WEBVTT
1
00:00:02.279 --> 00:00:06.519
Welcome to the Regulatory Transparency Project's Fourth Branch podcast series.
2
00:00:07.000 --> 00:00:09.679
All expressions of opinion are those of the speaker.
3
00:00:18.760 --> 00:00:22.719
Hello, and welcome to the Regulatory Transparencies Project's Fourth Branch podcast.
4
00:00:22.760 --> 00:00:24.719
My name is Steve Schaeffer, and I'm the director of
5
00:00:24.760 --> 00:00:28.879
the Federal Society's Regulatory Transparency Project, and I'm glad you're
6
00:00:28.879 --> 00:00:32.320
here today. We are discussing the failed Jet Blue and
7
00:00:32.359 --> 00:00:36.359
Spirit Airlines merger with Anti trucks anti trust expert ald
8
00:00:36.439 --> 00:00:39.600
nabboit a note, all expressions of opinion are those of
9
00:00:39.719 --> 00:00:44.679
the experts. ALDA. Nabbot is a senior research fellow focusing
10
00:00:44.679 --> 00:00:49.000
on anti trust issues. Before joining Mercadis, mister Abbitt had
11
00:00:49.000 --> 00:00:53.399
served as the FTC General Counsel from twenty eighteen to
12
00:00:53.479 --> 00:00:56.200
early twenty twenty one, where he represented the commissioning in
13
00:00:56.240 --> 00:00:59.679
court and provided legal advice to its representatives. Prior to
14
00:00:59.679 --> 00:01:02.000
working at the FTC, mister Abbitt worked at the Heritage
15
00:01:02.039 --> 00:01:05.120
Foundation and BlackBerry Limited. He also served as an adjunct
16
00:01:05.120 --> 00:01:08.959
professor at George Mason's Antiinsclia Law School from nineteen ninety
17
00:01:09.000 --> 00:01:11.879
one to twenty eighteen. He has a jd from Harvard
18
00:01:11.959 --> 00:01:14.799
Law School and an MA in economics from Georgetown University
19
00:01:15.120 --> 00:01:18.239
and is just an all round great guy. So Alden,
20
00:01:18.280 --> 00:01:19.719
thank you for joining us.
21
00:01:21.079 --> 00:01:24.719
Well, thank you Steve for the kind words, and thank
22
00:01:24.760 --> 00:01:27.840
you to the Federalist Society in the Right or Transparency
23
00:01:27.959 --> 00:01:32.640
Project for hosting this podcast. And what I think is
24
00:01:32.680 --> 00:01:36.920
an interesting issue. It's a case study about how I
25
00:01:37.040 --> 00:01:42.000
think merger analysis can go wrong if you're not careful. Specifically,
26
00:01:42.400 --> 00:01:46.359
the Justice Department's successful challenge about a year ago to
27
00:01:46.480 --> 00:01:50.920
Jet Blues for posed acquisition of Sperit Airlines provides an
28
00:01:50.959 --> 00:01:55.959
illustration of a Biden administration's and I Trust agencies new
29
00:01:56.040 --> 00:02:00.799
and less favorable approach to considering mergery efficiencies. And since
30
00:02:00.840 --> 00:02:04.760
we're changing administrations, it also may provide an example that
31
00:02:04.840 --> 00:02:09.120
the new incoming Trump and I Trust leadership may want
32
00:02:09.159 --> 00:02:16.039
to examine. It's also so ironically, I think the Justice
33
00:02:16.039 --> 00:02:20.159
Department's action may have tended to reduce, instead of enhancing,
34
00:02:20.960 --> 00:02:25.560
airline competition, by further entrenching a fore firm oligotholy of
35
00:02:25.680 --> 00:02:30.439
US airlines that real substantial market power American, Delta, Southwest
36
00:02:30.479 --> 00:02:35.000
and United. If that is the case, airline travelers ultimately
37
00:02:35.039 --> 00:02:38.639
will be the losers. So before turning to the specifics
38
00:02:38.639 --> 00:02:41.319
of the case, let me describe federal anti trust merger
39
00:02:41.400 --> 00:02:46.360
law in a nutshell. A merger violence the anti trust laws,
40
00:02:46.840 --> 00:02:50.759
specifically Section seven of the Clayton Act. If quote in
41
00:02:50.879 --> 00:02:53.840
any line of commerce in any section of the country,
42
00:02:54.479 --> 00:02:58.439
the effect of such acquisition may be substantially lesson competition
43
00:02:59.039 --> 00:03:02.919
or tend to create monopoletly close quote. Now, federal judges
44
00:03:02.960 --> 00:03:08.879
have viewed this requirement as requiring that relevant market or
45
00:03:09.080 --> 00:03:12.520
markets affected by a merger or be defined and assessed.
46
00:03:12.599 --> 00:03:15.400
So are you're asking, is there harm or not in
47
00:03:15.439 --> 00:03:19.360
a particular market. If competition is likely to be harmed
48
00:03:19.360 --> 00:03:22.000
in one or more relevant markets, the merger will be
49
00:03:22.039 --> 00:03:25.439
struck down. So after a likely harm is found in
50
00:03:25.479 --> 00:03:28.960
irrelevant market, the fact that competition might actually be enhanced
51
00:03:28.960 --> 00:03:32.960
in some other markets is irrelevant, the merger will still
52
00:03:33.000 --> 00:03:37.759
be rejected. Now, for over four decades, countervailing efficiencies have
53
00:03:37.800 --> 00:03:44.240
been considered in assessing whether in otherwise anti competitive merger passes.
54
00:03:44.360 --> 00:03:49.639
Muster efficiencies must, however, outweigh the anti competitive effects and
55
00:03:49.719 --> 00:03:54.919
must benefit consumers, And looking at efficiencies and consumers is
56
00:03:55.000 --> 00:03:59.520
consistent with what the Supreme Court said anti trust law
57
00:03:59.599 --> 00:04:04.400
is aimed at. It's a consumer welfare prescription, as a
58
00:04:04.439 --> 00:04:09.280
Supreme Court that in nineteen seventy nine. Now, for example,
59
00:04:09.280 --> 00:04:13.159
a merger that otherwise would reduce competition in a market,
60
00:04:13.240 --> 00:04:15.439
what do you allowed if it led the cost reductions
61
00:04:15.479 --> 00:04:19.079
or quality and service improvements that made consumers in all
62
00:04:19.199 --> 00:04:23.120
relevant markets that are off. However, even if a merger
63
00:04:23.199 --> 00:04:26.560
raised consumer welfare in one or more markets, it would
64
00:04:26.600 --> 00:04:30.120
almost always be struck down if consumers were made worse
65
00:04:30.160 --> 00:04:33.360
off in at least one market. Now, what did I say?
66
00:04:33.399 --> 00:04:38.199
Almost always? The twenty ten Joint of Federal Trade Commission
67
00:04:38.720 --> 00:04:44.839
DOJ merger guidelines created a narrow exception. Specifically, the guidelines
68
00:04:44.879 --> 00:04:49.720
stated that the agencies could exercise their prosecutorial discretion to
69
00:04:49.839 --> 00:04:55.160
consider efficiencies not strictly in irrelevant market, but quote so
70
00:04:55.399 --> 00:05:00.279
inextricably linked with it that a partial divestiture or other
71
00:05:00.759 --> 00:05:05.759
remedy could not feasibly eliminate the anti competitive effect in
72
00:05:05.839 --> 00:05:11.560
the relevant market without sacrificing efficiencies in other markets. So
73
00:05:11.639 --> 00:05:14.279
the agencies were more likely to consider out of market
74
00:05:14.360 --> 00:05:20.439
efficiencies when they very greatly outweighed the expected in market
75
00:05:20.480 --> 00:05:25.399
anti competitive effect. Now, the agency is explicitly credited out
76
00:05:25.439 --> 00:05:30.240
of market efficiencies in declining to challenge transactions in several
77
00:05:30.560 --> 00:05:34.879
particular cases, and I'd like to highlight two Justice Department
78
00:05:35.279 --> 00:05:40.560
airline merger cases. In twenty eleven in Southwest Airlines Company
79
00:05:40.639 --> 00:05:45.560
air trans Holding, Inc. Although the parties overlapped on some
80
00:05:45.759 --> 00:05:50.319
NonStop routes that is specific markets, say Pair Roots going
81
00:05:50.360 --> 00:05:55.000
from Sat Washington to Phoenix, the DOJ chose not to
82
00:05:55.240 --> 00:05:58.720
challenge a merger of these low cost airlines because it
83
00:05:58.839 --> 00:06:02.120
would allow the parties to offer new services and no
84
00:06:02.240 --> 00:06:07.519
affairs on other routes benefiting consumers nationwide. So this was
85
00:06:07.560 --> 00:06:11.439
an example. Okay, maybe a particular narrow route, there's some
86
00:06:11.600 --> 00:06:15.160
questions about harm, but we know that consumers many more
87
00:06:15.160 --> 00:06:20.279
consinuents will gain on major on other major routes. So similarly,
88
00:06:21.319 --> 00:06:26.720
DOJ declined to challenge Delta Airlines acquisition of Northwest Airlines
89
00:06:26.720 --> 00:06:29.879
in two thousand and eight. Although the merging parties were
90
00:06:29.920 --> 00:06:33.839
the only or two of three airlines providing services on
91
00:06:33.959 --> 00:06:40.439
multiple non stop routes, DOJ credited significant overall efficiencies from
92
00:06:40.480 --> 00:06:45.959
combining the party sizable and complementary markets and networks. So
93
00:06:46.079 --> 00:06:50.000
in both cases, the DOJ declined to challenge a transaction
94
00:06:50.480 --> 00:06:54.319
because out of market efficiencies outweighed alleged in market harm.
