Since becoming chair of the Federal Trade Commission, Lina Khan has arguably taken a novel approach to antitrust, one that incorporates broader ideas of what might actually constitute anticompetitive behavior. She's challenged huge tech companies like Amazon and Microsoft, and more recently, filed a lawsuit against a private equity firm that's been buying up anesthesiology firms across Texas. The action is noteworthy because it targets a common PE strategy of "rolling-up" multiple businesses and then consolidating them to eke out market efficiencies. So it's no wonder that PE players have called the FTC lawsuit "
terrifying
," or that Khan has been named "
Wall Street's No. 1 enemy
." In this episode, we speak with Lina Khan herself about the case, and whether the principles underlying it could be extended outside of healthcare to other industries with PE involvement. We also talk about political pushback, the FTC's research and examination process, and even... chickens. This transcript has been lightly edited for clarity.
Key insights from the pod:
Why look at roll-up strategies within healthcare? — 2:07
Could the FTC look at roll-ups in other industries? — 3:53
The USAP/Welsh Carson case and anticompetitive behavior — 4:40
What is the FTC’s research process like and what have they been hearing? — 6:10
Is this a classic example of antitrust enforcement? — 9:57
Roll-up strategies and lack of competition — 11:49
Pushback from politicians and Wall Street — 13:49
Monopsony and labor issues in antitrust — 16:27
On ‘hipster’ antitrust, or broader definitions — 20:32
Does reinvigorated antirust mean the government is picking winners? — 23:15
Balancing medical funding with competition — 27:18
Do FTC suits have to win in court to be effective? — 30:43
Lina Khan’s background in poultry — 32:46
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Tracy Alloway (00:09):
Hello and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.
Joe Weisenthal (00:14):
And I'm Joe Weisenthal.
Tracy (00:16):
Joe, I think it's fair to say that antitrust is having a moment.
Joe (00:20):
It's been having a moment for a while. It feels like, especially under this administration, there is this sort of renewed energy and interest. Of course, I think last month or two months ago, we interviewed Jonathan Kanter from the DOJ about it, but it whet our appetite and we want to do more.
Tracy (00:37):
That's right, we do want to do more and a lot of this renewed interest in antitrust, and even controversy, is down to Lina Khan, the chair of the Federal Trade Commission, the FTC, who's been going after everything from big tech to private equity investments in the healthcare industry. And I'm very happy to say that today we do in fact, have the perfect guest because we're going to be speaking to Lina Khan! I'm very excited.
Joe (01:02):
Me too. I'm psyched. I've been looking forward to this episode for a long time. I'm thrilled that it's finally here.
Tracy (01:07):
Well, without further ado Lina, thank you so much for coming on Odd Lots.
Lina Khan (01:10):
Thanks so much for having me.
Tracy (01:12):
So I wanted to sort of dive in immediately into some of the most recent stuff you at the FTC have been doing, and you recently filed this monopolization claim against a PE-backed company that's been buying anesthesiology businesses in Texas. And I have to say, reading the suit, there's some unsettling stuff in there, particularly the bit where there's a guy from the company, which is called US Anesthesia Partners, where they're buying another business and he's talking about how they can now raise their prices and this executive goes “cha-ching,”, which I'm guessing you don't want to have written down in a lawsuit about raising prices and roll-up strategies.
Joe (01:54):
But when you're filing a suit, you must love seeing stuff like that.
Tracy (01:56):
But, okay, here's my question. Why go after roll-ups in healthcare specifically, and could you theoretically go after private equity roll-ups anywhere?
Lina (02:07):
So, just to zoom out, the FTC oversees markets across the economy, but that includes healthcare. And healthcare markets are some of the most important ones that we oversee precisely because this is not a matter of buying toasters or vacuum cleaners, right? This is essential healthcare.
And in the United States we pay more for healthcare than any other country in the OECD, close to twice is average. We pay around a fifth of our GDP and health outcomes are worse off, right? We see higher rates of infant and maternal mortality. We see greater incidences of death from avoidable diseases.
