Odd Lots - DOJ's Jonathan Kanter on the Bidenomics Approach to Antitrust

Episode Date: July 31, 2023

A key plank of the Biden administration's "Bidenomics" involves stronger antitrust enforcement and we've seen the White House empower agencies like the Department of Justice to step up actions on monopolies and other behaviors that reduce competition. But what exactly counts as anti-competitive nowadays? And how does promoting competition sit alongside the administration's more proactive public investment and industrial policies? In this episode, we speak with Jonathan Kanter, assistant attorney general for the Antitrust Division at the DOJ, about how he's thinking about these issues. We also talk competition in banking after a wave of consolidation in the space, as well as new challenges posed by Big Tech and artificial intelligence.See omnystudio.com/listener for privacy information.

and welcome to another episode of the Odd Thoughts podcast. I'm Tracy Alloway. And I'm Joe Wisenthal. Joe, you remember last month we spoke with Jared Bernstein, who's the head of the White House Council of Economic Advisors, and we were talking about Bidenomics. Yeah, great chat. Always appreciate sort of getting a sense of how policy makers are thinking about things. And obviously, we've talked a lot about the sort of like industrial policy, domestic investment side, but there is still more. Yeah. So he outlined these kind of three basic planks of Bidenomics. And you already mentioned the big one, which is public investment slash industrial policy, whatever you want to call it. The second one is sort of empowering workers. And then there's this third one about promoting competition.

And we touched on it with Jared. We spoke a little bit about how the Biden administration is approaching antitrust. But I think it's one of those topics we really need to get into because it keeps. keeps coming up in various ways. Could I just say, I don't know anything about this topic. That's true for most episodes that we do, but I feel very comfortable saying that, like, when it comes to, you know, the law is not an area in which, you know, I'm, like, used to, like, reading, like, cell side research about, like, okay, the Fed is going to do this, so inflation is going to do this.

And when it comes to things, like, sort of like, the legal philosophies related to mergers, et cetera, like, I really genuinely know very little. All right. Well, there's a market opportunity out there to become the antitrust guy on Twitter. So maybe that should be our goal. But you have to admit, it does keep coming up. So we recorded an episode with Scott Hildenbrand recently about bank consolidation and whether or not we're going to be seeing a lot more bank mergers in the wake of the deposit drama in March. And then it came up again, I think on our episode with Josh Wolf, right, where he was talking about. how big tech companies are investing in artificial intelligence, but they're doing it in a very specific way to possibly evade regulatory scrutiny. Yeah, that was one of the things I hadn't appreciated before. And he pointed out that you have all these big companies making these huge investments, VC looking investment in AI startups. And he posited that one reason they may be making these investments, Microsoft and making investments, Google making investments,

is because, well, maybe antitrust authorities aren't going to be very happy if they buy some of these companies, but they can maybe perhaps make something that resembles a VC-style investment. So it's coming up enough in different sectoral conversations that we have that I think we need to drill deeper into the environment right now. Absolutely. Well, I am very pleased to say that we do, in fact, have the perfect guest. We're going to be speaking with Jonathan Cantor, the Assistant Attorney General for the Antitrust Division at the Department of Justice. So Jonathan, thank you so much for coming on all thoughts. Thank you for having me. It's a pleasure to be with you today.

Maybe just to begin with, you can give us an overview of what does antitrust actually mean in 2023 versus, you know, maybe in previous administrations or previous decades? Yeah, so let's take a look back through history and think about the importance of a competition and a competitive economy. It's been the cornerstone of our society since the Tea Party, but you can think back historically to standard oil and AT&T, IBM, Microsoft. At major inflection points in our economy, we've confronted monopoly choke points. And antitrust has been, some have referred to it as the Magna Carta Free Enterprise. It's the way in which we open opportunity so that companies who want to compete can compete on the merits. Antitrust can deliver lower prices. It can deliver better wages, better working conditions. It could deliver opportunities to build and grow a business. These are the arteries of commerce. And Congress

made a value judgment over 100 years ago that competition matters. And so our job is to enforce the law. And sitting here in 2023, you mentioned biodynamics, you mentioned the interest in antitrust globally and domestically. And that flows from, I think, an appreciation on so many different dimensions that we can't have a democratic society. We can't have a free society and we can't have a market-based economy without opportunities for competition. And so our job is to enforce the law in order to keep competition thriving in our country and to do so in a way that's consistent with the will of Congress. So my impression is that historically when it came to industry consolidation, which I guess on some level always maybe reduces the amount of competition out there,

but that when it came to industry consolidation, a key factor was this idea. It's like, well, if a company has monopoly power or if oligopoly power, then they can raise prices more, and that's bad for consumers. And so that should be blocked. And my understanding is that there's been some evolution of thinking where maybe there's more than just raising prices. And obviously this comes up in tech because we use a lot of tech products that they don't charge us anything, except for the checkmark on Twitter, which I haven't paid for. But other than that, like, so my, so I get the impression that like the sort of thinking about what actually constitute something that would harm competition has changed. So I, I guess I will start by saying

in many respects, nothing fundamentally has changed. The law is still exactly the same as it was when it was written. And the law says, for example, in the context of mergers, that we should prevent mergers. That's may substantially less in competition. tend to create a monopoly and that we should bring cases or we should prevent monopolization of markets or restraints of trade. The law and competition hasn't changed and that the benefits of competition are many. Competition delivers certainly lower prices, but not just lower prices. I think we can see that in our everyday lives. And if anything, I would say there's today, perhaps than in the recent past, a greater appreciation of why we should care about competition.

