[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                       REVIVING COMPETITION, PART 3:
                      STRENGTHENING THE LAWS TO ADDRESS 
                             MONOPOLY POWER

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

                                HEARING

                               BEFORE THE

     SUBCOMMITTEE ON ANTITRUST, COMMERCIAL, AND ADMINISTRATIVE LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             FIRST SESSION

                               ----------                              

                        THURSDAY, MARCH 18, 2021

                               ----------                              

                           Serial No. 117-13

                               ----------                              

         Printed for the use of the Committee on the Judiciary
         
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]         


               Available via: http://judiciary.house.gov
               
                              __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
47-296 PDF                 WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------                 

                       
                       COMMITTEE ON THE JUDICIARY

                    JERROLD NADLER, New York, Chair
                MADELEINE DEAN, Pennsylvania, Vice-Chair

ZOE LOFGREN, California              JIM JORDAN, Ohio, Ranking Member 
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
STEVE COHEN, Tennessee               LOUIE GOHMERT, Texas
HENRY C. ``HANK'' JOHNSON, Jr,       DARREL ISSA, California
    Georgia                          KEN BUCK, Colorado
THEODORE E. DEUTCH, Florida          MATT GAETZ, Florida
KAREN BASS, California               MIKE JOHNSON, Louisiana
HAKEEM S. JEFFRIES, New York         ANDY BIGGS, Arizona
DAVID N. CICILLINE, Rhode Island     TOM McCLINTOCK, California
ERIC SWALWELL, California            W. GREGORY STEUBE, Florida
TED LIEU, California                 TOM TIFFANY, Wisconsin
JAMIE RASKIN, Maryland               THOMAS MASSIE, Kentucky
PRAMILA JAYAPAL, Washington          CHIP ROY, Texas
VAL BUTLER DEMINGS, Florida          DAN BISHOP, North Carolina
J. LUIS CORREA, California           MICHELLE FISCHBACH, Minnesota
MARY GAY SCANLON, Pennsylvania,      VICTORIA SPARTZ, Indiana
SYLVIA R. GARCIA, Texas              SCOTT FITZGERALD, Wisconsin
JOE NEGUSE, Colorado                 CLIFF BENTZ, Oregon
LUCY McBATH, Georgia                 BURGESS OWENS, Utah
GREG STANTON, Arizona
VERONICA ESCOBAR, Texas
MONDAIRE JONES, New York
DEBORAH ROSS, North Carolina
CORI BUSH, Missouri

        PERRY APELBAUM, Majority Staff Director & Chief Counsel
               CHRISTOPHER HIXON, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON ANTITRUST, COMMERCIAL,
                         AND ADMINISTRATIVE LAW

                DAVID N. CICILLINE, Rhode Island, Chair
                PRAMILIA JAYAPAL, Washington, Vice-Chair

JOE NEGUSE, Colorado                 KEN BUCK, Colorado, Ranking Member
ERIC SWALWELL, California            DARREL ISSA, California
MONDAIRE JONES, New York             MATT GAETZ, Florida
THEODORE E. DEUTCH, Florida          MIKE JOHNSON, Louisiana
HAKEEM S. JEFFRIES, New York         W. GREGORY STEUBE, Florida
JAMIE RASKIN, Maryland               MICHELLE FISCHBACH, Minnesota
VAL BUTLER DEMINGS, Florida          VICTORIA SPARTZ, Indiana
MARY GAY SCANLON, Pennsylvania       SCOTT FITZGERALD, Wisconsin
LUCY McBATH, Georgia                 CLIFF BENTZ, Oregon
MADELINE DEAN, Pennsylvania          BURGESS OWENS, Utah
HENRY C. ``HANK'' JOHNSON, Jr., 
    Georgia

                       SLADE BOND, Chief Counsel
                      DOUG GEHO, Minority Counsel
                            
                            
                            C O N T E N T S

                              ----------                              

                        Thursday, March 18, 2021

                                                                   Page

                           OPENING STATEMENTS

The Honorable David Cicilline, Chair of the Subcommittee on 
  Antitrust, Commercial, and Administrative Law from the State of 
  Rhode Island...................................................     2
The Honorable Ken Buck, Ranking Member of the Subcommittee on 
  Antitrust, Commercial, and Administrative Law from the State of 
  Colorado.......................................................     4

                               WITNESSES

The Honorable Rebecca Kelly Slaughter, Acting Chair, Federal 
  Trade Commission
  Oral Testimony.................................................     8
  Prepared Testimony.............................................    11
The Honorable Diane P. Wood, Judge, U.S. Court of Appeals for the 
  Seventh Circuit
  Oral Testimony.................................................    21
  Prepared Testimony.............................................    23
The Honorable Philip Weiser, Colorado Attorney General
  Oral Testimony.................................................    33
  Prepared Testimony.............................................    35
Mike Walker, Chief Economic Adviser, United Kingdom Competition 
  and Markets Authority
  Oral Testimony.................................................    49
  Prepared Testimony.............................................    51
The Honorable Noah Phillips, Commissioner, Federal Trade 
  Commission
  Oral Testimony.................................................    58
  Prepared Testimony.............................................    60
The Honorable Doug Peterson, Nebraska Attorney General
  Oral Testimony.................................................    67
  Prepared Testimony.............................................    69

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Items submitted by the Honorable David N. Cicilline, Chair of the 
  Subcommittee on Antitrust, Commercial, and Administrative Law 
  from the State of Rhode Island for the record
  Statement from Iain Gold, Marka Peterson, and Joan Moriarty of 
    the International Brotherhood of Teamsters and the Strategic 
    Organizing Center............................................   106
  Statement from George P. Slover, Senior Policy Counsel, 
    Consumer Reports, and Sumit Sharma, Senior Researcher, 
    Technology Competition, Consumer Reports.....................   115
  Statement from the American Economic Liberties Project and 
    Public Citizen...............................................   120
  Statement from the Honorable Sean D. Reyes, Attorney General, 
    Utah.........................................................   143
  Joint statement from twelve antitrust experts..................   148

                                APPENDIX

Items submitted by the Honorable David N. Cicilline, Chair of the 
  Subcommittee on Antitrust, Commercial, and Administrative Law 
  from the State of Rhode Island for the record
  A paper entitled ``A new vision for antitrust enforcement in 
    the United States,'' Raksha Kopparam, The Washington Center 
    for Equitable Growth.........................................   166
  A paper entitled ``Competitive Edge: Crafting a monopolization 
    law for our time,'' Andrew I. Gavil, The Washington Center 
    for Equitable Growth.........................................   173
  A paper entitled ``Competitive Edge: Principles and 
    presumptions for U.S. vertical merger enforcement policy,'' 
    Jonathan B. Baker, Nancy L. Rose, Steven C. Salop, and Fiona 
    M. Scott Morton, The Washington Center for Equitable Growth..   180
  A paper entitled ``Competitive Edge: Remedying monopoly 
    violation by social networks--the role of interoperability 
    and rulemaking,'' Michael Kades and Fiona M. Scott Morton, 
    The Washington Center for Equitable Growth...................   188
  A paper entitled ``Competitive Edge: Underestimating the cost 
    of underenforcing U.S. antitrust laws,'' Michael Kades, The 
    Washington Center for Equitable Growth.......................   196
  A paper entitled ``Interoperability as a competition remedy for 
    digital networks,'' Michael Kades and Fiona Scott Morton, The 
    Washington Center for Equitable Growth.......................   206
  A paper entitled ``Modern U.S. antitrust research supports 
    strict enforcement of the law,'' Raksha Kopparam, The 
    Washington Center for Equitable Growth.......................   250
  A paper entitled ``Modern U.S. antitrust theory and evidence 
    amid rising concerns of market power and its effects,'' Fiona 
    Scott Morton, The Washington Center for Equitable Growth.....   254
  A paper entitled ``U.S. antitrust and competition policy amid 
    the new merger wave,'' John E. Kwoka, The Washington Center 
    for Equitable Growth.........................................   283
  A paper entitled ``Antitrust experts call on Congress to 
    address failings in antitrust law to preserve competition and 
    prevent monopolies in digital marketplaces'' Michael Kades, 
    The Washington Center for Equitable Growth...................   302
  A paper entitled ``Market power in the U.S. economy today,'' 
    Jonathan B. Baker, The Washington Center for Equitable Growth   308
  A paper entitled ``Restoring competition in the United 
    States,'' Bill Baer, Jonathan B. Baker, Michael Kades, Fiona 
    M. Scott Morton, Nancy L. Rose, Carl Shapiro, and Tim Wu, The 
    Washington Center for Equitable Growth.......................   325