And so overall, we see a whole set of problems that are stemming from a whole set of factors. The factor that's in our wheelhouse is looking at consolidation and a lack of competition. And so we enforce the nation's antitrust laws in hospital markets, in pharma markets and we've been wanting to make sure that our enforcement efforts are really matching the realities of what we're seeing in today's markets.
One of the trends that we've seen over the last decade is greater expansion of private equity in healthcare markets. At the FTC we’re business model agnostic, but we have been hearing from a whole lot of market participants, including healthcare workers, about the ways in which private equities incursion can result in detrimental outcomes.
There was a study that found that, for example, when private equity bought out nursing homes, that you saw higher mortality rates, right? So this is not even just about pricing, but it can really be life or death. So that's really overall what has stemmed our interest in taking a closer look at private equity and what ultimately led to the suit and the investigation.
Tracy (03:48):
But what about in other industries? Is that something that you could theoretically also look at?
Lina (03:53):
Yeah, so we can look at businesses across the US economy and how they're structured and what their particular business model is can vary. We've been particularly focused on healthcare markets, but especially after we filed this lawsuit, we've been hearing from market participants across sectors about additional areas where they believe that we should be scrutinizing, be it in healthcare or elsewhere.
Joe (04:17):
So it's not against the law to raise prices generally, and it might be ill advised and it might make lawyers cringe, but it's also not against the law to write “cha-ching” in an email, you know, the game is to make money. What is it about this case that makes it to your mind anti-competitive beyond just profitable raising [of] money?
Lina (04:40):
Yeah, it's a good question. So this case is about a roll-up scheme that was architected by the private equity firm, Walsh Carson, and our lawsuit, both named USAP as well as Welsh Carson because they were ultimately the core mastermind. And what happened was Welsh Carson recognized that the anesthesiology markets in Texas were quite fragmented, and that that created an opportunity for them to go in, do a whole set of acquisitions.
They ended up buying out some of the largest anesthesiology practices in Texas in ways that eliminated competition, right? So you had a market that previously was fragmented, where different anesthesiology providers were competing against one another. But ultimately, when they were a whole bunch of them put under the same ownership, that competition was eliminated.
And we saw the effects of that pretty clearly because these entities were able to ultimately jack up prices and so they did that in a whole set of cities across Texas. For the anesthesiology practices that they weren't able to buy outright, they ended up entering into all sorts of agreements, either not to enter each other's markets or to coordinate and ultimately hike prices nevertheless.
So there's a whole set of anti-competitive conduct that we allege was going on here, and that's reflected in the whole set of antitrust claims that we bring — both illegal acquisitions, but monopolization as well as illegal market allocation schemes.
Tracy (06:10):
One of the things I'm interested in, and we spoke a little bit to Jonathan Kanter about this, but how do you actually go about examining an industry and how do these things actually land on your radar? Because when we're doing Odd Lots, one of the things I think we've learned over the years is that even after we dive into a particular business for an hour, we often come away with more questions and this leads to five more hour long episodes about a single business. So what’s your research process actually like? And then also, I know you said you were going to be reaching out to doctors to try to get more stories about the impact of PE on the healthcare industry, but what are the types of things that you're hearing?
Lina (06:52):
So we have phenomenal staff at the FTC who are deep, deep experts. I mean, these are the people who are really drilling into the intricate mechanics of how various markets work, you know, what are the contracting practices like if you're looking at pharma? Drilling down into what is the active ingredient, what are the drugs in the pipeline?
I mean, really just incredible mastery over just the nuts and bolts of all sorts of markets across the US and so we really rely on their expertise. Beyond that, we solicit information from a range of sources. One thing that I've been really focused on is making sure we're regularly engaging the broader public. And so we do these regular commission meetings where anybody can sign up and come talk to us. We've opened up a whole set of public dockets asking for information about certain types of contracting practices.