I think it resonates with people in so many different corners of our country, whether it's somebody looking to start a business, somebody competing with an established business who wants to break into a new market, somebody who wants the ability to switch jobs or get the benefits of competition for labor, an author looking for a book advance, a traveler looking for fewer cancellations and better conditions on their flights. All of this is competition. It also relates to the marketplace of ideas. Competition in the media space, for example, generates the flow of information, which is foundational to our political discourse. And, you know, in the United States, that distinguishes us as a, on the world stage, as a democracy. And I think we are proud of that, but we have to protect it and we have to invest in it through a competitive economy. Are we allowed to say hipster antitrust in this conversation? I mean, that's really, that's kind of what you were alluding to, right, Joe?

Well, yeah, I mean, like, there is some change, right? Like, there is some shift. Yeah, so let me start by saying it's a good thing that we're audio only, or maybe it's a bad thing, because if you saw me in person, you would recognize that I am definitely not a hipster. My hair line. I am. I'm wearing a Western shirt right now. Yeah, there you go. So I think we can dispense with that right away.

I think we're talking about antitrust. And I think we're talking about restoring antitrust that. really reflects the will of Congress. So the antitrust laws were written at a time when members of Congress and presidents who signed bills didn't want a concentrated economy. They didn't want clogs on competition. And I think what going back to our, you know, a few moments ago, it's not that something has changed in terms of the law, but it's really that something has changed in terms of awareness. And I think what I've found, at least throughout my evolution, I'm someone who's spent my entire career in the antitrust space, going back to my summers in law school working at the FTC,

to my first job at the Federal Trade Commission in 1998, I've been practicing antitrust ever since. And when I started, it was in many respects in niche area that was really interesting, perhaps a bit wonky, did not generate a lot of attention, certainly was not the subject of a presidential executive order or the third pillar in a presidential economic platform. But I think what we found out, what I find today is that the awareness outside of the insular antitrust bubble is greater than ever, or perhaps that is greater than in at least, you know, or about 100 years. And so why? Well, I think so many different people have experiences with monopoly choke points in their lives. And they're all very different. It could, again, be a worker looking to be mobile.

It could be the small business. It could be the traveler. It could be the concert goer. It could be the person who cares about their privacy. People want control over their lives. They believe that freedom and choice and competition go hand in hand. And so what we've seen is a greater awareness. And I think there's an important opportunity to meet that moment. But we have to do it in a way. And I would remind at least folks listening now that my job at the Anti-Trust Division at the Department of Justice is a law enforcer. So I don't write the law. I don't make the law. In many respects, the policy judgments have already been made. They've been made by Congress, interpreted by courts over a century. And our job is to enforce the law the way Congress wrote it. Now, I personally believe there's a lot of wisdom in the antitrust laws. And it is a really important part of our free and democratic society in open markets and economic freedom.

But those judgments were made, you know, initially in 1890 and then again in 1914 and then numerous times thereafter, as the antitrust laws were revised, updated, and expanded. So just on the awareness point, I think everyone can appreciate the sense that maybe a big monopoly is bad for either our personal lives in one way or another or for economic society as a whole. You kind of get this nagging sense that, well, maybe Amazon prices are really low, but it's not great that they're crowding out other players in the market. And I know Biden has talked about using antitrust to also improve, you know, workers' lives and labor power and things like that. But how do you actually measure these things, first of all? You know, it's one thing to go out and look at prices and say, well, there's a bad monopoly out there and they're raising prices and that's bad.

I imagine it must be kind of different to go out and say, like, well, you know, there are these other things happening that might be detrimental to, the economy as a whole. Right. So that's why each investigation is highly fact intensive. And so we start, and we just talked about this in some new merger guidelines that we'll probably talk about in a little bit. But we talk about one of the first questions we ask in an antitrust investigation is how does competition in this market present itself? And does the merger or the conduct in question threaten that competition? And then we work backwards from that because competition is, is not this monolithic being. It's dynamic.

It presents differently in markets throughout the economy. And so we start by saying, how do we have a sophisticated understanding of how markets function? And so in a technology market, it might be a multi-sided platform with significant feedback effects and where data itself is a platform. And this is something we're seeing increasingly in AI. And the competitive dynamics in a market like that might be. very different than traditional vertical supply chain where you have a manufacturer, wholesaler, and a retailer.

And if we don't adapt our thinking to make sure that we understand the economics of how markets function in a modern economy, then we're going to miss the competitive dynamics and then we're not going to be able to enforce the law effectively. And so our job is to make sure that we have the expertise to do that. And so that's one of the things that we've been doing over the last year at the antitrust division is we've been building our expertise to meet. the needs of a modern economy, and that includes hiring AI experts and technologists in addition to labor economists and, and of course, our IO economists and competition experts. And that's a

field of expertise and a scope of expertise that I think we have to expand in order to be relevant. Indian women are looking for more. More to themselves, their businesses, their elected leaders, and the world are out of them. And that's why we're thrilled to introduce the Honest Talk podcast. I'm Jennifer Stewart and I'm Catherine Clark and in this podcast we interview Canada's most inspiring women entrepreneurs artists athletes politicians and newsmakers all at different stages of their journey so if you're looking to connect then we hope you'll join us listen to the honest talk podcasts and iHeartRadio or wherever you listen to your podcasts you know since you mentioned multi-sided marketplaces I know that this is something specific in the new merger guidelines which you really least in early July in which you just sort of teased ahead. But why don't you just sort of give us the little, the summary, as you see it, of what's new in these new merger guidelines. And so that companies think about doing deals like generally understand the rules of the road here.