 
                     REVIVING COMPETITION, PART 3:
            STRENGTHENING THE LAWS TO ADDRESS MONOPOLY POWER

                              ----------                              


                        Thursday, March 18, 2021

                        House of Representatives

               Subcommittee on Antitrust, Commercial, and

                           Administrative Law

                       Committee on the Judiciary

                             Washington, DC

    The Committee met, pursuant to call, at 2:14 p.m., in Room 
2141, Rayburn House Office Building, Hon. David N. Cicilline 
[Chair of the Subcommittee] presiding.
    Members present: Representatives Cicilline, Neguse, Jones, 
Jeffries, Raskin, Jayapal, Demings, Scanlon, McBath, Dean, 
Johnson of Georgia, Buck, Jordan, Issa, Steube, Bishop, Spartz, 
Fitzgerald, Bentz, and Owens.
    Staff present: John Williams, Parliamentarian; Amanda 
Lewis, Counsel; Joseph Van Wye, Professional Staff Member; 
Slade Bond, Chief Counsel; Phillip Berenbroick, Counsel; Chris 
Hixon, Minority Staff Director; David Brewer, Minority Deputy 
Staff Director; Tyler Grimm, Minority Chief Counsel for Policy 
and Strategy; Andrea Woodard, Minority Professional Staff 
Member; and Kiley Bidelman, Minority Clerk.
    Mr. Cicilline. The Subcommittee will come to order.
    Without objection, the Chair is authorized to declare 
recesses of the Committee at any time.
    Good afternoon, and welcome to today's hearing, the third 
in the series to develop legislation to promote competition 
online and to modernize the antitrust laws.
    Before we begin, I would like to remind Members that we 
have established an email address and distribution list 
dedicated to circulating exhibits, motions, or other written 
materials that Members might want to offer as part of our 
hearing today. If you would like to submit materials, please 
send them to the email address that has been previously 
distributed to your offices, and we will circulate the 
materials to the Members and the staff as quickly as we can.
    I would also like to remind all Members and our Witnesses 
that guidance from the Office of the Attending Physician states 
that face coverings are required for all meetings in an 
enclosed space, such as the Committee hearings. I expect all 
Members on both sides of the aisle to wear a mask for the 
duration of today's hearing.
    I now recognize myself for an opening statement.
    In 1950, Congress enacted the Celler-Kefauver Anti-Merger 
Act, one of the last major amendments to the antitrust laws. 
This landmark statute expanded the Clayton Act's prohibition on 
illegal mergers, to include stock acquisitions and non-
horizontal transactions, reflecting the sense of Congress that 
unchecked monopoly power poses a threat to our economy as well 
as our democracy.
    Congress enacted the Anti-Merger Act in response to the 
extensive record created by the temporary National Economic 
Committee and the Federal Trade Commission, and the dangers of 
severe economic concentration, and recommendations to rein in 
dominant companies. It captured key sectors of the U.S. 
economy.
    As the FTC warned in 1948, and I quote, ``If nothing is 
done to check the growth in concentration, either the giant 
corporations will ultimately take over the country, or the 
Government will be compelled to step in and impose some forms 
of direct regulations in the public interest.''
    Following its enactment, the Supreme Court broadly 
construed the Anti-Merger Act in a series of decisions that 
reasserted the primacy of competition in the law over the 
rising abuse of monopoly power, decisions which included Brown 
Shoe and Philadelphia National Bank.
    Indeed, as the court observed in 1962, this law clearly 
reflected, and I quote, ``the danger to the American economy of 
unchecked corporate expansions through mergers, and that 
acquisitions with even a probable anticompetitive effect are 
illegal.'' In spite of clear legislative intent, courts have 
systematically weakened the antitrust laws, limiting the 
analysis relied upon to focus primarily on price and output 
rather than protecting the competitive process.
    As Judge Diane Wood will testify today, the doctrine 
developed by the Supreme Court over the last 40 years has 
doomed many cases to failure, leading to under-enforcement.
    The antitrust agencies have also contributed to this 
problem by adopting a narrow view of their authorities, 
particularly in emerging areas of the law, or in the face of 
litigation risk. Bill Baer, the former head of the Justice 
Department's Antitrust Division, testified before the 
Subcommittee last Congress that the simple ``fear of getting it 
wrong has warped antitrust.'' Adding that the attitude that 
``uncertainty should result in inaction has also caused courts 
to require a level of proof that is often unattainable.''
    As a result of these trends, market power has risen 
dramatically on an economy-wide basis, resulting in numerous 
industries that are dominated by just one or two companies. As 
my colleague and friend Senator Amy Klobuchar said last week in 
a similar hearing before the Senate Antitrust Committee, 
``America's market power problem cuts across our entire 
economy. We see it in everything from cat food to caskets.''
    Numerous studies show high levels of market power and 
concentration across the U.S. economy causing nearly everyone 
to question whether our competition laws and enforcement 
approaches are adequate to protect consumers from 
anticompetitive conduct and mergers, as acting secretary--
Acting Chair Rebecca Kelly Slaughter will testify today.
    Moreover, during our investigation last Congress, the 
Subcommittee documented how today's monopolies have exploited 
these structural weaknesses in the law and lax enforcement to 
expand their dominance by buying or burying their competitive 
threats. For example, ahead of Facebook's acquisition of 
WhatsApp, top executives of the company plainly described its 
strategy as a land grab to shore up Facebook's position.
    In 2012, Mark Zuckerberg went as far as saying that the 
company could ``always just buy any competitive start-up.'' In 
the years since, Facebook has certainly done so without 
receiving more than a single second request from enforcers.
    Google has similarly entrenched its dominance in the 
navigation app market, of which it controls an estimated 80 
percent, and has been referred to by investors as a utility. It 
protects its market power through a series of acquisitions that 
eliminated any meaningful competitive threat.
    Prior to its acquisition by Google, the CEO of Waze, Noam 
Bardin, said that the company was ``the only reasonable 
competition'' to Google Maps. Since then, he has commented that 
Waze could have probably grown faster and much more efficiently 
if it had stayed independent, renewing concerns that this 
acquisition killed a competitive threat to Google's own mapping 
services, while reinforcing its power in other markets.
    Our investigation also showed that once dominant, these 
firms engage in a similar playbook of anticompetitive conduct 
to protect and expand their power. For example, according to 
its internal documents, Google recognized as early as 2005 that 
specialized search engines could pose a threat to Google's 
long-term dominance, noting that these search verticals could 
hurt Google badly.
    In response, Google deployed a series of tactics to 
advantage its own services and appropriate the content of other 
companies online. One entrepreneur, Brian Warner, told us that 
his website was thriving until Google stole his content with a 
drop in traffic to his website by 80 percent, forcing him to 
lay off half of his staff.
    Simply put, this conduct is destroying opportunity and 
entrepreneurship, while undermining the open, decentralized 
nature of the internet that made it a bastion for innovation. 
As Mr. Warner told us, ``If someone came to me with an idea for 
a website or web service today, I would tell them to run, run 
as far away from the web as possible.''
    We heard similar stories from other executives at small and 
medium size companies who have been forced to slash jobs, cut 
research and development budgets, primarily because of 
anticompetitive conduct by the dominant technology firms. 
Across the board we have seen less innovation, fewer jobs, and 
less choice, while a handful of companies are growing larger 
and larger. As a result, the internet has become highly 
concentrated, less open, and more hostile to innovation and 
entrepreneurship.
    Although the Federal Trade Commission and the Justice 
Department recently filed lawsuits against Facebook and Google, 
challenging some of these practices or violations of the 
antitrust laws, this conduct has gone unchecked for far too 
long. This abysmal record was underscored by recent reporting 
by Leah Nylen of Politico on the FTC's investigation of 
Google's dominance in search nearly a decade ago.
    Hundreds of pages of internal memoranda by the commission's 
economists and lawyers obtained by Politico demonstrate that 
despite significant evidence, the FTC was unwilling to 
challenge Google's monopoly power. As the documents made clear, 
Google sought to own the U.S. market through exclusive 
contracts with carriers and device manufacturers, which made 
Google the default choice for search on the vast majority of 
smart phones.
    Google's own employees acknowledge that these homogenous 
payments, which totaled billions of dollars, were used to block 
rivals from the market.
    As Jeremy Stoppelman, the CEO of Yelp has said, these 
documents ``show how Google methodically destroyed the Web.'' 
Despite recommendations by the Bureau of Competition to file an 
antitrust lawsuit, the FTC voted unanimously to close the 
investigation.
    Over and over again these examples provide case studies of 
why we need a massive overhaul of our antitrust laws, and 
significant updates to our competition system. Today's hearing 
is an opportunity to take additional steps in that process by 
identifying reforms to develop and clarify the antitrust laws 
to confront America's monopoly problem.
    I thank our extraordinary panel of Witnesses for their 
testimony. I look forward to today's hearing very much.
    With that, it is now my pleasure to recognize the gentleman 
from Colorado, the distinguished Ranking Member of this 
Subcommittee, for purposes of making an opening statement.
    Mr. Buck. Thank you, Mr. Chair. Thank you for holding this 
hearing.
    I have been reflecting on last year's investigation and the 
ideas we heard during the hearings, in particular, I was 
thinking about the various proposals we heard at the hearing 
last October where several areas for potential action were 
outlined, including increasing rigorous enforcement, reforming 
burdens of proof for big tech mergers involving a monopoly 
platform, instituting rebuttal presumptions, and codifying the 
consumer welfare standard.
    There are several areas where I believe Republicans and 
Democrats are ready to work together. Before I begin, I want to 
address the disinformation campaign the monopoly companies have 
launched around town. They are whispering to anyone who will 
listen that the proposals under consideration are going to 
apply to the entire economy. That is not true.
    I want to be clear for the record that the proposals I am 
supporting are limited solely to big tech monopoly platforms. 
We need to fully understand and appreciate the unintended 
consequences of our proposals. I am very concerned that any 
action we take should not impede our efforts to build a robust 
economy after the crushing blow we received from the pandemic. 
We must address predatory conduct of the big tech monopolies 
without jeopardizing other sectors of our economy.
    One area there is agreement between Republicans and 
Democrats is that we need more robust enforcement of the 
antitrust laws. We need personnel at these agencies who are 
willing to bring the difficult cases.
    Just this week, Politico published a piece outlining the 
Obama-Biden Federal Trade Commission's reluctance to bring an 
antitrust case against Google for its anticompetitive behavior 
in the online search advertising and mobile phone software 
markets. Among the revelations in the documents released by 
Politico was an email where a top Google executive bragged to 
the CEO that the company could ``own'' the U.S. market with its 
exclusive contracts with major smart phone manufactures and 
telecommunications companies.
    Google also acknowledged to the FTC that it made humongous 
payments as part of those contracts solely to keep rivals like 
Microsoft and Yahoo from getting prime access to mobile phones.
    Their tactics obviously work: Google is now the default 
search engine on 86 percent of U.S. smart phones, to go along 
with their 94 percent dominance in the desktop search market. 
These contracts also form a major part of the antitrust suit 
that the Trump Justice Department and 11 states filed against 
Google.
    As we consider giving the FTC and DOJ more funds, I want to 
assure the agencies that any increase in funds will come with 
increased oversight and an expectation by taxpayers that the 
agencies bring the hard cases. We aren't making more taxpayer 
money available so this type of dilatory behavior by government 
bureaucrats can continue.
    I have pleased to see the State Attorney Generals pick up 
the enforcement ball in referred proposals that would assist 
them that I think would warrant further investigation, Mr. 
Chair. I very much appreciate the leadership and hard work of 
Attorney General Phil Weiser from my home State of Colorado.
    Mr. Chair, I would recommend a provision that would give 
the State Attorneys General the same deference regarding venue 
selection that the United States enjoys in big tech monopoly 
cases. This fix would have major implications quickly.
    For example, Google has filed a motion to change venue, 
trying to move Texas' ad case to the Northern District of 
California and, therefore, the Ninth Circuit where they have 
favorable case law on appeals. This fix acknowledges our 
federalist system of government, because it rightly recognizes 
the sovereignty of the states and, pragmatically, it would 
eliminate gamesmanship and forum shopping in these cases by the 
big tech monopolies.
    Another area where I believe Republican and Democrats could 
work together is on reforming the evidentiary burden of proof 
in merger cases. The burden of proof has become essentially 
insurmountable and is basically a grant of near total immunity 
to big tech companies. This is a big problem for consumers and 
market competition because these tech titans' buying spree has 
continued unabated for essentially the past 20 years.
    Estimates vary, but the number of deals involving digital 
platforms stands at approximately 750 over the past two 
decades. Facebook acquired its competitors Instagram and 
WhatsApp. Google bought its Google Maps competitor Waze. These 
deals were cleared by the antitrust agencies with a casual 
glance.
    The buying spree continues. We now see Google trying to 
acquire Fitbit, which will result in a predictable duopoly in 
the wearables market: Apple and the iWatch, and Google with 
Fitbit. Other wearables will be stripped of their market share, 
and consumers will be left disrobed. Exposing this predatory 
behavior will ensure that wrists don't go naked. If consumers 
choose not to wear a wrist device, my conservative friends and 
I can protect a consumer's right to ``bare arms.''
    There seems to be a certain arrogance to the way these 
companies operate. Congress has investigated and the State 
Attorneys Generals have filed multiple lawsuits, and they have 
been sued by the Department of Justice and the Federal Trade 
Commission. Yet, they continue to Act with complete impunity. 
Apple, Google, Facebook, and Amazon have reached monopoly 
status, and their behavior won't change until Congress acts, 
the enforcement agencies do their job, and the courts move 
quickly to rein in their predatory conduct.
    Third, I think another area we may need to look at is 
implementing a rebuttable presumption to deny mergers at 
certain dominance levels. In just a few years, we have seen the 
tech center in Silicon Valley transferred from a nimble, 
innovation-driven force that was the pride of the American 
capitalist system, to an acquisition-driven behemoth. 
Investment in R&D has evaporated along with self-generated 
innovation at these companies.
    The big tech monopoly platforms are now just whales 
inhaling the start-up plankton.
    Lastly, I believe we can work together to codify the 
consumer welfare standard and remind agencies and the courts 
that price is not the only factor that should be considered 
when looking at whether a merger will have a negative effect on 
competition. This change would reflect the reality that in big 
tech markets, competition is not driven by price or output but, 
rather, by potential innovation and forward-looking competition 
reviews.
    Mr. Chair, I thank you again for your collegiality and your 
commitment to bipartisanship. I look forward to working with 
you on these proposals.
    I yield back.
    Mr. Cicilline. I thank the gentleman for yielding back.
    It is now my pleasure to introduce today's Witnesses. We 
may take them a little out of order, depending on the technical 
difficulties.
    Our first Witness is Rebecca Slaughter, the Acting Chair of 
the Federal Trade Commission. She was appointed to the FTC in 
2018 and is one of the nation's leading experts on competition, 
privacy, and consumer protection issues. While at the agency, 
she has been a staunch advocate for increased FTC resources, 
and a vocal proponent for American consumers and workers.
    Before joining the FTC, Acting Chair Slaughter served as 
chief counsel to Senator Charles Schumer as an associate at 
Sidley Austin, LLP. Acting Chair Slaughter received her 
bachelor's degree from Yale University, and her J.D. from Yale 
Law School.
    Our second Witness is Diane P. Wood, Circuit Judge in the 
United States Court of Appeals for the Seventh Circuit. Prior 
to being appointed a circuit judge in 1995, Judge Wood served 
as Deputy Assistant Attorney General in the Department of 
Justice Antitrust Division.
    From 2013-2020, Judge Wood was a Chief Judge of the Seventh 
Circuit. She is also a Fellow of the American Academy of Arts 
and Sciences and serves as Chair of the Council of the American 
Law Institute.
    Judge Wood received both her bachelor's degree and J.D. 
from University of Texas at Austin.
    I would now like to recognize my distinguished colleague, 
the gentleman from Colorado, Mr. Neguse, to introduce our third 
Witness.
    Mr. Neguse. Thank you, Mr. Chair, for your courtesy, and 
thank you for the opportunity to welcome our third Witness, 
Phil Weiser, the Attorney General of Colorado, who has 
committed his life to public service. Previously, Attorney 
General Weiser served as a professor of law and a dean of the 
University of Colorado Law School where he founded the Silicon 
Flatirons Center for Law, Technology, and Entrepreneurship.
    In the Obama Administration he served and was appointed to 
serve as the Deputy Assistant Attorney General in the U.S. 
Department of Justice, as well as a Senior Advisor for 
technology innovation at the White House's National Economic 
Council.
    Earlier in his career he also Co-Chaired the Carter 
Innovation Council and served in President Bill Clinton's 
Department of Justice.
    He clerked after law school in Denver for Judge David Bell 
in the 10th Circuit Court of Appeals and held two clerkships at 
the United States Supreme Court for Justices Byron White and 
the late Ruth Bader Ginsburg.
    Attorney General Weiser, I want to thank you for joining us 
and for the tremendous work that you do every day on behalf of 
Coloradans. I know myself and Ranking Member Buck look forward 
to your testimony.
    Mr. Cicilline. Thank you. The gentleman yields back.
    Welcome, General Weiser, it is good to have you here.
    Our fourth Witness, Mike Walker, has served as the Chief 
Economic Advisor for the United Kingdom's Competition and 
Market Authority since 2013. Prior to joining the CMA, he was 
Vice President of the European Competition Policy Team at CRA 
International in London, a team he established in 2000.
    He has also served as the Director of Competition Policy at 
London Economic, and a senior regulatory economist with British 
Telecom, and a Senior Associate at Lexecon Ltd.
    Dr. Walker is the co-author of the Economics in Competition 
law, a professor at the College of Europe at Bruges, and a 
visiting fellow at King's College London.
    Dr. Walker received his bachelor's, master's, and Ph.D. 
from the University of Oxford.
    Our fifth Witness, Noah Phillips, is a commissioner at the 
Federal Trade Commission. Prior to his 2018 nomination and 
unanimous confirmation to the FTC, he served as Chief Counsel 
to Senator John Cornyn on the Senate Judiciary Committee from 
2011-2018. In this role he advised the senator on issues 
involving antitrust, constitutional law, consumer privacy, and 
intellectual property. Commissioner Phillips is also an 
experienced litigator, and worked at both Cravath, Swaine & 
Moore, as well as Steptoe & Johnson before his tenure with 
Senator Cornyn.
    Commissioner Phillips received his A.B. from Dartmouth 
College, and his J.D. from Stanford Law School.
    Today's final Witness, Doug Peterson, is the 32nd Attorney 
General of Nebraska. He was elected in 2014 and has worked to 
defend the constitution and laws of the State of Nebraska.
    Before being elected Attorney General, Mr. Peterson spent 
more than 20 years in private practice, advising and advocating 
for both individuals and businesses. From 1988-1990 he served 
as Assistant Attorney General to the Nebraska Attorney 
General's Office, representing the State in employment law and 
tort litigation matters.
    Attorney General Peterson received his bachelor's degree 
from the University of Nebraska, and his J.D. from Pepperdine 
University School of Law.
    We welcome all our distinguished Witnesses, and we thank 
you for your participation in today's hearing. I will begin now 
by swearing in our Witnesses. I ask our Witnesses testifying in 
person to rise. I ask the Witnesses testifying remotely to turn 
on their audio and make sure that we can see your face and your 
raised your right hand while I administer the oath.
    Do you swear or affirm under penalty of perjury that the 
testimony you are about to give is true and correct, to the 
best of your knowledge, information, and belief, so help you 
God?
    [Chorus of ayes.]
    Mr. Cicilline. Let the record show that the Witnesses 
answered in the affirmative. Thank you, and you may be seated.
    Please note that your written statements will be entered 
into the record in their entirety. Accordingly, I ask that you 
summarize your testimony in five minutes. To help you stay 
within that time frame there is a timing light in Webex. When 
the light switches from green to yellow, you have one minute to 
conclude. When the light turns red it signals that your five 
minutes has expired.
    I now recognize Acting Chair Slaughter for five minutes.

              STATEMENT OF REBECCA KELLY SLAUGHTER

    Ms. Slaughter. Thank you, Mr. Chair. Thank you Ranking 
Member Buck, and Members of the Subcommittee for the invitation 
to appear before you today. It is an honor.
    Promoting competition and protecting consumers is the FTC's 
mission. Current market conditions across the economy have 
caused nearly everyone to question whether our competition laws 
and enforcement approaches are adequate to protect consumers 
from anticompetitive conduct and mergers.
    Aggressive enforcement, using the FTC's existing authority, 
can and should be complemented by this Committee's work to 
sharpen antitrust laws and to import broader market-wide 
restrictions that address pervasive anticompetitive conduct and 
conditions.
    I believe the FTC must push antitrust law forward through 
bold agency action. Specifically, that means prioritizing 
deterrence rand using the full range of the FTC's authorities 
to stop unfair methods of competition.
    The Commission has spent far too many of our enforcement 
dollars and limited staff hours to challenge mergers that are 
plainly illegal and should never have gotten out of the 
boardroom. It is clear we have a deterrence problem.
    To address this, we must develop a higher tolerance for 
litigation risk, advocating for the most effective remedies--
including structural separation and refusing to accept 
settlements that don't fully correct harm.
    At the same time, we must lay the groundwork for success 
for new theories and more aggressive enforcement. One way we 
are doing just that is with our announcement this week of a 
working group with international and domestic partners to build 
a new approach to pharmaceutical merger enforcement.
    We also need to make sure our merger guidelines, horizontal 
and vertical, chart an enforcement path that fully addresses 
competitive harms, and is appropriately skeptical of claimed 
benefits. In addition to making our enforcement actions more 
effective, we need to dust off some important tools that have 
languished too long in our toolbox. We should activate our 
unfair methods of competition rulemaking authority to prohibit 
anticompetitive conduct that is difficult to litigate on a case 
by case basis. We should consider bringing standalone section 5 
claims in our competition cases more frequently.
    We can work hard to be strategic and aggressive with our 
toolbox, but we do face acute and urgent challenges in carrying 
out our mission and that is where the work of Congress comes 
into play.
    First, resources. Though Congress has been very generous 
recently in helping our resourcing catch up to demand, we are 
not there yet.
    Just one new data point: In the first five months of this 
fiscal year, we processed 60 percent more HSR filings that we 
had on average over the past five years. In February of this 
year alone, we had more than twice as many filings as we did 
the year before.
    Even before this recent wave, filings had about doubled in 
the last ten years while our FTE count stayed flat.
    Another pressing problem for the Commission is the ongoing 
threat from the courts to our authority under section 13(b) of 
the FTC Act; a series of bad decisions limits our ability to 
enjoin illegal conduct and seek monetary redress.
    In its motion to dismiss the Commission's antitrust 
complaint, Facebook cited these decisions and argued that 
section 13(b) bars the suit. Together, all five commissioners 
wrote to Congress and asked that you swiftly restore the 
longstanding interpretation of section 13(b); I hope you will 
consider that request.
    On top of addressing those FTC-specific challenges, I also 
support efforts by this Committee to reform the antitrust laws 
more broadly. Even our most excessive enforcement efforts are 
no substitute for legislative changes that clean up bad case 
law, impose clear presumptions, and reduce untenable burdens on 
enforcers. These changes would minimize the need to engage in 
tortured and expensive efforts to both measure and balance harm 
inefficiencies, particularly in cases where the facts support a 
clear theory of harm.
    Changes to the enforcement framework can work in tandem 
with the broader restrictions on dominant platforms Congress is 
considering. I strongly believe that effective enforcement is a 
complement, not an alternative to thoughtful regulation.
    Our antitrust laws protect the democratic ideal of fair 
participation in a free society. I strongly support legislation 
that will facilitate protecting not only consumers but all 
market participants, workers, entrepreneurs, and small 
businesses, especially those in marginalized communities, from 
monopolistic practices and exclusionary conduct.
    I look forward to working with this Committee and others in 
Congress to consider the best balance of an enforcement and 
regulatory framework to promote competition, and I welcome your 
questions.
    [The statement of Ms. Slaughter follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Cicilline. Thank you, Acting Chair Slaughter.
    Judge Wood, you are now recognized for five minutes.

                   STATEMENT OF DIANE P. WOOD

    Judge Wood. Thank you very much, Mr. Chair, Ranking Member 
Buck and the Members of the Subcommittee. It is a real 
privilege to be here today to testify on such an important 
topic.
    I would like to make three key points for the 
Subcommittee's consideration.
    First, I think it is important for us to recognize that the 
antitrust laws have always been concerned not about the narrow 
concept of so-called consumer welfare just in the sense of low 
prices, but also with concentrated economic power that chokes 
off vibrant competition and innovation.
    Second, it is not only possible, but essential, that 
exclusionary practices once again be pursued seriously by all 
parties able to enforce the law--U.S. Government enforcers, 
State Attorneys General, private parties--because these 
practices have fallen by the wayside in recent years in terms 
of enforcement priority.
    Finally, third, it may be time to consider legislative 
changes in the remedies area of the statutes, because we don't 
want to see antitrust practices go unredressed because either 
the standards are too onerous or the available remedies are too 
ineffective.
    I should stress with regard to substance that I am here 
expressing only my personal views on these subjects, nothing 
more.
    This is obviously hardly the first time Congress has 
considered legislative changes to the antitrust laws. But, this 
is a time where clarification of the intent of Congress is 
really called for. Congress does the same thing from time to 
time. Congress did this with the Americans With Disabilities 
Act when the courts seemed to be going in a direction that was 
not where Congress had thought the law should go.
    So, our antitrust laws, as I said, haven't always been 
about the problems with monopoly. We need reinforcement of the 
fact that these kinds of monopolistic practices are part of 
what the law covers. Senator Sherman himself singled them out 
when he first introduced the bill all those many years ago.
    The original Supreme Court, the people who were 
contemporaneous with the enactment of the Act, also recognized 
that it was about fair competition practices. That is why the 
FTC Act in 1914 spoke of unfair methods of competition. So, the 
question for today's Congress is whether we need to sharpen the 
laws, people's presumptions, and refine the breadth of its 
concern.
    I want to also discuss another thing. Some people are 
afraid that if we focus on exclusionary practices we are not 
going to be able to tell the difference between good old 
fashion hard competition, which we like, and an anticompetitive 
exclusionary practice on the other side.
    I don't think that is a real risk. I think we can see when 
firm has dominance, perhaps when it has a 40 or 50 percent 
market share. Maybe the Committee should consider a threshold. 
When the firm starts to behave as we have heard and swoop up 
all its rivals, or exploit government barriers, or grant 
exclusive rights thereby freezing other people out of markets, 
competition is being damaged. We have the tools to examine that 
sort of thing.
    I am not talking about the old fashioned per se rule, which 
may have been too clumsy, but the rule of reason itself could 
be sharpened and made a more effective tool.
    The under-enforcement of the law has come from a couple of 
directions. Largely I think there is a sense that it is very 
difficult to proceed when the law and the courts have become so 
unfavorable. So, again, there is room for Congress.
    Finally, in my last minute I would like to focus on 
remedies. For section 2, all we have is injunctions, including 
divestitures--very important--damages. Damages are difficult to 
prove, but their availability is certainly a good private tool.
    Perhaps we need to think more ambitiously. Maybe we want to 
add to the menu something like Federal fines or make very 
clear, as the Chair was saying, that disgorgement of profits is 
acceptable. No one has to use all the tools all time, but they 
can be complimentary. Many other countries do this. Perhaps the 
Congress should seriously consider giving the remedy of fines 
to the American governmental enforcers.
    I will leave you with one thought. The antitrust laws are 
for the protection of competition, not competitors. We need 
competitors before we have competition.
    Thank you very much.
    [The statement of Judge Wood follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Cicilline. Thank you so much, Judge Wood.
    I now recognize Attorney General Weiser for five minutes.

