Antitrust Laws and Competition Issues

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The Trustbuster Who Has Apple and Google in His Sights

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Shortly after Jonathan Kanter took over the Justice Department’s antitrust division in November 2021, the agency secured an additional $50 million to investigate monopolies, bust criminal cartels and block mergers.To celebrate, Mr. Kanter bought a prop of a giant check, placed it outside his office and wrote on the check’s memo line: “Break ’Em Up.”Mr. Kanter, 50, has pushed that philosophy ever since, becoming a lead architect of the most significant effort in decades to fight the concentration of power in corporate America. On Thursday, he took his biggest swing when the Justice Department filed an antitrust lawsuit against Apple. In the 88-page lawsuit, the government argued that Apple had violated antitrust laws with practices intended to keep customers reliant on its iPhones and less likely to switch to competing devices.That lawsuit joins two Justice Department antitrust cases against Google that argue the company illegally shored up monopolies. Mr. Kanter’s staff has also challenged numerous corporate mergers, including suing to stop JetBlue Airways from buying Spirit Airlines.“We want to help real people by making sure that our antitrust laws work for workers, work for consumers, work for entrepreneurs and work to protect our democratic values,” Mr. Kanter said in a January interview. He declined to comment on the Google cases and other active litigation.At a news conference about the Apple lawsuit on Thursday, Mr. Kanter compared the action to past Justice Department challenges to Standard Oil, AT&T and Microsoft. The suit is aimed at protecting “the market for the innovations that we can’t yet perceive,” he said.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    An Emboldened F.T.C. Bolsters Biden’s Efforts to Address Inflation

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    With few unilateral options and little hope of legislation from Congress, the president’s early investment in competition policy could pay a political dividend.An independent federal agency has become one of the most reliable executors of President Biden’s attempts to fight inflation, at a time when the White House has few weapons of its own to quickly bring down stubbornly high prices of consumer staples like groceries.The Federal Trade Commission filed a lawsuit on Monday, joined by several state attorneys general, to challenge a merger between the supermarket giants Kroger and Albertsons. The agency’s rationale in many ways echoed Mr. Biden’s renewed attempts to blame corporate greed for rising prices and shrinking portions in grocery aisles.“If allowed, this merger would substantially lessen competition, likely resulting in Americans paying millions of dollars more for food and other essential household goods,” agency officials wrote in a legal complaint. Because grocery prices have risen significantly in recent years, they added, “the stakes for Americans are exceptionally high.”That is true for consumers, and it is true for the president. More Americans disapprove of his handling of the economy than approve of it. Consumer confidence, while improved in recent months, remains relatively weak for an economy with low unemployment and solid growth like the one Mr. Biden is presiding over.An internal analysis by White House economists suggests that no single factor is weighing more on consumer sentiment than grocery prices. Those costs soared in 2022 and have not fallen, though their rate of increase has slowed.White House officials concede that there is little more Mr. Biden can do unilaterally to reduce grocery prices and even less chance of legislative help from Congress. That is why Mr. Biden has resorted to the bully pulpit, calling on stores to reduce prices and chastising snack makers for engaging in “shrinkflation” — reducing portions while raising or maintaining prices.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Can a Tech Giant Be Woke?

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    The December day in 2021 that set off a revolution across the videogame industry appeared to start innocuously enough. Managers at a Wisconsin studio called Raven began meeting one by one with quality assurance testers, who vet video games for bugs, to announce that the company was overhauling their department. Going forward, managers said, the lucky testers would be permanent employees, not temps. They would earn an extra $1.50 an hour.It was only later in the morning, a Friday, that the catch became apparent: One-third of the studio’s roughly 35 testers were being let go as part of the overhaul. The workers were stunned. Raven was owned by Activision Blizzard, one of the industry’s largest companies, and there appeared to be plenty of work to go around. Several testers had just worked late into the night to meet a looming deadline.“My friend called me crying, saying, ‘I just lost my job,’” recalled Erin Hall, one of the testers who stayed on. “None of us saw that coming.”The testers conferred with one another over the weekend and announced a strike on Monday. Just after they returned to work seven weeks later, they filed paperwork to hold a union election. Raven never rehired the laid-off workers, but the other testers won their election in May 2022, forming the first union at a major U.S. video game company.It was at this point that the rebellion took a truly unusual turn. Large American companies typically challenge union campaigns, as Activision had at Raven. But in this case, Activision’s days as the sole decision maker were numbered. In January 2022, Microsoft had announced a nearly $70 billion deal to purchase the video game maker, and the would-be owners seemed to take a more permissive view of labor organizing.The month after the union election, Microsoft announced that it would stay neutral if any of Activision’s roughly 7,000 eligible employees sought to unionize with the Communications Workers of America — meaning the company would not try to stop the organizing, unlike most employers. Microsoft later said that it would extend the deal to studios it already owned.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Choice Hotel Franchise Owners Push Back on Merger With Wyndham