Right. So just for a little bit of background, in 1914, Congress wrote the Clayton Act, and Section 7 of the Clayton Act prohibits mergers that may substantial less in competition or tend to create a monopoly. That law has been updated numerous times, including including a significant amendment in the 50s to make sure that the law captured a broader range of acquisitions, including asset acquisitions, but also to clarify, and this was an important update, that antitrust and the Clayton Act can apply to vertical acquisitions, or as they termed it at the time, conglomerate acquisitions, something that we would probably use a different term to describe today. And so the statute was written broadly to protect competition, and then it was updated again to provide a notification requirement.

Starting in 1968, the Department of Justice started issuing guidelines to help provide a framework that the department could use with transparency to the public to have a little bit of discipline and transparency into how we go about analyzing mergers. There have been updates since then, including a significant update by the Reagan administration in 1982, updates in 1984, 1992, 1997, 2010, and then a partial update. update in 2020. And so there's a rich history of updating these guidelines to generally meet the needs of a modern economy, but also to reflect changes in the law, both statutory and interpretation by courts like the Supreme Court. There was an executive order early on in this administration

by President Biden that encouraged or mandated that government cross agencies start taking competition more seriously and we pursue a whole of government approach to how we think about competition policy. As part of that, it asked the Department of Justice and the Federal Trade Commission to revisit whether updates to the merger guidelines were appropriate. We undertook that exercise. We solicited public comments of which we received very historic number relative to past endeavors. And what we uncovered was that the merger guidelines had largely been, and there been many really helpful updates over the years, but it's largely been an update to the same framework. And that framework often started with the question, is this merger vertical or

is this merger horizontal, right? Because those were legally significant or economically significant questions. But one of the things that we've learned is that markets don't always present in that two-dimensional way. And I often like to say that thinking about markets is vertical and horizontal is like looking at 4K video through a black and white TV. You might make out some of the images, but you're going to miss all the nuance. And the fact of the matter is today's economy is, you know, the geometry is more like a gemstone for fans of the show, a righteous gemstone. But it's more like a gemstone than it is a, you know, a two-dimensional drawing. And so if you think about the realities of today's economy, certainly compared to 50 years ago, it's different.

Phones don't have rotors, documents are stored in the cloud and not in file cabinets. And even 10 years ago, most people are still stopping at the gas station and asking for directions. Our worlds have changed. Data isn't something that is a byproduct of business, but it's the product of business now that itself is becoming a platform. And markets are increasingly multi-sided, multidimensional, and more sophisticated. And it's really important, at least to me and I think to the public, that we adapt our analytical frameworks to recognize those foundational shifts in our economy and to use state-of-the-art economics and analysis to ensure that we are conducting investigations in a way that

accurately reflects the realities of today's market and that we are building the expertise necessary to understand those nuances and ask the right questions so that we can, can generate the right answers to determine whether the facts in the law support enforcement. I definitely want to ask you how you're applying those analytical frameworks to specific industries, but maybe one more process question from me. And you sort of touched on it in that answer there. But one of the things that has happened recently is, you know, the White House has directed a bunch of different agencies to think more about competition, think more about antitrust. How are you coordinating with some other entities like, for instance, the Federal Trade Commission?

How are you all collectively working together on this issue? It's a great question. So we have a very good relationship with the Federal Trade Commission and the Department of Justice. Anti-Trust Division and the Federal Trade Commission have worked closely together for decades across administrations. I think what the executive order really unlocked was a broader whole-of-government approach. and an opportunity to really think about competition in so many different dimensions. And so we've seen reports come from, you know, treasury relating to the spirits and alcohol and beer business.

We've seen reports relating to agriculture. We've seen greater cooperation with our partners at the Department of Transportation. What we're seeing, and I was actually thinking about this a little bit earlier today, it's almost the way in which in the 80s cost-benefit analysis was infused. into regulatory and policymaking across the government. I think the executive order really elevated competition in a very similar way and said it's a core value that we need to carry forward in every dimension. So if we want a competitive economy, we need to make sure that we're thinking about competition in all aspects of our government. I think that's a separate question from enforcement.

Enforcement is more specific. It's not covered by the executive order, but it's something that we do on a case-by-case basis. But nonetheless, we've still been pursuing a more whole-of-government approach. And one example is we brought, we believe, for the first time ever, at the antitrust division, a Packers and Stockyards claim based on a referral from the Department of Agriculture in order to address issues in connection with the tournament system that was affecting farmers and growers and processing, poultry processing plant workers, who are, in our view, being deprived of better wages due to information sharing. And so unlocking those tools is a very important part of the agenda, both from a policy perspective, so that we can weigh in and encourage

our fellow agencies to think about competition and competition policy and share our expertise, but also in how we deploy our own enforcement tools. Let's get into some of these. Actually, I was going to ask a question about banks, and I want to start getting into the sectoral questions and how you're thinking about how this supplies of different industries. But since you mentioned the tournament system of poultry, which I had never seen or heard this term, and I feel I would be remiss to, because now it's like, oh, we're definitely I could do a tournament poultry episode. What is the tournament system in poultry? And I do remember, like, there was a lot of talk about stockyard consolidation, particularly in 2020, when there

was a scarcity of meat due to supply chain issues and things like that. What is the tournament system of poultry and what are some of the things that you identify within the sort of meat or poultry or farm ecosystem that flashes on your radar? Yeah. So without going into specifics of specific investigations, you know, generally speaking, the concern that's been expressed by farmers and growers throughout the country is that the risk is being shifted from the packers to the farmers. Okay.