95
00:06:55.879 --> 00:07:01.560
But times have changed. FTC and GD released new joint
96
00:07:01.600 --> 00:07:05.600
Merger Guidelines in twenty twenty three, reflecting a far more
97
00:07:05.600 --> 00:07:10.560
aggressive approach to merger enforcement. This approach also is reflected
98
00:07:10.560 --> 00:07:15.160
in the treatment of efficiencies. By the way, when I
99
00:07:15.160 --> 00:07:19.879
said a more aggressive approach, it was much more focused
100
00:07:19.920 --> 00:07:24.279
just on how reduction of a number of major competitors
101
00:07:24.480 --> 00:07:28.199
so called higher market concentration, and less focus on the
102
00:07:28.240 --> 00:07:33.240
real economic effects of particular transactions. Now, the twenty twenty
103
00:07:33.240 --> 00:07:36.600
three Joint Merger Guidelines did away with the twenty twenty
104
00:07:36.639 --> 00:07:42.079
guidelines more permissive language regarding out of market efficiencies, it
105
00:07:42.959 --> 00:07:47.480
stating unconditionally that quote the anti trust agencies will not
106
00:07:47.600 --> 00:07:52.199
credit benefits outside the relevant market that would not prevent
107
00:07:53.079 --> 00:07:56.480
a lessening of competition in the relevant market, So it's
108
00:07:56.519 --> 00:08:02.040
double negatives. But it says that basically, even if there
109
00:08:02.040 --> 00:08:05.879
are lots of gains, lots of benefits to consumers, huge
110
00:08:05.879 --> 00:08:09.360
benefits in other markets, if there's an often very narrow,
111
00:08:09.360 --> 00:08:13.000
irrelevant market or on that some consumers would not benefit,
112
00:08:13.319 --> 00:08:17.399
we're not going to consider the major benefits at the
113
00:08:17.439 --> 00:08:21.319
same time, the twenty twenty three guidelines prohibit consideration ab
114
00:08:21.319 --> 00:08:25.279
out of market efficiencies. They mandate consideration of out of
115
00:08:25.399 --> 00:08:29.839
market harms. Specifically, they say that the FTC and NOOJ
116
00:08:30.040 --> 00:08:33.480
will not credit one entry by other firms into the
117
00:08:33.480 --> 00:08:38.559
irrelevant market or two efficiencies arising in irrelevant market if
118
00:08:38.639 --> 00:08:42.840
either involves a decrease in competition in another market. That is,
119
00:08:42.879 --> 00:08:46.080
another market that would be not at all considered. It's
120
00:08:46.120 --> 00:08:51.679
not winning the scope of the merger. So the agencies
121
00:08:51.759 --> 00:08:54.759
must consider out of market harms to determine whether the
122
00:08:54.840 --> 00:08:58.759
party's entering efficiency arguments in a relevant market are valid.
123
00:08:59.480 --> 00:09:03.159
In sharp contrasts, the old twenty ten guidelines allowed agencies
124
00:09:03.200 --> 00:09:08.320
to credit entry that involved shifting capacity, say shifting planes,
125
00:09:08.320 --> 00:09:11.519
for example, from another market to the relevant market in
126
00:09:11.559 --> 00:09:18.080
response to change competitive conditions due to a merger. For example,
127
00:09:18.080 --> 00:09:22.240
the old guidelines credited entry by suppliers with quote readily
128
00:09:22.279 --> 00:09:26.759
available swing capacity currently used in adjacent markets that can
129
00:09:26.840 --> 00:09:30.639
easily and profitably be shifted to serve the relevant market
130
00:09:31.120 --> 00:09:35.000
close quote. That is so called rapid entrance. So I said, okay,
131
00:09:36.039 --> 00:09:38.440
there's not really going to be harmed if entry is
132
00:09:38.480 --> 00:09:41.960
going to happen if if prices rise or can quality
133
00:09:42.039 --> 00:09:45.639
goes down. As for efficiencies, the twenty twenty guidelines state
134
00:09:45.679 --> 00:09:50.159
that efficiencies should not quote arise from anti competitive reductions
135
00:09:50.159 --> 00:09:53.840
in output or service, but they did not directly forbid
136
00:09:53.919 --> 00:09:58.519
consideration of efficiencies that may in some respect less in
137
00:09:58.559 --> 00:10:02.519
competition and non relevant markets. Now, the twenty twenty three
138
00:10:02.559 --> 00:10:06.720
guidelines also demonstrate an increased focus on harm to competition
139
00:10:06.879 --> 00:10:13.159
outside irrelevant market. I think we suggested, so what does
140
00:10:13.200 --> 00:10:21.320
this all mean. How did they discuss instance, reprepositioning of assets. Well,
141
00:10:22.320 --> 00:10:26.240
as I said, repositioning of assets is actually quite important
142
00:10:26.320 --> 00:10:31.320
often in mergers because that just reflects really the how
143
00:10:31.440 --> 00:10:36.320
markets may adapt and change in light of a merger.
144
00:10:37.080 --> 00:10:41.159
So regarding entry, they guidelines now advise quote the agencies
145
00:10:41.200 --> 00:10:44.759
typically do not credit entry that depends on lessing competition
146
00:10:45.360 --> 00:10:49.399
you know their markets close quote. And also rephysitioning would
147
00:10:49.399 --> 00:10:53.759
reduce competition and markets from which products or services are moved.
148
00:10:54.120 --> 00:10:57.559
If that happens, it's not a cognizable rebuttal for a
149
00:10:57.639 --> 00:11:00.919
lessening of competition and irrelevant market. So even if really
150
00:11:00.960 --> 00:11:04.440
competition would get better in the market relevant market, we
151
00:11:04.519 --> 00:11:08.879
think that the chance that would have hurt competition somewhere else,
152
00:11:09.879 --> 00:11:13.399
we're not even going to take account of it. And
153
00:11:15.080 --> 00:11:19.919
so now the Jeff Blue Spirit merger decision really sort
154
00:11:19.919 --> 00:11:23.000
of reflects, I think, the new thinking, and we're going
155
00:11:23.080 --> 00:11:26.960
to examine now, examined it now and discussing this case.
156
00:11:27.000 --> 00:11:30.879
I should note my comments are very much in line
157
00:11:30.919 --> 00:11:35.840
with an analysis published about eight nine months ago in
158
00:11:35.919 --> 00:11:39.639
Law three sixty by an trust lawyers Lisa Ruman and
159
00:11:39.679 --> 00:11:45.240
Anthony Ferrara. So I great minds sink alike, but they
160
00:11:45.279 --> 00:11:50.399
had the same concerns about how efficiencies have analysis has
161
00:11:50.440 --> 00:11:53.720
been changed in airlines. So let's go to look at
162
00:11:53.799 --> 00:11:59.559
Jeff Lewin's Spirit, the country sixth and seventh largest airlines, respectively,
163
00:11:59.600 --> 00:12:02.840
which hounce the plan emerge in July twenty twenty two.
164
00:12:03.600 --> 00:12:07.519
DOJ followed complaint challenging the merger in March twenty twenty three.
165
00:12:08.120 --> 00:12:11.679
According to DOJ, the transaction would eliminate the largest and
166
00:12:11.759 --> 00:12:16.440
fastest growing ultralocus low cost carrier in the US, and
167
00:12:16.559 --> 00:12:20.720
the Justice Department alleged relevant markets or individual flight routes
168
00:12:21.480 --> 00:12:25.000
and identify numerous route specific markets where Jet Blue and
169
00:12:25.080 --> 00:12:29.559
Spirit compete to provide service, I say, city city to city,
170
00:12:31.320 --> 00:12:34.559
so Jet Blue and Spirit Center should be a national
171
00:12:34.639 --> 00:12:38.399
relevant market, arguing that the roots specific markets failed to
172
00:12:38.440 --> 00:12:42.840
account for system wide competition, and the two companies argue
173
00:12:42.879 --> 00:12:47.039
the merger would enhance national competition and benefit consumers by
174
00:12:47.080 --> 00:12:50.480
physicianing Jet Blue as a more effective competitor to the
175
00:12:50.559 --> 00:12:55.120
large legacy airlines. For example, the merger would have allowed
176
00:12:55.159 --> 00:12:58.440
Jet Blue to expand its network, adding flights to new
177
00:12:58.519 --> 00:13:03.000
locations and growing its presence in multiple cities, while also
178
00:13:03.039 --> 00:13:07.840
expanding other aspects of its business, such as its loyalty program,
179
00:13:07.879 --> 00:13:12.960
to increase its relevant for relevance for consumers. And simultaneously,
180
00:13:13.519 --> 00:13:17.240
the parties argued that even looking at the root specific mergers,
181
00:13:17.840 --> 00:13:22.600
DOJ alleged other airlines could readily move fleet and crew
182
00:13:23.000 --> 00:13:27.679
ship capacity to enter the alleged relevant markets, defeating any
183
00:13:27.720 --> 00:13:32.320
competitive harm arising from the merger. Now Justice Department rebutted
184
00:13:32.360 --> 00:13:37.519
the arguments astro efficiencies. It said it declined to negotiate
185
00:13:37.559 --> 00:13:43.440
to negotiate a settlement that would address the problematic overlaps
186
00:13:43.440 --> 00:13:47.840
between the airlines via divestitures which the airlines that opened
187
00:13:48.440 --> 00:13:54.200
had offered up while preserving of transactions claimed benefits, and
188
00:13:54.240 --> 00:13:57.279
this was a departure from the Justice Department's practice in
189
00:13:57.360 --> 00:14:00.799
past airline merger cases, and I should saying in general
190
00:14:00.879 --> 00:14:04.080
this was also the case in a recent supermarket case.