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    Franchisees are fighting Choice Hotels’ attempted takeover of its biggest rival, which would create a dominant player in the budget hotel sector.When Patrick Pacious, the chief executive of a large portfolio of hotel brands, promoted a blockbuster attempt to acquire a competitor in October, he said the proposed merger would lower costs and attract more customers for the families and small businesses that own most of the company’s locations.“Our franchisees instantly grasped the strategic benefit this would bring to their hotels,” Mr. Pacious, who leads Choice Hotels, said on CNBC.As the weeks have passed, however, the reaction has not been positive. Wyndham Hotels and Resorts, the target of the proposed deal, rejected the offer from Choice, which is now pursuing a hostile takeover. And in early December, an association representing the majority of hoteliers who own Choice and Wyndham-branded properties came out strongly against it.“We all don’t know what’s driving this merger. Many of us feel it’s not needed,” said Bharat Patel, the chairman of the organization, the Asian American Hotel Owners Association. The group surveyed its 20,000 members and found that about 77 percent of respondents who own hotels under either brand or both thought a merger would hurt their business.“I’m not against Choice or Wyndham,” said Mr. Patel, who owns two Choice hotels. “We just need robust competition in the markets.”That opposition illustrates a growing resistance to consolidation in industries that have grown more concentrated in recent years. Even some Wall Street analysts have expressed skepticism that Choice’s proposal is a good idea.The views of hotel owners could become a hurdle for Choice as it seeks approval for a merger from the Federal Trade Commission, which has taken an interest in franchising as evidence has mounted that the economic and legal relationship has increasingly tilted in favor of brand owners and away from franchisees.To understand why franchisees are worried, it’s helpful to understand how hotels are structured.About 70 percent of the nation’s 5.7 million hotel rooms operate under one of the several big national brands like Marriott or Hilton, according to the real estate data firm CoStar. The rest are independent.Over the past few decades, franchise chains have bought one another and merged to the point where the top six companies by number of rooms — Marriott, Hilton, InterContinental, Best Western, Choice and Wyndham — account for about 80 percent of all branded hotels.How a Choice/Wyndham merger would stack upCombining the two companies would create America’s largest branded hotel chain

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    Number of hotel rooms in the United States
    Note: Data is as of Dec. 19.Source: CoStar GroupBy The New York TimesUnlike fast food franchisees, hotel owners typically develop or buy their own buildings, representing a multimillion-dollar investment for each property. The industry has drawn thousands of immigrant entrepreneurs from South Asia. Some owners accumulate sprawling portfolios, but most end up with just a few hotels.The average member of the Asian American owners’ group owns just two hotels, most commonly with one of the economy or midscale brands. Choice and Wyndham dominate that segment, with 6,270 and 5,907 hotels in the United States, including Days Inn, Howard Johnson, Quality Inn and Econo Lodge.Being part of a franchise network provides a recognized name, a business plan and collective purchasing that is supposed to give small businesses the benefits of scale. In exchange, hotel owners pay the brands a fee to join, ongoing royalties and other payments for marketing, technology and consulting.As a result, franchisees are effectively customers of the hotel brands. Less competition between hotel chains can leave owners with fewer options and, thus, less leverage to demand better services for a lower cost.Consider the frustrations of Jayanti Patel, who owns a Comfort Inn — one of Choice’s 22 brands — in Gettysburg, Pa.He said Choice had been taking a larger cut, via charges like an $18 monthly fee for reporting his property’s energy use, discounts for rooms booked with rewards programs and penalties when guests file complaints. Mr. Patel also laments declining service, such as from revenue management consultants who are supposed to provide advice that increases his profits. Choice has outsourced this work to a service that operates partly overseas.Mr. Patel said his profit margins had become “thinner and thinner,” and he’s considering signing up with a different brand when his franchise agreement ends in a couple of years. Friends who own Wyndham-branded properties seem happy, so he might adopt one of its brands as long as Choice doesn’t acquire that chain.“When my window comes up in 2026, 99 percent I don’t want to renew my agreement,” Mr. Patel said. “And maybe If I want to go to Wyndham, they have nearly 20 brands, and I lose that opportunity, because it will be the same thing.”Choice argues that as its rivals have expanded and merged, it also needs to grow to offer hotel owners bigger savings on supplies like signage and bedsheets. The company is also promising to bargain down the commissions that hotel owners pay websites like Expedia and Booking.com, which are particularly crucial in the budget segment.