We're doing an inquiry right now into pharmacy benefit managers, the PBMs, which are these middlemen in the pharmaceutical supply chain. We've been getting a whole set of comments from independent pharmacies to patient advocates. And so we really want to make sure that we are sourcing broadly and making sure those information gathering channels are open and really to make sure that our understanding of markets is really reflecting the reality.
And this is actually how I got my start in antitrust as a business journalist and researcher and one of my jobs was to really drill down and understand how various markets were faring, especially after decades of consolidation. And it was really that work and talking to market participants and understanding the reality and mechanics of their day-to-day, and actually seeing how that departed from what some of the models and theories and antitrust were predicting, that really gave me a renewed appreciation for actually talking to the people in these markets to understand what's going on, rather than just relying on our models and theories.
Joe (08:47):
One thing I really like about, when reading through the complaint against US Anesthesia Partners, there's a really long conversation in there just essentially about how the business model of anesthesia works and the relationship that the clinics have with the hospitals and how those arrangements are set. Something though, I'm curious about reading this — no one knows what the outcome is — it seems straightforward, it seems like what we all think of as sort of classical anti-competitive behavior, and the way you describe it is, yeah, they bought a bunch of regional clinics, got a big chunk of the market and raised prices, which I think if you ask people what anti-competitive behavior looks like, it's something like that, garnering a big...
Tracy (09:30):
And then saying cha-ching!
Joe (09:31):
And then saying cha-ching. But the reason why I ask is that obviously I think a lot of people associate your work with a sort of broader theory of antitrust related to corporate power and other ways that powerful corporate entities can affect employees or consumers or smaller businesses. Is it fair to say though, that this is sort of retro, old school antitrust or sort of a retro example of antitrust enforcement?
Lina (09:57):
I mean, everything we do is old school antitrust in the sense that we’re...
Joe (10:00):
No, I know, I would never like acknowledge that there's some new thing, but it does not feel like some exotic or some sort of trendy legal theory.
Lina (10:09):
Yeah, so look, the interesting thing about antitrust is that our foundational statutes are over a hundred years old, right? The Sherman Antitrust Act was passed in 1890. You then had the Clayton Act, the FTC Act, which created the Federal Trade Commission in 1914. And these laws set out terms like unfair methods of competition or restraints of trade.
And at various points, lawmakers had debates. They said ‘Should we define more specifically what that means?’ And they decided against it because they realized that as markets change, as technologies change, as business models change, firms are going to be endlessly innovative in how they monopolize the tactics that they use.
And so they left it open-ended for enforcers to use their expertise to do deep investigations and make sure that those principles were being vindicated no matter whether you're in a smokestack industry or in the context of private equity or in the context of some of these newer digital markets. And so those are really the principles that we're animated by and that we look to vindicate throughout our work.
Joe (11:13):
Well, let me just ask as a follow-up, I mean, presumably as you said, you're collecting more comments, you're looking at more areas, etc. Is there anything in this particular case that was anti-competitive, but not in the sort of straightforward garnering market share and raising prices? In other words, are there other types of roll-ups, perhaps in healthcare, perhaps other parts of other things, that private equity might engage in where this case could serve as a warning, even if the strategy isn't about ‘Oh, let's get 70% of the market and raise prices.’
Lina (11:49):
So this is the first roll-up case that the FTC has brought in several decades and what I mean by that is that this case was about not just looking at each acquisition in a silo, but really looking at them in the aggregate, right?
And that's really what we see with some of these roll-up and serial acquisition strategies is that they may be composed of a whole set of individual transactions and acquisitions. Each one, when considered in a silo may not seem problematic from a competition perspective. Some of them may not even be reportable because they may be just a few tens of millions of dollars and not even trigger the Hartt-Scott Rodino filing.
So you may have a series, each one of which is small and may seem benign, but when you zoom out and look in the aggregate, what you may have seen is a roll-up of a market. And so this case should really put market participants on notice that the FTC is going to be looking at these deals in the aggregate. We're reserving that right for ourselves rather than just looking at each one in a silo.