                   STATEMENT OF PHILIP WEISER

    Mr. Weiser. Thank you, Mr. Chair. Thank you, Member Buck, 
Congressman Joe Neguse for your kind introduction, and the 
Members of the Subcommittee. I appreciate the opportunity to 
visit with you today.
    I have shared my final comments, and today I want to get to 
the heart of the question that, Mr. Chair, you focused on: A 
level of market power, a lack of concentration that calls on 
enforcers to take actions to restore competition, and raises a 
question for policy makers: How did we get to this point, and 
what do we do about this?
    The short answer is that in some markets we are seeing 
entrenched incumbents. We talked about the area of tech 
platforms where permissive merger policy, exclusionary conduct, 
and other actions have lessened competition. Now, I want to be 
clear, there are markets that function in a healthy manner with 
competition. Take, for example, consumers can choose from a 
number of video streaming services.
    In other sectors, airlines and pharmaceuticals, for 
example, we have too little competition and consumers are worse 
off.
    Let me start with airlines. For example, after a series of 
mergers, four airlines now control almost 70 percent of 
domestic air travel. Moreover, this industry Witnessed a 
successful effort by American Airlines in the 1990s to stomp 
out rivals through predatory pricing, and a mistaken court 
decision that allowed this anticompetitive harm to happen.
    For consumers, this has been a blow to our pocketbooks. 
When the fuel prices went down, consumers didn't benefit; 
rather the airlines made record profits and, as the New York 
Times put it, consumers just got peanuts.
    This decreased competition is not only bad for our 
pocketbooks, but it means consumers are treated worse off. 
During the pandemic, the number one complaint we have gotten at 
the Colorado Department of Law is about airlines, particularly 
Frontier Airlines, not following Federal consumer protection 
requirements. That is why a bipartisan coalition of Attorneys 
General, 40 of us, including General Peterson and I, are 
calling for enhancing the enforcement of Federal airline 
consumer protection laws.
    We have to take a look. We have had too much concentration, 
and we have to ask questions, how did we get here? These 
retrospective studies are important, and we need more of them.
    What we also need to ask is why have courts shown a 
reluctance to enforce the antitrust laws? As the Chair noted, 
why have enforcers been afraid of bringing new cases?
    The short answer is the Chicago School of antitrust. Judge 
Wood is not necessarily a member of that school, although you 
were at the University of Chicago Law School for a long time. 
It offered a series of critiques of antitrust laws, started out 
on sound economic concerns, but overshot the mark, as the late 
Bob Pitofsky put it, and now are focused on the mantra that all 
we have to worry about is over-enforcement, and not to worry 
about under enforcement.
    This mind set is wrong and explains some of the mistaken 
court decisions, including the one that I mentioned.
    So, where do we go from here? I would recommend four steps.
    First, we need enforcers to bring cases, to do their 
homework, know their industry, and not be afraid, to bring 
forth empirical evidence, rigorous economic analysis of 
competitive harm happening in the marketplace. That is what the 
U.S. Department of Justice did a generation ago when I was 
working with Joel Klein. That unanimous Microsoft case that 
resulted from that leadership set an important precedent about 
exclusionary contracts, degraded access to a platform, and 
efforts to keep artificial barriers to entry high, thereby 
excluding rivals.
    In the internet cases that our department and other states, 
including Nebraska, have brought against Google and Facebook, 
we are alleging harm similar to that of Microsoft. In the case 
of Google, we explain in our complaint that Google protected 
monopolies in search, in search advertising, using exclusionary 
contracts and inhibiting rivals going to acquire customers.
    Like Microsoft in the 1990s, Google sees threats to its 
dominance from adjacent sectors and is not competing on the 
merits to undermine the ability of rivals to compete. We must 
restore competition to the marketplace and lower barriers to 
entry.
    In the Facebook case, its strategy was buy or bury the 
rivals. The wrath of Mark Zuckerberg was well know, and under 
his direction upstart rivals were either purchased or were 
buried. That is the opposite of what the antitrust laws are 
about, which is competition on the merits.
    Second, we also need, as I mentioned, more retrospectives 
to understand where markets are not working, where we can learn 
from past mistakes. I appreciate the call for funding resources 
for the FTC and the Antitrust Division of the DOJ to do just 
that.
    Third we must think about competition policy more broadly. 
It is not only about antitrust enforcement. Back to the airline 
industry, airports make leasing decisions based on landing 
gates. We need to make sure those decisions are made with an 
eye to facilitating competition.
    The same goes with respect to our patent laws and how we 
enable competition in pharma.
    Finally, yes, we need legislative action to address this 
wrong turn called for by the Chicago School. This Congress can 
make an effort and show leadership in antitrust enforcement, 
competition policy, and consumer protection.
    I thank you for your attention to these issues, and I 
welcome your questions.
    [The statement of Mr. Weiser follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Cicilline. Thank you very much, Mr. Attorney General.
    I now recognize Dr. Walker for five minutes.

                    STATEMENT OF MIKE WALKER

    Mr. Walker. Thank you, Mr. Chair, Ranking Member Buck, and 
other the Members of the Subcommittee for this opportunity.
    I have been asked to speak about what I think we in Europe 
have learned about the large digital platforms and how, if at 
all, they should be regulated.
    I think the starting point for thinking about competition 
policy with respect to digital platforms is to note the they 
undoubtedly provide great products and services that consumers 
and firms love, but to also note that this is not a ``get out 
of jail free'' card that should allow them to exploit their 
substantial market power to the detriment of consumers, firms, 
and the economy.
    So, what do I think we have learned in Europe? Well, I 
think we have learned that the existing competition policy 
approach has failed with respect to large platforms.
    I think we have learned that unilateral conduct cases on 
their own are not enough to restrict these platforms' abilities 
to exercise market power.
    They take too long. They are not enough to restrict the 
platforms' intense market power, and there is no belief that 
entrenched market power is going to self-correct in the near 
future.
    I think we have learned that existing competition law is 
not able to deal with the adverse impact of platform 
envelopment strategies, particularly with respect to 
undermining the ability of innovative entrants to be 
successful. I think we have learned that competition policy 
should not Act independently of privacy regulations. The 
European experience is that incumbent platforms use privacy 
regulation as a protective shield against competitive threats.
    So, my view is that the entrenched market power of these 
platforms requires regulation to restrict both their ability to 
exploit their current market power and their ability to enhance 
it by creating barriers to new entry. The key long-term 
objective of this regulatory regime should be to open these 
markets to new competitors. It is competition, not monopoly, 
that drives innovation. It is innovation that enhances consumer 
welfare.
    Now, I think that merger control policy should be part of 
this regulatory regime. It has a key role to play in stopping 
existing incumbent platforms from further entrenching their 
market power. We are all aware of past failures in this area.
    So, what have we decided to do? In the U.K. we are setting 
up a new regulator, the Digital Markets Unit, that is going to 
regulate firms with ``strategic market status.'' These are 
firms with entrenched market power that has an adverse effect 
across a range of markets. Firms that are found to have 
strategic market status will be subject to three types of 
intervention.
    First, a bespoke code of conduct that limits the ability of 
the firm to exploit its existing market power. That code of 
conduct will be based on three core principles: Fair trading, 
open choices, and trust and transparency.
    Second, we will have interventions that will be 
procompetitive interventions to encourage new entry and 
innovation to challenge the SMS firms. Such interventions are 
likely to include remedies around personal data mobility, 
interoperability, and data access.
    Third, they will face enhanced merger scrutiny to ensure 
they cannot protect or enhance their market power via 
acquisitions. So, the merger standard is proposed to be reduced 
to a reasonable prospect of harm, a lower standard than the 
current balance of probabilities standard.
    I think this is a super important part of the proposed 
regime. The best way to deal with market power is not to allow 
it to exist in the first place. It should be noted that this is 
one area where the U.K. is different from the EU plan. The EU 
proposals do not include merger control change and I think that 
is a significant omission.
    It is really important to note this is not traditional rate 
of return or price regulation that is being proposed. The aim 
of this regulation is not to bake in existing outcomes, but to 
facilitate innovation and, hence, facilitate good competitive 
outcomes. I cannot stress enough that encouraging innovation is 
key to successful competitive outcomes.
    I should also note the code of conduct for each SMS firm 
will be bespoke to that firm. That seems right to me. The 
business models of the firms differ and, hence, the source of 
market power differs across the firms. Google and Facebook are 
advertising funded, Amazon is transaction funded, and Apple 
relies on devices and the iOS app store.
    I have two final comments. One, I often hear the argument 
that the future of these markets is very uncertain, the danger 
of regulatory mistakes is high, and, therefore, regulators 
should leave them alone. I think this argument is profoundly 
wrong. There are very substantial risks to inaction, such as 
market tipping or incumbents' intent to keep competitors out of 
the market. Inaction is not a neutral choice; it is an active 
choice and, in my view, the wrong choice.
    Finally, digital platforms are global players. In my view 
this means that regulatory consistency between the U.S., 
Europe, and other jurisdictions is highly desirable, both to 
protect consumers and to create greater consistency for the 
platforms.
    Thank you for your attention.
    [The statement of Mr. Walker follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Cicilline. Thank you, Dr. Walker.
    I now recognize Commissioner Phillips for five minutes.

                   STATEMENT OF NOAH PHILLIPS

    Mr. Phillips. Thank you, Mr. Chair.
    Chair Cicilline, Ranking Member Buck, and the Members of 
the Subcommittee, thank you for the opportunity to appear 
before you today. I am pleased to be before you with my friend 
and colleague, the acting Chair of the Federal Trade 
Commission, and the other esteemed panelists to discuss 
antitrust reform.
    Today, the agencies are engaged in vigorous enforcement in 
industries from tech, to pharmaceuticals, to consumer products. 
In fiscal year 2020, the FTC brought a record-setting 27 merger 
enforcement actions, the highest number in decades. Over the 
last three years, we have also brought seven monopolization 
cases. We appreciate the funding that Congress has 
appropriated, which will help us to continue to enforce the 
law.
    Today's discussion concerns whether the law suffices. What 
Congress does will have far-reaching consequences throughout 
our economy. That will require careful consideration. I 
encourage this Subcommittee to continue to engage thoughtfully.
    The antitrust laws protect competition. Competition 
benefits society, and consumers, by spurring innovation, 
improving quality, and lowering prices. Companies, even 
industries, rise and fall, but the competitive process ensures 
that American consumers benefit. That is why antitrust focuses 
on whether a merger, or other business conduct harms consumers. 
We care about prices. No one should work to make Americans pay 
more for food or healthcare. Competition also means output, 
quality, and innovation.
    Businesses compete to hire workers and buy inputs, too. 
Antitrust cares about all these things.
    Antitrust is a powerful tool. The laws are not designed to 
address every problem that large companies create. Even perfect 
competition cannot solve every problem. Some reformers seem to 
promise antitrust can solve everything, from the political 
power of large corporations, to privacy, to labor rights, to 
racial inequality.
    Does competition help address social problems? Without a 
doubt. When companies compete to lower prices, for example, 
people with fewer means have access to more products. That is 
good for distributional equity. Antitrust is not, and should 
not be, a regulatory catch-all.
    This Subcommittee has done its homework to understand some 
of the major technology platforms today. Many reform proposals 
are not limited to four technology companies. The antitrust 
laws apply to almost every industry, and many proposals that I 
have seen go broader than big tech.
    The antitrust laws are written broadly. Their breadth gives 
plaintiffs and courts the flexibility to deal with many issues, 
including in the tech sector. For example, the FTC recently has 
sued to block mergers, break up companies, protect platform 
competition, encourage new drugs to market, and stop contracts 
protecting monopolies. The important work we do is not just in 
tech, but hospitals, energy, consumer products, and 
pharmaceuticals.
    As you consider reform, animated in particular by a handful 
of the largest technology firms, I urge you to consider the 
impact on all businesses.
    The history of antitrust legislation includes unintended 
consequences: Some laws took money out of the pockets of 
American consumers, or failed to check corporate power. The 
Robinson-Patman Act sought to protect small, retail businesses 
from larger, more efficient chain stores. The unfortunate 
result was that American consumers paid more money for 
groceries and household products that they use every day.
    The 1960 Celler-Kefauver Amendments to the Clayton Act, 
which the Chair mentioned, which are good, and which we use 
today, were followed by a two-decade merger wave. The results 
was not the diminishment of powerful corporations, but rather 
the rise of gargantuan, unwieldy conglomerate corporations. It 
took America a long time to get out of that mess.
    Our Nation is emerging from a crisis, with tens of millions 
out of work and shuttered businesses. We want to encourage 
companies, big and small, to enter and meet consumer need. 
Mergers and acquisitions are one way that they do that.
    For example, the FTC recently permitted a large medical 
diagnostics company to buy a small innovator developing a rapid 
PCR test for COVID-19 and the flu. According to the companies, 
the combination of the innovator's technology and the 
acquirer's scale would enable the combined company to bring 
better tests to more people. That is a good thing as we race to 
put this pandemic behind us.
    Markets work better when companies are allowed to give 
consumers what they want. Government intervention is sometimes 
necessary, but it can also get in the way. The FTC advocates 
against State laws that prevent new hospitals, or impose 
unnecessary occupational licensing requirements. Burdensome 
environmental and NIMBY permitting slowed the plans of both 
Presidents Obama and Presidents Trump to improve American 
infrastructure.
    Competitive M&A is no different. We can and do stop the bad 
ones, but over-regulating will also stop good ones. The ability 
to sell a company--
    Mr. Cicilline. Commissioner, I hate to interrupt. Your time 
has run. So, if you could wrap up.
    Mr. Phillips. Two more sentences?
    Mr. Cicilline. Sure.
    Mr. Phillips. Thank you, Mr. Chair.
    The ability to sell a company encourages people to innovate 
and start them, and venture capitalists to fund them, in tech, 
biotech, and consumer products. On the flip side, sand in the 
gears prevents the market from working. As we think about 
reform, please think about those facts.
    Thank you for inviting me today. I look forward to your 
questions.
    [The statement of Mr. Phillips follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Cicilline. Thank you, Commissioner.
    I now recognize Attorney General Peterson for five minutes.