“Combining with Wyndham would enable us to continue to deliver enhanced profitability for franchisees — by helping to lower their costs and grow their direct revenue while providing our best-in-class technology platform,” Choice said in a statement.However, many hotel owners say that even if Choice did negotiate lower prices, they are skeptical that they would reap those benefits. In 2020, 90 franchisees filed a lawsuit that accused the company of, among other things, not passing along rebates from contracts with vendors. A judge ruled that hotel owners would have to pursue their claims in separate arbitration cases, and several did.Rich Gandhi, a hotelier in New Jersey, supports a campaign for state legislation that would improve the rights of franchisees in the hospitality industry.Hannah Yoon for The New York TimesChoice prevailed in two of those proceedings. But in one, brought by a hotelier in North Dakota, an arbitrator found this past summer that Choice had “made virtually no efforts to leverage its size, scale and distribution to obtain volume discounts.” He ordered Choice to pay $760,008 in legal fees and compensation. Choice is contesting the award.The case is just one example, but it squares with recent economic research. A 2017 study found that while being part of a hotel franchise system helped bring in guests, it did not lower the cost of doing business compared with operating an independent hotel.But litigating on your own is expensive, which is why few franchisees do so even when they feel they’ve been mistreated.Rich Gandhi, a hotelier in New Jersey, is supporting a campaign for state legislation that would improve the rights of franchisees in the hospitality industry. He leads a three-year-old group called Reform Lodging that is also opposing the merger.Mr. Gandhi has turned four of his Choice-branded hotels into Best Westerns and Red Roof Inns, both non-Choice brands that he said offered better assistance, fewer restrictions and more reasonable fees. Choice, he argued, introduced too many competitors to his area because it makes money from selling new franchises and controlling more of the market, even if the practice squeezes existing owners.“They want the biggest pie, because to them it’s all incremental revenue,” Mr. Gandhi said. “If you keep accumulating all these buildings and provide no support, it’s like one of those old pyramid schemes that’s ready to fall apart, which is exactly what’s happening.”A representative for Choice referred The New York Times to four hoteliers who it said would speak favorably of the merger. Two of them, including the chairman of the Choice Hotels Owners Council — to which all franchisees must belong and pay dues — declined to comment on the record. A third, who owns three Radisson hotels and was happy when Choice bought the brand, said the purchase of Wyndham — a much bigger company — could pose problems.The fourth, a Florida hotelier, Azim Saju, said that despite the loss of competition, if Choice acquired Wyndham the company would still have an incentive to make sure franchisees stayed afloat.“The concern is valid, but the bottom line is that franchising doesn’t do well unless the franchisees are profitable,” Mr. Saju said. “I think Choice has become more conscientious of the importance of franchisee profitability in order to further their success.”The dissatisfaction of hotel owners could hurt Choice’s ability to absorb Wyndham, especially if more franchisees switch to other brands. That prospect has soured some Wall Street analysts on the deal.“In hotel franchising, the critical constituency, as much as consumers walking in the door, is that franchising community,” said David Katz, an analyst who covers the hospitality and gambling industries for Jefferies & Company. “They’re going to own more than 50 percent of the limited service and economy hotels in the United States, and not have the full support of the largest franchisee organization out there? I think that merits further debate.”Franchisee support isn’t important just for morale. It could also sway federal regulators, who have started to take into account the effect of corporate mergers not just on their consumers but also on suppliers like book authors, chicken farmers and Amazon sellers.“Traditionally in antitrust there’s this consumer welfare standard, which is focused on ‘Is this going to be good or bad for consumers?’” said Brett Hollenbeck, an associate professor at the Anderson School of Management of the University of California, Los Angeles. “If the F.T.C. doesn’t feel like this argument will hold sway, they could try a more novel theory, which is that it could hurt franchisees.”Choice said it anticipated that its deal would be approved and was expecting to complete the transaction within a year. Its offer to buy all outstanding Wyndham shares extends through March, when it will try to replace the directors on the company’s board with people who will approve the sale. More

