Antitrust and High Tech: A Tale of Two Mergers

Between 2016 and 2019, two proposed mergers captured much of the attention and resources of the Antitrust Division of the Department of Justice (DOJ). The first was the vertical merger of AT&T Inc. and Time Warner Inc.—a merger of a communications, media, and content distribution company (AT&T) with a content provider (Time Warner). The second was the horizontal merger of Sprint and T-Mobile—a merger of two mobile telephone companies. In general, vertical mergers are reviewed with greater leniency than horizontal mergers because the latter, by definition, eliminate a competitor in the relevant marketplace, which is not a concern with the former. Moreover, merger-specific efficiencies may be easier to demonstrate when a company merges with another company in its own supply chain. Even so, the DOJ challenged the vertical merger of AT&T and Time Warner but permitted (with conditions) the horizontal merger of Sprint and T-Mobile. As this Article sets forth, these seemingly distinct mergers were destined to be linked. Even though the DOJ unsuccessfully blocked the AT&T-Time Warner merger, the companies are separating again only a few short years after finalizing their merger. The stated reason for the unwinding is arguably linked to the DOJ’s decision to permit the T-Mobile-Sprint merger. The competitive pressure created by the joined mobile telephone company—T-Mobile—has pressured AT&T to invest further in its own mobile telephone business. In other words, the DOJ’s initial fear that the merged AT&T could use theoretical market power to anticompetitively charge higher consumer prices and raise rivals’ costs in content distribution was never realized. In contrast, the DOJ’s humility in assessing potential efficiencies for a merged T-Mobile in the growing 5G mobile telephone market is already paying competitive dividends. The tale of these two mergers, therefore, provides interesting insights into modern merger review policies

Wireless Net Neutrality Regulation and the Problem with Pricing: An Empirical, Cautionary Tale

I present here a unique empirical analysis of the consumer welfare benefits of prior regulation in the mobile telecommunications industry. In particular, I analyze the relative consumer benefits of state rate regulation and federal entry regulation. The institution of filing requirements and FTC review and approval of various consumer pricing regimes is highly analogous to the consumer price controls imposed by various state level public utility commissions in the past. Furthermore, the imposition of a zero-price rule is analogous to past rate regulation; in particular it is similar to past wholesale regulation with its underlying principles of open access and interconnection rights to non-network competitors. Consumer welfare in this empirical analysis is defined in terms of consumer prices, not in express terms of innovation increases in the application and equipment markets. A motivating rationale behind the zero-price rule, and network neutrality regulation in general, is that each application provider should enjoy nondiscriminatory access to the Internet for the equal opportunity to compete for the attention of end users. Consumer prices offer a proxy for the size of the available network because as prices decrease subscribership typically increases. As the size of the network increases, the benefit of network effects (e.g., profit, reputation, and notoriety) increases and, therefore, the incentive for innovation by application and equipment innovators increases. My analysis is set forth as follows. Part I presents a brief overview of a few key elements of the network neutrality debate that have led to various proposals for direct or indirect price regulation. Part II presents an introduction to the mobile communications industry and describes the unique dataset I use. Part III sets forth the empirical model to test for the efficacy of past regulation, including consumer price regulation and wholesale open access pricing regulation, and presents the results. Specifically, price regulation, akin to proposed consumer price regulation and the zero-price rule, is shown to have had little or no benefit to consumers and may have harmed consumers in some instances. Moreover, even subjectively innocuous regulation is shown to have, at best, an ambiguous effect on consumer welfare. Comparable analysis of regulation increasing market entry suggests great consumer welfare benefits, indicating that regulation is best directed at encouraging increased competition rather than dictating specific network neutrality requirements to individual operators. Finally, the Conclusion sets forth the policy recommendations indicated by the empirical results

