other cases that the agency in 
particular I think about, the FTC is always returning a lot of 
money to the Treasury from prosecuting fraud and things like 
that.
    Chair Klobuchar. Mm-hmm.
    Ms. Slaiman. So they absolutely are bringing in money, as 
well.
    Chair Klobuchar. All right. Thank you. Dr. Rose, one thing 
that we've seen is that vertically integrated online platforms 
will often use their dominant position in a market, as we've 
discussed today, to preference their own products or content. 
That's why we've reintroduced the bipartisan--Senator Grassley 
and I--American Innovation and Choice Online Act. We thank 
Senator Blumenthal for being one of the many co-sponsors.
    Dr. Rose, how could more vigilant review of vertical 
mergers help to prevent companies from unfairly preferencing 
their own products and services over those of competitors? And 
we're talking here--as you know, the bill's been endorsed by 
the National Federation of Independent Businesses because of 
the fact that small businesses feel very strongly about this, 
that they are getting pushed down the platform in preference 
for things like Amazon Basics products on the Amazon platform. 
Professor Rose?
    Professor Rose. So, I think there are two parts of your 
question, and the first I want to really highlight is, again, I 
keep coming back to, as you've heard also, I think, from others 
on this panel, the benefit of congressional action. And, if we 
take something like self-preferencing, I think that's a 
behavior that is currently extremely difficult for U.S. 
antitrust enforcers to reach. Even if it is reflective of the 
anticompetitive action that would fall under Section 2, it's 
just extraordinarily difficult to bring an enforcement action 
and succeed in court. So I think Congress making it clear that 
that's a violation will help both in deterrence and in----
    Chair Klobuchar. Which they've done in other countries.
    Professor Rose. Yes. Yes. Well, in other countries, what's 
the equivalent of our Section 2 standard is also a bit easier. 
You've got this abuse of a dominant position that we don't have 
here that allows them to enforce it.
    Chair Klobuchar. Mm-hmm.
    Professor Rose. So I would just say, if we've got a 
problem, and self-preferencing may not--may arise in many 
contexts that have nothing to do with vertical acquisitions----
    Chair Klobuchar. Mm-hmm.
    Professor Rose [continuing]. It may just arise organically, 
that having this kind of congressional action to make clear 
what types of behavior and conduct they feel violate the law 
would be very helpful.
    In terms of vertical mergers, I guess I think--and this is 
something that we've seen the agencies I think begin to 
consider, that the acknowledgment that the more you're 
acquiring companies that are related to you, either in a 
vertical chain or with these platforms, it may not even be 
vertical. They're depending on you for some things, but they're 
complementary, part of this kind of two-sided market. I think 
recognizing that there's a potential harm that can arise from 
increasing your activity off the platform, that then is in 
conflict with providing service to your downstream or small 
business competitors, Amazon Basics competitors, you have an 
incentive to preference your product over theirs. I think 
recognizing that potential in mergers could be an important 
thing for agencies to do.
    Chair Klobuchar. Mm-hmm.
    Professor Rose. I think it's going to be extremely 
difficult to successfully bring challenges based on that theory 
of harm, but I think if Congress demonstrates----
    Chair Klobuchar. Without additional----
    Professor Rose. Yes.
    Chair Klobuchar [continuing]. Legal authority? So, we're 
just----
    Professor Rose. Yes, and----
    Chair Klobuchar. I mean, my problem is we're just, and I'm 
going to turn it over to Senator Blumenthal, who has done some 
incredible work on app stores and the like. It feels like, to 
me, that we're just static. We're pretending the world is as it 
was, not quite back to the Standard Oil days with the old 
cartoons, but 30, 40 years ago. And we have this whole new 
market, and we haven't really passed, with the exception of the 
resources and the venue bill, one piece of competition 
legislation in the tech area, and we're just pretending like 
it's not there. And the rest of the world isn't. They're moving 
around.
    Professor Rose. Right.
    Chair Klobuchar. They're looking at it. And so I just 
think, in the end, it's going to be at our great folly for 
competition and for the economy as a whole because the power is 
so immense with 90 percent market share for Google of search 
engines. And then not putting any guardrails in place is just 
going to lead to much more limited choice and much--all kinds 
of little companies going under because they're just not going 
to be able to compete if that is their gateway.
    Professor Rose. Or we outsource our enforcement to Europe 
and the U.K.
    Chair Klobuchar. Well, that is exactly right. We don't have 
our American brand of enforcement. We are--of course, these 
companies, we're proud of the innovations they've brought in, 
but that doesn't mean you just step back. We were also proud 
that they built the railroad. That really was a great thing. 
