Loading summary
Transcript41 lines
- [00:00]
Freewheel Sponsor
This podcast is brought to you by Freewheel. Freewheel gives advertisers direct connections to streaming video inventory from the world's leading publishers. It's simple, really. They're removing middlemen, which means more working media dollars, better outcomes, and enhanced control. Discover how it pays to go direct. Visit freewheel.com marquitecture that's freewheel.com marquiquure.
- [00:35]
Alan Chappelle
Welcome to the Monopoly Report the Monopoly Report is dedicated to chronicling and analyzing the impact of antitrust and other regulations on the global advertising economy. If you were new to the Monopoly Report, you can subscribe to our weekly newsletter@monopoly-report.com and you can check out all of the Monopoly report podcasts@monopolyreportpod.com I'm Alan Chappelle. This week I continue my discussion with Jonathan Kanter, former Assistant Attorney General for the Antitrust Division leading the DOJ antitrust trials against Google during the Biden administration. In Part one of the interview, we talked a bit more generally about antitrust law and then turned to the Google search antitrust case. In Part two of the interview, we finish our discussion of remedies in Google's search case and then turn to questions about the ad tech case. After I'd finished Part one of the interview, it was pretty clear that I wasn't going to get Jonathan to share his thinking about specific divestment options available to the doj, or at least the deliberations around such things. So in light of that, I tried to focus the discussion a bit more on how these types of cases work more generally, or how they worked in previous antitrust enforcement, such as the DOJ cases against Microsoft and IBM years ago. I think that comes off as a more fruitful path for obtaining general insights about what's taken place against Google. I'm excited about this one, so let's get to it. So what are your thoughts on some of the claims around privilege and evidence spoilation? Because it struck me that those were central, central, central in both of the trials, but doesn't seem to have made its way into a lot of mention in some of the post trial stuff, at least in the search case. And like, do you have any thoughts as to why that might be?
- [02:19]
Jonathan Kanter
I think it all speaks for itself, but when you're in a remedy's phase as a defendant, you're going to the court and saying hey, trust us and so you know your track record matters and I'll leave it there.
- [02:34]
Alan Chappelle
Okay, fair enough. I've got a couple of questions specific to the ad tech case and when you transitioned out of doj, we were still waiting for the decision from Judge Brinkama. And now that it's here and they're at the remedy stage, I'd welcome your thoughts on a couple of specifics. So first, in general, how much does DOJ game out various scenarios as it puts together remedies. So I'm not asking for your specific thinking as regards to this case, but like in general, as you're putting together the chessboard of remedies, like how much of that are you gaming out?
- [03:10]
Jonathan Kanter
Yeah, quite a bit. So when we started taking on these ambitious cases, you know, including the cases against Google, but other companies, the question is, well, what do you want? What do you do if the dog catches the car? And so we undertook an exercise, right. And how do we approach a problem like that? What's our process? And my view was, well, let's start with the law. Too often in antitrust, I think prior to our recent arrival, there was this sort of very touchy feeling like, oh, what do we think? How do we engineer a market or what's the right outcome and what's this curve say? And where's the gray out part of the triangle and all that kind of nerdy stuff. That is interesting, but this is an exercise in law enforcement. Someone breaks the law, they should be held accountable. And so we went back to first principles and said, okay, what are the goals of remedies in antitrust cases? What are the range of options legally in an antitrust case and then how do you implement them? And then within that construction, how do you figure out what works and doesn't in a particular case? And so again, you end up with certain core principles. For example, you know, denying the monopolist the fruits of the violation, preventing recurrence, the need for forward looking remedies and technology cases that you can pry open the market in light of where the technology is, you know, today and during the pendency of the remedy, and then you can see different approaches and you can look at other disciplines and we took a lot of time looking at, you know, other sort of regulatory approaches and communications and other things to get a sense of what works and what doesn't. And then you try to do your best and minimize the risk of failure. You know, again, the remedies, when in some of the cases like that we brought are going to be big and expansive and there's going to be risk, I believe that risk on balance should be borne by the defendant, the violator of the law, and not the public. And so it's going to be clunky in some instances, just because you're trying to address 15 years of conduct or deeply entrenched monopolies. And so you do the best you can with the information you have, but you start with those legal realities and market realities. What I think gets sometimes lost in this conversation is this is why you need more real time enforcement. And so, you know, the enforcement authorities actually address these issues, which they could have along the way. Right. The remedies wouldn't have to be so invasive. They'd be a lot easier to implement. They'd be a lot, frankly, more effective in real time. And now, so we're here trying to rewire something that has been stitched together over 15 years, rather than, you know, a little bit of help along the way could have prevented a lot of damage. And so hopefully, you know, the, the approach, again, I think kind of going back to those first principles from the law, I think structural remedies are really important. In the ad tech case, when we filed the case, we were very clear we were going to seek structural remedies. And seems like the DOJ is going to do that. But I also want to make sure we don't lose sight of the fact that we could do a better job making sure we don't fall into this situation again in the future by doing a little bit more in real time.
