Vito Sperduto
Hello, and welcome to another episode of Strategic Alternatives, the RBC, and A podcast. I'm Vito Sperduto, global head of mergers and acquisitions at RBC Capital Markets, and today, I'm joining you from RBC's. Global TIMT, Technology, Internet, Media, and Telecom Conference here in New York City. Today, I'm joined by Andy Lipman, who is a partner at Morgan Lewis based in DC. Andy practices in most aspects of communications law and related fields, including regulatory, transactional, litigation, legislative, and land use, and very topical, Andy is here today to talk to us a bit about the antitrust landscape, and earlier today, we had Jonathan Kanter, the assistant attorney general in DOJ responsible for antitrust, as part of a panel discussion at our conference, and it certainly provoked a number of questions for Andy and I. So, Andy, welcome to the podcast.
Andy Lipman
Thanks, Vito. It's a pleasure to be here, a pleasure to be participating At this, RBC conference as I have many years in the past.
Vito
Let's start. I think the, the current administration Vision through the DOJ and the FTC has certainly taken a more aggressive approach to antitrust enforcement. They've challenged a number of high profile mergers. When they've gone to fruition, as we all talk about, the record has not been great. They've won one case in the publishing space, and there's been 7 others that the the the companies have won. But, You know, there are draft merger guidelines out there right now, and as you emphasized to me earlier, these are guidelines. Help our our audience think through, you know, what your expectations are from a go forward perspective. How do you think the administration is gonna continue to apply, You know, the these guidelines and the cases they're pursuing, and you know, we'll get into a bit of sort of how it impacts some of our key clients that are here today.
Andy
Sure. So, I mean, I think it's important to realize that this administration's Philosophy on competition and regulation is different materially different, then other administrations, including other Democratic administrations, you know, the Obama and Clinton administrations, for example, and I think you need to go back to the early days of the Biden administration and the fact that The progressive wing of the party was very disappointed there were no progressive cabinet officers. So the consolation prize is that a lot of the antitrust authority and regulators were positions that the progressives had a say in, and this was largely coordinated by Tim Wu, former existing now former Columbia law professor Who actually came up with the terminology network neutrality.
And Tim helped recruit People to the government in terms of Alina Khan, Jessica Rosenworcel at the FCC, Jonathan Kanter, who had a much more aggressive philosophy, more progressive, friendly philosophy on competition, and you know, this was embodied in an executive order that the president's signed that largely Tim Wu wrote that, you know, criticized past enforcement actions in antitrust, you know, that they weren't tough enough. They were also, in Tim's view, the president's view, too one dimensional. They didn't take into account the perspective of workers. They didn't take into perspective the perspective of the community. They didn't take in per in per perspective of, you know, the the larger industry. I mean, they were very focused on, you know, one dimension, and that was the impact on prices, and so you have a philosophy now that really wants to go back from the Bork philosophy of the seventies to the earlier Brandeis philosophy to taking a much more holistic view on mergers and consolidation, and I think that is the key difference now from what we've seen in the past.
Vito
And, look, I think one of the things that I often think about and was brought up in the panel discussion earlier today is. As we think about the merger guidelines or the merger rules that were existing, which were put in place in 2010, you know, certainly, there's been a ton of advancement, and The companies, for instance, at our conference today across technology, Internet, media, and telecom have grown dramatically. They've expanded dramatically. There's new technologies out there. Out there. Everybody's talking about generative AI, including the administration trying to put some some rails on it, and I think it's fair to say that The agencies are trying to catch up to this new environment, and so part of it's applying some of the older rules, but it's also having to modernize them.
As you look at some of this the draft merger guidelines, do you think that they're they've made Enough of a of a move. Do you think that they've been overly aggressive and too ambitious here because they know they're gonna get scaled back? I mean, how would you characterize them in in the grand scheme of things? So you're correct.