And so it's almost like growing into a gig economy style model. model where the farmers take all the risk where they're asked to be exclusive or or have elements of exclusivity and their commitments but then are under the thumb of larger companies who are at their whims in terms of how much supply is being purchased, how much of the risk of failure is on them and then on risk of loss. And so it's again, without getting into too many specifics and talking about any specific case, there are elements of it that I think are emblematic of other areas of our economy where workers or entrepreneurs are being held, you know, at the thumb of really significant, powerful companies who are imposing terms that not only exploit, but

limit their ability to work with competitors. Tracy, two things. A, I think, I'll tell you after the episode, I think I have a good chicken guest, actually, on more of this topic. You know how I feel about chicken. I know. And I've been meaning to tell you. And two, what he, with Jonathan just point, reminds me of our conversation with Gordon McGill about the distribution of risk being distributed outward onto the drivers rather than trucking companies.

So this broader theme in society comes up again. I mean, this does seem to be something that companies are becoming more sophisticated about the distribution of risk and also, I guess, pricing to some degree. And a lot of this is contractual, too, right? I think what we're, when we start getting concerned is when a lot of these are terms and conditions that are being posed and are being imposed by companies with power. Jonathan, can I ask one more process question before we move on to banks? And I promise we will get to them. But how do these things land, this might be a weird question or a simplistic question, how do these things actually end up on your radar? You know, is it, you're working at the DOJ and you

wake up one day and you think, hmm, I think I see some problematic things happening in the poultry industry or in tech or wherever. Or do you kind of have like a vision of how all this should work together? Like how does this actually land on a desk at the DOJ? So many different ways. I'll give you a little anecdote because I remember it was the summer of 1996 and I'm dating myself here and and revealing my unhipster-like age. And it was my first summer of law school and I was working at the FTC. And I walked in in the morning

and I was bright-eyed and excited to roll up my sleeves and dig in. And I walked in the morning and I saw attorneys and this was common at the time we can explain the technology but reading newspapers. And people were flipping through newspapers.

And I was like, oh, why are people reading the newspaper? And what I was told at the time was looking for potential leads. And it was a very, you know, intuitive point, which is that, you know, that was one source of case generation. You know, I've come to learn that there are many sources of case generation. Some of it is we develop expertise in industries and we monitor those industries. And that might be as simple as opening up a newspaper or logging online to local journalists. but it also might be hearing from industry participants affected customers, consumers,

farmers, entrepreneurs. One of the biggest sources of case generation for us tends to be from business. So I'm often asked the question, well, is antitrust good for business? And if you ask the folks who are coming to us asking for enforcement of the antitrust laws, I think the answer is yes. A lot of our cases are generated by businesses who want the opportunity to compete. in a B-to-B market or consumer market don't want to be held under the thumb of a dominant firm or dominant firms. We have a number of other ways.

I think it's important for us as we, as the economy becomes more sophisticated, to use data analysis, to identify trends that might indicate problems and concerns. We have a whole range of tools and methods that we are using and modernizing to make sure that we are being proactive in our case detection. Now, that's a little bit different from there are a couple of distinctions in some other areas of our enforcement. One is mergers. And so I mentioned the update to the Clayton Act in the 70s. That required mergers of a certain size to pre-notify and wait to close until we've had the chance to investigate. And that's called the Hart Scott Rodino Act. So mergers, at least above a certain size, come to us through merger filings.

And then in the criminal context where we have criminally antitrust enforcement, we will get tips. we will get proactive, you know, sources and methods that we use to uncover violations, but we also have a vibrant leniency program where we can have potential wrongdoers come to us under certain conditions and self-disclose. So it's not reading the newspaper, but, you know, there was an episode of a podcast called Odd Lots that was released July 17, 2023, in which our guests said that large tech companies are making big investments in AI startups because they can't, they're worried about antitrust enforcement. And so they're not

going to buy them outright. But what they're doing is maybe a large company with the big cloud division makes an investment in some company that makes an AI model. And then that company spends all of their money on the investors cloud. And then all of their future customers are implicitly customers of that cloud, et cetera. And so I'm curious, you know, and he said that, he's like, well, this is just because of a, you know, a way to get around, concerns about antitrust. Are there non-merger things that are anti-competitive in your view, such as business relationships that large tech companies could make with, say, strategic investments that can raise red flags even if they're not formally a merger?

So that's a fun question. I think you have a future in writing law school exams, because that's like a perfect hypothetical scenario. Again, I want to be careful. It's all hypothetical. I didn't know. name any companies, by the way. I didn't say Google, OpenAI, Microsoft, Anthropic. I just said large cloud companies, companies with a model. Well, thank you for that. Let me take a little bit of a step back at a different level of abstraction and try to answer the question in a productive way here for you. So one of the things I often will say across all industries is that substance over form. And so what we're looking at is it's not just mergers. First of all,

One of that amendment that I mentioned in the 50s made sure to cover other kinds of partial and asset acquisitions. Our new merger guidelines has a whole new section that specifically addresses partial ownership and acquisitions. And there are other parts of the antitrust law. There's monopolization. There's an area of antitrust enforcement that we have deployed perhaps more extensively than any enforcement authority ever, since it was enacted in 1914, and that's called Section 8 of the Clayton Act, which prohibits interlocking directorates, meaning you can't sit on the boards or have representatives on boards of competing companies.