191
00:14:04.120 --> 00:14:07.639
In the past, the agencies, if you can assure the
192
00:14:07.679 --> 00:14:11.279
agency that, Okay, we're going to reduce the number of
193
00:14:11.360 --> 00:14:14.600
competitors in a particular market, if you have any concerns
194
00:14:14.600 --> 00:14:17.200
you're going to sell our capacity to somebody else, you
195
00:14:17.240 --> 00:14:19.399
are not going to reduce the number of competitors. Will
196
00:14:19.440 --> 00:14:25.240
take actions to make sure also the new competitor works out. Currently,
197
00:14:25.279 --> 00:14:29.200
the agencies don't like that. In accepting instances, they say,
198
00:14:29.240 --> 00:14:31.960
we don't want investenters. We want to say yay or
199
00:14:32.039 --> 00:14:34.679
ny about a merger, and that sort of ignores the
200
00:14:34.759 --> 00:14:39.799
real benefits the merger might bring about, but they generally
201
00:14:39.879 --> 00:14:44.360
don't want to take that into account. So the parties
202
00:14:44.440 --> 00:14:49.440
in this case had offered major divestitors at four major
203
00:14:49.480 --> 00:14:53.600
airports who address DOJ's concerns about head to head competition
204
00:14:53.720 --> 00:14:57.960
and roots specific markets. Now, DJ argued that the parties
205
00:14:58.000 --> 00:15:02.519
cannot appoint to efficiencies arrive in arising outside of the
206
00:15:02.559 --> 00:15:06.600
alleged roots specific markets that would justify the deal, and
207
00:15:06.720 --> 00:15:09.840
even if Jet Blue would have been able to enter
208
00:15:09.960 --> 00:15:14.240
new routes and accelerate its network growth nationally. DOJ contended
209
00:15:14.279 --> 00:15:19.679
efficiency would not create concrete benefits for consumers in the
210
00:15:19.720 --> 00:15:23.120
specific alleged route markets, but it didn't really say why
211
00:15:23.120 --> 00:15:26.039
it wouldn't. And again this is important because we're talking
212
00:15:26.039 --> 00:15:29.600
about an oligopoly where it's the same major airlines and
213
00:15:29.639 --> 00:15:34.120
this was really and up to now they budget airlines
214
00:15:34.120 --> 00:15:36.480
had shown some success, you know, and really being able
215
00:15:36.480 --> 00:15:39.639
to lower costs, but Justice again didn't want to look
216
00:15:39.639 --> 00:15:43.320
at it. As for entry, DOJ argued courts should not
217
00:15:43.399 --> 00:15:47.519
credit other airlines entry into the alleged route specific markets
218
00:15:47.879 --> 00:15:52.960
if that would involve shifting capacity from other routs, that is,
219
00:15:53.000 --> 00:15:57.039
exiting or reducing fight frequency on less profitable routes. Such
220
00:15:57.080 --> 00:16:01.720
shifts would risk harmy competition consumers in other markets, and
221
00:16:01.759 --> 00:16:05.679
again this reflects the concern of the new merger guidelines
222
00:16:05.679 --> 00:16:11.519
about competition in other markets. But it said that, but
223
00:16:11.559 --> 00:16:15.200
the DOJ did not identify those other markets as relevant markets,
224
00:16:15.559 --> 00:16:19.000
nor did DOJ alledge of transaction would cause a substantial
225
00:16:19.080 --> 00:16:23.320
lessening of competition in those other markets. So I think
226
00:16:23.440 --> 00:16:27.360
it could be fairly sad. It was specultly harm and
227
00:16:27.399 --> 00:16:31.080
there's a general emphasis on really wanting a very concrete
228
00:16:31.440 --> 00:16:35.759
likelihood of harm. But in January twenty twenty four, US
229
00:16:35.799 --> 00:16:40.279
District Court of Massachusetts issued in junction blocking a transaction
230
00:16:40.960 --> 00:16:45.279
and jeff Lewin's FIRIT subsequently abandoned the transaction. So the
231
00:16:45.360 --> 00:16:49.600
court credited jeff Lewin's firits efficiencies evidence, finding the merger
232
00:16:49.600 --> 00:16:52.960
would like to expand Jefflu's network, fleet and loyalty program
233
00:16:53.000 --> 00:16:56.600
and enhance competitive pressure on a big poor air lines.
234
00:16:57.320 --> 00:17:00.480
But the court agreed with DOJ that relevant markets were
235
00:17:00.559 --> 00:17:06.680
routes specific and ultimately concluded the party's efficiencies evidence failed
236
00:17:06.680 --> 00:17:10.680
to establish a proposed merger would not substantially less in
237
00:17:10.720 --> 00:17:15.319
competition in at least some of irrelevant markets. So the
238
00:17:15.359 --> 00:17:18.880
court seems to have concluded that while jeff Lewin's FEAR
239
00:17:18.920 --> 00:17:24.519
approved cognizable efficiencies, most of those efficiencies benefited a national
240
00:17:24.599 --> 00:17:30.319
market instead of specific routes that constituted irrelevant markets Justice
241
00:17:30.359 --> 00:17:36.920
Department focused on. Therefore, the claimed efficiencies were largely out
242
00:17:36.960 --> 00:17:40.359
of market. At the same time, the Court accept the
243
00:17:40.359 --> 00:17:44.119
DOJ's argument it should not credit other airlines entry into
244
00:17:44.160 --> 00:17:48.720
the roots specific markets that would involve abandoning existing markets
245
00:17:48.759 --> 00:17:52.440
or markets, or they would have otherwise entered or grown,
246
00:17:52.519 --> 00:17:56.279
but for the merger, the court concluded that such entry
247
00:17:56.319 --> 00:17:59.559
cannot offset ani competitive effects of the merger because it
248
00:17:59.559 --> 00:18:03.319
would create new arms to competition. Okay, So, in addition,
249
00:18:03.799 --> 00:18:08.640
at the court discounted the proposed divestiture buyer's testimony that
250
00:18:08.759 --> 00:18:13.319
he could readily shift assets from profitable routes to the
251
00:18:13.400 --> 00:18:17.920
relevant markets, which suggests that the divestitor could have worked
252
00:18:17.960 --> 00:18:23.200
to avoid harm. So the court was unpersuaded by entry
253
00:18:23.279 --> 00:18:28.039
arguments accepted in prior airline industry mergers, which we already mentioned,
254
00:18:28.400 --> 00:18:32.880
because entry into the relevant roots specific markets would reduce
255
00:18:32.960 --> 00:18:37.400
competition on other roots at issue in the transaction. So
256
00:18:37.519 --> 00:18:41.039
in some the court declined to look outside the relevant
257
00:18:41.079 --> 00:18:45.039
markets and weighing efficiencies, but did look outside the irrelevant
258
00:18:45.119 --> 00:18:48.960
markets in assessing entry. And this is just one district
259
00:18:48.960 --> 00:18:52.519
court opinion, of course, and it's unclear whether most courts
260
00:18:52.519 --> 00:18:55.839
would adopt the same analysis, but it is fairly well
261
00:18:55.960 --> 00:19:00.559
established at courts will not credit efficiencies arising outside the
262
00:19:00.640 --> 00:19:04.640
relevant market that the government is challenging. However, there are
263
00:19:05.000 --> 00:19:08.279
appear to have been no prior decisions or the court
264
00:19:08.559 --> 00:19:13.799
considered out of market harms caused by repositioning from competitors.
265
00:19:14.200 --> 00:19:17.720
So prior decisions have generally focused on whether entry or
266
00:19:17.759 --> 00:19:23.359
repositioning by competitors into the alleged relevant market would rebut
267
00:19:23.400 --> 00:19:26.720
the alleged arms in that market, not on whether the
268
00:19:26.880 --> 00:19:31.200
entry or repositioning would cause harm in another market. So
269
00:19:32.680 --> 00:19:35.599
was the court's holding good for competition? So this may
270
00:19:35.640 --> 00:19:41.240
seem very technical efficiency efficiencies here or harmed there that
271
00:19:41.319 --> 00:19:45.160
are not that are counted or not counted, But big picture,
272
00:19:45.720 --> 00:19:49.519
what's going to happen? Flash forward to November eighteen, twenty
273
00:19:49.559 --> 00:19:55.319
twenty four. Once Fared Airlines filed for bankruptcy protection citing
274
00:19:55.359 --> 00:20:01.200
mounting losses, unaffordable depth, increased competition for bargain seeking airline passengers.