                   STATEMENT OF DOUG PETERSON

    Mr. Peterson. Thank you, Mr. Chair and the Members of the 
Subcommittee for the invitation to be with you today. I 
appreciate this opportunity to share with you my perspective on 
how to address monopoly power and revive competition in the 
modern economy.
    At the outset, I want to express my appreciation to the 
Subcommittee for its impressive and extension investigation 
into the potential anticompetitive conduct occurring with the 
big tech marketplace. Frankly, after 16 months of bipartisan 
investigation, you have reviewed over 1.3 million internal 
documents, you have considered 38 submissions by antitrust 
experts, interviewed over 240 market participants, and 
testimony at seven hearings, including CEOs from four major 
tech companies.
    So, I seriously doubt that I can bring any new information 
to the investigation, excerpt to provide you one State Attorney 
General's perspective on how we can bring better competition 
into the markets.
    I think it is helpful to look at an historical perspective. 
I think it is productive to step back and reflect where we have 
been with antitrust enforcement, not just in the U.S. but 
globally.
    For several years now, the foreign competition authorities 
have been very active in investigating and prosecuting big 
tech. They are to be applauded for their important efforts. The 
EU also passed the GDPR. However, I think they have rightfully 
asked where is the U.S. enforcement? The answer is, and my 
perspective is, we are on our way.
    In the last two years, both the House and the Senate have 
initiated studies regarding antitrust enforcement during the 
digital age. Both the U.S. Department of Justice and the FTC 
have investigated and have filed antitrust actions against 
Google and Facebook. From my perspective, the most significant 
addition in the last two years is that 39 states, the District 
of Columbia, territories of Puerto Rico and Guam, have 
participated in both the multi-state investigation and have 
subsequently joined as parties to one or more of the two 
antitrust lawsuits that have been filed against Google and 
Facebook.
    There has never been a time in U.S. history where this 
number of states have exercised their dual authority to enforce 
the Sherman Act. The closest example would be the Microsoft 
case in the late 1990s where 20 states joined the Department of 
Justice. It is obviously upon the Attorney Generals to see this 
type of number and a renewed a commitment to our duty to 
enforce the Sherman Act. I think that is a significant sea 
change when you look at the number that have been involved in 
these two cases.
    The degree of collaboration between the State antitrust 
leadership and those at DOJ and the FTC has been outstanding 
over the last two years. Antitrust enforcement actions are 
resource-intensive endeavors, and require armies of specialized 
attorneys, combined with both technical and economic experts to 
be successful. As a result, enforcers are most effective when 
cooperating and coordinating our efforts. Cooperative 
enforcement was highly effective in past cases such as 
Microsoft and the Apple E-Books in which State and Federal 
enforcers came together successfully to take on some of the 
world's largest technology companies.
    Today, we are seeking action in our efforts with Federal 
agencies. State enforcers have become true partners with their 
Federal counterparts by bringing separate, yet coordinated, 
enforcement actions, thus allowing us to bring more expansive 
and aggressive cases where appropriate.
    I recognize the House recently increased funding for 
Federal agency enforcement, and we encourage this Subcommittee 
to seriously consider additional proposals to increase 
resources allocated to the antitrust enforcement community to 
ensure agencies have the resources necessary to successfully 
pursue our anticompetitive investigations.
    The Sherman Act has been the primary tool for antitrust 
officers to protect competitive markets for more than 130 
years. I want to talk just briefly about some of the discussion 
with regards to changes that are being called for.
    Over the last century, it has offered an adaptable 
framework for a wide range of fact patterns. Antitrust cases 
provide each case a very factually unique setting, whether it 
is defining markets or behaviors, or whether it is a highly 
regulated industry. I think the Microsoft case provides the 
best model for analyzing our current cases with regards to 
Facebook and Google.
    In Microsoft, the D.C. Court of Appeals endorsed the idea 
that antitrust harm extends beyond simple price increases or 
output reductions. Instead, the Sherman Act protects against 
conduct which hinders or distorts the competitive process. 
Courts largely understand that offering free product is no 
exception from antitrust scrutiny or liability and, instead, 
focuses on broader conceptions of competition, such as quality, 
consumer choice, and innovation. In doing so, their analysis 
goes far beyond the simple consumer price analysis.
    I know that there are several proposals being considered by 
this Subcommittee. There are just three that I would talk about 
briefly. One is in the merger acquisition burden issue--
    Mr. Cicilline. Mr. Attorney General, if I could ask you--I 
hate to interrupt--but if I could ask you to wrap up. Your time 
is expired. If you could make some concluding remark.
    Mr. Peterson. Thank you, Chair.
    Mr. Cicilline. We are going to ask a lot of questions.
    Mr. Peterson. Mr. Chair, I will go ahead and wrap up with 
that. Just simply say that I think with regards to the tech 
platforms and what we are seeing today, they are moving 
quickly, they are gathering much, a lot of data and market 
dominance. I appreciate what this Committee has done to address 
this. I think the discussion and dialog need to continue to be 
at the forefront.
    Thank you.
    [The statement of Mr. Peterson follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Cicilline. Thank you, Mr. Attorney General.
    Thank you to all our Witnesses for your very important 
testimony. We will now proceed on the five-minute rule.
    I now recognize myself for five minutes.
    Chair Slaughter, I thank you very much for appearing before 
us today. I am in strong agreement with your testimony and I 
appreciate it very much.
    I want to begin by asking you about the recent report by 
Politico about the commission's decision to close the Google 
investigation in 2013. Even though I know you were not on the 
commission at the time, I think it is important for us to 
understand what happened.
    One of the things that I find most alarming about the 
report is how the FTC completely ignored direct evidence of 
Google's anticompetitive conduct. Google favored some 
properties, suppressed action on major competitors, paid 
billions of dollars to be the default choice for mobile search, 
and deployed other exclusivity provisions to own the market, as 
one of Google's own executives described it.
    In sum, they paid exorbitant amounts to lock up the search 
market on desktop and mobile, reinforcing the moat around 
Google's business, and devastating competition online.
    Instead of acting on this very serious threat to 
competition, the commission chose to do nothing. As has become 
the hallmark of economic legal analysis during this period, the 
agency vastly overstated the likelihood of entry by firms 
capable of challenging Google's dominance, and discounted the 
likely harm to competition.
    Most importantly, instead of aggressively enforcing the 
law, the agency ignored contradictory evidence and blindly 
adhered to a misguided view that markets self-correct. This is 
not good economics, and this is not good lawyering.
    This misguided approach was also at the heart of the 
Commission's decision to close its investigation in Google's 
acquisition of DoubleClick and AdMob, decisions that were bad 
at the time but look even worse now.
    There is something very wrong with this period. So, Chair 
Slaughter, don't you agree that we must never let this happen 
again?
    What can we do to ensure that enforcers are following fact 
rather than ignoring evidence or relying on faulty market 
predictions? Do we need new laws, or do we need deep internal 
reforms at the agency, or both?
    Ms. Slaughter. Thank you for the question, Mr. Chair.
    Yes, I agree. We want to make sure that our enforcement is 
as effective as it can be.
    Look, I wish a complaint had been filed at the time. I 
think it is important to note that many of the issues that were 
in the FTC's investigation are very much at play in the case 
the cases that DOJ and the States have filed right now at 
Google, with Google. I think it's great that our sister 
agencies are taking a hard look and bringing these hard cases.
    I also think it is incumbent on the FTC to bring hard 
cases. I think in all areas, not just in tech, not just in 
platforms, we need to go back and take a look at our past 
analysis, figure out where are analytical tools are lacking, 
where our predictions were wrong, and what we need to do better 
going forward. That is very much something I am committed to.
    Consistent with my testimony, there is work that the 
agencies can do in that respect, and that there is work that 
Congress can do to help us in that area.
    I think that one of the key points that you and several 
other Witnesses have raised is the question of error risk. Do 
we stay being worried about the risk of over-enforcement, which 
I think has been a guiding principle for a long time, or should 
we focus more on the dangers of under-enforcement and the 
dangers of inaction?
    I am very much in the camp where I am concerned about the 
dangers of inaction, under-enforcement, and addressing that is 
a priority for me.
    Mr. Cicilline. Thank you very much.
    General Weiser, thank you again for appearing today as well 
as for giving your excellent briefing to us at our field 
hearing in Colorado last year.
    As I noted in my opening statement, the Clayton Act's 
prohibition on mergers that may substantially lessen 
competition is concerned with probability, not certainty. That 
is important because, as you have noted, it is a lot easier to 
prevent monopolization at the outset by blocking a merger 
versus bringing a complex case years later after the damage is 
done and impossible to undo in its entirety.
    So, General Weiser, my question is what recommendations do 
you have for modernizing merger enforcement to address this 
concern, as well as strengthen the law with respect to nascent 
and potential competition?
    Mr. Weiser. Thank you, Mr. Chair. It is a pleasure to be 
with you again. Let me take your second question first.
    I do think, and this picks up what Chair Slaughter just 
noted, the fear of taking on these nascent competition cases 
has been a barrier to action. We are worse for it.
    When there is a dominant firm, I do believe there should be 
a presumption that acquiring a would-be rival who could 
threaten that firm's dominance is a violation of the antitrust 
laws. That is a position for which I believe there is potential 
support in current law, but clarification of that principle 
would be important
    We also need the encouragement, as my prior speaker just 
said, for taking these cases on. Unfortunately, there were some 
cases, I think there were bank mergers that didn't go well in 
this doctrine and, unfortunately, enforcement stayed away.
    The broader point, is that the merger guidelines that were 
done in 2010 are important in setting up the structure for 
merger analysis. You put your finger on a fundamental 
principle, which is called in the world of antitrust, the 
structural presumption. When we begin to see markets where we 
lose four viable competitors, we start to see bad things for 
consumers.
    In the airlines, that is the reality. We have four major, 
nationwide entities, providers, but almost no market has actual 
four major providers of airline service. We are now working 
with mostly two, which lends itself to coordination, and which 
is not good for consumers.
    So, we need to see more vitality for that structural 
presumption and really put the burden of proof heavy on would-
be merging firms who want to overcome it, not to essentially 
allow the enforcers to get stopped by undue artificial burdens.
    Mr. Cicilline. Thank you very much, General.
    I now recognize the Ranking Member of the Subcommittee, Mr. 
Buck, for five minutes.
    Mr. Buck. I thank the Chair. I would like to recognize or I 
would like to have the Chair recognize Mr. Fitzgerald to ask 
questions at the end, if that is permitted.
    Mr. Cicilline. Of course. Mr. Fitzgerald, you are 
recognized for five minutes.
    Mr. Fitzgerald. Thank you, Mr. Chair.
    Commissioner Phillips, last September the FTC issued a 
notice of proposed rulemaking that would provide 10 percent de 
minimis exemption to investment funds and master limited 
partnerships. Any idea when that rulemaking is going to be 
completed?
    Mr. Phillips. Mr. Fitzgerald, thank you for the question. I 
don't have an update on timing. Because it is an ongoing 
rulemaking, I have to be careful about what I can and cannot 
say.
    I did write in a statement that accompanied that notice of 
proposed rulemaking that that 10 percent exemption, taking out 
from what we do, transactions that over 40 years we have never 
challenged one. Transactions that no one has made an argument 
are anticompetitive would be a good way to allow the market to 
continue to function, allow the securities markets to continue 
to work better, and save agency resources.
    Again, in 40 years we have never, ever brought a case on 
one of these transactions. These are not mergers in the 
colloquial sense, these are equity purchases. Oftentimes, they 
are by index funds or other investors. I do think, as I wrote 
in my statement, subject to what input we get in the rulemaking 
process, of course we want to look at that evidence. I do think 
going in it is a good idea.
    Mr. Fitzgerald. Very good. Thank you very much.
    Chair Slaughter, you mentioned in the past that you want 
more effective enforcement of vertical mergers. I just 
wondered, can you kind of point to what you mean by that?
    Also, can you explain why you think some of those may be 
anticompetitive?
    Ms. Slaughter. Thank you, Congressman, for the question.
    Yes, so I think for a long time there has been a general 
sense in the antitrust world that vertical mergers are rarely 
bad, and in fact, may be mostly good. This assumes some 
benefits to those mergers that I am not sure are supported by 
the evidence.
    In fact, the concern we have in verticals, or the concern I 
have in verticals, is where the manufacturer of an input and 
its downstream customers, one of its downstream customers 
merge, then that manufacturer may be inclined not to share that 
input with other customers.
    So, I will give you an example of a case that we worked on, 
that the FTC worked closely with Attorney General Weiser's 
office on, which was a health insurance company that purchased 
a physician's group. The FTC ended up taking a consent on a 
horizontal element of concern in that case, but didn't have a 
majority to support action on the vertical theory, which was 
about protecting consumers basically from physician price 
increases, and making sure that they still had access to 
physicians through their health insurance, through health 
insurance.
    Working with the FTC staff, Attorney General Weiser was 
able to pursue a remedy on the vertical theory there that I 
think was really important for protecting consumers in 
Colorado.
    Mr. Fitzgerald. Yeah. I, just because I only have a minute 
here, is there specific examples. You may not have those at 
your fingertips right now, but love to see that as the 
Subcommittee moves forward and takes a little bit harder look 
at this.
    Ms. Slaughter. Sure. I will give you another example of a 
case that concerned me.
    We had a case involving a kidney dialysis company that ran 
a lot of clinics and purchased a company that made home 
dialysis equipment. The concern there is once the company that 
supplies clinic--that runs clinics owns the technology that 
would take patients out of clinics and do home dialysis use, 
are they really going to have the incentive to supply that 
technology to the market if it draws away from their clinic 
business?
    That is a concern for patients for some real access to real 
lifesaving medical technology.
    So, that is one example, but we would be happy to work with 
you to get more.
    Mr. Fitzgerald. Okay. Thank you very much.
    Mr. Chair, I would yield back.
    Mr. Cicilline. The gentleman yields back.
    I now recognize Mr. Jones of New York for five minutes.
    Mr. Jones. Thank you, Mr. Chair. Thank you to the Ranking 
Member as well for your leadership, sir.
    I would like to thank our esteemed Witnesses for sharing 
their expertise with us this afternoon. In our democracy no one 
should be above the law, not the President, not any of us in 
Congress, not the world's biggest corporations. Today, 
unleashed from competition and from antitrust enforcement, the 
monopolies that dominate our economy are increasingly above the 
law.
    On one hand, these monopolies have become too big to 
govern. They know that if they violate our laws, they probably 
won't be held accountable. To them, the penalties for breaking 
the law are just the costs of doing business.
    On the other hand, these monopolies are so big that they 
have the power to govern us. They force us to ration lifesaving 
medications, like insulin, set the wages for working families, 
and choose which small businesses live or die. They decide 
whether their workers will face exposure to COVID-19, and they 
decide when their workers can use the bathroom. They can fire 
almost anyone for almost any reason, but these corporations 
themselves can break the law with impunity. They even evade 
regulation by this body, until now.
    We would never give our elected officials unlimited power 
and blindly trust they will use it for the best. We compel them 
to compete for our votes, and we limit their power with checks 
and balances. Our economy should be no different. We need 
competition, we need checks and balances, and stronger 
antitrust laws must be part of the solution.
    Judge Wood, it is an honor to speak with you this 
afternoon. I used to work with someone at the Justice 
Department who even then sang your praises. So, it is a 
pleasure to finally make your acquaintance.
    You testified that our antitrust statutes were created to 
protect consumer welfare and to prevent ``concentrated economic 
power.'' How has the Supreme Court made it harder for the FTC 
and the Department of Justice to challenge unlawful 
concentrations of economic power?
    Judge Wood. Well, thank you very much for the question. It 
is really a privilege to be here, and it is a privilege to meet 
you as well, through Zoom.
    The Supreme Court since roughly the mid-70s, I date it to 
1974, has accepted what General Weiser called the Chicago 
School approach, which I think is a little over-inclusive with 
the name since I am from Chicago and it is not my approach. 
They said that the only thing to worry about was high prices 
for consumers or restrictions of output.
    The Supreme Court has over and over again recited this 
phrase: The antitrust laws are for the protection of 
competition, not competitors. So, exclusionary practices that 
push a competitor out of markets, often in a vertical setting, 
were blessed by the Court. The court said there was no 
violation. That is how they understood the statute.
    There is nothing wrong with the Supreme Court doing its job 
to interpret the statute, but Congress also has a job to say, 
is this the statute we meant to have?
    The other thing the Court has done is to adopt the notion 
that the market will fix everything in the long run. The 
analogy I would invite the Subcommittee to consider is one that 
comes from the merger guidelines. If you don't think that 
competition will be restored within about a two-year period, 
you are going to be really worried about that merger.
    Think of the example of Kodak, a monopolist for many years. 
You probably barely remember it existed. Between 1925-1995 it 
had about 80 percent of the U.S. film market. Well, that is a 
long time to wait for the market to control things, for the 
market to correct things.
    So, my suggestion to the Subcommittee is it might, in these 
monopolization cases, put in a requirement that is like the 
two-year requirement in merger cases: If you think that the 
monopoly will start breaking down because there is open 
architecture, because there is interoperability, then maybe you 
don't need to worry about it; but if you think it is going to 
be persistent, that is a different story.
    Mr. Jones. If Congress believes that the Supreme Court has 
misinterpreted these statutes, doesn't Congress have the power 
to correct that misinterpretation, specifically, the power to 
ensure the FTC, the Department of Justice, and private 
plaintiffs can hold corporations accountable?
    Judge Wood. Congress absolutely has that power. As I was 
suggesting, I can think of other areas in which Congress has 
exercised it. Think of the Lilly Ledbetter statute that was 
passed when the Supreme Court gave a very narrow interpretation 
to the civil rights employment discrimination statute. Look at 
the Americans With Disabilities Act.
    Congress can step in whenever it wants to with a statute 
and either change it, or correct it, or whatever it wants to 
do.
    Mr. Jones. Thank you.
    Mr. Chair, I yield back.
    Mr. Cicilline. The gentleman yields back.
    I now recognize Mr. Bentz from Oregon for five minutes.
    Mr. Bentz. Thank you, Mr. Chair.
    So, Mr. Phillips, every law has to have a limiting 
principle, otherwise it is not a law, it is a license to be 
subjected. So, in fact, what we end up doing is outsourcing 
this enforcement to perhaps bureaucracies. Thus, our antitrust 