Tracy (12:53):
Well, on that note, when I think of roll-up strategies, I think of them as kind of a foundational aspect of private equity and I think it's fair to say that there are a lot of PE decks that go around where they talk about multiple acquisitions and the ability that gives them in pricing power. So I guess it's unsurprising that you have seen some pushback and some lobbying recently. I think Politico just this week or last week, ran a story calling you Wall Street's enemy number one, something to that effect. And we have seen businesses trying to use political partisanship to persuade some politicians to maybe repeal some of these laws or kind of push back against them. How does that impact what you do? And I guess how vulnerable are some of the directional shifts or changes that you've made at the FTC to this type of political pressure?
Lina (13:49):
Look, embedded in the DNA of the FTC is when as an agency, we're being faithful to the statutes, right? The anti-monopoly statutes. We're going to be pitted up against monopolies and very well-heeled interests, right? And these entities have power, they have resources, and they have a lot to lose if the antitrust laws are faithfully enforced and so that type of pushback is probably baked in if we're doing our job and being effective.
The important thing though, to recall is that the business community is not a monolith, right? And we've been hearing equally from businesses, from entrepreneurs, from startups about the ways in which consolidation and anti-competitive practices are locking them out of markets, muscling them, are squeezing them. We heard a lot from independent pharmacies, for example, about the ways in which vertical integration by PBMs may be leading to practices that are squeezing them.
And especially in rural areas where you have some of these independent pharmacy shutters, that's essential healthcare that's no longer being provided to communities. The other week I spoke to a conference of ER doctors who shared the way in which private equity expansion into emergency medicine, they believe, is really harming not just the doctors, but ultimately the quality of patient care.
These are real problems with real material effects on people and so that's where making sure that we're hearing broadly and not just from well-heeled companies that can afford lobbyists in DC is really critical and making sure that we're keeping our eye on the prize and faithfully doing our jobs.
Joe (15:45):
I'm glad you brought up the potential harm to doctors and obviously the quality of care. There was an interesting article I read, I guess it was just yesterday in the American Prospect about the AMA considering a resolution for a federal ban on the corporate practice of medicine. And I guess, I want to go back to what you said about, I think it was in the first question about listening to more people and opening up comments. Are you hearing the same thing, the sort of frustration from doctors? And could the FTC in theory take action at some point in the future against an entity that wasn't necessarily aggressively raising prices, but by dint of them having rolled-up multiple clinics are mistreating workers or mistreating patients? Like, could that be enough?
Lina (16:27):
So the antitrust laws protect everybody. They protect patients and consumers, but they're also supposed to protect workers. We've seen over the last decade in particular, significant empirical research from labor economists finding that labor markets in the US are much more concentrated on average than previously believed.
And that you have what's called monopsony power that can give employers outsized power over their workers when they're not checked adequately by competition. So that's a dimension of competition in labor markets that we are very much looking at. The revised merger guidelines that we put out a draft of this past summer includes a particular guideline laying out how we will assess whether mergers may unlawfully lessen competition in labor markets. And one of the hospital mergers that we sued to block last year in Rhode Island included analysis about how the merger would be bad, not just for patients, but also for registered nurses.
So it's becoming more and more a key part of our analysis. Earlier this year in January, the FTC also brought a series of enforcement actions relating to the use of non-compete clauses.
So we brought one lawsuit against this company called Prudential Security. It had been employing security guards that were making close to minimum wage, and that had imposed on them these non-compete clauses that we alleged were coercive and unfair methods of competition. We also brought a set of cases in the glass manufacturing industry. This is a part of the market that's quite concentrated. You basically have three big players, and we alleged that their use of non-competes had not even just been bad for workers, but it actually harmed competition because if you had an upstart who wanted to enter the market, they believed there was excess demand that they could come in and fill.