But we didn't just step back and say this is just going so well 
for everybody. We said, okay, we have to put some rules in 
place. This just isn't happening here, and that's what I'm 
trying to convince my colleagues of, that, as you say, we're 
letting--we are outsourcing how this is regulated to other 
nations as we speak, if we don't do something ourselves. What a 
great segue to Senator Blumenthal. Thank you.
    Senator Blumenthal. Definitely outsourcing enforcement to 
other countries, to Europe, primarily. And how ironic and, in a 
sense, shameful that the United States, which really originated 
the idea of antitrust enforcement, trust busting, and so forth, 
should be behind Europe.
    And just to sort of add a footnote to what Senator 
Klobuchar just said, the way I view your testimony, Professor 
Rose, is that you're saying not so much that economics have 
changed or that the economy has changed, but the old 
assumptions, which were not based on facts, they were 
theoretical. Bork being--Professor Bork, I should say, with all 
due respect, I took his course at Yale Law School in 
antitrust--simply kind of erected this construct of theory that 
really bore very little relationship to the facts of how 
vertical mergers don't have those efficiencies that were 
presumed and do have the anticompetitive effects that were 
presumed not to exist, and maybe now we're just becoming more 
realistic about it.
    But let me ask you, coming back to remedies because for 
many years I was an enforcer, so I'm more interested in the 
practical results of enforcement, should we--and this is really 
a question for all of you. Should we be engaging in consent 
decrees anymore? Shouldn't we just say, no, this is not going 
forward? This merger has too many problems. We're not going to 
try to set conditions or divestiture requirements. Just--it's 
too big.
    Professor Rose. So, I do think we need to have the 
resources to bring more enforcement challenges, just outright 
challenges. I don't, unfortunately, think that the option of 
taking settlement entirely off the table is likely to succeed 
in the way that we want.
    I've been increasingly thinking what congressional 
intervention could help, and one of the things we're seeing, I 
think, in the last few years is an increasing tendency of 
parties to come in, having proposed a remedy. I think that 
Makan had to deal with this when he was at the DOJ as well, but 
I just see it even coming in more frequently, particularly in 
the vertical space, but not just vertical. And the agencies are 
having to litigate the fix, and it's extraordinarily difficult.
    And so I'm wondering if something like, and I think this 
would have to be congressional action, a presumption--or a 
burden shifting or a presumption that says the agencies 
litigate the mergers presented and the harm, and if the parties 
have a fix for it, then it's their burden to demonstrate that 
that will alleviate all of the competitive harm. And, they've 
got the information and data to be able to present that case. 
It's very hard for the agencies to prove the negative of that 
because they don't have as much access to information and 
understanding of markets.
    And I don't know if that would help and, also, at the same 
time, make it a little bit less attractive for companies to 
come in and say, yes, we know there's a problem, but let's just 
settle. But I do think in the vertical context, these conduct 
remedies just--I'm going to go take your assignment to go back 
and look, but I'm sure there are some that have worked okay 
because probably the incentive to foreclose rivals wasn't so 
strong.
    But if the companies can make more money by doing A prime, 
B prime, and C prime, they will say, I agree not to do A, B, or 
C. That's in the contractual terms of the consent decree, and 
the Department of Justice is not going to be able to go and 
convince a judge that they're doing A prime, B prime, C prime--
you should stop them. The judge will say, well, if you didn't 
want them to do that, you should've written it in the consent 
decree. And I just think that's the problem we're facing in so 
many of these situations.
    Mr. Delrahim. I think, Senator, it depends on--when you 
say, ``to disallow the consent decree,'' it depends on what do 
we mean. Is it behavioral or structural? A lot of times, a 
consent decree is a settlement to a merger where the parties 
agree to sell something or do something, where it removes the 
disincentive to act in a profit-maximizing way. And that 
becomes the problem with some of the behavioral remedies that I 
think the agencies were too quick to enter into. So I think 
it's--we shouldn't remove them. We should look at what are ways 
to have them enforceable, to have them--that actually solve the 
problem.
    The other thing is, we did this for the first time, but 
Attorney General Reno put in place--Congress, 1995, passed a 
law to arbitrate administrative cases. Attorney General Reno 
issued regulations. We did that in one merger case for the 
first time in history. It created efficiencies of resources. It 
created predictability. The Division actually prevailed in that 
case against my current law firm now.
    It was a good result, and I think the agencies and if 
Congress supported that, is to encourage more of that. Now you 
have an expert arbitrator that the two sides would agree, who 
has an economics background, who has an actual incentive to be 
there rather than a judge with 400, 500 cases, who has no 
interest to hear this case or want to be educated by Professor 
Rose on one side but maybe Professor Carlton on the other side, 
who are both incredibly qualified, but say the exact opposite 
thing. And that's one of the challenges of administrability.
    The other thing that I think would be helpful is that we 
really don't have a lot of judicial guidance on remedies. 
