What’s next for the F.T.C.?
Joe Simons, the chairman of the Federal Trade Commission, said in a speech yesterday that monopolies could “squash” smaller competitors by buying them, words seen as a warning for the agency’s expected lawsuit against Facebook. It also raises questions about how the agency will approach antitrust under a Biden administration, as the left wing of the Democratic Party pushes for even tougher reviews and enforcement of competition policy.
A debate has raged in antitrust circles between more laissez-faire conservatives and what’s become known as the progressive “hipster antitrust movement” that calls for a muscular overhaul of policy, especially when it comes to reining in Big Tech. As in other areas, President-elect Joe Biden will probably seek a moderate path between these competing ideologies, a source familiar with Mr. Biden’s thinking told DealBook.
The tables are turning. At the F.T.C., five commissioners — currently three Republicans and two Democrats — hash out ideological arguments in decisions and dissents. The Democrats, Rohit Chopra and Rebecca Slaughter, have often decried the majority’s “permissive” treatment of corporations, and one of them may soon lead the commission, if the chatter is to be believed.
The House Committee on Energy and Commerce recently urged Mr. Simons to “immediately stop work on all partisan, controversial items,” noting that leadership “will undoubtedly be changing.” A member of that committee, Representative Jan Schakowsky, Democrat of Illinois, told DealBook that “there is a real opportunity to wake up the F.T.C.”
But change won’t come quickly. F.T.C. commissioners serve staggered terms and need Senate approval, so it may take time for the partisan balance to shift. Yet experts agree that adopting a radically different approach to review and enforcement will face an uphill battle regardless.
The incoming administration’s F.T.C. advisory review team includes Bill Baer of the Brookings Institution, who previously led antitrust at the Justice Department and headed the F.T.C.’s competition division. He isn’t seen as someone who advocates a sharp break from past practices.
“Antitrust laws haven’t worked very well in the digital economy,” said David Vladeck of Georgetown Law, a former director of the F.T.C.’s consumer protection unit. Yet he doubts a revolution is either desirable or possible. Similarly, Eleanor Fox and Harry First of N.Y.U., who recently outlined new rules to rein in Big Tech, told DealBook that there was a lot of room for consensus in the ideological middle, balancing nuanced views on market efficiency and consolidation.
Away from tech, Sean Royall, a partner at Kirkland & Ellis and former deputy director of the F.T.C.’s competition bureau, told DealBook to watch the pharmaceutical industry for a potential overhaul, as commissioners could begin directing studies of previously cleared deals. Still, he added, “the changes we expect are on balance fairly moderate.”
HERE’S WHAT’S HAPPENING
Judy Shelton’s Fed nomination gains new life. After it stalled over the summer on questions about her qualifications and unorthodox views on issues like the gold standard, it appears to be back on track. Senate Republicans set up a vote for next week on her nomination to the board of governors, and Senator Lisa Murkowski of Alaska, who had been a skeptic, said she would vote in favor of Ms. Shelton.
Prospects for a new economic stimulus are fading. Democrats and Republicans in Congress still disagree over size and other details, and seem unlikely to compromise ahead of Georgia’s Senate elections. Passing an aid package is likely to test President-elect Joe Biden’s deal making and rapport with longtime colleagues in the Senate.
Top central bankers warn the pandemic isn’t over. Jay Powell of the Fed and Christine Lagarde of the European Central Bank cautioned against overexuberance after promising vaccine trials. (Case in point: The U.S. announced 160,000 new coronavirus cases yesterday, a record.) Meanwhile, Deutsche Bank told its Americas investment bankers to resume working from home, and the first Caribbean cruise to sail since the pandemic ended early after five passengers tested positive for Covid-19.
President Trump bans U.S. investment in Chinese companies with military ties. A White House executive order bars Americans from investing in 31 companies, including Huawei and China Telecom. It’s the latest effort by the Trump administration to decouple the American and Chinese economies.
Disney trumpets its streaming success. The company’s shares jumped in after-hours trading after it announced that Disney+ had surpassed 73 million subscribers, ahead of expectations. That appeared to offset worries about an 82 percent decline in operating profit and more woes at its coronavirus-devastated theme parks.