They wouldn't be able to scale ultimately because the relevant talent pool was all locked up through these non-competes. So that's becoming a greater part of our work. In January, we also proposed a rule that would eliminate non-compete clauses in employment contracts for the vast majority of workers with a couple of exceptions. And that again, was stemming from a whole set of empirical research that found that non-competes may be depressing workers’ wages to the tune of $300 billion a year annually.
One thing that was very interesting to me was that you can imagine how the non-compete may be bad for the worker that's directly covered by the non-compete, but interestingly, they also have a negative effect even on workers who are not directly covered, which kind of makes sense, right? If there's less churn in the economy because workers are locked in by a non-compete, that means there are fewer opportunities even for workers that are not covered by non-compete. So we found harm to workers, we also found harm to competition and to innovation. And so this is another area of our work where we're looking at product markets, but we're also looking at labor markets.
Joe (19:23):
Tracy, that's interesting about the non-competes. It's almost like the corollary or flip-side to what we've talked about recently, workers getting wages even if they're not in the union from wage gains. So what may affect just sort of one subset of workers has a broader impact on everyone.
Tracy (19:39):
Totally. Also, can I just say ever since the 2018 Jackson Hole, I get really excited whenever anyone says monopsony.
Joe (19:47):
We need an air horn to go off whenever a guest says monopsony for Tracy.
Tracy (19:51):
But I mean, just on this labor issue point, I mean, this is where we're sort of getting into the heart of the idea of ‘hipster antitrust’ or sort of moving away from more traditional or classical interpretations of it. You're obviously the expert, and correct me if I'm wrong, but my impression is that a lot of this is untested in courts, and as you just pointed out on the non-compete clauses that you could maybe fix some of this through new rulemaking, but otherwise you're going to have to pursue it through legal channels. So what exactly is the argument there? Like how do you get the courts to incorporate this idea into existing law?
Lina (20:32):
So the idea that antitrust laws protect everybody, including workers, including competition in labor markets, is entirely accepted by the courts. There was a few years ago a Supreme Court decision NCAA v Alston relating to student athletes where the court reaffirmed the idea that antitrust laws protect competition on the whole set of sides of the market. And just recently the Justice Department prevailed in a case that they brought against publishers that were seeking to merge and one of the arguments they advanced there was that that merger would've depressed the payments that are made to authors.
And so they, again, were looking at sides of the market other than end consumers and there again that idea also prevailed. I believe we're returning to faithful interpretations of the law, which are accepted by courts and on the non-compete side, for example, a lot of the comments that we've gotten are also from healthcare workers.
And so something that we heard, for example, was that the use of non-competes during the pandemic really impeded the ability of physicians to move. And this was a moment in time where you had outbreaks in different cities and different regions, and so doctors and healthcare workers wanted to be mobile. They wanted to be able to go where Covid was really breaking out, and they found that they weren't able to move easily, and in some instances, at all because of these non-competes. And so you see, again, in a very real material way how this is not just about abstract debates with various labels tacked on, but really just real life impact.
Joe (22:09):
I have what is kind of a philosophical question that I've been thinking about a lot since we interviewed your sort of counterpart over at the DOJ. When I think about the broader economic agenda of the Biden administration and many commenters have talked about this, this sort of turn away against neoliberalism, turn away against the sort of assumption that the market is best and so we have these big subsidies that are going toward the big domestic agendas. Some could even say we're picking winners and picking losers in a way, and yet thinking about your antitrust work, competition always seems like a good thing. It is like mom, apple pie, the American flag and competition. Like, no one's against competition. But I wonder how it fits in this sort of economic moment in which policy seems to be moving in other realms away from what ‘the market knows best.’ And so you're sort of pursuing this idea that competition is this sort of per se good or sort of a north star to pursue at a time when a lot of the economic policymaking seems to be skeptical of a lot of traditional ideas of what makes a good market.