That's something that I've been thinking a lot about 
researching. The Supreme Court's decision in the NCAA last 
year, Justice Gorsuch's decision, gave some guidance, to say, 
here's the discretion that the judge has and wide discretion at 
the district court level to construct remedies. The previous 
judicial guidance on this was really the Microsoft case in the 
D.C. Circuit, 20 years ago, about--this was a structural remedy 
that the judge had imposed, and the D.C. Circuit said, uh-uh, 
no, not really.
    Senator Blumenthal. I'm very familiar with----
    Mr. Delrahim. I know you are.
    Senator Blumenthal [continuing]. The case, having actually 
been a plaintiff----
    Mr. Delrahim. In that matter.
    Senator Blumenthal [continuing]. Said to the judge, this 
structural remedy ain't going to fly with the D.C. Circuit, and 
we were right, but the district court judge----
    Mr. Delrahim. Judge Jackson, at the time.
    Senator Blumenthal. Yes.
    Mr. Delrahim. Yes. That's the challenge, is that, what is 
the guidance that judges have to craft a remedy, and deducing 
from that, what do the enforcers have, because ultimately, 
that's--how do you craft these? It's an administrative issue, 
and these have nothing to do with, I don't think, Bork judges 
or Trump judges and all that. The recent case, the ASSA ABLOY 
case, was a Biden-appointed judge, the UnitedHealth-Change, 
those both remedies that were readily available, the Department 
had rejected, but the judges had rejected.
    Chair Klobuchar. All right.
    Senator Blumenthal. My time has expired, so I'm going to 
ask----
    Mr. Delrahim. Thank you.
    Senator Blumenthal [continuing]. Ms. Slaiman to respond in 
writing, if you don't mind. I would be very eager to have your 
response.
    And again, to all of you, if you have suggestions for 
consent decrees that have worked, I'd be very interested in 
getting into them and seeing why they've worked as opposed to 
the many that have not. Thank you.
    Chair Klobuchar. Good point. Thank you very much, Senator 
Blumenthal. And then to close things out, so we both don't hold 
up the Senate, Senator Lee.
    Senator Lee. Thank you very much. Mr. Delrahim, getting 
back to you, covering some of the themes that we talked about 
earlier about instances in which the Department of Justice and 
the Federal Trade Commission sometimes take divergent views, 
sometimes take different paths, one deciding to withdraw Merger 
Guidelines, the other not. That's just the tip of the tip of 
the iceberg. No one would ever envision the Catholic Church 
being successful if it had two Popes serving simultaneously in 
the exact same position. We would never dream of having two 
Presidents of the United States serving simultaneously. This 
sort of two-headed monster phenomenon is a recipe for disaster, 
and that's why I've long advocated for choosing one or the 
other. Pick a horse and ride it, as my former boss, Paul 
Warner, used to say.
    As I look to which horse we ought to ride, all things being 
equal, I think it ought to go to the Department of Justice. 
There are a couple of reasons for this. Number one, it's set up 
in such a way that it is more politically accountable. It's run 
by people who are appointed by the President and, after Senate 
confirmation, serve at the pleasure of the President. And its 
overall structure is also just generally better suited for 
decisive enforcement of the sort that's necessary to protect 
American consumers. Moreover, given the criminal ramifications 
of some of the--some of our antitrust laws, it's important to 
put it in an entity that has criminal law enforcement 
authority. The Department of Justice has that. The Federal 
Trade Commission, not so much. So the One Agency Act would do 
this. It would consolidate antitrust authority in one agency, 
in the Department of Justice.
    Mr. Delrahim, what do you think of the--first of all, the 
wisdom, or lack thereof, of having two separate entities, and 
second, the idea that if you're going to pick a horse, it ought 
to be the Department of Justice?
    Mr. Delrahim. Thank you, Senator, for the question. I'm no 
longer in an administration where I need OMB approval. I may 
cause other problems by my comments here. I think that even 
other countries--China recently combined its three agencies 
into one--one and a half. There's great efficiencies in the 
administration of justice, especially when we're talking about 
law enforcement.
    Here you have, for a number of reasons--you mentioned it--
why I think the DOJ is better. You have one decision-maker. You 
know, we've had issues in the past--Microsoft case at the FTC 
was one, Google was another--where you have a tie or you have 
litigation where one commissioner writes an amicus to a judge, 
who is really not comfortable with this stuff anyways and is 
like, wait a minute--your commission is bringing a lawsuit and 
one of your commissioners is writing a perfectly legible 
argument why it's bad? How am I supposed to decide this? You 
have a decision-maker. If there's--if Mr. Kanter, for example, 
is recused, then the Attorney General steps in or the Deputy 
Attorney General, and you can make a decision and enforce the 
law in a predictable way.