275
00:20:01.599 --> 00:20:05.400
It said the inability to merge had left it little
276
00:20:05.480 --> 00:20:09.319
choice now. Three of the big four airlines, American, United
277
00:20:09.319 --> 00:20:12.119
and Delta in the past many years ago filed for
278
00:20:12.200 --> 00:20:17.279
bankruptcy and emerged stronger. But those competitors had numerous hops
279
00:20:17.319 --> 00:20:22.039
in a major nationwide in international presence, it's far from
280
00:20:22.079 --> 00:20:25.640
clear that Spirit, a struggling budget airline based on a
281
00:20:25.640 --> 00:20:29.079
low fare model, will have similar success. It has already
282
00:20:29.119 --> 00:20:31.720
announced the sale of twenty three of its airbus jets,
283
00:20:31.799 --> 00:20:36.440
the late future aircraft deliveries infernold hundreds of pilots. If
284
00:20:36.480 --> 00:20:40.480
Spirit is forced to scale back its schedule or cities
285
00:20:40.480 --> 00:20:44.799
it serves, goes out of business or gets purchased by
286
00:20:44.799 --> 00:20:47.680
another larger airline. By the way, it would even worse
287
00:20:48.039 --> 00:20:51.759
if one of the big Polygothlis purchased in the fresher
288
00:20:51.799 --> 00:20:55.440
to offer lower prices will be reduced and many air
289
00:20:55.480 --> 00:21:00.400
travelers may suffer as a result. So again have to
290
00:21:00.400 --> 00:21:03.480
see what happens. But I think the big four airlines,
291
00:21:04.200 --> 00:21:09.039
who have been criticized for not competing as vigorously as
292
00:21:09.039 --> 00:21:11.720
they should on price, maybe breathing a sigh of relief.
293
00:21:12.319 --> 00:21:15.119
So what are the key takeaways in this case? This
294
00:21:15.279 --> 00:21:20.000
case clearly illustrates the current FTC and DJ's views toward
295
00:21:20.039 --> 00:21:22.880
out of market efficiencies and out of market arms under
296
00:21:22.880 --> 00:21:27.759
the twenty twenty three merger guidelines, and this shift in
297
00:21:27.799 --> 00:21:31.839
policy last year and actually in recent years was especially
298
00:21:31.960 --> 00:21:35.480
likely to affect firms that operate across multiple local and
299
00:21:35.519 --> 00:21:39.920
regional markets. In short, the twenty twenty three merger guidelines
300
00:21:39.960 --> 00:21:43.319
heightened focus on out of market harms makes it harder
301
00:21:43.319 --> 00:21:46.599
for merging for parties to rely on entry and efficiency
302
00:21:46.680 --> 00:21:50.839
defenses to support their transactions, while at the same time
303
00:21:50.960 --> 00:21:56.079
just favoring divestngers that would preserve significant efficiencies. Now, companies
304
00:21:56.119 --> 00:22:00.160
hoping to highlight the pro competitive benefits of transactions need
305
00:22:00.200 --> 00:22:03.759
to consider whether they can plousitibly frame those benefits as
306
00:22:03.799 --> 00:22:08.319
arising within irrelevant markets. The agencies typically look to define
307
00:22:08.359 --> 00:22:12.960
the narrow as possible relevant markets, and they even be
308
00:22:13.039 --> 00:22:16.759
incentivized to alets very narrow markets to exclude the parties
309
00:22:16.839 --> 00:22:21.480
claimed efficiencies, and that leads to a criticism, as sometimes
310
00:22:21.519 --> 00:22:24.720
in made about murder enforcement. You've got these very tiny
311
00:22:24.880 --> 00:22:29.119
markets and the old joke that you know, a good
312
00:22:29.160 --> 00:22:33.759
prosecutor could even indict before a grand joy a ham sandwich. Well,
313
00:22:33.799 --> 00:22:38.279
you know, the argument is that a good enforcer can
314
00:22:38.279 --> 00:22:40.599
come up with very, very narrow markets where it's going
315
00:22:40.599 --> 00:22:43.920
to find harm, but that often ignores the bigger picture.
316
00:22:44.799 --> 00:22:47.640
Firm should bear in mind that if their transaction is
317
00:22:47.759 --> 00:22:51.319
challenged in court, they will need to frame any efficiency
318
00:22:51.440 --> 00:22:54.599
argument in such a way that the claimed efficiencies followed
319
00:22:54.599 --> 00:22:57.640
in irrelevant markets, and at the same time they must
320
00:22:57.720 --> 00:23:02.759
be prepared to address ancillary market harms arising from in
321
00:23:02.960 --> 00:23:07.079
market efficiencies. Again, that's under the twenty twenty three guidelines,
322
00:23:08.759 --> 00:23:13.680
and so in some once again, the twenty twenty three
323
00:23:14.640 --> 00:23:17.720
guidelines is set off to allow the agencies to take
324
00:23:17.759 --> 00:23:23.400
a broad approach to discredit efficiencies that reflect out of
325
00:23:23.519 --> 00:23:27.440
market effects. So what can the new administration do? Well?
326
00:23:27.559 --> 00:23:31.839
It could utter the implications. Well, in particular, it may
327
00:23:31.880 --> 00:23:35.200
want to rewrite or revise part or all of the guidelines.
328
00:23:35.519 --> 00:23:39.400
It may want to seriously consider revising the discussion of
329
00:23:39.440 --> 00:23:44.640
efficiencies to reinstate the more pro efficiency twenty twenty guidelines approach.
330
00:23:45.240 --> 00:23:47.440
It may even want to go beyond that by showing
331
00:23:47.519 --> 00:23:51.279
a greater willingness to weigh out of market efficiencies when
332
00:23:51.319 --> 00:23:55.960
the benefits they provide to consumers clearly outweigh consumer losses
333
00:23:56.240 --> 00:24:00.480
within the relevant market. Specific language might, for example, provide
334
00:24:00.480 --> 00:24:03.519
that in such a case, the agencies would not pursue
335
00:24:03.519 --> 00:24:09.799
a murderer challenge. Finally, revised guidelines might state that efficiency
336
00:24:09.920 --> 00:24:14.400
claims will be accorded as much weight as series of
337
00:24:14.480 --> 00:24:20.400
competitive harm based always on hard facts. So, and that's
338
00:24:20.680 --> 00:24:23.920
such a physician would be aligned with a recommendation by
339
00:24:24.000 --> 00:24:29.720
former FTC Commissioner Christine Wilson, it could encourage more efficiency
340
00:24:29.799 --> 00:24:34.440
driven deals to be considered thereby raising consumer welfare. And
341
00:24:34.519 --> 00:24:36.920
certainly in my view and a view of Wilson and
342
00:24:37.000 --> 00:24:40.319
some other people, that it would mean that the undercounting
343
00:24:40.319 --> 00:24:44.519
of efficiencies, even under the old guidelines or underestimation, is
344
00:24:44.559 --> 00:24:47.559
a bad thing. Because, after all, as I already suggested,
345
00:24:48.519 --> 00:24:51.200
the Supreme Court has always said consumer welfare as a
346
00:24:51.279 --> 00:24:56.839
key a guidepost of anti trust and indeed Adam Smith,
347
00:24:57.480 --> 00:25:00.240
the sort of the father of modern economics, and well
348
00:25:00.279 --> 00:25:04.559
some nations way back in seventeen seventy six said for
349
00:25:05.200 --> 00:25:09.799
actions by producers are a value social value to the
350
00:25:09.839 --> 00:25:14.960
extent they benefit the consumers. So I think consumer welfare
351
00:25:15.000 --> 00:25:18.160
should always be on our mind, and the agencies, the
352
00:25:18.200 --> 00:25:21.680
anti trust agencies can do a better job of taking
353
00:25:21.759 --> 00:25:25.880
account a broader understanding of efficiencies if they want to
354
00:25:25.880 --> 00:25:29.720
truly promote consumer welfare. And I hope you found this
355
00:25:29.759 --> 00:25:31.960
of some interest, and I thank you for your time.
356
00:25:32.759 --> 00:25:35.759
Yeah, Altin, thank you so much for sharing not only
357
00:25:36.440 --> 00:25:40.599
this particular denied merger between Jet Blue and Spirit Airlines,
358
00:25:40.640 --> 00:25:45.720
but also like the background of prior merger guidelines and
359
00:25:45.799 --> 00:25:50.559
what our audience should look forward to as their discussions
360
00:25:50.599 --> 00:25:53.039
about who's going to be on the FTC, but also
361
00:25:53.640 --> 00:25:57.240
what future actions they may in fact take, and also
362
00:25:58.039 --> 00:26:01.680
people keeping an eye on what happens with Spirit Airlines
363
00:26:02.119 --> 00:26:05.200
as they go through structuring and as you indicated, the
364
00:26:05.240 --> 00:26:08.920
selling off of planes. So lots to think about there,
365
00:26:09.000 --> 00:26:11.200
So thank you so much for your time and sharing
366
00:26:11.200 --> 00:26:14.039
your expertise with our audience, and for those of you
367
00:26:14.079 --> 00:26:16.400
who are listening, you know, thank you so much. Please
368
00:26:16.480 --> 00:26:19.480
check out more content like this at regproject dot org.
369
00:26:19.519 --> 00:26:23.160
That's regproject dot org, where you have the opportunity to
370
00:26:23.160 --> 00:26:28.079
listen to experts share their you know, their analysis and information,
371
00:26:29.920 --> 00:26:32.720
and we really appreciate you all, so thank you very much.
372
00:26:39.559 --> 00:26:42.720
Half of the Federal Society's Regulatory Transparency Project. Thanks for
373
00:26:42.759 --> 00:26:45.839
tuning in to the Fourth Branch podcast to catch every
374
00:26:45.880 --> 00:26:49.200
new episode when it's released. You can subscribe on Apple Podcasts,
375
00:26:49.400 --> 00:26:53.200
Google Play, and Speaker For lays from our TP, please
376
00:26:53.279 --> 00:26:56.319
visit our website at reg project dot org. That's our
377
00:26:56.440 --> 00:26:58.200
egproject dot org.
378
00:27:07.079 --> 00:27:08.960
This has been a fed Sock audio production.