Lina (23:15):
So antitrust and competition policy is really about setting the rules of the market, right? Antitrust and the FTC Act are really about distinguishing between fair and unfair methods of competition. So are you able to compete by burning down your competitor's storefront? Are you able to compete by engaging in certain types of exploitative or predatory practices or just buying out all of your rivals?
No, I mean, those are unlawful means of competing. There are other means of competing that are entirely lawful: investing in your facilities, investing in your workers, developing real operational efficiencies. I mean, these are all mechanisms of competing that are fair game and so that's really where antitrust fits in.
I think one area where you do see some analogs between some of the rethinking that's happening is where we are revisiting some of the core assumptions that started to be baked in say the late seventies and eighties.
And in antitrust, those assumptions were really around the idea that monopoly power would generally be fleeting. Because if a monopoly tried to exercise its power by, say raising prices, you would immediately see this flood of new competitors that would come in and discipline away that monopoly power.
And there was this idea that there's always uncertainty and so in the face of that uncertainty, the government should err on the side of being hands-off because government inaction that erroneously allowed monopoly power to flourish would be disciplined and fixed by the market. Whereas government errors on the side of enforcing the law would be much stickier and difficult to get new legislation passed or court rulings overturned.
And so that basic, what is known as kind of the error cost analysis that like, when in doubt government should stay out and not do anything, was kind of baked into the approach the agencies took, to a whole set of court decisions. And that's really what's being revisited. This idea, this whole set of neoclassical assumptions baked in that just say ‘the market will self-correct.’
And, you know, the Biden administration through the executive order, the president actually even said in his speech, you know, we've been living for 40 years under this natural experiment and the signs are all around us that this natural experiment has failed. We see too little competition in all these sectors, Americans are paying more, they're making less money, we're seeing innovation decline, there are all these material harms. And so that's where we need to reinvigorate, we need to dispel this notion that the best antitrust is no antitrust and we actually need to faithfully enforce the laws.
Tracy (26:19):
Joe, remind me to tell you about my first experience with American healthcare after this.
Joe (26:24):
When we do the outro you can talk about it.
Tracy (26:27):
But just on this point, some of the criticism that we've seen, and I really hate to keep quoting headlines from competing media outlets, but for instance, there was a Wall Street Journal op-ed that had a very unsubtle headline of ‘ Lina Khan Blocks Cancer Cures.’ And I guess the question is, the argument there is by making people think twice about investing in certain medical businesses, maybe you're cutting off a source of capital for a very capital-intensive industry. It takes a lot of money to research new medicines, new treatments, build new facilities or whatever. So how do you balance the need to fund new and innovative medical treatments, in other words, the need to get money into this industry, with the desire to ensure fair and competitive markets?
Lina (27:18):
So look, we always consider every particular deal on its specific facts on a case by case basis. I believe the merger that that op-ed is referencing was actually voted out before I even arrived at the FTC on a unanimous basis. So I think sometimes there's a desire to over-attribute to me.
But look, in the pharma space for example, we often hear arguments that ‘Oh, the only way for commercialization is to have the big pharma companies buy out the smaller pharma companies.’ And I think we've seen in practice that you want to be able to maintain more exit opportunities.
So even if you're talking about an existing monopolist buying out a new pipeline drug that could be a direct competitor, we think that's bad. And there's research showing that we've seen what are known as killer acquisitions in the pharma space in particular where you have these buyouts and ultimately the acquiring firm shuts down what was a pipeline drug or an existing area of R&D because it risked cannibalizing some of their existing drugs.
The FTC also brought a lawsuit this summer against Amgen's acquisition of Horizon and there we were really building on the fact that Amgen had a history of engaging in some of these exclusionary cross bundling tactics where they would use their existing portfolio of blockbuster drugs as anchors to secure more favorable treatment or placement by PBMs for some of their non blockbuster drugs and that that could have a real exclusionary and anti-competitive effect in ways that again, is about ensuring that Americans have more affordable access to healthcare.