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    The Upshot of Microsoft’s Activision Deal: Big Tech Can Get Even Bigger

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    President Biden’s top antitrust officials have used novel arguments over the past few years to stop tech giants and other large companies from making deals, a strategy that has had mixed success.But on Friday, when Microsoft closed its blockbuster $69 billion acquisition of the video game publisher Activision Blizzard after beating back a federal government challenge, the message sent by the merger’s completion was incontrovertible: Big Tech can still get bigger.“Big Tech companies will certainly be reading the tea leaves,” said Daniel Crane, a law professor at the University of Michigan. “Smart money says merge now while the merging is good.”Microsoft’s purchase of Activision was the latest deal to move forward after a string of failed challenges to mergers by the Federal Trade Commission and the Justice Department, which are also confronting the big tech companies through lawsuits arguing they broke antimonopoly laws. Leaders at the two agencies had tried to block at least 10 other deals over the past two years, promising to dislodge longstanding ideas from antitrust law that they said had protected behemoths like Microsoft, Google and Amazon.But their efforts ran headlong into skeptical courts, largely leaving those core assumptions untouched. In the case of Microsoft’s Activision deal, the idea that the F.T.C. questioned was a “vertical” transaction, which refers to mergers between firms that are not primarily direct competitors. Regulators have rarely sued to block such deals, figuring that they generally do not create monopolies.Yet “vertical” deals have been especially common in the tech industry, where companies like Meta, Apple and Amazon have sought to grow and protect their empires by spreading into new business lines.In 2017, for instance, Amazon bought the high-end grocery chain Whole Foods for $13.4 billion. In 2012, Meta acquired the photo-sharing app Instagram for $1 billion and then shelled out nearly $19 billion for the messaging service WhatsApp in 2014. Of the 24 deals worth more than $1 billion completed by the tech giants from 2013 to mid-August of this year, 20 were vertical transactions, according to data provided by Dealogic.The sealing of the Microsoft-Activision deal has buttressed the notion that vertical deals generally are not anticompetitive and can still go through relatively unscathed.“There continues to be the presumption that vertical integration can be a healthy phenomena,” said William Kovacic, a former chair of the F.T.C. The F.T.C. is proceeding with its challenge to the Microsoft-Activision deal even as it has closed, said Victoria Graham, a spokeswoman for the agency, who added that the acquisition was a “threat to competition.” The Justice Department declined to comment. The White House did not immediately have a comment.The idea that vertical transactions were less likely to harm competition than combinations of direct rivals has been ingrained since the late 1970s. In the ensuing decades, the Justice Department and F.T.C. took no challenges to vertical deals to court, instead reaching settlements that allowed companies to proceed with their deals if they changed practices or divested parts of their business.Then, in 2017, the Justice Department sued to block the $85.4 billion merger between the phone giant AT&T and the media company Time Warner, in the agency’s first attempt to stop a vertical deal in decades. A judge ruled against the challenge in 2018, saying he did not see enough evidence of anticompetitive harms from the union of companies in different industries.Mr. Biden’s top antitrust officials — Lina Khan, the F.T.C. chair, and Jonathan Kanter, the top antitrust official at the Justice Department — have been even more aggressive in challenging vertical mergers since they were appointed in 2021.That year, the F.T.C. sued to stop the chip maker Nvidia from buying Arm, which licenses chip technology, and the companies abandoned the deal. In January 2022, the F.T.C. announced it would block Lockheed Martin’s $4.4 billion acquisition of Aerojet Rocketdyne Holdings, a missile propulsion systems maker. The companies dropped their merger.But judges rejected many of their efforts for lack of evidence and denied Ms. Khan and Mr. Kanter a courtroom win that would have set new precedent. In 2022, after the D.O.J. sued to block UnitedHealth Group’s acquisition of Change Healthcare, a judge ruled against the agency.Lina Khan, the chair of the Federal Trade Commission, challenged Microsoft’s deal for Activision last year. Tom Brenner for The New York TimesThe F.T.C.’s move to block Microsoft’s purchase of Activision last year was a bold effort by Ms. Khan, given that the two companies do not primarily compete with one another. The agency argued that Microsoft, which makes the Xbox gaming console, could harm consumers and competition by withholding Activision’s games from rival consoles and would also use the deal to dominate the young market for game streaming.To show that would not be the case, Microsoft offered to make one of Activision’s major game franchises, Call of Duty, available to other consoles for 10 years. The company also reached a settlement with the European Union, promising to make Activision titles available to competitors in the nascent market for game streaming, which allowed the deal to go through.In July, a federal judge ultimately ruled that the F.T.C. didn’t provide enough evidence that Microsoft intended to forestall competition through the deal and that the software giant’s concession eliminated competition concerns.The agencies are “facing judges who have said 40 years of economics show that vertical mergers are good,” said Nancy Rose, a professor of applied economics at M.I.T. with an expertise in antitrust, who is among a group of scholars who say vertical deals can be harmful to competition. She said the agencies should not back down from challenging vertical mergers, but that regulators would need to be careful to choose cases they can prove with an abundance of evidence.Ms. Khan and Mr. Kanter have said they are willing to take risks and lose lawsuits to expand the boundaries of the law and spark action in Congress to change antitrust rules. Ms. Khan has noted that the F.T.C. has successfully stopped more than a dozen mergers.Mr. Kanter has said that challenges to mergers from the Justice Department and the F.T.C. have deterred problematic deals.“There are fewer problematic mergers that are coming to us in the first place,” he said in a speech at the American Economic Liberties Project, a left-leaning think tank, in August.Still, bigger companies that have the resources to fight back will probably feel more confident challenging regulators after the Microsoft-Activision deal, antitrust lawyers said. The aggressive posture by regulators has simply become the cost of doing business, said Ryan Shores, who led tech antitrust investigations at the D.O.J. during the Trump administration and is now a partner at the law firm Cleary Gottlieb.“A lot of companies have come to the realization that if they have a deal they want to get through, they have to be prepared to litigate,” he said. More

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    U.S. Blasts Google Over Paying $10 Billion a Year to Cut Out Search Rivals