And we've caused, I think, over 15, nearly 20 members of boards to step off boards in violation of Section 8. We have a whole range of investigations that are open. So the short answer to your question is, we have many tools that we can use, and it's substance over form. And so attempts at evasion are usually not successful. And so if the goal of a transaction or investment is to monopolize a market, manipulate a market, to exclude competition, then we have the tools necessary to address that if we need to. Let me ask the question in a slightly different way. Do you see any evidence currently of perhaps anti-competitive practices

in some of the, let's call it the AI boom recently. And then secondly, I'd just be curious how you're sort of looking at AI and its interactions with tech. And I know you mentioned beefing up staff and technical expertise on that matter. Yeah. So the first part of the question, I will artfully dodge because I can't talk about specific industries. I appreciate the effort. It's noble and noted. But the second part I can embrace.

So our job is to make sure that we are following the puck where it's going, so much so that we have something at the antitrust division we call Project Gretzky, based on the famous quote from Wayne Gretzky, which is he skates to where the puck is going, not to where it is. And so AI is a significant inflection point and development in business. And it's changing the way a lot of things operate, and it's changing economic realities. And so we have to understand those significant. changes. And it's really more, AI is an umbrella term that's used to talk about a lot of different things. But machine learning, data as a platform, are all really important developments. And it's also going to create many really great opportunities, right? So, you know, we're agnostic in many respects to the technology itself, at least at the antitrust division. What we're trying to do is make sure that, particularly at these inflection points, that competition has the ability to thrive. It's also not lost on us, and we've talked about this, that AI is, you know, particularly, for example,

like a large language model is based on data and mountains of it. Yeah. And so when you think about AI being deployed, you know, not just in the consumer tech space, but in enterprise tech, in health care and energy and agriculture and everything in between, you know, we're looking at a world where companies that have access to the most data are going to be able to pay the cost of entry. And so if you want to build those foundational platforms, you're going to need a corpus. You're going to need data at scale. And so competition or lack thereof in a predecessor technology could very much limit the ability for there to be vibrant competition for technologies and AI that depend on data.

So we have to think about making sure that we're opening up all avenues to competition in this space. But we can't do that effectively, in my view, unless we understand it, unless we have the right experts in-house in order to appreciate those nuances and see clearly what is actually happening in the marketplace and then skate to where the puck is going. Me and women are looking for more. More to themselves, their businesses, their elected leaders, and the world are out of them. And that's why we're thrilled to introduce the honest talk. podcast. I'm Jennifer Stewart and I'm Catherine Clark and in this podcast we interview Canada's most inspiring women entrepreneurs artists athletes politicians and newsmakers all at different stages of their journey. So if you're looking to connect then we hope you'll join us listen to the honest

talk podcasts and iHeart radio or wherever you listen to your podcasts. I want to ask a question about how antitrust thinking dovetails with other priorities and this is also sort of a segue into consolidation in banks. So obviously Silicon Valley Bank blew up in March, and perhaps one reason that it blew up is because there are lower sort of regulatory requirements for smaller banks. And I wonder if there is a tension where you want there to be competition with the gigantic money center banks that are based in New York. But on the other hand, there are many who argue that say a Canadian-style banking system of essentially like six banks, all of which are very big and regulated to the max is the most stable system.

And so I wonder how you think about tension where it's like, okay, we want there to be a competitor to the big ones. One way to make sure that there's competition is to lower maybe the capital requirement standards, et cetera. But if you have this competition, then does that run into priorities potentially of financial stability? Sure. It's great question.

So the word dovetail or words, I guess it's a word, right? I'll look it up while you're doing. Yes, is the perfect way to describe it. So because, you know, we have some authority here, but that authority dovetails with the bank regulators. And the two sides of the coin work very well together and are important compliments. And so there's something called the Bank Merger Act, which gives us the antitrust division the ability to provide a report to the bank regulators to assess competition. and we do that on the regular when there are certain bank mergers that were obligated to address. And then if we decide we want to challenge an acquisition, we still have independent authority to do that,

even after the bank regulators weigh in. I gave a speech at Brookings a few weeks ago where I talked about many respects, a lot of the things that we've already discussed today, which is how our economy has changed. And in the context of banks, I talked about how, you know, competition. and banking might have been reflected in giving away free toasters when you sign up for an account. But those days are over, and banking is very different today than it was, you know, 30 years ago. And the last bank merger guidelines were written in the 90s when people still got toasters. And that's outdated.

And I think we realize now that, you know, bank fees and overdraft fees, I think something one of your guests a few weeks ago, Jared Bernstein talked about that. Those are in different technologies and customer service are all nuances of a modern banking economy, and we want to make sure we understand that well so that we can provide appropriate analysis to the bank regulators. The other distinction that I called out in that speech is that a lot of bank merger analysis, at least on the competition and concentration side had been done using a very stylized model of what we called HHSHNDA Herschman Index, which is just a fancy way to talk about measuring market shares and concentration levels.