laws were expanded in scope of purpose, say, to add to consumer 
protection such as independent businesses, fair economy, and 
other things, to name a few.
    What does this do to you in the regulatory realm?
    Mr. Phillips. Thank you, Mr. Bentz, for that question.
    I have seen the name that the old expression he who serves 
two masters, serves none, is an important one to keep in mind. 
The more things we are directed to do simultaneously, the less 
we focus on any given one.
    So, clarity in law and administrability was really 
important for making us efficacious in our work. The more 
different things you add, the worse off we are.
    Now, as I said in my testimony, what we do today, the 
consumer welfare standard that the Supreme Court has recognized 
isn't just limited to price. So, for instance, if you don't 
have price competition there might be other aspects of 
competition that are affected. It is important to note that 
today, in litigation we look at those other things, too.
    So, we will allege price harms, but we will also allege 
innovation harms, and so forth. That is how we do it today.
    Mr. Bentz. Continuing with you, the principles of antitrust 
law have evolved over 100 years, I suppose. There are people 
who have become reliant upon them, build their businesses 
around them.
    If we choose to change those, what impacts do you 
anticipate, if we change them significantly, perhaps even 
dramatically?
    Mr. Phillips. Yes. So, I think it really depends on what 
changes we make. That is why this important network, this 
discussion that we are having today is so important.
    Part of what makes America great, part of what has allowed 
our economy to be as innovative as it is--more innovative, by 
the way, than other jurisdictions that have more restrictive 
laws--is the fact that we have still today a vibrant investment 
environment. People know maybe they are going to bet on a 
unicorn and make a lot of money, but if they don't, they can 
still make money selling out, including through M&A.
    Founders know that when they go a leave a steady job to 
start a company, they have a chance of making some of that 
back.
    That is an important ecosystem that we need to consider as 
part of this discussion.
    Mr. Bentz. Pursuing you with one more question, the 
complexities of this area are truly amazing. When one goes into 
litigation it takes years. Is that a function of just a poorly 
designed system, or is it a function of the incredible 
complexity of the businesses we are now dealing with?
    Mr. Phillips. I think it is a mix of things. The truth is, 
the problems with antitrust litigation in terms of costs--they 
are real, and that is why I support more resources--aren't just 
about antitrust. If you think about securities litigation or 
corporate contract litigation, they are also hiring economists, 
they are also spending a lot of time figuring, to figure things 
out.
    A lot of the most effective work that we do today--this is 
important to recognize, and it goes, by the way, to nascent 
competition--is before the litigation starts.
    So, for instance, in mine and the acting Chair's tenure we 
have challenged three examples of nascent competition: Big 
established firms buying smaller ones.
    We have brought complaints. We have used the merger laws, 
that is the Clayton Act. We have used the Sherman Act. We have 
used the monopolization laws. We have gone to court and they 
have called off the mergers. That is a good outcome for 
consumers. I think it is a good outcome for enforcers as well.
    Mr. Bentz. In the limited time left, how should the law 
distinguish between conduct that harms the competitor from 
conduct that harms competition?
    Mr. Phillips. Sure. What we look to protect is the 
competitive process. There are times when one firm out competes 
another. That hurts the other firm. That is not necessarily 
bad. That is the distinction that phrase draws.
    Sometimes it doesn't sound so meaningful, but the point is 
we want people to benefit from the fruits of competition. We 
don't just want, as sometimes happens, companies to come in and 
complain that they are being beaten in the market and they want 
the Government to go make it right for them.
    Mr. Bentz. Thank you, Mr. Phillips.
    Mr. Chair, I yield back.
    Mr. Cicilline. The gentleman yields back. I now recognize 
the gentleman from Colorado, Mr. Neguse, for five minutes.
    Mr. Neguse. Thank you, Mr. Chair. I want to say at the 
beginning, thank you for holding this hearing to examine ways 
that Congress and improve and strengthen antitrust laws not 
only for the digital marketplace, but across our economy. There 
is clear bipartisan support, in large part due to the Chair's 
approach to this Subcommittee's investigation with respect to 
the digital marketplace that a Congress should construct a 
broad and comprehensive range of reforms to modernize the 
antitrust laws and protect innovation, and I thank him for that 
work. Of course, to the distinguished panel that has joined us 
both virtually and here in person.
    Commissioner Phillips, do you believe that the FTC's 
approach to pharmaceutical mergers is working?
    Mr. Phillips. Forgive me. Congressman, thank you for the 
question. My view, some have suggested that it isn't. What I am 
interested in hearing is what are the harms that folks think we 
are missing, because I think if they exist, we should figure 
out what they are, figure out how to build a case on them, and 
bring those cases. That is why I support the Chair's effort to 
convene a group of enforcers. I think there are other enforcers 
we could convene as well to think about what those additional 
harms may be.
    Mr. Neguse. Well, so let me say this, and I appreciate your 
answer and then appreciate you being candid with respect to 
your views. It sounds like you believe that they are working, 
that the policies at the FTC has pursued with respect to 
pharmaceutical mergers have been effective. I don't think that 
is the case.
    I happen to agree with the dissenting view that was issued 
back in last November of 2020, and I think the empirical 
evidence bears that out with a market that is highly 
concentrated and an American public that is paying higher 
prices for pharmaceutical drugs than any other Western country. 
Clearly, it is an area that is ripe for the attention of 
regulators which is why I am--I guess the one thing we do have 
in common, Commissioner, that I do share your enthusiasm for 
the Chair's decision to convene this working group, because I 
am hopeful that it will provide some potential best practices 
that the FTC could implement. So, to Commissioner Slaughter, 
Acting Commissioner Slaughter, as you noted in your prepared 
testimony, the FTC announced this multilateral working group to 
build a new approach to pharmaceutical mergers, which is 
something I fully support. You, of course, have expressed--the 
dissenting opinion that I referenced was yours--your view as to 
the FTC's failings in this regard. I wonder if you can expound 
on both what you hope to achieve through the working group and 
perhaps expound a bit on the concerns that you articulated in 
the dissent that you issued, which I certainly fully agree 
with.
    Ms. Slaughter. Thank you so much, Congressman, for the 
question and for the support that you have articulated for our 
initiative. I am really excited about it. I am really excited 
about the opportunity to take a fresh look at a broader range 
of questions in pharmaceutical mergers than our traditional 
approach has taken.
    Some of the issues I want to make sure we think about are 
innovation, broadly, not just in terms of specific products and 
pipeline products, but when two large pharmaceutical companies 
merge what does that do to their R&D budgets? What does that do 
to the incentives to bring new, unrelated products to the 
market? What does it do for the incentives for venture 
capitalists and entrepreneurs to invest in small biotech start-
up companies that could bring new products to market that might 
have to be scaled up through larger companies at some point?
    Another area of concern for me has to do with conduct. We 
have an entire division of the FTC that is devoted to 
anticompetitive conduct in the healthcare industry and much of 
that attention is focused on the pharmaceutical industry. So, 
when two large companies with history of anticompetitive 
conduct merge, what happens to their incentives to engage in 
that conduct? That is something that I think that we need to be 
looking at.
    The goal of this initiative is to put concrete theories and 
concrete examples of evidence that we can give to staff, 
because it is true when we bring cases, they are specific cases 
that we have to prove in court. I want our staff to be armed 
with the best tools to do their investigations as thoroughly as 
possible, address all the potential theories, and bring cases 
effectively.
    So, that is one thing I am excited about. The other thing I 
am really excited about is the opportunity to partner with 
sister enforcers and other great thinkers on these issues 
across the globe. The list that we started with is by no means 
an exclusive list. I am sure we would welcome participation 
from other players, but I agree with what Attorney General 
Peterson said earlier and that Attorney General Weiser 
reflected which is that enforcers are stronger when we are 
working together and partnering on issues and working in 
harmony. This is a great example of an opportunity to do just 
that.
    Mr. Neguse. Thank you very much. Thank you, Commissioner, 
and I have two seconds left here. With the Chair's courtesy, I 
would simply say I want to give kudos to the Attorney Generals 
and, in particular, my Attorney General from the State of 
Colorado for their efforts. I think what you hear is a 
bipartisan sense of gratefulness from this Committee for your 
willingness to take on these very tough issues. With that I 
would yield back.
    Mr. Cicilline. The gentleman yields back. I now recognize 
the gentleman from California, Mr. Issa, for five minutes.
    Mr. Issa. Thank you, Mr. Chair. I want to piggyback on a 
lot of the discussion about why particularly tech companies do 
acquisitions in order to close off competition, but I want to 
take it in a slightly different direction, if I may. Closing 
off competition can be done in a number of ways and in fact 
ensuring a dominant position in a number of ways. I want to 
switch now to standard essential patents.
    I come from an industry, many years ago at this point, the 
electronics industry, where almost everybody who has a patent 
would like to have their patented technology put into a 
standard that then everyone must use and pay. This has 
happened, certainly, in the telecommunications industry for 
years, but we see it happening in bio and other areas in a 
greater amount.
    So, the question, primarily, I will take it from anyone 
but, Acting Chair Slaughter, I would like to start with you. Do 
you have the authority to effectively stop that practice from 
turning into either revenue and thus perpetuating the 
dominance, or other resource, other tools, or do you need 
Congress to give you additional tools that would allow you to 
stem the profiteering from that way of doing business? It would 
be for Slaughter or the Commissioner.
    Ms. Slaughter. Thank you for the question, Congressman, and 
I will note that both Commissioner Phillips and I had the 
pleasure of working with your office on the patent issues when 
we were Senate staffers together so I am always excited to talk 
about these issues with you. I think that to the extent that 
what you were pointing out is that patent, and particularly a 
standard essential patent, conveys enormous market power, it is 
a really important issue. Standards are good. They allow 
broader innovation and implementation and that is great.
    We want to make sure that the market power isn't abused, 
and that when you get--when your patent gets included in a 
standard, that you follow through on the commitment to license 
that patent at a fair, reasonable, and nondiscriminatory rate 
so that your market power from your inclusion in a standard on 
which many implementers read doesn't allow you to exclude 
competitors from the market. That is different from the way we 
traditionally think about patents, which are really rights to 
exclude.
    So, there is a role for antitrust law to play. I think it 
is--there are many ways that we could be better enabled to 
address competition problems and I have outlined some of them 
in my testimony, but I think this is an important issue for us 
to continue to focus on.
    Mr. Issa. While I will let Commissioner Phillips answer 
also, I am going to put a hypothetical. Congress could 
determine that when a product with the approval of the patent 
holder becomes a portion of a standard, and thus an essential 
standard patent, that the standard for reimbursement and 
inclusion could change from the right to exclude to eliminate 
the right to exclude altogether, and from a reasonable royalty 
to a diminished reasonable royalty based on what would have 
been the revenue if it were not a standard and then divided 
more broadly since it is a standard. In other words, not allow 
the enrichment of everyone using it to logarith-mically, in 
some cases, increase the revenue.
    Congress could certainly determine how that calculation 
would be made so as not to unfairly enrich somebody who chose 
to have it put into a standard while having it patented and 
often patented again and again and again over the years. 
Please, Commissioner.
    Mr. Peterson. So, first, I just want to echo the Acting 
Chair. I recall very fondly the work we did together on 
patents.
    Mr. Issa. Back when we used to get new patent law made, 
right?
    Mr. Peterson. Well, this is actually really important. The 
original monopolies were issued by the English kings in letters 
patent. So, the original concept of a monopoly, right, is a 
government grant of only you can be in that market, and you can 
derive the rights. Our Founders wisely determined that we 
should only grant that for the purpose of science progress and 
the useful arts, right. That is in the Constitution. There are 
many areas including as Mr. Neguse was talking about with 
pharmaceutical where not only antitrust policy, but other 
aspects of policy come to play.
    The answer to your question, fundamentally, is absolutely. 
Congress determines that antitrust laws, but more critically 
for purposes of the question they determine patent rights. One 
thing I would note is when the FRAND process is perverted, as 
in the Rambus case, we have used antitrust law.
    Mr. Issa. Thank you. Thank you, Mr. Chair.
    Mr. Cicilline. The gentleman yields back. I now recognize 
the gentleman from California, Mr. Swalwell, for five minutes.
    Mr. Swalwell?
    No? All right. I will now recognize the distinguished 
gentleman from New York, the Chair of the House Democratic 
Caucus, Mr. Jeffries, for five minutes.
    Mr. Jeffries. I thank my good friend, Chair Cicilline, for 
yielding, recognizing me, and for your incredible leadership 
and putting together such a distinguished panel on this 
important subject.
    Attorney General Weiser, it is good to see you. The State 
of Colorado has joined the antitrust lawsuit led by New York 
State Attorney General Letitia James against Facebook; is that 
correct?
    Mr. Weiser. That is correct, Congressman.
    Mr. Jeffries. That lawsuit alleges that Facebook has 
engaged in a pattern of either burying or buying competitors in 
violation of our nation's antitrust laws; is that true?
    Mr. Weiser. That is true.
    Mr. Jeffries. As evidence that Facebook has sought to bury 
competitors such as Vine and Circle, is that part of your 
lawsuit, sir?
    Mr. Weiser. It sure is.
    Mr. Jeffries. Facebook has also bought competitors like 
Instagram and WhatsApp; is that true?
    Mr. Weiser. Yes, it is.
    Mr. Jeffries. Now, it is my understanding that you are a 
Colorado Rockies fan; is that correct?
    Mr. Weiser. That is correct, although with respect for you 
and Congressman Jones, I did grow up as a Mets fan and it is 
hard to get rid of that experience.
    Mr. Jeffries. Yes, I appreciate your clarity there. I was a 
little bit disappointed when I heard the news because I know of 
your New York roots. Major League baseball would never allow 
the New York Yankees to purchase and merge with the Boston Red 
Sox; is that right? Is that fair to say?
    Mr. Weiser. I don't think there has ever been merger of two 
baseball teams before.
    Mr. Jeffries. Right. I mean that would create an 
anticompetitive environment, true?
    Mr. Weiser. Absolutely. I did grow up a Mets fan, so I am 
remembering 1986 fondly when it comes to the Red Sox.
    Mr. Jeffries. Yes. Now, I don't think the NFL would permit 
the Kansas City Chiefs to merge with the Tampa Bay Buccaneers, 
correct?
    Mr. Weiser. I don't believe so.
    Mr. Jeffries. It would seem to me impossible to see a 
scenario where the NBA would allow the Lakers to merge with the 
Boston Celtics because of the fundamental unfairness that that 
would create. So, I am just trying to figure out from your 
perspective why in the world would our laws permit Facebook to 
be able to purchase a competitor like Instagram possibly to the 
detriment of the U.S. consumer?
    Mr. Weiser. The answer gets to the prior conversation I was 
having with the Chair, which is when a rival is still nascent 
the ability to show that it is exercising a true constraint, 
particularly when it is a market like this one where prices 
aren't an issue, it is very difficult to do that. So, the 
antitrust laws as they have been implemented provide almost an 
incentive and an opportunity for dominant firms to keep a 
lookout for nascent rivals and purchase them before it is self-
evident that they are effective competition.
    What we can say, clearly, looking back, is that Instagram 
and WhatsApp presented unique, clear, and significant threats 
to Facebook and they were able to purchase them and thereby 
avoid the sort of rivalry that we depend on in a free market 
system.
    Mr. Jeffries. Thank you.
    Acting Chair Slaughter, prior to your tenure at the FTC, 
the FTC actually approved that merger between Facebook and 
Instagram. Why were our laws insufficient to see what was 
coming and what should we contemplate changing to facilitate 
the type of competitive playing field that we expect in sports 
and should expect to see as it relates to big tech?
    Ms. Slaughter. Thank you so much for question, Congressman. 
So, I want to point to one word that you said in that question 
which is that the FTC approved these mergers. It is worth 
remembering that our laws don't actually give enforcers the 
authority to approve mergers. It is not the case that but for 
our approval, mergers would not go through; in fact, it is the 
opposite.
    We have the opportunity to investigate mergers before they 
are consummated if they are large enough to merit an HSR 
filing, and then, if we think that they might be a problem, we 
have the opportunity to go to court and try to block mergers 
and convince the court that the merger would be 
anticompetitive. For reasons that Attorney General Weiser 
pointed out, that can be a challenging endeavor in the case of 
a nascent competitor.
    I think it is an important thing to remember where that 
balance lies in the laws as they are structured right now in 
terms of acquisitions. It is also important to know that the 
law does not stop after an HSR filing passes in the waiting 
period lapses or an investigation is concluded. The law gives 
the agencies the authority, and the responsibility, to continue 
to check their work and where it is appropriate to take action 
if it becomes clear that a merger was anticompetitive. That is 
exactly what the FTC did in filing our own lawsuit against 
Facebook in parallel with our partners and the State Attorney 
Generals' offices.
    Mr. Jeffries. Thank you, Madam Chair.
    My time is expired, but I look forward to working with 
Chair Cicilline and Ranking Member Buck on these issues 
including updating the Clayton Act. I yield back.
    Mr. Cicilline. The gentleman yields back. I now recognize 
the gentleman from Florida, Mr. Steube, for five minutes.
    Mr. Steube. Thank you, Mr. Chair. Recent actions by big 
tech companies and their online platforms require action by 
Congress. These companies have censored political debate in 
this country and restricted competition. The most direct way to 
alleviate this growing problem is not through antitrust 
measures, but rather by amending section 230 of the 
Communications Decency Act. The extraordinary protections of 
section 230 should be contingent upon big tech allowing free 
and open speech on their platforms. We can immediately address 
big tech censorship through section 230 legislation. I urge my 
colleagues to support this effort.
    To the extent the Federal antitrust laws can address these 
issues, it is important that our approach is not overly broad 
and does not hinder State efforts to rein in big tech 
monopolies. My first question is for AG Peterson. To the extent 
antitrust laws can only partially bring big tech to heel, what 
role do you think State consumer protections laws should play 
and how about reforms to Federal law such as section 230?
    Mr. Peterson. Well, I think it is a good question and, 
frankly, it is a question that is being discussed by several 
Attorney Generals as the utilization of our consumer protection 
laws in some of the practices that we see. Actually, the 
section 230 issue is obviously a much more complicated one. 
From the consumer protection standpoint and, frankly, the FTC 
has some of the same jurisdiction, I can't go into any further 
detail, but I can say is that there is discussion in regards to 
how we can be more diligent about following the platform 
practices and how they may be in violation of consumer 
protection laws.
    Mr. Steube. It seems like exercise of big tech's powers 
have an increasingly disproportionate impact on culture and 