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    The Justice Department and 38 states and territories on Tuesday laid out how Google had systematically wielded its power in online search to cow competitors, as the internet giant fiercely parried back, in the opening of the most consequential trial over tech power in the modern internet era.In a packed courtroom at the E. Barrett Prettyman U.S. Courthouse in Washington, the Justice Department and states painted a picture of how Google had used its deep pockets and dominant position, paying $10 billion a year to Apple and others to be the default search provider on smartphones. Google viewed those agreements as a “powerful strategic weapon” to cut out rivals and entrench its search engine, the government said.“This feedback loop, this wheel, has been turning for more than 12 years,” said Kenneth Dintzer, the Justice Department’s lead courtroom lawyer. “And it always turns to Google’s advantage.”Google denied that it had illegally used agreements to exclude its search competitors and said it had simply provided a superior product, adding that people can easily switch which search engine they use. The company also said that internet search extends more broadly than its general search engine and pointed to the many ways that people now find information online, such as Amazon for shopping, TikTok for entertainment and Expedia for travel.“Users today have more search options and more ways to access information online than ever before,” said John E. Schmidtlein, the lawyer who opened for Google.The back-and-forth came in the federal government’s first monopoly trial since it tried to break up Microsoft more than two decades ago. This case — U.S. et al. v. Google — is set to have profound implications not only for the internet behemoth but for a generation of other large tech companies that have come to influence how people shop, communicate, entertain themselves and work.Over the next 10 weeks, the government and Google will present arguments and question dozens of witnesses, digging into how the company came to power and whether it broke the law to maintain and magnify its dominance. The final ruling, by Judge Amit P. Mehta of the U.S. District Court of the District of Columbia, could shift the balance of power in the tech industry, which is embroiled in a race over artificial intelligence that could transform and disrupt people’s lives.A government victory could set limits on Google and change its business practices, sending a humbling message to the other tech giants. If Google wins, it could act as a referendum on increasingly aggressive government regulators, raise questions about the efficacy of century-old antitrust laws and further embolden Silicon Valley.“It is a test of whether our current antitrust laws — the Sherman Act, written in 1890 — can adapt to markets that are susceptible to monopolization in the 21st century,” said Bill Baer, a former top antitrust official at the Justice Department, adding that Google was “indisputably powerful.”The case is part of a sweeping effort by the Biden administration and states to rein in the biggest tech companies. The Justice Department has filed a second lawsuit against Google over its advertising technology, which could go to trial as early as next year. The Federal Trade Commission is separately moving toward a trial in an antitrust lawsuit against Meta. Investigations remain open in efforts that could lead to antitrust lawsuits against Amazon and Apple.The Justice Department filed the case accusing Google of illegally maintaining its dominance in search in October 2020. Months later, a group of attorneys general from 35 states, Puerto Rico, Guam and the District of Columbia filed their own lawsuit arguing that Google had abused its monopoly over search. Judge Mehta is considering both lawsuits during the trial.The case centers on the agreements that Google reached with browser developers, smartphone manufacturers and wireless carriers to use Google as the default search engine on their products. Since the lawsuit was filed, more than five million documents and depositions of more than 150 witnesses have been submitted to the court. Last month, Judge Mehta narrowed the scope of the trial, while allowing the core claims of monopoly abuse in search to remain.The trial unfolded on Tuesday in Courtroom 10 at Washington’s federal courthouse, a complex minutes from Capitol Hill. It drew a large crowd, with some people standing in line to enter as early as 4:30 a.m. Officials from the Google rivals Yelp and Microsoft also attended, as did dozens of attorneys and staff from the Justice Department, states and Google after years of work on the case.Judge Mehta began the proceedings punctually. In the government’s opening statement, Mr. Dintzer focused on the search agreements Google had struck with Apple and others. He referenced internal company documents that described how Google would not share revenue with Apple without “default placement” on its devices and how it worked to ensure that Apple couldn’t redirect searches to its Siri assistant.“Your honor, this is a monopolist flexing,” Mr. Dintzer said.In blunt language, Mr. Dintzer also argued that Google had tried to hide documents from antitrust enforcers by including lawyers on conversations and marking them as subject to attorney-client privilege. He showed a message from Sundar Pichai, Google’s chief executive, asking for the chat history to be turned off in one conversation.“They turned history off, your honor, so they could rewrite it here in this courtroom,” Mr. Dintzer said.William Cavanaugh, a lawyer for the states, echoed Mr. Dintzer’s concerns about Google’s agreements to become the default search engines on smartphones. He added that Google had limited a product used to place ads on other search engines to hurt Microsoft, which makes the Bing search engine.In response, Mr. Schmidtlein, Google’s lawyer, argued that the company’s default agreements with browser makers don’t lock up the market the way that the Justice Department said. Browser makers such as Apple and Mozilla both promote other search engines, he said, and it was easy for users to switch their default search engine.Using a slide show, Mr. Schmidtlein demonstrated the number of taps or clicks required to change the default on popular smartphones. People who wished to switch their search engine but did not know how could search Google for instructions or watch a video tutorial on YouTube, which Google owns, he said.The government’s evidence was coming from “snippets and out-of-context” emails, he said.The lawyers also sparred over whether Google was as dominant as the government claimed. The Justice Department and the states said Google competes primarily with broad search engines that act as a single place to look for multiple types of information. But Mr. Schmidtlein said Google’s universe of competitors was wider, including online retailers like Amazon, food delivery apps like DoorDash and travel booking sites like Expedia.In the afternoon, the Justice Department called Hal Varian, Google’s chief economist, as its first witness to establish that the company had long been aware of its power in search and deliberately tried to sidestep antitrust scrutiny.In more than three hours of testimony, Mr. Varian was asked about views that he shared with other Google employees on the power of defaults, the threat of Microsoft’s entry into search and his awareness of language that could invite the attention of antitrust regulators. The Justice Department drew from Mr. Varian’s emails and memos from as far back as the early 2000s.Mr. Varian is scheduled to return to the witness stand on Wednesday.Nico Grant More

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    Amazon to Meet Regulators as U.S. Considers Possible Antitrust Suit