379
00:27:10.039 --> 00:27:10.279
Yam
1
00:00:02.279 --> 00:00:06.519
Welcome to the Regulatory Transparency Project's Fourth Branch podcast series.
2
00:00:07.000 --> 00:00:09.679
All expressions of opinion are those of the speaker.
3
00:00:18.760 --> 00:00:22.719
Hello, and welcome to the Regulatory Transparencies Project's Fourth Branch podcast.
4
00:00:22.760 --> 00:00:24.719
My name is Steve Schaeffer, and I'm the director of
5
00:00:24.760 --> 00:00:28.879
the Federal Society's Regulatory Transparency Project, and I'm glad you're
6
00:00:28.879 --> 00:00:32.320
here today. We are discussing the failed Jet Blue and
7
00:00:32.359 --> 00:00:36.359
Spirit Airlines merger with Anti trucks anti trust expert ald
8
00:00:36.439 --> 00:00:39.600
nabboit a note, all expressions of opinion are those of
9
00:00:39.719 --> 00:00:44.679
the experts. ALDA. Nabbot is a senior research fellow focusing
10
00:00:44.679 --> 00:00:49.000
on anti trust issues. Before joining Mercadis, mister Abbitt had
11
00:00:49.000 --> 00:00:53.399
served as the FTC General Counsel from twenty eighteen to
12
00:00:53.479 --> 00:00:56.200
early twenty twenty one, where he represented the commissioning in
13
00:00:56.240 --> 00:00:59.679
court and provided legal advice to its representatives. Prior to
14
00:00:59.679 --> 00:01:02.000
working at the FTC, mister Abbitt worked at the Heritage
15
00:01:02.039 --> 00:01:05.120
Foundation and BlackBerry Limited. He also served as an adjunct
16
00:01:05.120 --> 00:01:08.959
professor at George Mason's Antiinsclia Law School from nineteen ninety
17
00:01:09.000 --> 00:01:11.879
one to twenty eighteen. He has a jd from Harvard
18
00:01:11.959 --> 00:01:14.799
Law School and an MA in economics from Georgetown University
19
00:01:15.120 --> 00:01:18.239
and is just an all round great guy. So Alden,
20
00:01:18.280 --> 00:01:19.719
thank you for joining us.
21
00:01:21.079 --> 00:01:24.719
Well, thank you Steve for the kind words, and thank
22
00:01:24.760 --> 00:01:27.840
you to the Federalist Society in the Right or Transparency
23
00:01:27.959 --> 00:01:32.640
Project for hosting this podcast. And what I think is
24
00:01:32.680 --> 00:01:36.920
an interesting issue. It's a case study about how I
25
00:01:37.040 --> 00:01:42.000
think merger analysis can go wrong if you're not careful. Specifically,
26
00:01:42.400 --> 00:01:46.359
the Justice Department's successful challenge about a year ago to
27
00:01:46.480 --> 00:01:50.920
Jet Blues for posed acquisition of Sperit Airlines provides an
28
00:01:50.959 --> 00:01:55.959
illustration of a Biden administration's and I Trust agencies new
29
00:01:56.040 --> 00:02:00.799
and less favorable approach to considering mergery efficiencies. And since
30
00:02:00.840 --> 00:02:04.760
we're changing administrations, it also may provide an example that
31
00:02:04.840 --> 00:02:09.120
the new incoming Trump and I Trust leadership may want
32
00:02:09.159 --> 00:02:16.039
to examine. It's also so ironically, I think the Justice
33
00:02:16.039 --> 00:02:20.159
Department's action may have tended to reduce, instead of enhancing,
34
00:02:20.960 --> 00:02:25.560
airline competition, by further entrenching a fore firm oligotholy of
35
00:02:25.680 --> 00:02:30.439
US airlines that real substantial market power American, Delta, Southwest
36
00:02:30.479 --> 00:02:35.000
and United. If that is the case, airline travelers ultimately
37
00:02:35.039 --> 00:02:38.639
will be the losers. So before turning to the specifics
38
00:02:38.639 --> 00:02:41.319
of the case, let me describe federal anti trust merger
39
00:02:41.400 --> 00:02:46.360
law in a nutshell. A merger violence the anti trust laws,
40
00:02:46.840 --> 00:02:50.759
specifically Section seven of the Clayton Act. If quote in
41
00:02:50.879 --> 00:02:53.840
any line of commerce in any section of the country,
42
00:02:54.479 --> 00:02:58.439
the effect of such acquisition may be substantially lesson competition
43
00:02:59.039 --> 00:03:02.919
or tend to create monopoletly close quote. Now, federal judges
44
00:03:02.960 --> 00:03:08.879
have viewed this requirement as requiring that relevant market or
45
00:03:09.080 --> 00:03:12.520
markets affected by a merger or be defined and assessed.
46
00:03:12.599 --> 00:03:15.400
So are you're asking, is there harm or not in
47
00:03:15.439 --> 00:03:19.360
a particular market. If competition is likely to be harmed
48
00:03:19.360 --> 00:03:22.000
in one or more relevant markets, the merger will be
49
00:03:22.039 --> 00:03:25.439
struck down. So after a likely harm is found in
50
00:03:25.479 --> 00:03:28.960
irrelevant market, the fact that competition might actually be enhanced
51
00:03:28.960 --> 00:03:32.960
in some other markets is irrelevant, the merger will still
52
00:03:33.000 --> 00:03:37.759
be rejected. Now, for over four decades, countervailing efficiencies have
53
00:03:37.800 --> 00:03:44.240
been considered in assessing whether in otherwise anti competitive merger passes.
54
00:03:44.360 --> 00:03:49.639
Muster efficiencies must, however, outweigh the anti competitive effects and
55
00:03:49.719 --> 00:03:54.919
must benefit consumers, And looking at efficiencies and consumers is
56
00:03:55.000 --> 00:03:59.520
consistent with what the Supreme Court said anti trust law
57
00:03:59.599 --> 00:04:04.400
is aimed at. It's a consumer welfare prescription, as a
58
00:04:04.439 --> 00:04:09.280
Supreme Court that in nineteen seventy nine. Now, for example,
59
00:04:09.280 --> 00:04:13.159
a merger that otherwise would reduce competition in a market,
60
00:04:13.240 --> 00:04:15.439
what do you allowed if it led the cost reductions
61
00:04:15.479 --> 00:04:19.079
or quality and service improvements that made consumers in all
62
00:04:19.199 --> 00:04:23.120
relevant markets that are off. However, even if a merger
63
00:04:23.199 --> 00:04:26.560
raised consumer welfare in one or more markets, it would
64
00:04:26.600 --> 00:04:30.120
almost always be struck down if consumers were made worse
65
00:04:30.160 --> 00:04:33.360
off in at least one market. Now, what did I say?
66
00:04:33.399 --> 00:04:38.199
Almost always? The twenty ten Joint of Federal Trade Commission
67
00:04:38.720 --> 00:04:44.839
DOJ merger guidelines created a narrow exception. Specifically, the guidelines
68
00:04:44.879 --> 00:04:49.720
stated that the agencies could exercise their prosecutorial discretion to
69
00:04:49.839 --> 00:04:55.160
consider efficiencies not strictly in irrelevant market, but quote so
70
00:04:55.399 --> 00:05:00.279
inextricably linked with it that a partial divestiture or other
71
00:05:00.759 --> 00:05:05.759
remedy could not feasibly eliminate the anti competitive effect in
72
00:05:05.839 --> 00:05:11.560
the relevant market without sacrificing efficiencies in other markets. So
73
00:05:11.639 --> 00:05:14.279
the agencies were more likely to consider out of market
74
00:05:14.360 --> 00:05:20.439
efficiencies when they very greatly outweighed the expected in market
75
00:05:20.480 --> 00:05:25.399
anti competitive effect. Now, the agency is explicitly credited out
76
00:05:25.439 --> 00:05:30.240
of market efficiencies in declining to challenge transactions in several
77
00:05:30.560 --> 00:05:34.879
particular cases, and I'd like to highlight two Justice Department
78
00:05:35.279 --> 00:05:40.560
airline merger cases. In twenty eleven in Southwest Airlines Company
79
00:05:40.639 --> 00:05:45.560
air trans Holding, Inc. Although the parties overlapped on some
80
00:05:45.759 --> 00:05:50.319
NonStop routes that is specific markets, say Pair Roots going
81
00:05:50.360 --> 00:05:55.000
from Sat Washington to Phoenix, the DOJ chose not to
82
00:05:55.240 --> 00:05:58.720
challenge a merger of these low cost airlines because it
83
00:05:58.839 --> 00:06:02.120
would allow the parties to offer new services and no
84
00:06:02.240 --> 00:06:07.519
affairs on other routes benefiting consumers nationwide. So this was
85
00:06:07.560 --> 00:06:11.439
an example. Okay, maybe a particular narrow route, there's some
86
00:06:11.600 --> 00:06:15.160
questions about harm, but we know that consumers many more
87
00:06:15.160 --> 00:06:20.279
consinuents will gain on major on other major routes. So similarly,
88
00:06:21.319 --> 00:06:26.720
DOJ declined to challenge Delta Airlines acquisition of Northwest Airlines
89
00:06:26.720 --> 00:06:29.879
in two thousand and eight. Although the merging parties were
90
00:06:29.920 --> 00:06:33.839
the only or two of three airlines providing services on
91
00:06:33.959 --> 00:06:40.439
multiple non stop routes, DOJ credited significant overall efficiencies from
92
00:06:40.480 --> 00:06:45.959
combining the party sizable and complementary markets and networks. So
93
00:06:46.079 --> 00:06:50.000
in both cases, the DOJ declined to challenge a transaction
94
00:06:50.480 --> 00:06:54.319
because out of market efficiencies outweighed alleged in market harm.