DoorDash is ready to deliver
The meal-delivery app will publicly file its I.P.O. prospectus later today, DealBook hears, the first in a batch of tech companies heading to the stock markets. (Filings from Airbnb and the gaming platform Roblox are expected next week.) Here are three things to watch for in the filing for DoorDash, which was valued at $16 billion this summer.
How do the numbers look? The food delivery industry is consolidating rapidly as big players seek to get even bigger. How will that affect DoorDash’s margins and growth? Also keep an eye on how DoorDash pays its workers after changing how it handles delivery tips amid criticism.
What about regulation? DoorDash will most likely address how worried it is about efforts to reclassify gig workers as employees, a move that would require the company to pay health insurance and other benefits. Gig-economy businesses scored a victory in California this month with the passage of Proposition 22, which will let them continue to classify drivers as contractors. But labor unions and progressives are continuing to push for changes, meaning more fights are in the future. (Yesterday, DoorDash pledged $200 million to support local communities where it operates.)
Can it keep up the momentum? The pandemic has been a boon for online delivery. In the longer term, investors will ask how DoorDash can keep up its growth. Possibilities include expanding grocery delivery, opening in more international markets and signing up more customers to its DashPass subscription service.
In the papers
Some of the academic research that caught our eye this week, summarized in one sentence:
Exclusive: Guitar Center is planning to file for bankruptcy
Guitar Center is planning to file for a prepackaged Chapter 11 bankruptcy in the next few weeks, people familiar with the situation told DealBook. The country’s largest retailer of musical instruments is finalizing the terms of an agreement with creditors that will include forbearance on an interest payment it missed last month. The people cautioned that, as always with such negotiations, plans could change or be delayed.
This will allow the company to carry on, and it will continue to pay its vendors and employees. It doesn’t plan to announce any closures of its roughly 300 stores with the bankruptcy filing. “We are in discussions with our creditors regarding multiple options to strengthen our capital structure and we look forward to a positive resolution,” a Guitar Center spokesman said. Guitar Center has about $1.3 billion in debt, according to Moody’s.
It’s the latest example of the pandemic divide, with a growing gap between the strongest and weakest companies. Although many people have turned to hobbies like playing music while homebound, the biggest winners have been those with the strongest e-commerce infrastructure. In musical instruments, the online retailer Sweetwater was already threatening Guitar Center’s brick-and-mortar business.
“We are pleased with the trajectory of our business despite the pandemic,” the Guitar Center spokesman added. “Stores are open and our e-commerce business has realized significant growth with renewed interest in making music spurred by the quarantine. We continue to operate our business as usual.”
How we got here. Guitar Center was acquired by Bain Capital in 2007 for $2.1 billion. The deal left the retailer with debts that became difficult to manage as it faced new competition from online retailers. It did a debt-for-equity swap with private equity firm Ares Management in 2014, in which Ares took control of Guitar Center. In already challenging retail conditions, the pandemic pushed it over the edge.
THE SPEED READ
The delivery service Instacart has reportedly hired Goldman Sachs to work on its coming I.P.O., which is targeting a $30 billion valuation. (Reuters)
Airbnb is reportedly considering listing its shares on the Long Term Stock Exchange, which requires companies to adhere to social, environmental and governance requirements, in addition to the Nasdaq. (Bloomberg)
Politics and policy
A Justice Department review faulted the former top federal prosecutor in Miami for “poor judgment” in his handling of an investigation into Jeffrey Epstein a decade ago. (NYT)
Progressive groups urged President-elect Joe Biden to avoid hiring “corporate executives, lobbyists and prominent corporate consultants” for his administration. (NYT)
The Commerce Department held off on restrictions that would have effectively banned TikTok in the U.S., after several federal judges blocked such an action. (NYT)
Did President Xi Jinping of China personally order the suspension of Ant Group’s I.P.O.? (WSJ)
LinkedIn said it had discovered errors that inflated ad-viewing metrics, leading to more than 400,000 advertisers overpaying for campaigns. (WSJ)
Best of the rest
Distributing Pfizer’s Covid-19 vaccine is really complicated. (NYT)
British pubs are praying for a Christmas miracle. (NYT)
“How I Got Caught Up in a Global Romance Scam” (NYT)
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