- [06:39]
Alan Chappelle
So to what degree is DOJ bringing in third party experts who kind of, you know, understand the particular marketplace that you're, you're looking at, at enforcing against?
- [06:51]
Jonathan Kanter
Yeah, again, I won't go into internal deliberations, but what I will say is, and this was a very important part of my tenure, which is, let's start with market realities first. And in order to understand market realities, you need to look under the hood and you need a degree of expertise. And while economists are very important to that to understand principles of economics and how markets function, they're not a substitute for technical experts and industry experts who actually know how things work. I think we were for too long in the antitrust community, long on the former and short on the latter. And so what we tried to build is both in house and outside fleet of experts who bring together all of those fields of expertise and domain knowledge together to make sure that we are starting with those market realities and working backwards.
- [07:43]
Alan Chappelle
So how does DOJ approach divestment, though? At some point you say, okay, X needs to be divested and the, the monopolist is going to say, okay, well, X is worth, you know, $3 trillion.
- [07:55]
Jonathan Kanter
You'Re talking about X the. The company or.
- [07:56]
Alan Chappelle
Yeah, yeah, yeah. XD's been divested from. And the monopolist. I'm trying not to.
- [08:01]
Jonathan Kanter
I was making a joke about the company.
- [08:02]
Alan Chappelle
X. Oh, yes, I'm sorry. And I completely missed it. Oh my goodness. But, but I, I guess my question is, is like, what's the process around? You know, the monopolist says, well, it's worth way more than it is. Or how do you address something where, like, the thing you're looking to divest is very clearly a loss leader for the monopolist. And so ascertaining a value is going to be a lot more difficult.
- [08:26]
Jonathan Kanter
I think if something is a loss leader, then probably the divestiture needs to either be broader than just the loss leader or it needs to be flanked by behavioral remedies that allow the product to have value. I think part of the problem with these kind of tech conglomerates is there's a massive amount of loss leading in cross subsidization. So they drive markets that are competitive, they drive the revenue to zero and the profitability to zero, or sometimes even in the negative. And then they recoup it somewhere else along the chain where they have a dominant position. And in the case of advertising, it might be where you have the long tail of advertisers and you can just sort of take the money from there or other products and services. And so, you know, it's an interesting problem. But, you know, I think again, this is where those market realities come into play and also understanding of, you know, business realities and business strategy come into play as well.
- [09:23]
Alan Chappelle
So what happens if the monopolist says, you know what, I can't find a buyer? Do you just. Do you just shut down the particular thing that is required to divest?
- [09:32]
Jonathan Kanter
No, you throw more assets in and make it attractive.