society because of the power that certain big tech companies 
have. Instead of open and rigorous debate, voices that take 
traditional views are increasingly being canceled. What role, 
if any, do you think aggressive State antitrust enforcement 
might play to help foster a more vibrant marketplace, AG 
Peterson?
    Mr. Peterson. Yes. What I would say is in the discussions 
among AGs in addressing the market dominance by some of the big 
tech companies, frankly, it has been very important among the 
AGs in order to have a bipartisan coalition to stay as focused 
as possible on competition factors and anticompetitive 
behavior, which does not get out into the political speech 
issues. I think we lose part of our coalition if we do try to 
address any of the political speech issues with the antitrust 
laws that we are utilizing.
    Mr. Steube. Commissioner Phillips, speaking of the 
unintended consequences of tinkering with well-established 
antitrust laws, what guiding principles can Congress adhere to 
make sure that any action we take in regard to tech and 
antitrust does not end up being a total revision of antitrust 
laws in this country?
    Mr. Phillips. Congressman, thank you for the question. I 
think the two most important things to keep in mind are, first, 
that when you are thinking about things like presumptions you 
should look for data to understand that the thing you are 
targeting is more bad, in general, than good. So, here is what 
I mean.
    In antitrust law today, we have a structural presumption 
for mergers that we apply in court. We have presumptions what 
we call of per se rule, so if you are fixing prices or dividing 
markets, doing things that we know, in general, are bad, 
enforcers and private plaintiffs get a leg up. We are doing a 
study right now at the FTC of acquisitions by large tech 
companies. To be clear, there are other large companies that 
also make acquisitions. What I think you want to know, think 
about when you think about presumptions, is what do the data 
show? So, that is the first thing, what do the data show.
    The second thing, as you noted in your line of questioning 
to Attorney General Peterson, antitrust is not designed to and 
will not be effective at solving every problem. Some of the 
problems that we are talking about don't have to do with 
antitrust and the tools that we have aren't effective at doing 
that. I will give an example. We were talking about content 
moderation and what platforms are doing with speech that is, I 
see platforms making decisions that I really don't like, but I 
also see smaller companies doing that too.
    So, it is harder for me to see how Twitter has market 
power, but that doesn't mean that they aren't making decisions 
that I don't like. Antitrust is not the salve for everything, 
and I do think it is really important to figure out what the 
problem is we are trying to solve and figure out the right 
tools to solve it.
    Mr. Steube. Well, along that line, and I only have a couple 
of seconds, but what are the dangers of amending antitrust laws 
to try to address problems unique to only a certain industry 
like tech companies?
    Mr. Phillips. Look, I think you always want to work with a 
scalpel. One of the great things about the antitrust laws is 
that they apply broadly, and they embed critical principles, 
don't divide markets, don't set prices, and that is good. I 
think a lot of the other problems relate to other things.
    Mr. Steube. Thank you. My time is expired.
    Mr. Cicilline. The gentleman's time has expired. The 
gentleman yields back. I now recognize the gentleman from 
California, Mr. Swalwell, for five minutes.
    Mr. Swalwell. Thank you, Chair, and really appreciate your 
interest in this area. I have to say to the panelists, I hope 
we can do this in a bipartisan way. I hope we do not conflate 
the so-called cancel culture concerns of my colleagues with 
real reforms that need to be made. If they have real concerns 
about cancel culture, I suggest that their next minority 
Witness be Colin Kaepernick. I think he would have a few things 
to say about them and cancel culture.
    Let's get on to serious business because we have serious 
matters to address. Acting Chair Slaughter, I think you talk 
about antitrust cases as being notoriously expensive and taking 
years to investigate and litigate. In some cases, we have seen 
judges just completely exasperated at the time, and expense 
that plaintiffs and defendants investing after teams of experts 
and lawyers are involved. Can you talk about whether you see 
like maybe a third way, rather than going through the full 
course of litigation?
    When I was a prosecutor, if we wanted to avoid a lengthy 
trial and a lengthy period of time in between litigation and a 
verdict, sometimes we would offer a deferred sentence, meaning, 
if the parties agreed that they had to do A, B, and C, you 
wouldn't have a trial. Is that a possibility here to avoid an 
all or nothing approach?
    Ms. Slaughter. Thank you so much for the question, 
Congressman. I think that there two things I would say. First, 
you are absolutely right about the expense in terms of both 
time and money to engage in the kind of battle of the experts 
that we see in antitrust litigation right now. I will just 
point out, since I talk about resources all the time, it is 
worth noting that one of the real squeezes on the FTC's 
enforcement budget right now is the cost for us on economic 
experts. It makes it really hard to bring cases. They are 
expensive, they are time consuming, and they really squeeze our 
budget.
    To the extent that you are talking about a third way, it 
sounds to me like what you are talking about are settlements, 
and I think settlements have a really valuable role to play to 
the extent that they actually solve the competitive problem 
about which we are concerned. My anxiety comes into play when 
we take settlements just to defer lengthy litigation and we 
don't actually solve the problem, and the settlement is 
something that maybe papers over, or requires ongoing 
complicated monitoring or is difficult to administer and isn't 
a clear solution to the problem.
    So, I am for settling where we can do it in a way that 
addresses the issue that we have, but I would rather see us go 
all in on litigation, even risky and expensive litigation, if 
that is the only way to solve the problem. I do think the way 
we could avoid that cost is in some of the reforms that you are 
considering that would do some burden shifting or add 
presumptions so that we don't have to do as much and judges 
don't have to spend as much time engaging in this tortured 
battle of the expert and extensive analysis to balance harms 
and efficiencies all the time.
    Mr. Swalwell. Chair, talking dollars and cents, what do 
these costs mean for those types of cases? Are there instances 
where anticompetitive conduct or illegal mergers that the FTC 
would typically want to bring enforcement actions against are 
not pursued because of budget constraints?
    Ms. Slaughter. Well, listen. I am not comfortable saying we 
are going to forego enforcement actions because of budget 
constraints. Even before we had visibility to what our budget 
would look like this year, in December, I think we filed four 
separate enforcement actions in that month alone, because it is 
important to go at it.
    We are looking at ways to cut those costs. If we can't make 
sure that our resourcing keeps up with the costs of litigation 
and, more importantly, the demand on the agency, the very, very 
high volume of anticompetitive transactions that we are seeing, 
then foregoing enforcement is a real possibility and that is a 
very unsatisfying one to me.
    Mr. Swalwell. Great. Well, thank you so much and I yield 
back.
    Mr. Cicilline. The gentleman yields back. I now recognize 
the gentleman from North Carolina, Mr. Bishop, for five 
minutes.
    Mr. Bishop. Thank you, Chair Cicilline. I appreciate that.
    The Chair mentioned, I think the same article I am holding, 
a Politico article that is titled, ``How Washington Fumbled the 
Future,'' by Leah Nylen, dated March 16, and I am taken with it 
as the Chair. Have you had occasion to read that article, Mr. 
Phillips?
    Mr. Phillips. I have read the article, yes.
    Mr. Bishop. It tells a story in which the lawyers are the 
heroes, and perhaps it deserves some skepticism on that basis 
alone, but I wonder. It depicts, if I can summarize, I think 
that the FTC had an enforcement failure in 2013 in evaluating 
Google and it depicts a disagreement between economists and 
lawyers, particularly in the agency.
    Was there an enforcement failure there, in your view, or do 
you have insight about that?
    Mr. Phillips. So, Congressman, I think about two years ago, 
I read portions of some of the memos discussed in that article, 
but I have not read all of them. I have not been briefed by 
staff in any substance on the case and what went on. To be 
clear, this was years before my tenure and I haven't reviewed 
the evidence, so I don't want to weigh in on the particulars.
    What I will say is this. The agency benefits from the 
robust conversation between economists and lawyers. To be fair 
to the economists who took a little criticism, our hospital 
enforcement today is built on the work that they did, building 
a model and explaining to courts for why hospital mergers can 
be problematic, so I think we benefit from that input.
    The answers are, when it comes to antitrust, when it comes 
to merger enforcement, it is future-looking. Congress have told 
us to look into the future and make our best guess and we do 
that. We are not always going to get it right. To be clear, in 
the history of American antitrust enforcement, not only people 
not wanting to bring suits have gotten things wrong, but also 
people wanting to bring suits, right. So, America once believed 
that mainframe computing would be the only game in town. No one 
does that anymore.
    What a lot of people you have heard today talking about and 
what I think is a change that is ongoing already at the 
agencies is that when we look at a merger, in particular, let's 
say, a merger of a nascent competitor, we are a little bit less 
concerned with the risks of over-enforcement and a little more 
concerned about the risks of under-enforcement.
    I think that change is underway today. I think that is why 
with my colleagues I voted for three of these cases including a 
platform case that is the Illumina/PacBio case, that gene 
sequencing platform. That is why the DOJ brought the Sabre 
case. That is why they brought the Visa/Plaid case. The reason 
you are seeing more of these cases is we are hearing the 
message and we are concerned about this dynamic.
    Mr. Bishop. So, you said something else that is interesting 
in your answers to Mr. Steube and that was a lot of folks here 
who are very concerned about the censorship that Mr. Swalwell 
made light of it, but I am very concerned about the censorship 
by tech giants acting together, that the problem there is a 
lack of competition. There is market power, market 
concentration of market power, and you said that, ``antitrust 
can't solve every problem and we may need to look elsewhere.'' 
Can you elaborate on that? I mean why would--if it seems to me 
to be a problem of a concerted action by five big tech 
oligarchs, then why isn't antitrust the regular solution?
    Mr. Phillips. Well, part of what I mean--thank you, 
Congressman, for the question--is that some of the behavior is 
governed by the First Amendment, so content moderation 
decisions, ultimately, are governed by that. The other point I 
was trying to make is these, and like I watch some of these 
decisions and I don't like them, but it is not clear to me that 
it is an exercise of market power, which is what we are trying 
to police.
    So, we do see some problematic instances with large tech 
platforms, but my point is, we also see problematic instances 
with other companies. So, I am not sold on the notion that this 
is an antitrust problem.
    Mr. Bishop. Well, I think the problem that maybe confounds 
some of us is that the other place to go, it seems, is section 
230, the Communications Decency Act, and it has sort of a meat 
cleaver-ish approach or a significance if that this model, 
business model, has been allowed to exist by virtue of the 
moderation that is allowed under that provision and so some 
desire to figure out how to fix it by invigorating competition.
    I guess your point is that you can do as much harm as good 
if you don't do that right.
    Mr. Phillips. Yes. Again, I also am not sure that this is 
sort of a manifestation of market power. The issue of content 
moderation, which is terrifically hard and you are right to 
note the complexities, and to be clear, I don't have a great 
answer on this, is a problem of allowing speech, in effect, at 
scale and the decisions that companies have to make, and 
sometimes it seems to me like they are stepping on rakes, 
right? Someone will call something to their attention, and they 
will take down. It is just not clear to me that it is a 
manifestation of market power.
    Mr. Bishop. Thank you, sir. Mr. Chair, my time is expired. 
I wish I could have gotten to Chair Slaughter, but I didn't. 
Thank you.
    Mr. Cicilline. The gentleman yields back. I now recognize 
the distinguished gentleman from Maryland, Mr. Raskin, for five 
minutes.
    Mr. Raskin. Mr. Chair, thanks to you and Mr. Buck for your 
great leadership with these hearings.
    Judge Wood, I wanted to come to you. We often trace the 
antitrust laws to a century or a little bit more ago, with 
Sherman and Clayton and so on, but wasn't the antimonopoly 
principle, in fact, something that the framers of the 
Constitution themselves talk about? Didn't Jefferson actually 
want an antimonopoly amendment in the Constitution? Doesn't it 
suggest that there are deeper political and philosophical roots 
to our antitrust jurisprudence?
    Ms. Wood. Well, thank you very much. There certainly are. I 
mean the antitrust laws did not spring out of nowhere. There 
had been the English common law restraints of trade and notions 
of what fair competition was all about, and that had been done, 
of course, for a century at the State level.
    The reason Congress stepped in, in 1890, was frankly that 
transportation, communication, all sorts of other things began 
to make it very easy for the Standard Oil Trust to be in 
Minnesota one minute and New Jersey the next minute and who 
knows where. So, Congress said the only thing that is going to 
work is a Federal approach.
    Then there is a period of time where the courts were trying 
to figure out, whether Congress had just codified the common 
law or if it had gone further than the common law, and that is 
a longer discussion than we have today. They certainly learned 
about the importance of competition from our forebearers.
    As Commissioner Phillips said, there had also been the 
statute of monopolies in England which led to our patent laws. 
I might throw in a bid here for saying that if the Committee is 
really interested in some of these difficult areas of dominance 
that are, say, in the pharmaceutical industry driven by patents 
and in other areas, one thing it could do is give authority to 
more courts to think about how patent law and antitrust law 
intersect. Give concurrent jurisdiction to the regular courts 
of appeals and--
    Mr. Raskin. Well, let me pursue that for a second, if I 
could, Judge. What is wrong with the narrowed-down, consumer 
welfare utility approach to antitrust? It sounds pretty good 
just to say, well, if it lowers prices for consumers then there 
can't be an antitrust violation.
    Ms. Wood. It does sound good, but what it excludes is all 
sorts of behavior designed to push people out of the market. 
So, take the airline example that General Weiser was talking 
about. If a newcomer decides to offer airline service between 
Chicago and Denver and the incumbents all lower the price below 
cost, well, that is lower prices for consumers. Consumers 
probably like paying lower prices, but it drives the newcomer 
not only out of that market, but it also sends a very 
forbidding message to other newcomers that maybe they better 
not try this because they are just going to lose a huge amount 
of money and they don't have the staying power of the dominant 
firms.
    Mr. Raskin. So, that is going to end up hurting the 
consumers in the long run when you get that monopoly--
    Ms. Wood. Exactly.
    Mr. Raskin. --power, but what else does it do to the 
economy or to our society to have just a few dominant players 
in each of these major industries?
    Ms. Wood. I would put my finger on innovation, frankly. I 
think when you have only a few dominant players, there are just 
so many brains looking at it. We know from the AT&T case, for 
example, that if you were the dominant player, you didn't have 
any incentive to get rid of your old built-out infrastructure 
and bring in something new and better.
    So, if you push out all these competitors, whether through 
refusals to deal or exclusionary practices or, through tying 
arrangements or however you do it, then you don't get those new 
ideas. You don't have that ferment that we have relied on over 
the course of our history.
    Mr. Raskin. Can you describe how a revived essential 
facilities doctrine might help us to address the monopolization 
tendencies that are taking place right now?
    Ms. Wood. Okay, so what I think of when I think of 
essential facilities is really the bottleneck monopoly. You 
have a firm that either gets all the control over an essential 
input or all the control over the essential patents and then it 
just decides who it is going to let in. It is actually a little 
bit like the question we had earlier on standard essential 
patents. Maybe a bottleneck is an extreme case of exclusionary 
behavior, but in my view, it is very effective at making sure 
you keep the market for yourself and you keep out those 
potential innovators.
    Mr. Raskin. Finally, very quickly, do you think antitrust 
law is a counterweight to the free market or do you see it as 
the guarantor of a free market?
    Ms. Wood. The second. I think it is the guarantor of the 
free market. It protects the competitive process, broadly 
speaking.
    Mr. Raskin. Thank you very much, Mr. Chair. I yield back to 
you.
    Mr. Cicilline. The gentleman yields back. I now recognize 
the Ranking Member of the Full Judiciary Committee, the 
gentleman from Ohio, Mr. Jordan, for five minutes.
    Mr. Jordan. Thank you, Mr. Chair.
    Mr. Phillips, if we are not going to use antitrust to deal 
with the censorship and you are reluctant to talk about 230, 
what is the answer?
    Mr. Phillips. Congressman, I am afraid that I don't have a 
good answer for you right now. This strikes me as a 
terrifically problematic issue. My remit is antitrust and 
consumer protection and it doesn't fall into those categories. 
Section 230 is a Congressional statute and that is something 
Congress can evaluate, but if I had a good answer, I promise I 
would give it you.
    Mr. Jordan. Well, last fall, big media--we know this 
happened--big media colluded with big tech to keep a critical 
story from the American people, the story about the Biden 
family and specifically Hunter Biden and the fact that he was 
under investigation. We know that was a fact. We know everyone 
knew. We know people in the press knew and they kept that from 
the American people in the run-up to the most important 
election we have which is a presidential election.
    We are trying to figure out what we do to--I mean last 
week, we had a hearing in this Committee where the Chair wants 
to give an antitrust exemption to the very big media who 
colluded to keep information from the American people; at the 
same time, they want to use antitrust to go after big tech.
    So again, we have got to do something, it seems to me. Any 
thoughts on all that?
    Mr. Phillips. Well, the one thing I would say is, if 
competition is the goal, and competition is the goal of 
antitrust, exemptions to the laws, right, permit companies not 
to compete, but to collude together, I don't think that would 
help the dynamic you are talking about.
    Mr. Jordan. Okay. Then, but what about 230? This is 
something that Congress can do. I happen to think, I have heard 
from scholar, I have heard from Professor Dershowitz who said, 
definitely we should reform 230. You are making content 
decisions on your platform your liability protection should be 
gone. I totally agree with that. I think that is something we 
can do. You don't have a thought on that at all?
    Mr. Phillips. The troubling thing, Congressman, in my 
understanding, and I am not a section 230 expert, is what I 
would like to see is a flowering of speech. I think that that 
is what we as Americans like. That is why we are concerned, 
when people of harangue other voices that they may not agree 
with out of the public square.
    The trick with section 230 is how to fashion it such that 
dynamic doesn't happen.
    Mr. Jordan. Yes.
    Mr. Phillips. I definitely worry when it comes to strike 
suit litigation that someone does something, someone fires a 
suit at them and they take the content down. We don't want that 
dynamic either. Again, I am not an expert on 230. That is the 
worry that I have.
    Mr. Jordan. Okay. I will yield the balance of my time to 
the Ranking Member, Mr. Buck. Thank you, Mr. Chair.
    Mr. Buck. Unexpected generosity, thank you.
    Commissioner Phillips, let me ask you a quick question 
here. Are you aware of any statutes passed by--well, you said 
earlier in your opening statement that the problem with 
antitrust revisions would be that they apply to the economy as 
a whole. I believe that is a fair summary paraphrasing.
    Mr. Phillips. Yes, sir.
    Mr. Buck. Okay. Are you aware of any statutes passed by 
Congress that targeted specific industries in the antitrust 
area?
    Mr. Phillips. So, I think there have been some attempts at 
exemptions, and actually we were talking about sports earlier 