And so the Horizon drugs that they were buying, Krystexxa and Tepezza, these are addressing special types of gout illnesses, special types of thyroid illnesses. These are drugs that cost anywhere from $400,000 to $600,000 for a six-month treatment and so whether an acquisition is allowing a firm to fend off new arrivals, fend off generics or biosimilars from the market and keep prices high, has a real material effect on people and so that's why we take enforcement in these areas so seriously.
Joe (29:31):
Just going back real quickly to the lawsuit that we started the conversation with, the actions that you are alleging were engaged in by USAP and their backing PE firm, Welsh, Carson, Anderson & Stowe, is it your belief or is it your sense that the basic playbook that they used is not confined to them? That there are many of these essentially same strategies that have been employed maybe in anesthesia or other realms within healthcare around the country that at some point may be worth looking into? How unique [is it]?
Lina (30:03):
Yeah, I mean we wouldn't want to prejudge anything before actually doing a real investigation, but I will say both after this lawsuit, we've started hearing a lot from healthcare workers and doctors and and folks in healthcare who are pointing to other specialties in particular that they believe have similarly been rolled-up, potentially unlawfully.
We also, when we put out our draft merger guidelines, we got thousands and thousands of comments. A lot of those also from healthcare workers, again, identifying areas where they believe we may have seen serial acquisitions or roll-up. So based on what we're hearing from the market, it certainly seems that this might not be an isolated strategy.
Tracy (30:43):
Does the FTC have to win its suits to be effective or is the threat of legal action in and of itself a deterrent to monopolistic practices? Or if companies see the FTC losing in court, do they become more emboldened?
Lina (31:00):
So look, we only bring lawsuits where we believe there's a law violation and we bring lawsuits because we want to win. One area where I've been really pleased with our impact is deterrence, right?
As a law enforcer, you want to make sure that firms are not engaging in law violations in the first place and one thing we've heard from senior dealmakers, senior antitrust lawyers, is that even a few years ago when there were initial deal discussions, antitrust risk would not be among like the list of things that would initially get discussed. It might come up in the middle of the deal or more often at the very end.
And these senior deal makers are acknowledging that that's totally changed, right? Antitrust risk is now talked about at the very beginning. And as an enforcer, you want entities to be thinking about how do we not break the law? That's good for enforcement, it's good for taxpayers and so from a deterrence perspective, we're quite pleased and happy and think it's reflective of a functioning law enforcement system and a rule of law system to make sure that entities are thinking about that type of risk initially.
Tracy (32:07):
So no more putting “cha-ching” in company presentations I guess.
Joe (32:11):
But wait, when you say that these antitrust concerns are happening very early on in the conversation among dealmakers, where is that being aired? Is that something people are telling you? Is that something people are writing about? How do you actually see that?
Lina (32:22):
So we've had people tell us that directly. We've also seen senior heads of divisions of investment banks go on TV and share that quite publicly.
Tracy (32:31):
I have just one more question and it's an extremely important one and listeners of this podcast know that whenever there's an opportunity to bring chickens into the conversation, I will seize on it. But Joe and I heard that you might have a background in poultry...
Lina (32:46):
That's right. So I got my start in antitrust in part as a business journalist and one of my first assignments was to look at the poultry market. The poultry market is an area where we've seen significant consolidation over the last few decades and so you have millions of consumers, you have thousands of farmers, but they're all just connected by a very small number of chicken processing companies.
We've heard a lot over the years from chicken farmers about how this market may be enabling coercive and potentially anti-competitive practices. We've also seen empirical research suggesting that consumers are paying more and chicken farmers are making less. And so it may be the companies in the middle that are just taking a bigger and bigger share.
Joe (33:29):
Tracy, if being a journalist is a stepping stone to this, then maybe one day this could be one of us.
Tracy (33:35):
This is a very motivational discussion. Need to do as well as Lina Khan. Okay. Well, Lina, that was amazing. Thank you so much for coming on Odd Lots and explaining the way you're thinking about antitrust at the moment. Thank you.