- [09:35]
Alan Chappelle
Ah, okay. I hadn't considered that as a. As a possibility. So are you able to share thoughts as a private citizen, at least on the. There seems to be a. One of the things that DOJ is proposing now in the ad tech case is a tiered divestment of the DFP publisher platform. And it struck me just on its face as being a rather complex. Complex because I was thinking that addicts and gam DFP would end up being a package deal, but that's actually prohibited there. So I guess my question is, can you share why a tiered approach might be the right way to do this?
- [10:13]
Jonathan Kanter
Yeah, I want to be careful because I haven't studied it and I don't know exactly what their rationale is in proposing a tiered approach. My guess is it's, it's designed to avoid massive disruption. Right, because when you have platform technologies that kind of provide a foundation for other businesses, we start ripping things out quickly. It could lead to unintended consequences. And so I would imagine that in structuring something like that, you want to avoid doing things in a reckless way that has, you know, causes more harm than good. But I don't know for sure exactly where they're going to go and I don't want to get out in front of their rationale. I'm sure it was well reasoned and so. But I also say that where you start isn't always where you finish. And as you start untangling the various different assets and possibilities, it's conceivable that the, you know, plaintiffs proposing the remedy might make some adjustments.
- [11:20]
Alan Chappelle
Well, that makes sense. So to one of my, my earlier questions, I mean, how, how does an approach to remedies avoid simply having the, the monopolist walk away from a particular marketplace? And I guess I can't really say this without saying this directly. Like if you look at Google's S1, they have been exiting the network business gradually for some time, maybe it's 10, 11 quarters so far. And so the fear about pulling some of the publisher tools is that they then just say, you know what, we are going to accelerate our exit away from the network business and more and just going to focus on our owned and operated properties.
- [12:03]
Jonathan Kanter
I think there is a danger in these cases where you don't want the monopolist essentially pull the rug out and leave the industry for dead. And so if a monopolist has created massive dependencies and then wants to essentially exit the market, leave everybody for dead, and then own the industry through its owned and operated, that's a problem. And so what you want to do is you want to make sure stuff works. So again, you have to think about what's the scope of the asset package, what are the requirements in terms of interoperability or providing other products and services, making them available for transition or in the either short or long term. There are a wide range of possibilities, but I think you have to deliberately guard against what it is you just described.
- [12:53]
Alan Chappelle
Fair enough. So two remedies that I really liked. For what it's worth, if Gail Slater happens to, happens to be listening to this, putting the DFP funds in escrow account designed to help publishers with the transition to, you know, the new environment and the prohibition on certain uses of Google's first party data via its buy side platforms. Like, I love those. As somebody who is concerned with the health of the ecosystem, my concern about both of them is that they could be pretty well viewed as an overreach.
- [13:28]
Jonathan Kanter
So I guess I don't think so. I think they're, you know, and again, I can't discuss whether those were in consideration long before the proposals. But I mean that's exactly what you have to do is to make sure that the remedy works. You need fencing in remedies, you need flanking remedies, you need economic incentives. And then you know that data is, that's, that's so key. Right. And so company like Google built its business on the backs of massive amounts of data that had accumulated and then deployed in this context. And you know, it would be irresponsible not to consider how it's used in the context of a remedy.
- [14:05]
Alan Chappelle
Fair enough. And one of the, one of the challenges to trying to go after somebody who's basically set up a, you know, a two sided market where they're, you know, both the judge, the executioner and the jury, it's really, really difficult to find a holistic approach to reining that in. So I'm not disagreeing with you. I guess my comment is that it did seem like it fell outside of the bounds and I just want to confirm you're sort of disagreeing with that.
- [14:32]
Jonathan Kanter
Again, I want to be careful about not weighing in on stuff that we deliberated on when I was there, but I haven't seen anything that to me seems outside the bounds. Everything seems frankly well within it. I mean the first party data and the buy side, even if it was in its own relevant market, was highly relevant to the power and the market dynamics. And so, you know, if it's in the opinion, then it's fair game.