95
00:06:55.879 --> 00:07:01.560
But times have changed. FTC and GD released new joint
96
00:07:01.600 --> 00:07:05.600
Merger Guidelines in twenty twenty three, reflecting a far more
97
00:07:05.600 --> 00:07:10.560
aggressive approach to merger enforcement. This approach also is reflected
98
00:07:10.560 --> 00:07:15.160
in the treatment of efficiencies. By the way, when I
99
00:07:15.160 --> 00:07:19.879
said a more aggressive approach, it was much more focused
100
00:07:19.920 --> 00:07:24.279
just on how reduction of a number of major competitors
101
00:07:24.480 --> 00:07:28.199
so called higher market concentration, and less focus on the
102
00:07:28.240 --> 00:07:33.240
real economic effects of particular transactions. Now, the twenty twenty
103
00:07:33.240 --> 00:07:36.600
three Joint Merger Guidelines did away with the twenty twenty
104
00:07:36.639 --> 00:07:42.079
guidelines more permissive language regarding out of market efficiencies, it
105
00:07:42.959 --> 00:07:47.480
stating unconditionally that quote the anti trust agencies will not
106
00:07:47.600 --> 00:07:52.199
credit benefits outside the relevant market that would not prevent
107
00:07:53.079 --> 00:07:56.480
a lessening of competition in the relevant market, So it's
108
00:07:56.519 --> 00:08:02.040
double negatives. But it says that basically, even if there
109
00:08:02.040 --> 00:08:05.879
are lots of gains, lots of benefits to consumers, huge
110
00:08:05.879 --> 00:08:09.360
benefits in other markets, if there's an often very narrow,
111
00:08:09.360 --> 00:08:13.000
irrelevant market or on that some consumers would not benefit,
112
00:08:13.319 --> 00:08:17.399
we're not going to consider the major benefits at the
113
00:08:17.439 --> 00:08:21.319
same time, the twenty twenty three guidelines prohibit consideration ab
114
00:08:21.319 --> 00:08:25.279
out of market efficiencies. They mandate consideration of out of
115
00:08:25.399 --> 00:08:29.839
market harms. Specifically, they say that the FTC and NOOJ
116
00:08:30.040 --> 00:08:33.480
will not credit one entry by other firms into the
117
00:08:33.480 --> 00:08:38.559
irrelevant market or two efficiencies arising in irrelevant market if
118
00:08:38.639 --> 00:08:42.840
either involves a decrease in competition in another market. That is,
119
00:08:42.879 --> 00:08:46.080
another market that would be not at all considered. It's
120
00:08:46.120 --> 00:08:51.679
not winning the scope of the merger. So the agencies
121
00:08:51.759 --> 00:08:54.759
must consider out of market harms to determine whether the
122
00:08:54.840 --> 00:08:58.759
party's entering efficiency arguments in a relevant market are valid.
123
00:08:59.480 --> 00:09:03.159
In sharp contrasts, the old twenty ten guidelines allowed agencies
124
00:09:03.200 --> 00:09:08.320
to credit entry that involved shifting capacity, say shifting planes,
125
00:09:08.320 --> 00:09:11.519
for example, from another market to the relevant market in
126
00:09:11.559 --> 00:09:18.080
response to change competitive conditions due to a merger. For example,
127
00:09:18.080 --> 00:09:22.240
the old guidelines credited entry by suppliers with quote readily
128
00:09:22.279 --> 00:09:26.759
available swing capacity currently used in adjacent markets that can
129
00:09:26.840 --> 00:09:30.639
easily and profitably be shifted to serve the relevant market
130
00:09:31.120 --> 00:09:35.000
close quote. That is so called rapid entrance. So I said, okay,
131
00:09:36.039 --> 00:09:38.440
there's not really going to be harmed if entry is
132
00:09:38.480 --> 00:09:41.960
going to happen if if prices rise or can quality
133
00:09:42.039 --> 00:09:45.639
goes down. As for efficiencies, the twenty twenty guidelines state
134
00:09:45.679 --> 00:09:50.159
that efficiencies should not quote arise from anti competitive reductions
135
00:09:50.159 --> 00:09:53.840
in output or service, but they did not directly forbid
136
00:09:53.919 --> 00:09:58.519
consideration of efficiencies that may in some respect less in
137
00:09:58.559 --> 00:10:02.519
competition and non relevant markets. Now, the twenty twenty three
138
00:10:02.559 --> 00:10:06.720
guidelines also demonstrate an increased focus on harm to competition
139
00:10:06.879 --> 00:10:13.159
outside irrelevant market. I think we suggested, so what does
140
00:10:13.200 --> 00:10:21.320
this all mean. How did they discuss instance, reprepositioning of assets. Well,
141
00:10:22.320 --> 00:10:26.240
as I said, repositioning of assets is actually quite important
142
00:10:26.320 --> 00:10:31.320
often in mergers because that just reflects really the how
143
00:10:31.440 --> 00:10:36.320
markets may adapt and change in light of a merger.
144
00:10:37.080 --> 00:10:41.159
So regarding entry, they guidelines now advise quote the agencies
145
00:10:41.200 --> 00:10:44.759
typically do not credit entry that depends on lessing competition
146
00:10:45.360 --> 00:10:49.399
you know their markets close quote. And also rephysitioning would
147
00:10:49.399 --> 00:10:53.759
reduce competition and markets from which products or services are moved.
148
00:10:54.120 --> 00:10:57.559
If that happens, it's not a cognizable rebuttal for a
149
00:10:57.639 --> 00:11:00.919
lessening of competition and irrelevant market. So even if really
150
00:11:00.960 --> 00:11:04.440
competition would get better in the market relevant market, we
151
00:11:04.519 --> 00:11:08.879
think that the chance that would have hurt competition somewhere else,
152
00:11:09.879 --> 00:11:13.399
we're not even going to take account of it. And
153
00:11:15.080 --> 00:11:19.919
so now the Jeff Blue Spirit merger decision really sort
154
00:11:19.919 --> 00:11:23.000
of reflects, I think, the new thinking, and we're going
155
00:11:23.080 --> 00:11:26.960
to examine now, examined it now and discussing this case.
156
00:11:27.000 --> 00:11:30.879
I should note my comments are very much in line
157
00:11:30.919 --> 00:11:35.840
with an analysis published about eight nine months ago in
158
00:11:35.919 --> 00:11:39.639
Law three sixty by an trust lawyers Lisa Ruman and
159
00:11:39.679 --> 00:11:45.240
Anthony Ferrara. So I great minds sink alike, but they
160
00:11:45.279 --> 00:11:50.399
had the same concerns about how efficiencies have analysis has
161
00:11:50.440 --> 00:11:53.720
been changed in airlines. So let's go to look at
162
00:11:53.799 --> 00:11:59.559
Jeff Lewin's Spirit, the country sixth and seventh largest airlines, respectively,
163
00:11:59.600 --> 00:12:02.840
which hounce the plan emerge in July twenty twenty two.
164
00:12:03.600 --> 00:12:07.519
DOJ followed complaint challenging the merger in March twenty twenty three.
165
00:12:08.120 --> 00:12:11.679
According to DOJ, the transaction would eliminate the largest and
166
00:12:11.759 --> 00:12:16.440
fastest growing ultralocus low cost carrier in the US, and
167
00:12:16.559 --> 00:12:20.720
the Justice Department alleged relevant markets or individual flight routes
168
00:12:21.480 --> 00:12:25.000
and identify numerous route specific markets where Jet Blue and
169
00:12:25.080 --> 00:12:29.559
Spirit compete to provide service, I say, city city to city,
170
00:12:31.320 --> 00:12:34.559
so Jet Blue and Spirit Center should be a national
171
00:12:34.639 --> 00:12:38.399
relevant market, arguing that the roots specific markets failed to
172
00:12:38.440 --> 00:12:42.840
account for system wide competition, and the two companies argue
173
00:12:42.879 --> 00:12:47.039
the merger would enhance national competition and benefit consumers by
174
00:12:47.080 --> 00:12:50.480
physicianing Jet Blue as a more effective competitor to the
175
00:12:50.559 --> 00:12:55.120
large legacy airlines. For example, the merger would have allowed
176
00:12:55.159 --> 00:12:58.440
Jet Blue to expand its network, adding flights to new
177
00:12:58.519 --> 00:13:03.000
locations and growing its presence in multiple cities, while also
178
00:13:03.039 --> 00:13:07.840
expanding other aspects of its business, such as its loyalty program,
179
00:13:07.879 --> 00:13:12.960
to increase its relevant for relevance for consumers. And simultaneously,
180
00:13:13.519 --> 00:13:17.240
the parties argued that even looking at the root specific mergers,
181
00:13:17.840 --> 00:13:22.600
DOJ alleged other airlines could readily move fleet and crew
182
00:13:23.000 --> 00:13:27.679
ship capacity to enter the alleged relevant markets, defeating any
183
00:13:27.720 --> 00:13:32.320
competitive harm arising from the merger. Now Justice Department rebutted
184
00:13:32.360 --> 00:13:37.519
the arguments astro efficiencies. It said it declined to negotiate
185
00:13:37.559 --> 00:13:43.440
to negotiate a settlement that would address the problematic overlaps
186
00:13:43.440 --> 00:13:47.840
between the airlines via divestitures which the airlines that opened
187
00:13:48.440 --> 00:13:54.200
had offered up while preserving of transactions claimed benefits, and
188
00:13:54.240 --> 00:13:57.279
this was a departure from the Justice Department's practice in
189
00:13:57.360 --> 00:14:00.799
past airline merger cases, and I should saying in general
190
00:14:00.879 --> 00:14:04.080
this was also the case in a recent supermarket case.
