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Durbin Questions Witnesses During Judiciary Subcommittee Hearing on Trends in Vertical Merger Enforcement

WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, today questioned witnesses at the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing entitled, “Trends in Vertical Merger Enforcement.”

Durbin began by asking Mr. Makan Delrahim, Partner at Latham & Watkins LLP and Former Assistant Attorney General for the Antitrust Division at the Department of Justice, about clarifying or correcting court precedent in antitrust law.

“In a speech you gave at Duke University in 2021, you noted several court precedents that proved to be particularly challenging as an antitrust enforcer. One of those cases was the 2018 decision in Ohio v. American Express, which you said is a ‘classic example of bad cases leading to bad law’,” Durbin said. “How did the decision in that case impact your ability to challenge proposed mergers?”

Mr. Delrahim explained the difficulty enforcers of antitrust law now face by saying, “The challenge with it is that now you have a law – and a market definition with it with two-sided markets – that’s very difficult to administer. It’s a great precedent to litigate, but it’s just very difficult for enforcers because it doesn’t have clarity.”

Durbin followed up, “Is the clarity lacking in terms of law and precedent or in the complexity of the case?”

Mr. Delrahim responded by saying, “The complexity of the case. How you address that, you’re going to have to litigate. …  These are difficult for the Supreme Court. Two-sided markets are difficult to understand and to really appreciate why two-sided markets are important.”

Durbin then asked Professor Nancy Rose, Professor of Applied Economics at Massachusetts Institute of Technology, about economic misunderstandings in case law and concerns in the digital marketplace.

“In an interview with The Harvard Gazette in 2021 … you said that the case law relating to vertical mergers was ‘too lenient’ and that ‘decisions have too frequently been based on misunderstanding the economics.’ Could you reflect on that comment?” asked Durbin.

Prof. Rose explained, “There was this … naïve and very formulaic view on vertical mergers that focused on the potential efficiencies of vertical integration and made the erroneous economics argument that in any vertical chain of production there was at most one monopoly profit, and so it didn’t really matter if that profit was earned at one level or another level. By combining the two levels, you weren’t going to increase the amount that a firm could earn. … That model is just wrong.”

She continued, “We understand now that vertical mergers can create the ability for firms to exclude rivals, to raise their costs, [to] advantage themselves in competition and harm consumers in that way.”

Video of Durbin’s questions in Committee is available here.

Audio of Durbin’s questions in Committee is available here.

Footage of Durbin’s questions in Committee is available here for TV Stations.

The Senate Judiciary Committee continues to take a leading role in examining what needs to be done to ensure we have competitive marketplaces. This year, the Committee held a hearing on competition in the ticketing and live entertainment industry, as well as a subcommittee hearing on restoring competition to digital markets. Additionally, the Committee voted to advance the Journalism Competition and Preservation Act, which would promote competition by allowing news organizations to jointly negotiate fair compensation by Big Tech companies that profit from their news content.