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    Amazon’s meetings with the Federal Trade Commission, known as “last rites” meetings, are typically a final step before the agency votes on filing a lawsuit.Amazon is scheduled to meet with members of the Federal Trade Commission next week to discuss an antitrust lawsuit that the agency may be preparing to file to challenge the power of the retailer’s sprawling business, according to a person with knowledge of the plans.The meetings are set to be held with Lina Khan, the F.T.C. chair, and Rebecca Kelly Slaughter and Alvaro Bedoya, who are F.T.C. commissioners, said the person, who spoke on the condition of anonymity because the discussions are confidential.The meetings signal that the F.T.C. is nearing a decision on whether to move forward with a lawsuit alleging that Amazon has violated antimonopoly laws. Such discussions are sometimes known as “last rites” meetings, named after the prayers some Christians receive on their deathbed. The conversations, which are usually one of the final steps before the agency’s commissioners vote on a lawsuit, give the company a chance to make its case.If the F.T.C. files suit, it would be one of the most significant challenges to Amazon’s business in the company’s nearly 30-year history. Amazon, a $1.4 trillion behemoth, has become a major force in the economy. It now owns not just its trademark online store, but the movie studio Metro-Goldwyn-Mayer, the primary care practice One Medical and the high-end grocery chain Whole Foods. It is also one of the world’s largest provider of cloud computing services.The F.T.C. has investigated Amazon’s business for years. The company’s critics and competitors have argued that the once-upstart online bookstore has used its retailing clout to squeeze the merchants that use its platform to sell their wares. U.S. officials have grown increasingly concerned about the influence and reach of giant tech companies like Amazon, Google and Meta, which owns Facebook and Instagram. The Justice Department has filed several antitrust lawsuits against Google, with two scheduled to go to trial next month. The F.T.C. has also sued Meta over accusations that it snuffed out young competitors by buying Instagram and WhatsApp.Some of those efforts have stumbled in the courts. Federal judges declined this year to stop Meta from acquiring a virtual reality start-up and Microsoft from buying the video game powerhouse Activision Blizzard, dooming F.T.C. challenges to both deals. In 2022, the Justice Department also lost its bid to challenge UnitedHealth Group’s plan to buy a health tech company.Stacy Mitchell, a co-executive director of the advocacy organization Institute for Local Self-Reliance and an Amazon critic, said she hoped the F.T.C. would pursue a sweeping case against the tech giant. She said the agency should focus on how Amazon’s control of the retail business — from its store to its logistics network that delivers packages — let it hurt competitors and merchants.“It’s a watershed moment,” she said. “What we need to see from the F.T.C. is a case that targets the core of Amazon’s monopolization strategy.”Amazon has said that it competes aggressively with other retailers and that efforts to regulate its business would only hurt consumers and the businesses that sell products through its site.Under the leadership of Andy Jassy, Amazon’s chief executive, the retailer has recently been in retrenchment mode. The company has cut costs, laying off thousands of workers as growth slumped after a soaring period fueled by the pandemic. Last week, Amazon announced that its revenue in the second quarter of the year had increased 11 percent, to $134.4 billion, beating analysts’ expectations.In June, the F.T.C. sued Amazon in a separate case that accused the company of tricking users into subscribing to its Prime fast-shipping membership program and then making it difficult for them to cancel.Amazon has also faced scrutiny from states and regulators in other countries. The District of Columbia’s attorney general filed a lawsuit against the company in 2021, arguing that it had used unfair pricing policies against merchants on its site. The lawsuit was thrown out by a judge, though the attorney general has tried to revive the case. California filed a similar lawsuit last year that is moving forward. In December, Amazon also reached a deal to end a European Union antitrust investigation by agreeing to change some of its practices.If the F.T.C. sues, it would formally pit Ms. Khan — who has been one of Amazon’s most prominent detractors — against the company.While a law student at Yale, Ms. Khan had argued that Amazon’s growth represented a failure of American antitrust laws, which she said had become myopically focused on consumer prices as a measure of whether businesses were violating the law. Amazon’s prices were often low, she wrote in a widely read 2017 paper, but that failed to account for other ways it could bully players across the economy.The paper’s success supercharged a debate in Washington about the power of the tech giants. In 2019, federal antitrust regulators decided to investigate some of the companies. In keeping with a longstanding practice of dividing responsibilities, the Justice Department agreed to look at Google and Apple while the F.T.C. examined Facebook and Amazon.President Biden named Ms. Khan chair to oversee the F.T.C. — giving her control of the Amazon investigation — roughly two years later. More

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    Biden Administration Unveils Tougher Guidelines on Mergers