191
00:14:04.120 --> 00:14:07.639
In the past, the agencies, if you can assure the
192
00:14:07.679 --> 00:14:11.279
agency that, Okay, we're going to reduce the number of
193
00:14:11.360 --> 00:14:14.600
competitors in a particular market, if you have any concerns
194
00:14:14.600 --> 00:14:17.200
you're going to sell our capacity to somebody else, you
195
00:14:17.240 --> 00:14:19.399
are not going to reduce the number of competitors. Will
196
00:14:19.440 --> 00:14:25.240
take actions to make sure also the new competitor works out. Currently,
197
00:14:25.279 --> 00:14:29.200
the agencies don't like that. In accepting instances, they say,
198
00:14:29.240 --> 00:14:31.960
we don't want investenters. We want to say yay or
199
00:14:32.039 --> 00:14:34.679
ny about a merger, and that sort of ignores the
200
00:14:34.759 --> 00:14:39.799
real benefits the merger might bring about, but they generally
201
00:14:39.879 --> 00:14:44.360
don't want to take that into account. So the parties
202
00:14:44.440 --> 00:14:49.440
in this case had offered major divestitors at four major
203
00:14:49.480 --> 00:14:53.600
airports who address DOJ's concerns about head to head competition
204
00:14:53.720 --> 00:14:57.960
and roots specific markets. Now, DJ argued that the parties
205
00:14:58.000 --> 00:15:02.519
cannot appoint to efficiencies arrive in arising outside of the
206
00:15:02.559 --> 00:15:06.600
alleged roots specific markets that would justify the deal, and
207
00:15:06.720 --> 00:15:09.840
even if Jet Blue would have been able to enter
208
00:15:09.960 --> 00:15:14.240
new routes and accelerate its network growth nationally. DOJ contended
209
00:15:14.279 --> 00:15:19.679
efficiency would not create concrete benefits for consumers in the
210
00:15:19.720 --> 00:15:23.120
specific alleged route markets, but it didn't really say why
211
00:15:23.120 --> 00:15:26.039
it wouldn't. And again this is important because we're talking
212
00:15:26.039 --> 00:15:29.600
about an oligopoly where it's the same major airlines and
213
00:15:29.639 --> 00:15:34.120
this was really and up to now they budget airlines
214
00:15:34.120 --> 00:15:36.480
had shown some success, you know, and really being able
215
00:15:36.480 --> 00:15:39.639
to lower costs, but Justice again didn't want to look
216
00:15:39.639 --> 00:15:43.320
at it. As for entry, DOJ argued courts should not
217
00:15:43.399 --> 00:15:47.519
credit other airlines entry into the alleged route specific markets
218
00:15:47.879 --> 00:15:52.960
if that would involve shifting capacity from other routs, that is,
219
00:15:53.000 --> 00:15:57.039
exiting or reducing fight frequency on less profitable routes. Such
220
00:15:57.080 --> 00:16:01.720
shifts would risk harmy competition consumers in other markets, and
221
00:16:01.759 --> 00:16:05.679
again this reflects the concern of the new merger guidelines
222
00:16:05.679 --> 00:16:11.519
about competition in other markets. But it said that, but
223
00:16:11.559 --> 00:16:15.200
the DOJ did not identify those other markets as relevant markets,
224
00:16:15.559 --> 00:16:19.000
nor did DOJ alledge of transaction would cause a substantial
225
00:16:19.080 --> 00:16:23.320
lessening of competition in those other markets. So I think
226
00:16:23.440 --> 00:16:27.360
it could be fairly sad. It was specultly harm and
227
00:16:27.399 --> 00:16:31.080
there's a general emphasis on really wanting a very concrete
228
00:16:31.440 --> 00:16:35.759
likelihood of harm. But in January twenty twenty four, US
229
00:16:35.799 --> 00:16:40.279
District Court of Massachusetts issued in junction blocking a transaction
230
00:16:40.960 --> 00:16:45.279
and jeff Lewin's FIRIT subsequently abandoned the transaction. So the
231
00:16:45.360 --> 00:16:49.600
court credited jeff Lewin's firits efficiencies evidence, finding the merger
232
00:16:49.600 --> 00:16:52.960
would like to expand Jefflu's network, fleet and loyalty program
233
00:16:53.000 --> 00:16:56.600
and enhance competitive pressure on a big poor air lines.
234
00:16:57.320 --> 00:17:00.480
But the court agreed with DOJ that relevant markets were
235
00:17:00.559 --> 00:17:06.680
routes specific and ultimately concluded the party's efficiencies evidence failed
236
00:17:06.680 --> 00:17:10.680
to establish a proposed merger would not substantially less in
237
00:17:10.720 --> 00:17:15.319
competition in at least some of irrelevant markets. So the
238
00:17:15.359 --> 00:17:18.880
court seems to have concluded that while jeff Lewin's FEAR
239
00:17:18.920 --> 00:17:24.519
approved cognizable efficiencies, most of those efficiencies benefited a national
240
00:17:24.599 --> 00:17:30.319
market instead of specific routes that constituted irrelevant markets Justice
241
00:17:30.359 --> 00:17:36.920
Department focused on. Therefore, the claimed efficiencies were largely out
242
00:17:36.960 --> 00:17:40.359
of market. At the same time, the Court accept the
243
00:17:40.359 --> 00:17:44.119
DOJ's argument it should not credit other airlines entry into
244
00:17:44.160 --> 00:17:48.720
the roots specific markets that would involve abandoning existing markets
245
00:17:48.759 --> 00:17:52.440
or markets, or they would have otherwise entered or grown,
246
00:17:52.519 --> 00:17:56.279
but for the merger, the court concluded that such entry
247
00:17:56.319 --> 00:17:59.559
cannot offset ani competitive effects of the merger because it
248
00:17:59.559 --> 00:18:03.319
would create new arms to competition. Okay, So, in addition,
249
00:18:03.799 --> 00:18:08.640
at the court discounted the proposed divestiture buyer's testimony that
250
00:18:08.759 --> 00:18:13.319
he could readily shift assets from profitable routes to the
251
00:18:13.400 --> 00:18:17.920
relevant markets, which suggests that the divestitor could have worked
252
00:18:17.960 --> 00:18:23.200
to avoid harm. So the court was unpersuaded by entry
253
00:18:23.279 --> 00:18:28.039
arguments accepted in prior airline industry mergers, which we already mentioned,
254
00:18:28.400 --> 00:18:32.880
because entry into the relevant roots specific markets would reduce
255
00:18:32.960 --> 00:18:37.400
competition on other roots at issue in the transaction. So
256
00:18:37.519 --> 00:18:41.039
in some the court declined to look outside the relevant
257
00:18:41.079 --> 00:18:45.039
markets and weighing efficiencies, but did look outside the irrelevant
258
00:18:45.119 --> 00:18:48.960
markets in assessing entry. And this is just one district
259
00:18:48.960 --> 00:18:52.519
court opinion, of course, and it's unclear whether most courts
260
00:18:52.519 --> 00:18:55.839
would adopt the same analysis, but it is fairly well
261
00:18:55.960 --> 00:19:00.559
established at courts will not credit efficiencies arising outside the
262
00:19:00.640 --> 00:19:04.640
relevant market that the government is challenging. However, there are
263
00:19:05.000 --> 00:19:08.279
appear to have been no prior decisions or the court
264
00:19:08.559 --> 00:19:13.799
considered out of market harms caused by repositioning from competitors.
265
00:19:14.200 --> 00:19:17.720
So prior decisions have generally focused on whether entry or
266
00:19:17.759 --> 00:19:23.359
repositioning by competitors into the alleged relevant market would rebut
267
00:19:23.400 --> 00:19:26.720
the alleged arms in that market, not on whether the
268
00:19:26.880 --> 00:19:31.200
entry or repositioning would cause harm in another market. So
269
00:19:32.680 --> 00:19:35.599
was the court's holding good for competition? So this may
270
00:19:35.640 --> 00:19:41.240
seem very technical efficiency efficiencies here or harmed there that
271
00:19:41.319 --> 00:19:45.160
are not that are counted or not counted, But big picture,
272
00:19:45.720 --> 00:19:49.519
what's going to happen? Flash forward to November eighteen, twenty
273
00:19:49.559 --> 00:19:55.319
twenty four. Once Fared Airlines filed for bankruptcy protection citing
274
00:19:55.359 --> 00:20:01.200
mounting losses, unaffordable depth, increased competition for bargain seeking airline passengers.