- [14:56]
Alan Chappelle
So I, I've only got a couple of more questions on the ad tech case. I know I've kept you a while here, but it seems like Google's mobile ad platforms like AdMob have not really been the focus of all this and despite having many of the same tying issues. Now I know that Android is sort of in the provisional stage and on the search side and that, you know, if Google isn't playing nice, that's, those are my words, isn't playing nice that, you know, DOJ can come back to the, back to the bar and ask for a divestment of Android. But what's your thinking on the, on mobile, I mean, are we going to need to, are we Going to need another suit specific to the mobile ecosystem.
- [15:37]
Jonathan Kanter
Yeah, I don't know. I mean, I listen, these, the bigger the cases, the harder they are. You know, throw everything in the kitchen sink. You know, when I arrived at tfj, they were separate cases and there's a little bit of historical accident in terms of what was in the search case and what was in the ad tech case and what wasn't. And, and so, you know, I think there are legitimate questions about whether there should be other cases or whether the cases should have been broader. And, you know, where does YouTube fit in? Where does AdMob fit in? And, you know, I can certainly see, you know, a fair criticism that, you know, it could be more comprehensive and to really address the problem, you need to consider all of those ingredients. And, you know, I think that's just, that's where we are and we want to be as effective as we can be. But I'm hopeful that the legal principles we've established across both of those cases will carry over and that future attempts to abuse market power will be addressed swiftly and decisively in light of, you know, the record we've established.
- [16:35]
Alan Chappelle
Fair, fair. And you partially answered this, so. But I'm going to ask it anyway. I mean, do you have any regrets? Was there something within this that you kind of wish you had done? How are you feeling about these cases?
- [16:47]
Jonathan Kanter
Yeah, so regrets? I have a few, but I did it my way.
- [16:53]
Alan Chappelle
Okay, fair enough. I'm going to set you up for that. We just start a comedy night here at the Monopoly Report. One more question. So how do you approach remedies with the potential of creating unintended consequences? Because often the case, and this isn't even just a Google thing. I think this was a Microsoft thing. I think this is to some extent an IBM thing.
- [17:15]
Jonathan Kanter
I think you have to look at these as living, breathing things. Right. And that's the whole one of the reasons why you want a technical committee and you want flexibility. And so, you know, if you look for the government just to come in, restructure the market in one document and then leave, I think you run the real risk that you get something wrong or there are these unintended consequences, or you're not nimble. I am a big believer in principles based remedies. Here is what we are trying to achieve. Here's what we think the best way to achieve it is. But if they engage in circumvention or if market conditions shift, then you need, within appropriate bounds, some degree of flexibility to call some audibles and make some changes. You know, again, I think there's some tension because, you know, how do you deal with, you know, certainty for the defendant and the court and all those other things? But I think if you establish clear principles, like you can't use your assets for the following bad purpose, and you have to divest this in order to make sure that other people have the appropriate opportunity to succeed, you state those principles clearly, and if it turns out you forgot a few things or you put too much in or someone's abusing it, so long as those principles are clearly articulated, then you should have the flexibility in a dynamic way to make adjustments. May not be complete changes to the structure of the remedy, but I do think that those adjustments should be priced in and baked into any structure that's imposed because it's just necessary and I think appropriate.
- [19:00]
Alan Chappelle
This has been absolutely wonderful. I've got one final question.
- [19:04]
Jonathan Kanter
Go for it.
- [19:05]
Alan Chappelle
And I want to see if you can weave a joke into here somehow.
- [19:08]
Jonathan Kanter
All right. At your own risk.
- [19:11]
Alan Chappelle
All of these tech platforms, even going back to Microsoft and IBM, I mean, have a worldwide component. How does a law enforcement agency even think about that? Because you are not here representing, you know, the people of Lithuania or the, you know, or. Or, you know, or some other place. Nonetheless, their regulators are sort of weighing in, and some of them have enforcement cases ongoing. Like, how does that get negotiated? Like, how does. What level of interaction is taking place amongst various regulators?