It's actually relatively simple mathematical exercise, quantitative exercise, but it's based on deposits in local branch overlaps. And one of the things I tried to stress is that, you know, while, some instances that may be helpful, that it's probably not the most sophisticated or relevant way to assess competition in today's markets. So we want to make sure that we're also updating our bank merger guidelines, which is something that we're working on, also under the executive order from President Biden. And in that discussion, we're going to think about all these different dimensions of competition. There's different roles of banks, but also making sure that

we understand that different banks have different kinds of customers. And so making sure that local communities have access to banking and competition and viable, resilient banks is a really important part of making sure that it's competitive because, after all, the needs of a local business might be different than a multinational. And, you know, local banks and regional banks, you know, are quite good at investing in their local communities because they want to build that vibrant local competitive economy. And so this is all agnostic to specific deals. It's simply just saying that it's important for us to make sure that our analysis understands those considerations.

But that's against the backdrop of a multi-factor analysis that the bank regulators have to undertake. And we have a part of that, but it's just a part, including convenience and needs and other factors that are related to but not perfectly overlapping with competition. You know, it feels like there's sort of a high-level philosophical tension or disagreement here, where on the one hand, it might be nice to have thousands of local banks with significant expertise and they know their customers and are able to sort of decide who gets a loan and who doesn't. Versus the financial stability sort of efficiency concerns where maybe it would make more sense to have a Canada-style model where we have. we have six dominant banks or something like that. And I think we've seen various expressions of those disagreements recently. I think Elizabeth Warren has sort of, you know, clapped back at some of Janet Yellen's thinking on this topic. But when you're at the DOJ, do you think about this

from a sort of holistic top level perspective? Do you think this is maybe what the banking system should look like or this is where we would like to see the banking system go? Does it kind of reach that level? So I'll leave it to the banking experts and regulators and policymakers and legislators to determine, you know, or discuss that big picture. We have the luxury, I guess, of focusing on this one narrow question is how do we make sure that these portions of our economy are competitive and how do we make sure that we are enforcing the law and providing expert reports to the regulators on the impacts of competition? And as I talked about in my Brookings speech, you know, our belief is that the law promotes

and encourages there to be a competitive economy, including in banking. And we try to enforce that faithfully. I'm curious about just firm size. And this comes up, I see a lot of Twitter fights about this, which is that there is this sort of school of progressive thought, which says small businesses aren't really that great, that we like to extol them, that we like the idea of like, you know, competition and all these like small businesses, but that by and large, you know, labor protections at small businesses are worse, that wages are worse, that environmental concerns are worse, that large companies

are more likely to be unionized, that large companies are more likely to invest in things related to decarbonization and so forth. And that, you know, the economy is run by, too much of the economy is run by small business owners that have incredible leverage over their own employees in their own area. I'm curious, like, how you think about, like, size? Is size good or bad, per se? Are there concerns about too much deconsolidation? I mean, I get most of the conversations about consolidation, but are the concerns about, like, too much distribution and some of the costs that sort of come with the management labor relationship? And I'm curious how that fits into you're thinking. Yeah. So again, I think, you know, I try to start from the premise of, well,

what does the law say? Yeah. And how do we go from there? And so when you're talking about E and I Trust historically, you're talking, you know, we mentioned earlier, the standard oils and AT&Ts and such of the world, we're often talking about some of the biggest companies, not exclusively, but those are where a lot of the biggest choke points occur. And that's sort of at the origin of anti-monopoly and antitrust law. Statute. provide different requirements. And so we talked about the Clayton Act and mergers. And it takes the view that not only a merger is problematic for it's substantial

lessens competition, but also if it tends to create a monopoly, right? So that's a value judgment that if something tends to create a monopoly, it could be illegal. There is a monopolization prong of the Sherman Act, Section 2 of the Sherman Act. So, you know, certain kinds of conduct that is used to create a monopoly. can be illegal. And that was a judgment that Congress made and we have the obligation to enforce. And I would also say in terms of small, there's a lot of, and I'll refer you to some of the legislative history and discussions around the creation and amendments to the antitrust laws about the importance of small business opportunity. But I guess I approach this discipline

from the perspective of that we're preserving economic opportunity. And so, So to me, opportunity and freedom go hand in hand. And, you know, one of the things that makes our country so amazing and so, such a wonderful place to be is that we provide opportunities to everybody when things are going well and things are going right. And the small business on the corner, you know, can lead to upward mobility for the next generation for industrious and ambitious people. and we want to make sure that we're providing those opportunities. And if those opportunities and those avenues to upward mobility are clogged, not only are we depriving citizens of the freedoms, the fundamental economic freedoms that they crave and that we promise to our citizens,

but we're also losing out on all of those benefits. And so competition is a value. It's a value that we have invested in as a country because we believe that providing opportunity and freedom of opportunity can generate so many benefits in so many different ways. And I often say it's not a switch that you can flip on and on when you need it. You have to invest it and invest in it. And I think that's why Congress was wise when it wrote the antitrust laws because it preserved those avenues for opportunity and competition. And, you know, the courts and Congress have been clear that those avenues and opportunities should not be limited to select few. They should be open to everyone, including

small businesses, farmers who are themselves small business owners, entrepreneurs. They should be geographically dispersed in those opportunities. And they should be merit-based. They should be based on the merits of your innovations, your customer service, your commitment in your imagination. And so to me, we don't have any of that as a society unless we have competitive marketplaces. So the polar opposite, perhaps, of the iconic American small business is probably American private equity. And there have been tons of negative headlines over the years. And I know this is something that's on your radar that you've talked about. I think you specifically talked about private equity's ability to exercise command and control over markets.