    I think bringing the Federal Trade Commission--wonderful 
entity--taking the Bureau of Competition only, putting it in 
the Antitrust Division, and I actually think you might have 
this opportunity because the Supreme Court's going to review 
the constitutionality of the CFPB next year, and who knows 
where that goes? If I were a betting man, I would vote against 
the constitutionality of its current structure.
    So, if you want to sort of keep the CFPB and let it 
survive, it enforces the same exact law as Section 5. Why not 
take the CFPB, put it in the FTC? While you're at it, let's 
create some more taxpayer savings. Take the CPSC--so you have 
one consumer protection agency, one antitrust agency that 
actually administers the law, and a much more--I mean, nobody 
loses a job, maybe a couple of politically appointed 
commissioners. That would make a lot of sense as a government 
design, and I think it would create efficiencies in the 
Government that would benefit everybody involved.
    So, that's one suggestion, and for a number of reasons, I 
think the Justice Department is the better place, as I 
mentioned. Most important is the fact that you have one 
decision-maker. It's a law enforcement. You have the chief law 
enforcer making that decision.
    Senator Lee. So not just efficiency but also increased 
certainty and enhanced accountability. Hardly----
    Mr. Delrahim. Due process.
    Senator Lee. Hardly sounds radical to me, coupled with due 
process. Ms. Slaiman, we often expect vertical integration in 
most markets to have at least some potential to create 
efficiencies, increased efficiencies of the sort that could 
benefit consumers in the right set of circumstances. And that 
often is the case, but it's certainly not always the case. 
Where there are substantial barriers to entry and where there 
are switching costs, for instance, it can also lead to 
foreclosure that keeps competition at bay, that keeps 
competition out. And to that extent, it can have the ability to 
either entrench, or expand, or, in some cases, even confer 
monopoly power. How has this worked out in ad tech?
    Ms. Slaiman. Thank you very much, Ranking Member Lee. I 
just want to very briefly respond about the importance of 
having both the FTC and the Department of Justice enforcing 
antitrust law. One of--I could spend a lot of time on this, and 
I won't since you didn't ask me, but one of the reasons is, 
it's very useful to have competition and consumer protection 
working together under one roof because there are important 
synergies between the two, but I'll focus on your question.
    The DoubleClick merger in 2007, as you have mentioned and 
Senator Klobuchar mentioned, along with many other mergers 
helped Google to amass an incredibly powerful position in ad 
tech. Right now, I think there's a serious conflict of 
interest. They are representing publishers and advertisers, and 
have a significant control of the exchange where publishers and 
advertisers are meeting in the middle to do their auctions. I 
think that conflict of interest is very pernicious, and I think 
we have now reached a point where divestiture is going to be 
the best solution to promote competition in that very important 
space.
    Senator Lee. Yes. No, you're exactly right. We do have a 
problem here. We've got companies like--well, we've got Google 
cutting off publishers who don't consent to Google collecting 
data on web visitors. That's why we need to pass the AMERICA 
Act. The AMERICA Act would solve this problem, and, among other 
things, it would create a duty for digital ad companies to act 
in the best interest of their customers and provide 
transparencies. I assume we agree on that one, even though we 
respectfully disagree----
    Ms. Slaiman. Absolutely.
    Senator Lee [continuing]. On the other.
    Ms. Slaiman. Thank you.
    Senator Lee. Thank you, Madam Chair.
    Chair Klobuchar. Well, thank you very much, Senator Lee. 
This has been a very informative hearing on a really important 
and timely topic, given the announcement of the new guidelines 
today.
    And we all know that vertical mergers are not the first 
thing that people may be thinking of on the tip of their 
tongue, but they are starting to see the effects, whether they 
are forced to pay higher prices to see their favorite band, or 
that they are charged too much on a bill, or they don't have 
the choice they should when it comes to an online platform. 
Those are the harms that certain vertical mergers cause.
    So as we work to continue to modernize our antitrust laws, 
we have to keep our eye on the prize. That is, the people of 
this country and the competition in our economy, which has been 
a cherished method for improvement of the lives of so many 
people, and we can't let that fall behind, which is why I am 
singularly focused on getting these bills through one at a 
time, and I have a lot of patience. Not really, I don't, but 
I've learned it over time working with Senator Lee.
    So, with that, do you want to say anything in closing, 
Senator Lee?
    Senator Lee. Go, fight, win.
    [Laughter.]
    Chair Klobuchar. Okay. All right, excellent. With that, the 
hearing is adjourned, and we're going to allow the record to be 
open for 1 week, until July 26th, 2023. Thank you very much to 
our witnesses.
    [Whereupon, at 4:26 p.m., the hearing was adjourned.]
    [Additional material submitted for the record follows.]

                            A P P E N D I X

              Additional Material Submitted for the Record


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]  


                                 [all]