and there are some sports that are exempt from antitrust. I am 
not aware of a specific antitrust statute that targets an 
industry. There are obviously regulatory statutes that Congress 
has adopted.
    Mr. Buck. So, let me ask you this. Are you familiar with 
the Hepburn Act?
    Mr. Phillips. I am not, as I sit here today.
    Mr. Buck. Okay, so the Hepburn Act says that it shall apply 
to any corporation or any person or persons engaged in the 
transportation of oil or other commodity by means of pipelines 
or partly by pipelines and partly by railroads or partly by 
pipelines and partly by water. Would that be an example of an 
antitrust statute that targeted a specific industry and 
commodity?
    Mr. Phillips. It may very well be. Also, I should add 
something. I even referred in my testimony to the Robinson-
Patman Act and that was definitely focused on the retail 
industry. So, to the extent my answer was inconsistent with 
that example, forgive me.
    Mr. Buck. Okay. Would there be anything inappropriate or 
improper, unconstitutional perhaps, with this Committee 
recommending to the House, and if it passed the House and 
Senate, signed by the President, targeting big tech platforms 
because of their unique space in our economy right now?
    Mr. Phillips. So, Congressman, certainly there is nothing 
improper or unconstitutional that I can think of off the top of 
my head.
    Mr. Buck. Okay.
    Mr. Phillips. Congress has power over interstate commerce.
    Mr. Buck. Great. I yield back.
    Mr. Cicilline. The time of the gentleman has expired, or 
the gracious gift from Mr. Jordan has expired. I now recognize 
the gentlelady from Washington, Ms. Jayapal, for five minutes.
    Ms. Jayapal. Thank you, Mr. Chair, for holding this very 
important hearing. When you drive a car, you typically assume 
certain rules of the road. These rules are there to protect 
people driving in different directions towards different 
destinations. Antitrust law used to abide by its own rules of 
the road, sometimes called bright line rules. If a merger 
risked concentrating too much power in the hands of a few firms 
that could then dominate an industry, regulators blocked that 
merger. They did that by setting clear thresholds. For 
instance, in 1968, two firms that each held a share of four 
percent or more in a highly concentrated market ordinarily 
could not merge without inviting a lawsuit. Today, antitrust 
law operates very differently. Now, corporations hire expensive 
economic consultants to help them argue in court that a 
proposed merger could theoretically--theoretically in quotes, 
``lead to lower prices for consumers.'' Studies show that these 
lower prices rarely materialize in practice, and the complexity 
of this so-called consumer welfare standard excludes low- and 
middle-income people who can't afford to hire fancy consultants 
even if they face immediate harms from a merger whether it is 
as consumers, workers, sellers, or community Members.
    Chair Slaughter, from your perspective as Acting Chair of 
the FTC, can you be specific about how enforcement under the 
current standard compares to the use of bright line rules for 
merger enforcement?
    Ms. Slaughter. Thank you, Congresswoman, for the question. 
I think you pointed to exactly how it compares, which is that 
right now we have to engage in a very extensive, expensive 
investigation into and then argument about, in court, the 
particular harms. We have to measure them, we must to try to 
balance them against measurable efficiencies, and that is 
difficult. I think if we had clearer bright line rules, we 
would absolutely prevent more mergers. If there is a risk to 
that it is that perhaps we might block some mergers that might 
not be the worst mergers in the world. It would be an over-
deterrence problem.
    I will tell you that as I sit here right now, given how far 
we have gone in under-deterrence, I don't lose a lot of sleep 
about the risk of over-deterrence.
    Ms. Jayapal. Thank you, Chair. In your testimony, you State 
that the FTC must be bold in bringing cases where success in 
the courts is not guaranteed. Would the adoption of bright line 
rules for merger enforcement embolden antitrust enforcers to 
bring important cases to court? I mean you referenced this. You 
said you don't think it is going to have that effect, but can 
you say more on that?
    Ms. Slaughter. Well, yes. I think it would make the cases 
less hard to litigate which would mean that we could bring more 
of them. It would make the cases less expensive to litigate 
which means we could bring more of them. I am focused very much 
on what we can do now, even while Congress is engaged in this 
important effort to reform the laws. I am excited about the 
idea of being bold with new tools as well.
    Ms. Jayapal. Yes, we are as well.
    Judge Wood, the point has been made a few times throughout 
this hearing that antitrust supposedly protects competition and 
not competitors. You wisely noted in your remarks that we can't 
have competition without competitors, and our antitrust laws 
also prohibit unfair methods of competition. Isn't this statute 
broader than antitrust laws? Should Congress clarify that it is 
a far-reaching tool given this repeated confusion even here in 
the hearing room today?
    Ms. Wood. Well, thank you very much. I think at this point, 
clarification might be welcomed not only, frankly, by 
enforcers, as the Chair was saying, but the business community. 
Business is very happy to deal with clear rules that everyone 
understands, that their general counsels, their individual 
lawyer, or whoever it is can just say to them, if you do this, 
you are going to be okay. If you do this other thing, you are 
inviting attention from antitrust enforcers or private 
plaintiffs.
    So, I actually think clarification from Congress about 
thresholds, about what to do with the nascent companies, the 
very little companies that have a lot of promise that really 
fall through the cracks these days because they don't increase 
concentration very much in the moment, as opposed to the longer 
term, but I think that there would be a great benefit from 
clarity, even if there was a little bit of risk of getting it 
wrong sometime.
    Ms. Jayapal. Let me quickly ask you about the question of 
concentration because you mentioned that antitrust laws have 
always been concerned not only with consumer welfare, but also 
with concentrated economic power. Can you quickly elaborate on 
what you mean by concentrated economic power and how you think 
this Subcommittee should understand it?
    Ms. Wood. Learned Hand said that concentrated power 
certainly existed at about the 75-80 percent share of the 
relevant market. The Europeans would tell you it is more like 
40 percent. When you control, let's say, more than half of the 
market, you can behave independently, and you don't have to 
care what consumers think. That is the problem.
    Ms. Jayapal. Thank you so much. I really believe we need to 
reassert the broader vision of a democratic economy and society 
that once guided antitrust enforcement and I am looking to do 
that, reinstating these clear rules of the road that apply 
equally to powerful corporations.
    Thank you, Mr. Chair. I yield back.
    Mr. Cicilline. The gentlelady yields back. I now recognize 
the distinguished Ranking Member of the Committee, Mr. Buck, 
from the great State of Colorado, for five minutes.
    Mr. Buck. Thank you. Thank you, Mr. Chair.
    Commissioner Phillips, I want to ask you a question with a 
quick answer and then go to the Chair, Acting Chair also for 
the same question. When was the last time the Federal Trade 
Commission brought a case on innovation only? Not price and 
innovation, but innovation only?
    Mr. Phillips. Off the top of my head, I can't think of 
that, but I would have to check the record.
    Mr. Buck. Acting Chair Slaughter?
    Ms. Slaughter. Well, I think innovation was very much at 
the heart of the complaint we filed against Facebook, right, 
that was not a price complaint. That was about innovation and 
access and nascent competitors. So, that is one I would point 
to, but that I agree with my colleague that I would like to 
give a little thought to more.
    Mr. Buck. Okay. Commissioner Phillips, did you support the 
FTC recent action against Facebook?
    Mr. Phillips. I did not.
    Mr. Buck. Acting Chair Slaughter, did you?
    Ms. Slaughter. I did. It was voted out on a 3-2 vote.
    Mr. Buck. Okay. What change, Acting Chair Slaughter, what 
changes, if any, or let me ask you this, this way. Should we, 
should Congress consider codifying the guideline that was 
issued jointly between the antitrust division and the Federal 
Trade Commission on vertical mergers?
    Ms. Slaughter. No, Congressman, honestly, I was concerned 
that the guideline as it was issued was overly crediting of 
claimed procompetitive benefits of vertical mergers and 
undercounted a number of harms that I think are important. So, 
I would prefer not to see those guidelines codified and, in 
fact, I think we should consider withdrawing them.
    Mr. Buck. Okay. How about shifting merger presumptions? 
What is your position on that?
    Ms. Slaughter. I think changing presumptions in mergers, 
particularly in the kinds of cases where there is clear 
evidence of anticompetitive harm or clear evidence of 
dominance, would be very helpful for enforcers.
    Mr. Buck. Commissioner Phillips?
    Mr. Phillips. I think it is the answer I gave to Mr. Steube 
earlier. I think we are conducting a study right now, in 
particular, the big tech context of acquisitions. When we 
create bright line rules in antitrust, we do our best when we 
target things for illegality that are mostly bad.
    Mr. Buck. Commissioner Phillips, what should we do about 
the recent court interpretations of Rule 13(b) which some have 
suggested undermine the effectiveness of Rule 13(b)?
    Mr. Phillips. I do think Congress needs to give us clarity 
on Rule 13(b). I don't know what the Supreme Court will do, but 
we certainly had a lot of roadblocks from courts. We go into 
these negotiations and people throw 13(b) decisions in our 
face, so I think clarity from Congress on that would be 
welcome.
    Mr. Buck. What is clarity? A lot of us have trouble seeing 
sometimes, so what is clarity?
    Mr. Phillips. So, there are two issues. One issue is our 
ability to get money as opposed to just an injunction barring a 
company from doing something under the statute. I think 
speaking to that is thing number one. The other, there are a 
series of decisions, and this comes up in the Facebook case, 
has to do with how far back we can go once the conduct has 
stopped.
    So, I think that getting clarity from Congress when they 
want to allow us to use 13(b) to get money how late after the 
conduct stops, would be terrific.
    Mr. Buck. Acting Chair Slaughter, your thoughts on clarity 
for 13(b)?
    Ms. Slaughter. I think it would be critical for Congress to 
speak not just with clarity but to restore the understanding 
that courts have had for decades of the power that 13(b) gives 
the FTC. Judge Wood wrote an incredibly eloquent, and I thought 
very persuasive, dissent in the CBC case in the 7th Circuit 
that tackled some of these issues. If we cannot get monetary 
redress, we can't make consumers whole when we have seen 
anticompetitive conduct or fraudulent behavior or any of the 
law violations that the FTC tackles.
    If we don't have the ability to go into court and stop bad 
behavior from recurring, if we don't have the ability to get an 
injunction, then there is very little that we can do to prevent 
a company once it has stopped doing its wrongdoing, even if it 
has stopped that in the shadow of an investigation, from 
restarting that behavior. It renders the agency very limited in 
its ability to go to Federal court. I think that is a real 
problem for consumers not just in consumer protection but also 
in the antitrust realm.
    Mr. Buck. I would be remiss if I didn't mention that I 
appreciate my fellow Coloradan joining me in supporting the 
Colorado Rockies. So, thank you very much, Mr. Attorney 
General.
    Mr. Cicilline. We will leave out the modification he said 
about his support of the Rockies.
    I now recognize the very distinguished gentlelady from the 
State of Florida, Ms. Demings, for five minutes.
    Ms. Demings. Thank you so much, Mr. Chair, and thank you to 
our Ranking Member as well. Thank you to all our Witnesses for 
joining us today.
    I think that we all agree, I believe that there is a need 
to modernize our antitrust laws to create a market that gives 
everyone a fair shot. That is what we are talking about, a fair 
shot to healthy competition and holds bad actors accountable.
    Judge Wood, in your written testimony, you explain that 
courts today assess allegations of exclusionary practices under 
the rule of reason. As a result, courts are left to try to 
distinguish between what is an anticompetitive exclusionary 
practice and what is merely tough-nose competition. Your 
testimony makes it clear that while making these distinctions 
isn't impossible, it can be challenging. What about this is 
challenging and why?
    Ms. Wood. Well, thank you very much, Congresswoman. It is 
challenging, first, because it is done under the rule of 
reason. That is a mushy term, coming all the way from a 1911 
Supreme Court decision. So, you need to figure out a lot of 
things with the help of very expensive economists, market 
studies, who has market power, what is the impact of this 
practice in the market, why was it undertaken--it is a very 
elaborate inquiry.
    That means that the rule of reason deters plaintiffs from 
bringing those lawsuits to begin with; not everybody has a 
pocket deep enough to support that. The enforcement agencies of 
the Federal government or the State Attorneys General also live 
on budgets. They have to assess very well what they are doing, 
so it is a big investment. Instead, you could have rules of 
thumb. You could say that if somebody is engaged in 
exclusionary practices of some type and they have--I will pick 
a number randomly--say, 40 percent of the market, then maybe we 
have a presumption there which would leave a safe harbor for a 
tremendous number of small- and medium-sized businesses to 
engage in whatever practices they thought were most efficient 
for them.
    I think that is what we want to do. We want to let them 
have some room to compete, but we also want to make sure that 
the big guys don't turn into Facebook, buy or bury.
    Ms. Demings. Thank you so much, Judge Wood. You also talked 
about legislative changes in the remedy areas. You talked about 
injunctions, damages, but you also talked about even additional 
remedies. Could you just elaborate a bit on those, please?
    Ms. Wood. Yes, certainly. I would be glad to. I will 
preface it by saying that when I was at the Department of 
Justice which, granted, was a long time ago at this point, my 
job like General Weiser's job included the international 
portfolio, so I learned a lot about other countries' 
competition laws. Most of them have among the remedies they can 
use the possibility of a civil fine.
    Even though that is not ideal, I would freely say that some 
fines are going to be too small and they may be a slap on the 
wrist and it is not something you would always want to use. 
They have a potentially important place. If you look at the 
choice between forbidding somebody from doing something that 
might be a bad fit for a particular case or ordering somebody 
to do something, license your patents or have open architecture 
on something, whatever, you might feel that was intrusive as 
well.
    Divestiture is great when that is the kind of structure of 
the market, but that is not always going to be right, too. So, 
I was thinking that the United States could just do what 
everybody else in the world that I know of has done and add 
civil fines to the menu.
    Ms. Demings. Thank you so much.
    Attorney General Weiser, what do you see as the primary 
reasons from your perspective that enforcement efforts have 
been weakened and what do you believe that Congress can do to 
help?
    Mr. Weiser. Thank you, Congresswoman.
    There has been--and I have great respect for Judge Wood. It 
is called the Chicago School, but not to take away from her 
often-called post-Chicago School views, the Chicago School 
thinking has had such an influence that has influenced both 
courts and enforcers to be afraid of bringing cases that would 
constitute so-called over-enforcement.
    As Judge Wood said really well, using Kodak as an example, 
we can see companies have durable, sustained market power that 
harms consumers and we will sometimes see people talking 
themselves out of bringing cases. What we saw with Google, for 
example, was an ability to move from dominating Search in the 
desktop to dominating Search in mobile. As the case that 
General Peterson and I are leading right now, we want to stop 
Google from dominating the Internet of things or connected 
cars, or other sorts of devices.
    So, what we need to do is get enforcers to commit to bring 
cases. We have got to have laws and a message to the courts 
that it is important to have robust enforcement and not to 
create these artificial rules--the American Express decision is 
a notable one--that makes it unduly difficult for enforcers to 
get the relief that will protect consumers.
    Ms. Demings. Thank you so much. Mr. Chair, I yield back.
    Mr. Cicilline. The gentlelady yields back. I will recognize 
the gentlelady from Pennsylvania, Ms. Scanlon, for five 
minutes.
    Ms. Scanlon. Thank you, Chair Cicilline. At a hearing last 
July, I raised concerns about Amazon's scheme to artificially 
lower the prices of Amazon brand diapers to drive down a 
competitor's profits and then eventually acquire that company. 
The tactic had real effects on parents who saw the cost of 
Amazon diaper products rise once the competition was 
eliminated.
    Attorney General Weiser, you testified today that that is 
the type of conduct that we should consider in violation of 
antitrust laws, and in your remarks at the George Mason Law 
Review's 24th Annual Antitrust Symposium this past February, 
you talk about the very high bars set by the courts for 
punishing predatory pricing schemes like the Amazon diaper 
scheme. Can you talk about why the bar is so high and what this 
means for smaller firms and then what legislative 
recommendations you would make?
    Mr. Weiser. Thank you very much, Congresswoman, and I 
appreciate you reading that article. The case that is at issue, 
it is a case influenced by the Chicago School thinking, is 
known as Brooke Group. Famously, there is a statement in that 
case that predatory pricing schemes are rarely tried and even 
more rarely successful. That statement came out of works by 
Chicago School scholars like Judge Bork; it didn't have a basis 
in reality.
    Unfortunately, that statement has influenced courts 
including the case I talked about in my testimony, the American 
Airlines case where what happened was exactly what Judge Wood 
talked about. There was the flights between Dallas and Wichita 
and after rivals, low-cost carriers, came in, American just 
flooded the market, moved to a whole bunch of flights a day, 
lowered prices, and then that pushed out the rivals from the 
market. As the concern you mentioned, once the rivals were 
gone, they raised their prices to back where they were. The 
courts took a very narrow view of cost and the courts have also 
taken at times a very demanding view of a recoupment 
requirement and that has really led to an absence of these 
cases and has created, as Chair Slaughter noted, a lack of the 
sort of deterrence we would like to see.
    So the short version is, I do think we need to either have 
a narrowing of this precedent in the courts, and I have written 
an article on this with a colleague of mine at how that could 
happen, and/or Congress can overrule this Brooke Group decision 
by statute. I do believe you have to have below-cost pricing 
and then define that appropriately.
    Then also you have to recognize, and this is again what 
Judge Wood, another co-author of mine, said is the reputation 
for predation that gets developed by an American Airlines that 
lasts. We haven't seen entry into the airline industry much at 
all over the last 20 years after this case was decided. That is 
a problem for airline consumers.
    Ms. Scanlon. Thank you. That is very helpful. I also would 
like to touch briefly on the connection between antitrust law 
and its privacy regulation. Mr. Walker, in your testimony, you 
talk about the need to consider privacy regulation and 
competition policy jointly, pointing out that dominant firms 
have used European privacy protections as a competitive weapon, 
and I also saw in your testimony that you talk about the fact 
that these dominant social media firms are unlikely to self-
correct. Can you tell us what you, can you explain that 
observation further?
    Mr. Walker. Certainly. So, the information about privacy is 
just that we have seen some of the platforms that take 
advantage of rules around the restrictions on sharing data 
outside of their ecosystem but being allowed to share data 
within that ecosystem as a way of buttressing their competitive 
position. In the U.K., we currently have a case against Google 
where Google has said they are going to phase out third-party 
cookies claiming--or saying, reasonably, they are doing that on 
privacy grounds, but that is going to have real competition 
effects, which is why we have instigated a case against them.
    Why do I say that it doesn't look like they are going to 
self-correct? Well, if you talk to Google, even up until two or 
three years ago, they were telling us, no, no, competition is 
only a click away and we could be--look what happened to Yahoo. 
Facebook was saying the same about Myspace. You think that 15 
years ago, yeah, okay, maybe you had an argument. If those are 
your examples of how your position could be taken away, if you 
are having to go back that far, then I don't think they are 
making convincing arguments.