Can you tell us a little bit more about how you're thinking of private equity's role in competition and what exactly the issues might be there? Yeah. So let me start by saying that the antitrust laws are business agnostic or business model agnostic. And so I think they apply equally across all businesses, including private equity. As I mentioned before, you know, it's important for us as enforcers to be mindful of developments on the ground, including private equity. As I mentioned before, you know, it's important for us as enforcers to be mindful of developers to be mindful of developments on the ground, including economic realities. And I think we can all agree that private equity, you know, today means something very different than it did 30 years ago and its prevalence and importance, or at least impact on our economy and our industry is quite significant and different than it was in the past. And again, that's just in an agnostic way. I'm not suggesting it's good, bad, or otherwise. Simply a fact. And so if we want to be relevant in understanding whether there is an antitrust violation or where to focus, we just need to make sure that we understand those market realities. And so, you know, issues that show up in non-private equity markets can show up in private equity too.

But there also might be, you know, distinguishing characteristics. So, for example, you know, private equity might lead to greater number of board interlocks. And it might result in more need to enforce. Section 8, we talk about roll-ups and we talk about serial acquisitions, which is something we see in private equity and out of private equity. But it might be an issue that becomes something we have to address with greater frequency if the business model is, in fact, to roll up industries in order to reduce competition. Again, I think we just have to call the balls and strikes as we see them. But if there are changes in how companies or businesses are run invested in, then I think we have to be mindful of that.

And we also have to be mindful of, you know, what is improving productivity and what's not. Again, these are all business model agnostic, but they're important concepts that apply in antitrust. And if we are being relevant, we have to be aware and knowledgeable of those developments. You know, I know in the beginning of the conversation, I think you sort of, of perhaps downplayed the degree to which the sort of you're thinking about antitrust as like some big departure, like, you know, some new thinking. And you're like, look, there's the law. And over time, the rules get rewritten. And maybe there's some interpretations. But basically, you're enforcing the law as written by Congress. That being said, and it's been, you know,

Bloomberg's report on this, the DOJ and the FTC have suffered a handful of setbacks in courts relating to some of these deals and mergers. I think there was recently a sugar deal. I know we're not going to talk about specific deals. But when you think about how you think about antitrust and perhaps how maybe the sitting judiciary, which may have judges who have been sitting there for 20, 30 years, maybe appointed by the Reagan administration, think about antitrust, does that affect your strategy in terms of thinking about which cases you can bring essentially based on like, you know, you have your perspective on what antitrust law says, and maybe the sort of stock of judges that are out there have a separate perspective.

Yeah. So let me address that question and also, you know, try to at least give you some perspective from the Department of Justice. When we bring a case, it's a matter of law enforcement, we have the burden. It's on us to make sure that we are following the facts of the law and presenting it to a court or jury in a way that convinces the, the court. And so that burden is on us, and it's up to us to make sure that we are bringing the right tools, the right facts, and the right legal analysis to persuade a court. And we play to win. And if we think we have a case that is sustainable in the facts and the law, and that it is the right use of our prosecutorial discretion, we move forward. And we do so in a very passionate

and fact and in legal-based way. You know, I will speak just from the Department of Justice perspective because I've, you know, heard people sometimes not all the information. It's all out there, but it's sometimes harder to collect. I'm very proud of our track record. So in this administration, we've filed nine cases in court. We've had two litigated victories, including a significant victory in a publisher merger, Penguin Random House, Simon & Schuster.

We've had the AAJet Blue Northeast Alliance case in Boston. We had an out-of-court settlement in a merger case. Two cases were mergers were abandoned after we filed. And we've had, by our count, 12 mergers abandoned right before we were going to file or in the face of filing litigation. And we have one pending. And so when you take that against the track record of a few negative outcomes in court, which we, you know, accept and learn from with humility, I think that's a pretty strong record

when you look at the whole of the significant, programmatically significant cases that we've won, and I think, you know, 15 or more abandonments, including some after we filed in court, that's a pretty good track record. And I'm proud of that. And I'm proud of the hardworking and professionals at the Antitrust Division and Department of Justice who have fought capably and professionally and with vigor and sophistication on behalf of the public and competition. And we're getting really good results that I'm extremely proud of. Can modern antitrust enforcement work without an update to existing antitrust laws? In other words, do we need more work on the actual legislative, you know, underpinnings of this in order to make it more effective?