Prioritizing Privacy in the Courts and Beyond

Big data has affected American life and business in a variety of ways—inspiring both technological development and industrial change. The legal protections for a person’s right to his or her own personal information, however, have not matched the growth in the collection and aggregation of data. These legal shortcomings are exacerbated when third party privacy interests are at stake in litigation. Judicial orders to compel sensitive data are expressly permitted even under the few privacy statutes that may limit data transfers. Historically, the Federal Rules of Civil Procedure favor generous disclosure of information. But as litigation becomes more technical and data collection and transfer costs are decreasing, this Article argues that the judiciary must take an invigorated role in discovery—in particular when third-party privacy interests are at stake. First, this Article explores the existing legal support for informational privacy rights in constitutions, statutes, and tort. As explained, the legal protections that exist are slim. This Article employs a novel theoretical model to illustrate that the current law is particularly ill-suited to protect third-party privacy rights in discovery because the law does not penalize parties for acquiescence to overreaching discovery requests. Therefore, with the current legal backdrop, to protect informational privacy rights, the judge’s role as the discovery gatekeeper is imperative. To emphasize the need for a privacysensitive judiciary, the Article examines an ongoing litigation, Morgan Hill Concerned Parents Ass’n v. California Dep’t of Education, where the otherwise FERPA-protected school records of an estimated ten million students were ordered to be disclosed—including addresses, social security numbers, birthdates, disciplinary records, and test scores. This Article proposes a three-step framework to protect the privacy interest of litigants and affected third parties. The time is ripe for renewed judicial focus on privacy interests in the courts, and a recent amendment to the Federal Rules was made precisely to encourage litigants and the courts to limit the size and scope of civil discovery. In addition to discovery reforms, this Article proposes changes to the law to incentivize collectors of data to either decrease collection of sensitive data or increase investment in privacy protections

FCC Regulation Versus Antitrust: How Net Neutrality is Defining the Boundaries

This Article challenges the various jurisdictional theories that underpin the FCC’s net neutrality regulation. The assertion of jurisdiction by the FCC over any aspect of the Internet ecosystem has raised populist, congressional, and even judicial rhetoric to a crescendo and resulted in a recent vote to defund the FCC’s efforts. This Article places the current crisis squarely in the context of the long-standing jurisdictional struggle between regulation and antitrust law. These two regimes are often at jurisdictional cross-purposes because, even though they both purport to maximize the social good, they do so by inapposite means. Indeed, there is a policy choice inherent in the very jurisdictional authority permitted each regime—a choice that the FCC’s jurisdictional bases for net neutrality may actually circumvent and obfuscate. Focusing on the Supreme Court’s seminal decision in Verizon Communications, Inc. v. Law Offices of Curtis V. Trinko, LLP and the D.C. Circuit’s decision in Comcast Corp. v. FCC, this Article examines the jurisdictional boundaries between the regulatory and antitrust camps. In analyzing the jurisdictional limits of each through the lens of the net neutrality debate, this Article reveals opportunities for congressional reforms beyond mere rhetoric. To identify problematic uses of regulatory authority, this Article: (1) creates an innovative grouping of possible bases for regulatory authority labeled “satellite jurisdiction” and (2) proposes a new framework to classify possible jurisdictional overreach in what the author brands as either “procedural opportunism” or “substantive opportunism.” Finally, this Article recommends a new standard by which both procedural and substantive jurisdictional opportunism may be tempered and antitrust authority maximized where most salutary and appropriate

Wireless Net Neutrality Regulation and the Problem with Pricing: An Empirical, Cautionary Tale

I present here a unique empirical analysis of the consumer welfare benefits of prior regulation in the mobile telecommunications industry. In particular, I analyze the relative consumer benefits of state rate regulation and federal entry regulation. The institution of filing requirements and FTC review and approval of various consumer pricing regimes is highly analogous to the consumer price controls imposed by various state level public utility commissions in the past. Furthermore, the imposition of a zero-price rule is analogous to past rate regulation; in particular it is similar to past wholesale regulation with its underlying principles of open access and interconnection rights to non-network competitors. Consumer welfare in this empirical analysis is defined in terms of consumer prices, not in express terms of innovation increases in the application and equipment markets. A motivating rationale behind the zero-price rule, and network neutrality regulation in general, is that each application provider should enjoy nondiscriminatory access to the Internet for the equal opportunity to compete for the attention of end users. Consumer prices offer a proxy for the size of the available network because as prices decrease subscribership typically increases. As the size of the network increases, the benefit of network effects (e.g., profit, reputation, and notoriety) increases and, therefore, the incentive for innovation by application and equipment innovators increases. My analysis is set forth as follows. Part I presents a brief overview of a few key elements of the network neutrality debate that have led to various proposals for direct or indirect price regulation. Part II presents an introduction to the mobile communications industry and describes the unique dataset I use. Part III sets forth the empirical model to test for the efficacy of past regulation, including consumer price regulation and wholesale open access pricing regulation, and presents the results. Specifically, price regulation, akin to proposed consumer price regulation and the zero-price rule, is shown to have had little or no benefit to consumers and may have harmed consumers in some instances. Moreover, even subjectively innocuous regulation is shown to have, at best, an ambiguous effect on consumer welfare. Comparable analysis of regulation increasing market entry suggests great consumer welfare benefits, indicating that regulation is best directed at encouraging increased competition rather than dictating specific network neutrality requirements to individual operators. Finally, the Conclusion sets forth the policy recommendations indicated by the empirical results