- [19:43]
Jonathan Kanter
Yeah, so the jokes I'd want to make, I probably won't. So I'll stick to being kind of direct about it, which is, first and foremost, when you're an enforcer, you represent at the Department of Justice, you represent the people of the United States of America. I always had the view that I was a lawyer and I had a client, and the client was the public. And everything we need to do to be in the best interest of the public. And so our analysis would start and end with that question. And every decision we make would be ultimately in the best interest of the public, which was our client. These companies exist a market reality that is global. And there are other regulatory and enforcement authorities across the world that are doing things that inevitably will affect how markets work in our country. And so it is necessary and responsible for us to understand that and to factor that in when we make decisions. But to me, it's a data point and it's a market reality. One that. And to be candid, I think there are a lot of opportunities to learn from each other. Right. When you have counterparts abroad who are undertaking similar kinds of tasks, it would be perfectly appropriate to understand how they're approaching those tasks, what's working, what's not, and, you know, using that knowledge to help make our approach better and better informed. But the decisions we make have to start and finish with what's in the best interest of the, you know, our public. And that's how we did it. And, you know, we did it to the best of our ability.
- [21:17]
Alan Chappelle
You did it your way.
- [21:19]
Jonathan Kanter
Our way, yes.
- [21:22]
Alan Chappelle
Jonathan, thank you so much for spending some time with me. I really appreciate your insights.
- [21:26]
Jonathan Kanter
You bet. Had a lot of fun and I appreciate all the great questions.
- [21:29]
Alan Chappelle
Thanks. That was a great discussion. One thing that didn't entirely make its way into the interview was a discussion of Jonathan and his team's reliance on industry experts within the digital media world. As the DOJ brings these types of cases, Jonathan emphasized how important it was to have so many in the ad space sharing their expertise to get the DOJ up to speed, given the complexities of the marketplace in which we operate it. So a couple of things that struck me, and I should emphasize that this is just my impressions, so as not to be seen as putting words into Jonathan's mouth. First, Jonathan noted that when it comes to remedies, where you start is often different from where you land. So this suggests that whatever's being proposed by the parties is probably going to evolve over time. And then later in the interview, when I asked about the divestment of loss leaders like Chrome and adex, Jonathan noted that a potential response to a claim that a particular platform might be a loss leader is that the divestiture might need to be expanded or at least flanked by additional behavioral remedies. So I took those statements to mean that the remedies phase in these trials may be more fluid and evolving than I'd first thought. When I suggested that the limitations placed on Google's use of first party data as proposed by the DOJ in the AdTech case might be viewed as a stretch. Jonathan vigorously disagreed, saying that those types of fencing remedies and economic incentives are exactly what is required. For my sake, I hope Jonathan's right. And while Jonathan joked a bit when asked about regrets, he did concede that it's a fair question to ask about some of the areas where DOJ didn't go after some of Google's mobile ad businesses and then YouTube. Personally, I fear that we're going to be back in court again soon enough, but maybe future antitrust informants against Big Tech will be slightly easier to bring as a result of Jonathan's efforts. Finally, and again, this is just my interpretation of Jonathan's comments, but it seems like we haven't yet witnessed the final impact of Google's issues with evidence spoliation and Google's approach to the attorney client privilege. Seems like those issues are going to continue to haunt Google as they make their way through these court proceedings. Because I think at the end of the day, a lot of these proceedings rely different entities to trust what you say. That may become a little bit more difficult for Google. That was a great episode. Thank you for listening. Please subscribe to the show@monopolyreportpod.com or on Spotify, Apple, YouTube, or wherever you listen to your podcasts. Thanks again for listening.
- [24:07]
Freewheel Sponsor
Thank you for listening to the marketecture podcast. New episodes come out every Friday and an insightful vendor interview is published each month. You can subscribe to our library of hundreds of executive interviews at marketecture tv. You can also sign up for free for our weekly newsletter with my original strategic insights on the week's news at News Market tv. And if you're feeling social, we operate a vibrant Slack community that you can apply to join@adtechgod.com.