Lina (33:48):
Well it’s so nice to meet you both. You're kind of like legends in the podcast world.
Joe (33:51):
Oh, I love it!
Tracy (33:52):
Producers, are you still recording?
Joe (33:55):
Yeah make sure to keep rolling.
Tracy (34:08):
Joe, that was fun. Any conversation that includes both monopsony and chickens, I am a major fan of.
Joe (34:17):
That was a great conversation. There were so many interesting aspects. I mean, one thing that I really appreciate and I said it, and it really comes through in the complaint against USAP and it makes sense, lawyers aren't just going to bring a case without understanding the industry, this sort of details about how these industries really operate and the different business models they're in. And I can only imagine the tip line that they must be getting flooded with at the FTC of frustrated doctors and frustrated healthcare workers as they watch themselves working for larger and larger corporate entities.
Tracy (34:50):
Well, I kept thinking maybe FTC staffers would make really good Odd Lots guests. I wonder if they would come on and talk about how they're thinking about specific industries.
Joe (34:58):
You know what I do think we should definitely get, I mean A) yes. But B) I think this corporate practice of medicine, I mentioned there's this really good, I mentioned it by Moe (Maureen) Tkacik at the American Prospect, you know, the AMA for years, one of their big things was sort of fighting against socialized medicine and things like that. And now they're complaining about corporatized medicine. And so what is it like to be a doctor in the year 2023 versus, I don't know, 1993, as these large private equity firms and other large corporations are your bosses, would sort of be a very interesting episode I think for us.
Tracy (35:35):
Absolutely and I'd be really interested in it because I have a confession to make, which is I still don't understand how US healthcare works at all. Like, it is just massively confusing. My plan is to never get sick, never have to go to a doctor or a hospital ever because I can't figure it out.
Joe (35:52):
You literally can't. So recently this summer I had a minor, it was a weird leg injury, it was fine. But I went to this hospital, it was fine and they took care of it in a day and then I got a bill and the bill was actually not that big. But in my mind, the bill could have been anywhere from $75 copay to $20,000 and I would've had no idea at any point what I was going to pay. It was just sort of a miracle. But how would I have any idea? I just think that you just sort of enter in randomly to the US healthcare system and then it feels like you're rolling dice.
Tracy (36:25):
Well, this is what I wanted to mention. So the first time I came to the States as a sort of working person was 2012, I think? I went to get a prescription for a medicine that I had gotten for free for more than 10 years in the UK and I left with an $800 tab, as an insured person, and it took months to sort it out with insurance. And I was so shocked that A) this could even happen and B) that because of the way the US healthcare system worked that it was suddenly incumbent on me to make a billion phone calls to both the insurance company and the doctor to argue about this fee? It just blew my mind.
Joe (37:09):
So one thing, again, in this complaint against USAP, there's this whole conversation and it's sort of wild to think about, that you could go into a hospital, the surgeon could be in your network and insured and you don't even think ‘Oh, but what if the anesthesiologist...’ who you just think is like part of the package, right? You don't really think there's any competition, you have no, no idea.
Tracy (37:30):
Well, the classic example is also if you get run over in the street and you're unconscious, you have no say in what hospital they're bringing you to.
Joe (37:36):
I mean, there's a lot to do with what a mess this is. So I do think that from a broader macro-priorities-of-the-United States standpoint, it is a belief that I have is it would be very good, if we could just continue to pursue general exploitation and grift within the industry.
Tracy (37:56):
No, I totally agree.
Joe (37:57):
That would be a good goal and if antitrust enforcement is one way to pursue that, then that's great.
Tracy (38:04):
And this kind of gets to Lina's point about we've had decades, at this point, to illustrate that some aspects of the system aren't really working. And certainly my experience would tally with that. But anyway, we could go on and on about healthcare disasters for hours. But shall we leave it there?
Joe (38:20):
Let’s leave it there.
You can follow Lina Khan at @linakhanFTC.