Andy
They're draft merger guidelines, and you know, I personally think it's, Yeah. Well, good idea to revisit these guidelines periodically, you know, maybe once a decade or or so, particularly now just given the incredible rapid advances in technology that, you know, we've seen punctuated at this conference. But, Yeah. This is a much more aggressive view. I mean, what Jonathan was was saying is that in many cases, he doesn't believe Structural remedies were effective. Okay. If you recall, Meghan Delrahim, who was Trump's antitrust chief, Yeah. Well, his mantra is we don't wanna do behavioral remedies. We wanna do structural remedies. Okay, and then if you go back to, you know, the Obama era. I mean, the Obama DOJ was criticized for allowing mergers to go through without structural remedies with behavioral remedies like Live Nation, Ticketmaster. Okay. Google IPA, you know, Comcast, NBC, Universal. So we've gone from behavioral remedies To nonbehavioral remedies, structural remedies, to now you know, structural remedies are often ineffective. So, I mean, we've Taking a journey that, you know, puts much greater headwinds on potential consolidation.
And, look, as I think about it as an, and a practitioner, I'm sure yourself in terms of providing legal counsel to clients, We're trying to advance the view as to how the agencies are going to look at a specific transaction very early in the process. I think, You know, someone said earlier today, normally, that was brought up once all the deal terms are understood. Well, today, you have to probably address at the same time as you're considering the initial steps of a process.
Andy
You're absolutely right, and yeah, I know I've worked with RBC Bankers, and you guys are very thoughtful in terms of doing that, and and I think that's the the right approach. I mean, of course, not only does it impact The terms and conditions of the purchase agreement, but, you know, I think it's it's instructive to the boards in terms of, Yeah. What the probability is and what the timing is and what the conditions are, if any, to a a transaction. So, I mean, I think it has to be a threshold consideration, you know, these days. I mean, if nothing else, just the timing issues, you know, in a period of rising interest rates or at least high interest rates, having a merger take 50 percent longer than it did a decade ago Could be killing, the deal from the get go. So, I mean, III think you almost have to work backwards from some of these competition issues.
Vito
The fact that it's going to take longer to close a transaction is a simple deterrent in itself, which I think is what some what the agencies are trying to accomplish in some cases. Just as we think about that, we're we're heading into 24, which is a a significant election year, which, you know, certainly, there's been a lot of run up to it. Do you think that the stance of the agencies will soften any from a combination of the fact that we're going into an election year and also the fact that They've had some high profile losses where I think in some of the cases, to to paraphrase and I'm I'm not an attorney, but to paraphrase what I read, It was well, remedies were suggested and you didn't take them into account, and so I think that, you know, Litigating the fix as we talk about it with a number of clients and the fact that you've suggested remedies, so, you know, let's try to get that proven out in court. You know, do you think that the agencies have are going to soften their stances at all, or or are you seeing no signs of that?
Andy
It's a great question because I would say historically, as you enter, say, the last 6 months before a presidential Election agencies did often soften their stances. I think now it's almost the opposite. I I think now this administration is so concerned about energizing its base and the populist, you know, part of that base That I think the agencies we're talking about, not just DOJ, the FTC, but the FCC as well, are actually going to double down and put on a more of a full court press to be even more aggressive to to punctuate, You know, that position. I mean, especially, you know, when it comes to a lot of the platform companies, you know, which, you know, what wasn't mentioned explicitly by attorney general Cantor. But, yeah, it was clearly in the air.
Vito
No. I I you know, we're watching that closely in terms of the Form Companies and then also a little bit unrelated to some of the companies we have here today in some other spaces from a roll up perspective in private equity. There's certainly a very significant case that the FTC is pursuing that is trying to take on private equity that Traditionally has a pretty strong thesis around roll ups. Oh, absolutely, and I think that it's interesting to watch that. Do do you think that the focus It's going to continue to be on some of the key industries. So, certainly, the technology players and the like, and therefore, Other more traditional industries like some of the industrial players and and so forth are gonna be a little bit more below the radar. Do you think there's gonna be any difference in application based on what industry you're in.