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    The proposed road map for regulatory reviews, last updated in 2020, includes a focus on tech platforms for the first time.The Biden administration’s top antitrust officials unveiled tougher guidelines against tech mergers on Wednesday, signaling their deepening scrutiny of the industry despite recent court losses in their attempts to block tech deal-making.Lina Khan, the chair of the Federal Trade Commission, and Jonathan Kanter, the top antitrust official at the Department of Justice, released draft guidelines for merger reviews that for the first time include a focus on digital platforms and how dominant companies can use their scale to harm future rivals.The guidelines — which generally provide a road map for whether regulators block or approve deals — show the Biden administration’s commitment to an aggressive antitrust agenda aimed at curtailing the power of companies like Google, Meta, Apple and Amazon.The guidelines, which aren’t enforced by law, follow a losing streak in the courts. A ruling last week prevented the F.T.C. from delaying the closing of Microsoft’s $69 billion acquisition of the video game maker Activision Blizzard. In January, a court sided against the F.T.C. in its lawsuit to stop Meta’s purchase of Within, a virtual reality app maker.The forceful antitrust posture is a pillar of President Biden’s agenda to stamp out economic inequality and encourage greater competition. “Promoting competition to lower costs and support small businesses and entrepreneurs is a central part of Bidenomics,” a senior administration official said in a call with reporters.The new guidelines would apply to all deals across the economy. But they highlight obstacles to competition among digital platforms, including how an acquisition of a nascent rival may be intended to kill off future competition. Such deals, known as killer acquisitions, are prevalent in the tech industry and at the heart of an F.T.C. antitrust lawsuit against Meta, which owns Facebook, Instagram and WhatsApp. The agency has accused Meta of buying Instagram in 2012 and WhatsApp in 2014 to prevent future competition.The F.T.C. and Justice Department also said they would look at how companies used their scale, including their large number of users, to ward off competition. These so-called network effects have helped companies like Meta and Google maintain their dominance in social media and internet search.The agencies also laid out ways in which mergers involving “platform” businesses, the model used by Amazon’s online store and Apple’s App Store, could harm competition. An acquisition could hurt competition by giving a platform control over a significant stream of data, the draft guidelines said, echoing concerns that tech giants use their vast troves of information to squash rivals.“As markets and commercial realities change, it is vital that we adapt our law enforcement tools to keep pace so that we can protect competition in a manner that reflects the intricacies of our modern economy,” Mr. Kanter said in a statement. “Simply put, competition today looks different than it did 50 — or even 15 — years ago.”While they lack the force of law, the guidelines can influence how judges look at challenges to mergers and acquisitions. The effort to update the guidelines has been closely watched by businesses and corporate lawyers that navigate regulatory scrutiny of megadeals.The guidelines were last updated in 2020. In 2021, Mr. Biden ordered the Justice Department and the F.T.C. to update them again as part of a broader effort to improve competition across the economy. The agencies will take public comment on the proposals and could make amendments before final guidelines are adopted.“These guidelines contain critical updates while ensuring fidelity to the mandate Congress has given us and the legal precedent on the books,” Ms. Khan said in a statement.While the F.T.C. experienced the recent court losses, it has forced some companies, including the chip-maker Nvidia and the aerospace giant Lockheed Martin, to abandon some large deals. The Justice Department blocked the publisher Penguin Random House from buying Simon & Schuster, using an unusual argument that the merger would harm authors who sold the publication rights to their books. More

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    Broadcast News Is at Center of Fight Over Noncompete Clauses