275
00:20:01.599 --> 00:20:05.400
It said the inability to merge had left it little
276
00:20:05.480 --> 00:20:09.319
choice now. Three of the big four airlines, American, United
277
00:20:09.319 --> 00:20:12.119
and Delta in the past many years ago filed for
278
00:20:12.200 --> 00:20:17.279
bankruptcy and emerged stronger. But those competitors had numerous hops
279
00:20:17.319 --> 00:20:22.039
in a major nationwide in international presence, it's far from
280
00:20:22.079 --> 00:20:25.640
clear that Spirit, a struggling budget airline based on a
281
00:20:25.640 --> 00:20:29.079
low fare model, will have similar success. It has already
282
00:20:29.119 --> 00:20:31.720
announced the sale of twenty three of its airbus jets,
283
00:20:31.799 --> 00:20:36.440
the late future aircraft deliveries infernold hundreds of pilots. If
284
00:20:36.480 --> 00:20:40.480
Spirit is forced to scale back its schedule or cities
285
00:20:40.480 --> 00:20:44.799
it serves, goes out of business or gets purchased by
286
00:20:44.799 --> 00:20:47.680
another larger airline. By the way, it would even worse
287
00:20:48.039 --> 00:20:51.759
if one of the big Polygothlis purchased in the fresher
288
00:20:51.799 --> 00:20:55.440
to offer lower prices will be reduced and many air
289
00:20:55.480 --> 00:21:00.400
travelers may suffer as a result. So again have to
290
00:21:00.400 --> 00:21:03.480
see what happens. But I think the big four airlines,
291
00:21:04.200 --> 00:21:09.039
who have been criticized for not competing as vigorously as
292
00:21:09.039 --> 00:21:11.720
they should on price, maybe breathing a sigh of relief.
293
00:21:12.319 --> 00:21:15.119
So what are the key takeaways in this case? This
294
00:21:15.279 --> 00:21:20.000
case clearly illustrates the current FTC and DJ's views toward
295
00:21:20.039 --> 00:21:22.880
out of market efficiencies and out of market arms under
296
00:21:22.880 --> 00:21:27.759
the twenty twenty three merger guidelines, and this shift in
297
00:21:27.799 --> 00:21:31.839
policy last year and actually in recent years was especially
298
00:21:31.960 --> 00:21:35.480
likely to affect firms that operate across multiple local and
299
00:21:35.519 --> 00:21:39.920
regional markets. In short, the twenty twenty three merger guidelines
300
00:21:39.960 --> 00:21:43.319
heightened focus on out of market harms makes it harder
301
00:21:43.319 --> 00:21:46.599
for merging for parties to rely on entry and efficiency
302
00:21:46.680 --> 00:21:50.839
defenses to support their transactions, while at the same time
303
00:21:50.960 --> 00:21:56.079
just favoring divestngers that would preserve significant efficiencies. Now, companies
304
00:21:56.119 --> 00:22:00.160
hoping to highlight the pro competitive benefits of transactions need
305
00:22:00.200 --> 00:22:03.759
to consider whether they can plousitibly frame those benefits as
306
00:22:03.799 --> 00:22:08.319
arising within irrelevant markets. The agencies typically look to define
307
00:22:08.359 --> 00:22:12.960
the narrow as possible relevant markets, and they even be
308
00:22:13.039 --> 00:22:16.759
incentivized to alets very narrow markets to exclude the parties
309
00:22:16.839 --> 00:22:21.480
claimed efficiencies, and that leads to a criticism, as sometimes
310
00:22:21.519 --> 00:22:24.720
in made about murder enforcement. You've got these very tiny
311
00:22:24.880 --> 00:22:29.119
markets and the old joke that you know, a good
312
00:22:29.160 --> 00:22:33.759
prosecutor could even indict before a grand joy a ham sandwich. Well,
313
00:22:33.799 --> 00:22:38.279
you know, the argument is that a good enforcer can
314
00:22:38.279 --> 00:22:40.599
come up with very, very narrow markets where it's going
315
00:22:40.599 --> 00:22:43.920
to find harm, but that often ignores the bigger picture.
316
00:22:44.799 --> 00:22:47.640
Firm should bear in mind that if their transaction is
317
00:22:47.759 --> 00:22:51.319
challenged in court, they will need to frame any efficiency
318
00:22:51.440 --> 00:22:54.599
argument in such a way that the claimed efficiencies followed
319
00:22:54.599 --> 00:22:57.640
in irrelevant markets, and at the same time they must
320
00:22:57.720 --> 00:23:02.759
be prepared to address ancillary market harms arising from in
321
00:23:02.960 --> 00:23:07.079
market efficiencies. Again, that's under the twenty twenty three guidelines,
322
00:23:08.759 --> 00:23:13.680
and so in some once again, the twenty twenty three
323
00:23:14.640 --> 00:23:17.720
guidelines is set off to allow the agencies to take
324
00:23:17.759 --> 00:23:23.400
a broad approach to discredit efficiencies that reflect out of
325
00:23:23.519 --> 00:23:27.440
market effects. So what can the new administration do? Well?
326
00:23:27.559 --> 00:23:31.839
It could utter the implications. Well, in particular, it may
327
00:23:31.880 --> 00:23:35.200
want to rewrite or revise part or all of the guidelines.
328
00:23:35.519 --> 00:23:39.400
It may want to seriously consider revising the discussion of
329
00:23:39.440 --> 00:23:44.640
efficiencies to reinstate the more pro efficiency twenty twenty guidelines approach.
330
00:23:45.240 --> 00:23:47.440
It may even want to go beyond that by showing
331
00:23:47.519 --> 00:23:51.279
a greater willingness to weigh out of market efficiencies when
332
00:23:51.319 --> 00:23:55.960
the benefits they provide to consumers clearly outweigh consumer losses
333
00:23:56.240 --> 00:24:00.480
within the relevant market. Specific language might, for example, provide
334
00:24:00.480 --> 00:24:03.519
that in such a case, the agencies would not pursue
335
00:24:03.519 --> 00:24:09.799
a murderer challenge. Finally, revised guidelines might state that efficiency
336
00:24:09.920 --> 00:24:14.400
claims will be accorded as much weight as series of
337
00:24:14.480 --> 00:24:20.400
competitive harm based always on hard facts. So, and that's
338
00:24:20.680 --> 00:24:23.920
such a physician would be aligned with a recommendation by
339
00:24:24.000 --> 00:24:29.720
former FTC Commissioner Christine Wilson, it could encourage more efficiency
340
00:24:29.799 --> 00:24:34.440
driven deals to be considered thereby raising consumer welfare. And
341
00:24:34.519 --> 00:24:36.920
certainly in my view and a view of Wilson and
342
00:24:37.000 --> 00:24:40.319
some other people, that it would mean that the undercounting
343
00:24:40.319 --> 00:24:44.519
of efficiencies, even under the old guidelines or underestimation, is
344
00:24:44.559 --> 00:24:47.559
a bad thing. Because, after all, as I already suggested,
345
00:24:48.519 --> 00:24:51.200
the Supreme Court has always said consumer welfare as a
346
00:24:51.279 --> 00:24:56.839
key a guidepost of anti trust and indeed Adam Smith,
347
00:24:57.480 --> 00:25:00.240
the sort of the father of modern economics, and well
348
00:25:00.279 --> 00:25:04.559
some nations way back in seventeen seventy six said for
349
00:25:05.200 --> 00:25:09.799
actions by producers are a value social value to the
350
00:25:09.839 --> 00:25:14.960
extent they benefit the consumers. So I think consumer welfare
351
00:25:15.000 --> 00:25:18.160
should always be on our mind, and the agencies, the
352
00:25:18.200 --> 00:25:21.680
anti trust agencies can do a better job of taking
353
00:25:21.759 --> 00:25:25.880
account a broader understanding of efficiencies if they want to
354
00:25:25.880 --> 00:25:29.720
truly promote consumer welfare. And I hope you found this
355
00:25:29.759 --> 00:25:31.960
of some interest, and I thank you for your time.
356
00:25:32.759 --> 00:25:35.759
Yeah, Altin, thank you so much for sharing not only
357
00:25:36.440 --> 00:25:40.599
this particular denied merger between Jet Blue and Spirit Airlines,
358
00:25:40.640 --> 00:25:45.720
but also like the background of prior merger guidelines and
359
00:25:45.799 --> 00:25:50.559
what our audience should look forward to as their discussions
360
00:25:50.599 --> 00:25:53.039
about who's going to be on the FTC, but also
361
00:25:53.640 --> 00:25:57.240
what future actions they may in fact take, and also
362
00:25:58.039 --> 00:26:01.680
people keeping an eye on what happens with Spirit Airlines
363
00:26:02.119 --> 00:26:05.200
as they go through structuring and as you indicated, the
364
00:26:05.240 --> 00:26:08.920
selling off of planes. So lots to think about there,
365
00:26:09.000 --> 00:26:11.200
So thank you so much for your time and sharing
366
00:26:11.200 --> 00:26:14.039
your expertise with our audience, and for those of you
367
00:26:14.079 --> 00:26:16.400
who are listening, you know, thank you so much. Please
368
00:26:16.480 --> 00:26:19.480
check out more content like this at regproject dot org.
369
00:26:19.519 --> 00:26:23.160
That's regproject dot org, where you have the opportunity to
370
00:26:23.160 --> 00:26:28.079
listen to experts share their you know, their analysis and information,
371
00:26:29.920 --> 00:26:32.720
and we really appreciate you all, so thank you very much.
372
00:26:39.559 --> 00:26:42.720
Half of the Federal Society's Regulatory Transparency Project. Thanks for
373
00:26:42.759 --> 00:26:45.839
tuning in to the Fourth Branch podcast to catch every
374
00:26:45.880 --> 00:26:49.200
new episode when it's released. You can subscribe on Apple Podcasts,
375
00:26:49.400 --> 00:26:53.200
Google Play, and Speaker For lays from our TP, please
376
00:26:53.279 --> 00:26:56.319
visit our website at reg project dot org. That's our
377
00:26:56.440 --> 00:26:58.200
egproject dot org.
378
00:27:07.079 --> 00:27:08.960
This has been a fed Sock audio production.
379
00:27:10.039 --> 00:27:10.279
Yam