    For the incumbent, the natural network effects of these 
incumbents and their entrenched position through their 
ecosystems makes it very hard for people to enter and compete.
    Mr. Cicilline. The time of the gentlelady--
    Ms. Scanlon. Thank you very much for that.
    Mr. Cicilline. Oh, thank you. I think the gentlelady was 
about to yield back. Thank you. I now recognize the gentlelady 
from Georgia for five minutes, Ms. McBath.
    Ms. McBath. Thank you so much, Chair, I really appreciate 
it. Thank you to each and every one of you that is here before 
us today. It is really important that we hear from you.
    Chair Slaughter, your testimony mentions a few ways 
Congress can strengthen the FTC's enforcement capabilities, and 
I also want to make sure that the FTC has strong investigative 
authority to root out problems that harm competition or reduce 
consumer choice. I am concerned that this investigative 
authority does not apply equally to all industries. With the 
cost of healthcare burdening so many Americans, I think the FTC 
must be able to study the insurance industry as it deems 
appropriate.
    There is particular cause for concern in light of what this 
Committee learned from our past hearings on consolidation in 
healthcare. At that hearing, Dr. Marty Gaynor told us that two 
largest health insurers have 70 percent of the market and over 
one-half of all local insurance markets. So, Chair Slaughter, 
do you think that the FTC should be empowered to study the 
health insurance industry without getting specific permission 
from Congress?
    Ms. Slaughter. I do, Congresswoman. That would be very 
welcome.
    Ms. McBath. Well, thank you so much. I appreciate that.
    So, Mr. Walker, or excuse me, should I say, Dr. Walker, as 
an economist, why do you believe that competition not monopoly 
drives innovation and improves consumer choice?
    Mr. Walker. I mean, there has been a debate in economics 
over this issue and there's a view that it is that monopolists 
have the money to invest and to drive innovation. There is the 
view that, no, it is competition; that the incentive to escape 
from competition to give yourself a competitive advantage is 
what drives innovation.
    Just empirically, I think the evidence is that competition 
is what drives innovation. Competitive markets lead to more 
innovation. The markets are all monopolized. The monopolies 
tend to get a bit lazy. If they don't face competitive 
pressures, they don't have an incentive to innovate. 
Competitive firms don't have that luxury. They need to innovate 
otherwise somebody else will and they will be dead.
    Ms. McBath. Thank you. Judge Wood, your testimony notes 
that antitrust law has long been concerned with promoting 
innovation and that concentrated economic power can stifle 
innovation if it is left unchecked. A recent article in The 
Verge highlighted an example of a small business that created a 
popular cross-body camera bag and sold it on Amazon, and Amazon 
then came out with its own Amazon Basics bag. That is what they 
called it and it bore a really striking resemblance to the bag 
that the small business developed. It even had the same name, 
and just until recently.
    There are many allegations of Amazon using its monopoly 
power over sellers and the data it extracts from them to copy 
successful products that are sold on its marketplace. These 
include shoes, a car company that invests, I think it was a car 
trunk organizer and seat cushions, but all for a lower price 
than the company that invested in the products' research and 
development.
    As we stated in our report, the Subcommittee's Report, the 
Subcommittee, we heard repeated concerns that Amazon leverages 
its access to third-party sellers' data to identify and 
replicate those popular and profitable products from among the 
hundreds of millions of listings on its marketplace. So, Judge 
Wood, should we concerned that entrepreneurs will no longer 
have an incentive to innovate if dominant firms leverage their 
monopoly power to copy and undercut small innovators?
    Ms. Wood. Well, you have really put your finger on a very 
important question, in my opinion, which is whether our whole 
categories in antitrust have become too rigid. We think of 
horizontal restraints, and Amazon is not competing with another 
Amazon. Amazon is actually the only player. There are also 
vertical restraints where Amazon has various people who use its 
facilities. I think there is a way that that should be loosened 
up, that there is a way in which we need to understand that 
these leveraging theories lead to consumer harm.
    Now, you might say, theoretically, the answer is stronger 
trademark laws or more strong other laws. Frankly, small 
businesses don't always have the budget to litigate forever on 
a trademark dispute either. So, I think these leveraging 
theories are something that would repay careful study.
    Ms. McBath. Well, thank you so much for your answers, and I 
believe that I must yield back the balance of my time.
    Mr. Cicilline. I thank the gentlelady and now recognize the 
gentlelady from Pennsylvania, Ms. Dean, for five minutes.
    Ms. Dean. Thank you so much, Mr. Chair. I apologize for 
having been in and out. I hope you will know that I was doing 
my best to listen in, but if I repeat a little bit, I hope you 
will bear with me.
    Judge Wood, I wanted to ask you, you noted in your written 
testimony antitrust enforcement has been weakened for a variety 
of reasons. Can you describe the primary contributing factors 
and how do we appropriately reverse these trends?
    Ms. Wood. Well, thank you very much. If I were to speculate 
the primary reason is that the chance of success in any 
particular antitrust case, especially a case that is not a 
hardcore cartel, horizontal price fixing division of markets, 
the things that are under the per se rule, it has become very 
hard and very expensive to win those cases. Also, lawyers are 
going to actually face ethical issues. Can you even file the 
case under the rules that govern stating a good-faith claim?
    As we get rule after rule inspired by what General Weiser 
keeps calling the Chicago School, saying, well, even if we have 
evidence that all the companies in this business are 
coordinating their behavior somehow that is not enough, we need 
a smoking gun where they all sit down in a room and say, let's 
charge the same price, it is that assessment of likelihood of 
success in the courts.
    Expense is another thing. As you get rid of clear rules 
such as the per se rules, then you definitely raise the expense 
of litigation. You have to assume people are rational. They are 
not just going to throw dollars away at something year after 
year if it is not likely to result in some sort of relief. So, 
I would single those out.
    Ms. Dean. Thank you very much, Your Honor.
    Dr. Walker, are there advantages to Europe's abuse of 
dominant standard compared to the United States law in its 
ability to reach anticompetitive conduct by monopolists or 
dominant firms?
    Mr. Walker. Well, certainly the provisions properly used 
can be very effective in stopping firms abusing their market 
power. However, there are definite limits that you should be 
aware of. First, the cases take an awfully long time, so if we 
think about Google Android, which most economists would think 
was a pretty obvious case, the complaint was 2013, we got a 
decision 2018, and it is now on appeal. So, they still take too 
long.
    Second, I would say they don't, generally, allow you to 
remove the source of the market power, and if you have a 
sophisticated firm with substantial market power and you stop 
them being able to exercise that in one way, that sophisticated 
firm, they are going to find another way to exercise that 
market power and you end up playing a game of whack-a-mole. So, 
yes, it is a useful provision, and we certainly have a number 
of cases that we are pursuing under that provision but, it is a 
long way from being perfect.
    Ms. Dean. I appreciate that. Certainly, we struggle here in 
our system with the court cases and appeals, etc.
    Also, for you, Dr. Walker, why do you believe effective 
merger control is an essential element of restoring competition 
in digital markets and addressing the dominant platforms' 
significant and durable market power?
    Mr. Walker. Well, I mean you have to learn from mistakes 
you have made in that past and we look at Facebook and we look 
at its position with Facebook, Instagram, and WhatsApp, and you 
have to think that those acquisitions have not been good for 
consumers. So, you want to be in a world where those 
acquisitions, in the future, are picked up.
    We have learned something about how to think about these 
acquisitions. One of the things we have learned is that under a 
balance of probability standard, it is extremely difficult to 
be able, in 2012, to say, yes, Instagram is a bad merger, I can 
be more likely than not, sure it is going to lead to consumer 
harm. The problem is, if it does lead to consumer harm, it 
leads to a lot, as we have seen. So, that is why, actually, we 
need merger control with a lower standard of proof for these 
cases so you can go in and say, this merger, there is at least 
a prospect it can be anticompetitive and a lot of harm if it 
is, therefore, we should be able to block it.
    Ms. Dean. I thank you for that and for the focus on 
consumer harm. I see my time is expired and I yield back.
    Mr. Cicilline. The gentlelady yields back. I now recognize 
the gentleman from Georgia, Mr. Johnson.
    Mr. Johnson of Georgia. Thank you, Mr. Chair, for holding 
this very important hearing. We have spent nearly two years 
understanding the complex problems posed by big tech companies 
that have full control over their marketplaces and now we 
finally turn to the big question which is, how do we fix this?
    Since this investigation began, I have been dismayed to 
learn about the depth of the anticompetitive issues that exist 
when just one company hold the keys to an entire segment of the 
economy. Whether a company prioritizes its own products for 
users or prevents the platform availability of a competitor 
application, big tech frequently exhibits self-preferencing 
behaviors, stacking the deck to enable themselves to get bigger 
while squeezing the life out of the little guy. What we are 
dealing with here is what happens when big tech becomes too 
big. (Audio interference.) Therefore, we want that corporation 
to do the right thing by way of competition and their 
competitors. That is why Congress enacted the antitrust laws 
more than a century ago, to keep our economy competitive and to 
avoid the immense concentration of economic power that we see 
today.
    As with other critical areas of the law such as the Voting 
Rights Act, the Supreme Court has whittled away at the 
antitrust laws over the past several decades. When coupled with 
forced arbitration causes and consumer agreements, which block 
everyday people and small businesses from getting their day in 
court, it has become practically impossible to hold 
corporations accountable when they break the law. So, I am 
looking forward for us to come up with some great ways of 
curing this by way of legislation.
    General Weiser, I am very concerned how anticompetitive 
conduct by dominant firms, like self-preferencing, is 
undermining innovation and preventing competitors from entering 
the market with better services and giving firms with 
gatekeeper power control over the entire marketplace. You have 
also testified that this dominance has created a kill zone, as 
you call it, for new companies, undermining (audio 
interference) generation of innovation. Is current law (audio 
interference) and how would legislative action help address 
these trends by removing obstacles to enforcement?
    Mr. Weiser. Thank you. I want to underscore that these 
hearings and this focus is a valuable complement and fits very 
closely with the agenda of pursuing cases like the Facebook 
case, like the Google case. We are confident we can prevail 
under current law in these cases. The Microsoft precedent I 
mentioned gives us a road map for how we win these cases. Part 
of what you can do, and Chair Slaughter mentioned this, is make 
sure to encourage and invest in antitrust enforcement as a 
critical part of the economy.
    I just want to pick up a point of innovation that you have 
adverted to and that Judge Wood mentioned. During AT&T's reign, 
AT&T had this gatekeeping monopoly where MCI and Sprint 
couldn't enter effectively into the long-distance market 
without interconnection that was nondiscriminatory to AT&T. 
When there was an effort to build a fiber optic network, there 
were no takers to buy the invention at that point. AT&T told 
the folks at Corning, when we want to build a fiber optic 
network it will be after we depreciate our current network and 
we will build it ourselves.
    After the AT&T divestiture, a procompetitive, antitrust 
decision, both Sprint and MCI purchased fiber optic networks 
and some of us are old enough to remember the pin-drop 
commercial that Sprint had and AT&T was forced to compete in 
the marketplace. That is what helps consumers. Choices in 
products, rival firms, and innovate--I agree with Dr. Walker, 
innovation comes from competition. Allowing firms like a Google 
or a Facebook to squelch out competition to deprive consumers 
the choice, that is bad for consumers and we need to fight for 
competition.
    Mr. Johnson of Georgia. Thank you, General.
    Dr. Walker, you are a leading antitrust economist. In your 
statement, you write, ``The right answer to uncertainty and 
complexity is not inaction.'' What do you believe is the 
biggest danger in taking a neutral approach to big tech 
monopolies?
    Mr. Walker. Well, the biggest danger is that antitrust 
authorities look at these cases and we say it is all too 
difficult so we will do nothing, and we will get exactly the 
wrong answer rather than trying to get roughly the right 
answer. Historically, competition authorities around the world 
have tended to go for inaction in the face of uncertainty and 
that has been a huge mistake.
    Mr. Johnson of Georgia. Yes, what are the global 
consequences that--
    Mr. Cicilline. The time of the gentleman's has expired. You 
can, of course, finish your thoughts.
    Mr. Johnson of Georgia. Okay, yes. I was just wanting to 
know what would be the global consequences if the U.S. fails to 
act, sir?
    Mr. Walker. Well, if we fail to act, then I don't see why 
the firms would stop their behavior. We know that behavior is, 
increasingly, they do squash nascent competitors. They do use 
leverage strategies to see if that works so competition 
authorities around the world need to act.
    Mr. Johnson of Georgia. Thank you. I thank the Chair and I 
yield back.
    Mr. Cicilline. The gentleman yields back. I am just going 
to ask the Witnesses to indulge me just a couple of minutes, 
and I will, of course, give the Ranking Member the same 
opportunity just to sort of wrap up with a couple of questions.
    Commissioner Phillips, I would like to turn to you. You 
testified that antitrust is a fact-intensive inquiry and that 
competition cannot solve every problem, but no one is seriously 
debating that. We are here to discuss reforms that will boost 
competition precisely because of the evidence and because a 
century of experience has taught us that competition in the 
economy is always desirable.
    Helpful to us is understanding how enforcers think about 
these issues and so your presence here is useful. You, for 
example, voted against the FTC's bipartisan complaint against 
Facebook for monopolization, correct?
    Mr. Phillips. I did.
    Mr. Cicilline. You are aware that 48 State Attorneys 
General, Republicans and Democrats, agreed that this evidence 
warranted filing an antitrust complaint, correct?
    Mr. Phillips. I am.
    Mr. Cicilline. You have read the underlying evidence in 
those complaints, I assume?
    Mr. Phillips. Yes.
    Mr. Cicilline. So, you are aware that Mark Zuckerberg told 
Facebook's Chief Financial Officer that the purpose of 
acquiring Instagram was to neutralize a competitive threat and 
buy the company time, correct?
    Mr. Phillips. Yes.
    Mr. Cicilline. You are aware that the company's own market 
data shows that Facebook has tipped the market in its favor in 
terms of monthly active persons' attention and time spent on 
its platform, correct?
    Mr. Phillips. I think that is right, but I will accept the 
premise for purposes of the question.
    Mr. Cicilline. All right. You also know that Facebook's own 
data scientists and economists believe that Twitter and Snap 
are not meaningful sources of competition to Facebook, correct?
    Mr. Phillips. I am not aware of that evidence, but I have 
no reason to disagree.
    Mr. Cicilline. So, I guess my question then is, in the 
light of that, tell us as we think about these issues, what 
additional evidence would you have needed or is your opposition 
based on something else that we don't understand?
    Mr. Phillips. So, my quibble with this case begins, 
Congressman, with the fact that these are transactions--the 
gravamen of the case is two transactions. It is Instagram and 
it is WhatsApp, and these are transactions that were brought to 
the attention of the Federal Trade Commission before I was 
there, the better part of a decade ago.
    There is no allegation in the complaints of fraud in that 
process or anything like that. The agency did what it did, and 
for years, the company was allowed to make decisions, made 
investments, so a big part of this goes to the integrity of the 
process. For the government to come back in years later, I 
don't think the government is barred as a matter of law later 
from bringing a case.
    Mr. Cicilline. In fact, it specifically authorizes as a 
matter of law, isn't it?
    Mr. Phillips. Sorry?
    Mr. Cicilline. It is specifically authorized to do that as 
a matter--
    Mr. Phillips. Yes. Yes, we can go in after the fact. As a 
general matter in terms of mergers, the longer you wait, the 
more investments the company make and I think that presents a 
real issue. I can't undo the fact that the agency did what it 
did. I also think on the merits there are some questions to do 
with market definition and effects under section 2. I do think 
this broader framing is really important. I wasn't there when 
this happened, but it did happen.
    Mr. Cicilline. Yes. Finally, Commissioner Phillips, you 
testified repeatedly today that the antitrust laws are working 
just fine, but that is simply not true. To give one example, 
the FTC recently suffered a crushing defeat in its efforts to 
challenge an anticompetitive hospital merger. Just a few months 
ago, on the Jefferson/Einstein case, a case where you voted to 
bring, in fact, the agency has lost a number of the cases you 
cited as examples of aggressive enforcement under current law 
such as the DOJ's Sabre/Farelogix case.
    So, you argue that the law is working just fine, but don't 
the outcomes in these cases say just the opposite?
    Mr. Phillips. So, Congressman, I don't think I used the 
phrase ``just fine,'' and I would agree with you that courts 
sometimes get these things wrong. I voted for the Jefferson 
complaint. I think we were right. I think the court was wrong. 
I agree with you. I also agree with you that the court's 
interpretation of Amex in the Sabre/Farelogix case was also 
wrong. That doesn't mean to me that it is the enterprise is 
broken.
    So, the examples I gave before in terms of small 
competitors being bought by incumbent firms, this is Illumina/
PacBio. This is Harry's and Schick. This is Procter & Gamble 
and Billie. On the DOJ side, it is the Sabre/Farelogix case 
what they brought. They brought the Visa/Plaid case. In all 
those other instances, the mergers were called off. These 
negotiations take part in the shadow of the law.
    So, I guess I am a little bit optimistic because of my 
experience about the ability of agencies to stop some of these 
mergers.
    Mr. Cicilline. All right, I thank you again for your 
testimony. I am happy to yield to Mr. Buck for any wrap-up 
questions he may have.
    Mr. Buck. I am going to ask one very quick question because 
we both have to go vote very quickly.
    Commissioner Phillips, based on Chair Cicilline's 
questions, don't your answers and the concerns that the Chair 
has indicated that we need more aggressive action and not less 
aggressive action from Congress, from the agencies, and from 
the courts?
    Mr. Phillips. So, I do think as I said before, the agencies 
are pivoting to focus on some of these issues. I think you see 
it in the enforcement program. I think that is a good focus. 
You have heard a lot about error costs, and one of the things 
that I am saying is that when I am looking at a merger ex ante 
before it happens, I am going to be willing to take some more 
risk. I think that is an important cultural change that has 
happened at the enforcement agencies.
    Mr. Buck. Okay, thank you very much for your time and I 
very much appreciate the Witnesses' time today.
    Mr. Cicilline. I seek unanimous consent to add a number of 
letters and statements regarding the Committee's work to 
strengthen the laws to address monopoly power into the record. 
Without objection.
    [The information follows:]

                      MR. CICILLINE FOR THE RECORD

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

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    In closing, again I want to thank on my behalf and behalf 
of Mr. Buck and the whole Committee, our extraordinary 
Witnesses for their testimony at today's hearing. Without 
objection, all Members will have five legislative days to 
submit additional written questions for the Witnesses or 
additional materials for the record, and the hearing is hereby 
adjourned.
    [Whereupon, at 4:55 p.m., the Subcommittee was adjourned.]


                                APPENDIX

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

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                 [all]