Yeah, so I have a couple of views on this. First is, you know, our job is to enforce the law. It's the job of Congress to write it. So on some level, you know, that is a decision that needs to be made by Congress. And so they'll give us the tools and we'll use them. I believe that the antitrust laws today still matter and they still can protect competition and the public. And we were going to enforce them in a way that's appropriate and consistent with. the facts on the ground. At the same time, there have been proposals in Congress to update the antitrust laws. We have weighed in as the Department of Justice in select instances, both in terms of providing technical assistance and in other instances with a full-throated endorsement of legislation. And so, you know, we take that on a case-by-case basis, but ultimately that's a decision that comes from Congress. And we're very mindful of the fact that they write the law, not us. And it's our job to enforce law as they write it. I just have one last small question. Can mergers be good? And by that, I mean, you know, companies, when they buy other companies, they're like efficiency gains,

one common platform, ways to, like, improve productivity, et cetera, across firms. Like, are you open? Is that a consideration? Do you believe in that possibility? Or in your view, is that mostly, like, span when they say that? So I'll start with the most diplomatic answer, which is, and the accurate one, which is my view doesn't matter. Okay. Which, and by that I mean, our job is really to determine whether the merger

substantial lessons competition tends to create a monopoly. And so that is what we are trying to do in a very fact-oriented way. I think that's kind of different from like the separate, you know, state of the union question on whether mergers are good or bad and whether efficiencies are realized or not. In any given transaction, companies will often explain why they think their mergers will generate certain benefits that

they either offset or mitigate competition concerns. And we have a framework for how we evaluate those efficiencies. This came up in our book publishing case that we won. And I think the court in that case laid out some pretty specific requirements for verifiability and making sure that those claims are something that can be supported in the court of law. And so we are appropriately skeptical, it's not, or not skeptical. We are appropriately scrutinizing, I should say, to make sure that if folks come in with claims that they're accurate and that they can be verified. But I also come back to the foundation, which is antitrust merger law, is ultimately an exercise in risk assessment.

And our job is to assess the risk that the merger may harm competition or tend to create a monopoly. And that requires a whole range of considerations that have been laid out in the statute, but ultimately refined by courts over the last century. And we deploy those considerations in a way that's faithful to the legal precedent. But it is necessarily predictive. It's necessarily forward-looking and does not require certainty and prediction. It's a risk assessment. And that's how we treat it. And we use the best evidence we have available, the best data, the best analytics, the best

economic evidence to try to be as accurate and responsive as we can to the facts on the ground. But ultimately, it's a risk assessment. Merger's good. Monopoly's bad. I'm going to have that made as a bumper sticker, I think. Jonathan Cantor, thank you so much for coming on All Thoughts. Really appreciate it. Very good.

It's such a pleasure to be with you. And thanks for such a fun conversation. And I'm going to go home and tell my kids that I'm officially hipster. Maybe not an antitrust. but in, on an econ podcast. Joe, that was really interesting. There are so many things to pick out of that conversation. I enjoyed hearing Jonathan's anecdote from, I think it was 1996 about how people at the, I think it was the, wasn't at the FTC at that time, how they were sort of generating leads for cases.

I know. I think I've heard about that. It's like, yeah, you're just like, oh, this. Open the paper. Open the front page of the Wall Street Journal. It's like, hmm, there's an interesting sounding deal. It's like, they find out about them the same way that we do. Or a farmer comes and complains about poultry tournaments.

The other thing that was interesting, just in the context of AI and tech, was that new, it does seem like more attention being paid to perhaps new types of ownership structure. So not outright mergers, but if you take a minority stake or something like that in a company, it could still garner interest. That was really interesting the fact that perhaps some of the avenues of where anti-competitive behavior could turn up in data ownership. That's going to be huge, obviously. Right. I mean, that's already this huge deal.

You hear it about it in finance all the time. Like, who has access to financial data, how much they charge for it. But now if these data sources are basically what you build a business off of, I thought that was super interesting as well. Right. And like throughout recent history, data has always been a source of competitive edge. and like almost de facto proprietary, right? Yes. Like this is how you become a big and powerful tech company

by having access to powerful and exclusive data. It's going to be really interesting to see how they sort of deal with that aspect of it. I'm still like really interested and I don't think there's like an answer that can be even given to the question. But this idea that we talked about like how it fits into other priorities of like, you know, going back to like the sort of broader or bidinomics question of like, you know, I do think that there is like some tension between

do we want a consolidated banking system that's really stable or a competitive one in which, you know, some banks aren't too big to fail, et cetera. I think some of these questions about, you know, how small do we are, can small businesses be bad? There are some really interesting, like fitting it into like the sort of like broader like binomics or maybe like the progressive framework is like very interesting to me. Right. And Jonathan. was very diplomatic about, you know, saying that it's not his job to sort of sort of sort out what the U.S. banking landscape should look like. It's his job to enforce the existing law. But you do kind of wonder, like, who is making those decisions and whether or not

they're being made on a sort of holistic, top-down level. I think Jonathan would be a great law professor. You know, this is like, no, seriously, like, like I said at the beginning, I don't know anything about this stuff. This has really never been my, like, sort of like, realm of, like, thinking. And I actually felt like I genuinely learned a little bit about how our antitrust system works by talking to Jonathan. Now you've been like Sherman Act Pilled. I'm Sherman Act filled. All right. Shall we leave it there? Let's leave it there. All right. This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthal. You can follow me on Twitter at the stalwart. I don't think Jonathan's on,

but you can follow the DOJ antitrust division at Justice ATR. Follow our producer. Carmen Rodriguez at Carmen Armin and Dashel Bennett at Dashbot and check out all of the Bloomberg podcasts under the handle at podcasts. And for more Odd Lots content, go to Bloomberg.com slash oddlots where we have transcripts, a blog, and a newsletter, and check out the Discord, discord.g. Slash oddlots, listeners hanging out in their 24-7 chatting about all of these topics and more. And if you enjoy Oddlots, if you too have been antitrust-pilled, then please leave us a favorable review on your favorite podcast platform. Thanks for listening.