Andy
I think there's a priority dealing with consumer facing businesses. Yeah, and that would include the Internet, telecom, you know, pharmaceuticals, you know, retail, auto, Health care and and so on, and you know, the agencies are necessarily resource limited, but, you know, if there was A transaction, just say, in trucking or concrete, you know, that was blatantly Anti competitive. I have no doubt that the agencies would, you know, get involved. But the priority seems to be and this was even in the executive order from president Biden on focusing on, you know, including agriculture, you know, consumer facing industries, and of course, that gets back to your last question because that's the those are the sectors that the voters care about. Do you no agree?
I mean, very few few people. Go to the polls and vote based on concrete consolidation. Exactly.
Vito
Different agency, the FCC, and if you think about some of their priorities and you know, there's obviously a Democratic majority there, How do you see that intersecting with some of the policies that the DOJ and the Federal Trade Commission are trying to pursue? You know, are are they similar? Are these they have the similar intent and and goal at the end? You know, what's the overlap?
Andy
It all goes back to what we're talking about at the top of the podcast, and that is president Biden's executive order. You know, the whole of government approach, and the FCC has Blot off on that entirely, and much more so recently because it's only been two months. Yeah. Only two months Into what's now almost a 3 year administration that there's a democratic majority at the FCC. It was deadlocked 22. So, you know, there is a full court press by chairwoman Rosenworcel to push an agenda through, including network neutrality. But today was the FCC's monthly meeting, and they Came out with a very controversial order on digital discrimination, okay, which was a 3 two vote. Republicans, you know, strenuously opposed it that are impacting not only intentional digital discrimination, But unintentional discrimination.
So even if there's a disparate impact, okay, it was done unintentionally On speeds, on, you know, marketing, on prices, the FCC could intervene and not just for dominant carriers, But all carriers, including competitive nondominant carriers. So and then that was basically just taking, like, a a very short. Provision of the infrastructure act and interpreting that very expansively. So, I mean, that really goes to the Biden all of of of approach, which, you know, a lot of people support, and that is that, you know, the agency should focus on Digital equality, social equality, ratio equality, you know, and and the like. Now, I mean, one can argue whether that That's within the jurisdiction of the FCC. One could argue, is that a role that government should play? But, nonetheless, I mean, that's very much a priority of this administration, and the FCC is entirely on board with that, or at least the 3 democrats are.
Vito
One other topic I wanted to cover is just we've talked a lot about the US regulators. Are you seeing that the DOJ and and FTC are catching up to where some of the foreign regulators are? Are Has been some of the dispersion in Europe and the growth in the UK provided sort of additional parties that now have to opine when there's transactions. Like, is everybody just trying to carve out their piece of the world here? Like, how how are you seeing it?
Andy
No. We are seeing a balkanization, and I think, you know, a good example is, Activision Microsoft where You had EU where you had UK, you know, reviews. I mean, a number of deals are falling by the wayside In China because of lack of Mofcom, approval. So and we've seen Brazil taking a more Active role in other countries as well. So it clearly impacts our global consolidation, and the agencies are particularly the UK, EU, US agencies are clearly in communications. I think, you know, Attorney general Cantor was was pretty clear about that, and I think the EU and UK in particular Has taken AAA very strong position on competition. Maybe after Activision, you know, that may recede. But yeah, and that's often gonna be the long pole of the tent.
Vito
Yeah. No. It it'll be interesting to watch how that plays out and how it all relates together. You know, one one other thing I'm keeping track of is, you know, you look at something like some of the action the FTC's taking or the DOJ have taken against, say, Google and and some of what they're doing around search, and then you have Google right now this week in court with regards to the Epic Games lawsuit that's going on. I gotta imagine that if you're sitting there in in DC, that they're watching closely that case and what Epic brings to bear, maybe doing some work for the agencies. Against Google. It's clearly on the radar. Yeah. Clearly on the radar, and yeah, there's more coordination than I've seen historically.
Vito
Yeah. No. Clearly. So, look, I really thank you so much for being here today. This has been a great conversation, and I think it's something we're gonna wanna Continue as we see more of this develop going forward. Alright, Bill.
Andy
Thanks, and thank you to RBC.