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    Job-switching barriers are routine at TV stations, even for workers not on the air. A proposed federal rule would curb the practice across all fields.Of all the professions, perhaps none is more commonly bound by contracts that define where else an employee can go work than local television news.The restrictions, known as noncompete clauses, have been a condition of the job for reporters, anchors, sportscasters and meteorologists for decades. More recently, they’ve spread to off-air roles like producers and editors — positions that often pay just barely above the poverty line — and they keep employees from moving to other stations in the same market for up to a year after their contract ends.For that reason, there’s probably no industry that could change as much as a result of the Federal Trade Commission’s effort to severely limit noncompete clauses — if the proposed rule is not derailed before being finalized. Business trade associations are lobbying fiercely against it.“The vast majority of people who work in this country, if they find themselves in a bad situation and they don’t like it, they have options to leave, and they don’t have to move,” said Rick Carr, an agent who represents broadcast workers. “And TV doesn’t allow that.”The pending rule would most likely help people like Leah Rivard, who produces the 6 p.m. and 10 p.m. newscasts at WKBT in La Crosse, Wis.She was hired in the summer of 2021, at an hourly rate of $15. A year later, the station brought on a cohort of recent journalism school graduates as part of a new training program that promised to pay off a chunk of their student loans. Several longer-tenured producers left, and Ms. Rivard wanted to leave, too, since she ended up having to teach a bunch of inexperienced young people how to write scripts and edit video.When Ms. Rivard spoke to her managers, she was told that if she left for another station anywhere in the country before her contract expired this year, they could sue her. So she has continued to work for the station, an experience she’s called “absolute hell.” But even after her contract ends in June, a noncompete clause will prevent her from working for any of the other stations in La Crosse or Eau Claire, an hour and a half north, for a year after that.Ms. Rivard plans to look for work in Milwaukee, and since she doesn’t have much to tie her down in La Crosse, she’s eager to leave. But for plenty of older employees with children in school and mortgages to pay, a noncompete means there’s no easy way out.“If your station is so toxic that it’s affecting you, and you want to leave, you have to leave news altogether and find a public relations job,” Ms. Rivard said. “It leaves no accountability for the company to be a good company for employees.”Chris Palmer, WKBT’s general manager, said he believed noncompetes benefited both employers and employees.“We invest a lot of time and money training and publicly marketing an individual journalist, which, in turn, increases the value of that journalist in the local market,” he said. “These employees also have access to proprietary local research and strategic investments. It would be unfair for that to benefit a direct competitor without protection.”Noncompete clauses have become standard in many workplaces and cover about 18 percent of the U.S. labor force, according to research by economists at the University of Maryland and the University of Michigan.In broadcasting, though, noncompetes are ubiquitous. According to a survey of TV news directors by Bob Papper, an adjunct professor at the S.I. Newhouse School of Public Communications at Syracuse University, about 90 percent of news anchors, 78 percent of reporters and 87 percent of weathercasters were bound by noncompetes in 2022. Those numbers have been fairly stable for decades.Amy DuPont quit her job as an anchor at WKBT and went to work in public relations, knowing that she wouldn’t be allowed to work locally in broadcasting for another year.Narayan Mahon for The New York TimesIn recent years, however, noncompetes have grown to cover a far wider swath of the newsroom. About half of digital writers and content managers, 71 percent of producers and 86 percent of multimedia journalists have clauses restricting their ability to work elsewhere in the market after their contracts end. That’s up significantly from when Mr. Papper started tracking contract provisions in depth two decades ago.That growth has occurred despite a campaign by the one of the biggest labor unions in television, SAG-AFTRA, to limit noncompetes for broadcast employees. Since the mid-90s, the group has been successful in a handful of states — like Massachusetts and Illinois — while failing in others, like Michigan and Pennsylvania. Some states, most notably California, decline to enforce most noncompetes, regardless of the industry.In states that circumscribe noncompetes, where SAG-AFTRA also tends to have the most members, the union says workers enjoy higher wages and more freedom to escape bad workplace conditions — particularly important for women, in a field notorious for sexual harassment.“We have seen more flexibility within our membership, and also nonunion shops, for employees who decide at the end of their contract that they’d like to move on,” said Mary Cavallaro, the chief broadcast officer for SAG-AFTRA. But the National Association of Broadcasters — which signed on to a multiindustry letter opposing the federal government’s proposed ban — says that because stations promote their reporters and anchors to develop their local brand recognition, they should be able to prevent them from “crossing the street,” in industry parlance.“While there are certainly some cases where noncompete clauses are overly restrictive, we believe a categorical ban goes too far and that broadcasting presents a unique case for the use of reasonable noncompete clauses for on-air talent,” said Alex Siciliano, a spokesman for the association.Mr. Siciliano did not respond to a further inquiry about why noncompetes were needed for employees not appearing on air.To many broadcasting veterans, the main reason that stations impose noncompetes is clear: There’s a recruiting crunch in broadcast news, particularly for producers. It’s a difficult job, with either very early or very late hours and tight deadlines. It requires a college degree and sometimes a master’s degree in journalism, and pay is no longer competitive for people with media skills. The median salary for a producer is $38,000, according to Mr. Papper’s survey.“There is a belief on the part of non-news executives that working in TV news is still glamorous enough that people are lining up to go into the business,” Mr. Papper said. “But what I’m hearing is that they’re not lining up anymore. And the fact is that the skill set you learn in college that allows you to start in TV news also allows you entry into a whole lot of other, better-paying jobs.”The apparent disconnect between television news management and the pool of available talent has meant that job postings stay open longer. When an offer is extended, it comes with an almost inescapable time commitment.Beth Johnson, a television talent agent, says she had to move from exclusively representing clients to more training and consulting, since newsroom employees were no longer able to move around enough to negotiate significant pay raises. The rapid consolidation in local news, with major companies like Nexstar and Sinclair buying out smaller ownership groups, has further diminished the employees’ options.“It’s really hard for these journalists to make a good living, and it’s getting harder to leverage to make sure they can,” Ms. Johnson said. “So we wanted to pivot to say to journalists, ‘It doesn’t make sense for you to pay me for three years, because you’re not going to make enough to keep me for three years, but you’re really going to need help with that promotion for a year.’”Although reporters and anchors are paid slightly better than producers, they are routinely forced to move if they need to earn more. If they can’t leave town, they often leave the business. The docket for the Federal Trade Commission’s proposed noncompete ban is peppered with examples of reporters and producers whose careers had been constrained or cut short by the inability to leave their employer for similar work nearby.Take Amy DuPont, one of Ms. Rivard’s former colleagues at WKBT. After working as an anchor in San Diego and Milwaukee, she moved with her husband to La Crosse, her hometown, after he retired from the military. When Ms. DuPont felt she had reached a breaking point at the station, she quit for a job in public relations. Other stations in town asked if she was interested in switching over, but she didn’t even try.“Even if I wanted to, I’m not legally able to go there,” said Ms. DuPont, who now represents Kwik Trip, the Midwestern gas station chain. “For someone like me, who’s married and 43 years old with two children, and I own my home, it prevents me from doing my career, something I’ve spent 22 years doing.”Ultimately, when journalists have to switch cities to earn enough to keep up with the cost of living, local residents lose a trusted source of reporting.David Jones worked in broadcast news for 23 years, mostly in management roles that required him to recruit and hire. He quit in 2021 to join a public relations firm, and posted a long meditation on LinkedIn about how inhospitable the industry had grown for employees.Not mentioned, but under the surface, were noncompetes, which hurt the public as well as the people bound by them, he said in an interview.“You really want someone with market knowledge,” Mr. Jones said, “which isn’t to say that someone can’t come in and learn the market quickly, but there’s so much benefit to the community when you’re able to do that. With noncompetes, you almost never get to do that.” More