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The Corner Newsletter, August 22, 2019: Sandeep Vaheesan Calls for Building Worker, Small Business Power and Criticizes Abusive Contracts – Kochland Author Chris Leonard Talks Koch Brothers, Corporate Power

Welcome to The Corner. In this issue, we

– share two articles from Legal Director Sandeep Vaheesan, and

– interview Chris Leonard, author of the newly-released book Kochland: The Secret History of Koch Industries and Corporate Power in America, who talks about the story of the Koch family and what it says about corporate power.

August 23, 2019  |  by Open Markets

Sandeep Vaheesan Calls for Building Worker and Small Business Power and Abolishing Abusive Contracts

In an article for The Atlantic titled, “There’s More Than One Way to Fight a Monopoly,” Open Markets Institute Legal Director Sandeep Vaheesan and co-author Nathan Schneider lay out two ways to restore power and true autonomy to people and small businesses.  They argue that while efforts break up monopolies are important, it is also crucial for government enforcers and regulators to ensure that ordinary people and small businesses are “able to join forces and create unions and cooperatives that could hold the largest corporations in check.” Vaheesan and Schneider conclude that “Cooperation among small actors can remedy the yawning imbalance of power between corporate giants and everyone else.”

Vaheesan also has an article in Current Affairs that calls for an end to corporations’ “rule by contract” over workers, consumers, and small businesses. In his article, Vaheesan criticizes the assumptions that undergird the rosy view of contracts are negotiated in “a realm of freedom and choice.” Besides the fact that workers and consumers simply do not have the time or resources to evaluate every term of every contract or agreement they enter into, they also must negotiate “against a background of deep inequality” with relatively large, powerful corporations. To restore peoples’ and small businesses’ rights, Vaheesan proposes that Congress ban specific abusive contract terms, like non-compete clauses, mandatory arbitration clauses, and class actions waivers, and also “grant a federal regulator the authority to identify and ban novel contracts of abuse through adjudication and rule making.”

Kochland Author Christopher Leonard Talks Corporate Power, the Koch Brothers, and Their “Outsized Influence over Policy”

Charles and David Koch are well known for their libertarian politics and influence over the Republican Party.  But as journalist Chris Leonard shows in his new book, Kochland: The Secret History of Koch Industries and Corporate Power in America, how the Kochs built their business empire is in many ways just as compelling of a story, especially for those focused on the role of corporate power in today’s economy.

The result of a six-year investigation, Kochland tells the mostly unknown and ironic story of how Koch Industries became perhaps the most powerful private company in America largely by exploiting the opportunities for monopoly created by government environmental regulation. Open Markets spoke with Christopher Leonard about his findings.

OMI: How did you get interested in Koch Industries and what drew you to this research?

Leonard: Back in 2011, I was a business reporter at the Associated Press, and I had all of these pressing concerns with corporate power and income inequality. I wondered why our economy could grow but middle-class workers didn’t really get ahead, and why corporations have more influence over our public policy than they have had in 100 years. I just had this “aha” moment in late 2011 when I realized I could explore all of this by telling the story of Koch Industries.

OMI: Throughout your research, did you find instances in which Koch Industries wielded its power to capture market share?

Leonard: Let’s look at the most important business to Koch Industries, which is oil refining. The United States hasn’t built a new oil refinery since 1977. And not only have we not had new entrants, but the ownership of the existing refineries consolidated dramatically during the 1990s. So, fewer and fewer people own the machinery that is at the head of our entire energy system.

Interestingly enough, the reason this is happening is because of the regulatory sprawl of the Clean Air Act. … Congress did not mean to stifle new competitors. But what happened is that the big incumbent players manipulated the rules and gamed the system because they’re the ones who could afford the attorneys and the lobbyists to do it. And they have managed to sit on top of their incumbent position and reap some of the highest oil refining profits in the world. This is just one example of how the incumbent entrenched players benefit from a lack of competition and monopoly power to reap super-normal profits.

OMI: Historically, what are some of the most significant moments for Koch Industries?

Leonard: The first one that comes to mind is the moment in 2009 when Barack Obama was elected. Charles Koch’s network makes a pivotal move when they flush money into their group called Americans for Prosperity. This is a nationwide network of volunteers and employees. It’s a boots-on-the-ground field army. What this means is when Koch opposes policy, it owns and operates one of the largest lobbying operations in the United States. Those lobbyists can identify the exact political terrain Koch needs to influence, and then with Americans for Prosperity, Koch can deliver busloads of angry voters from around the country to very targeted congressional offices. That moves policy. That controls policy. And I think that’s one of the most instrumental moves they ever made.

OMI: How did Koch Industries undermine labor unions?

Leonard: Koch is on the forefront of this fight, which I think is one of the most important fights going on in the United States. Since the 1960s, Charles Koch has absolutely detested labor unions. He has vehemently fought the labor unions within his own company, but more importantly has flooded money into the bigger picture fight to undermine and destroy organized labor in the United States. For example, Wisconsin, of all states, passed a right to work law under Scott Walker. Koch played a big role with Americans for Prosperity in pushing for that. So, it’s a multi-tiered, multi-decade effort to undermine labor union power wherever possible. And Koch is not alone in doing this. This is corporate America’s agenda at large.

OMI: What are some of the messages that you hope your readers take away from the book?

Leonard: That Charles Koch has been saying from the beginning, politics and economics are not different subjects. They are not separate fields. The reality of our political and economic system is intertwined like one strand of DNA. The functioning and shape of our economic life doesn’t happen by accident. It is not handed down from heaven. These are all decisions that we make about how to structure our government and our political system.

Two Years Ago This Month

ON AUGUST 30, 2017, a front-page story in The New York Times reported on how Google had pressured the New America Foundation to expel its Open Markets program.  Soon afterward, we established an independent Open Markets Institute and the rest is history in the making. In less than two years, Open Markets has dramatically changed the way the American public and our lawmakers view concentrated private poweracross the U.S. economy — from big technology to big agriculture. We have brought monopoly power to the forefront of the national conversation and demonstrated how it undermines democracy, the free pressnational security, and the health of our citizens.

With a growing network of allies and supporters like you, we are being heard: we have built bipartisan momentum and put antimonopoly on the national political agenda. Federal enforcers, including the Department of Justice and the Federal Trade Commission, have announced groundbreaking investigations into the anticompetitive behavior of the world’s largest tech corporations; parallel efforts are underway in the United States Congress, with the United States of Representatives House Judiciary Committee announcing a bipartisan investigationCongress is also scrutinizing Facebook’s plans to launch Libra in response to our work. As of this week, U.S. attorneys general are taking aim at big tech. Politicians of all political stripes – including leading Democratic presidential candidates – continue to announce support for breaking down corporate concentrations of power in technology, health care, pharmaceuticals, agriculture, and journalism, to name a few. As we approach our second anniversary, we are looking to the future and growing our team to increase our capacity to examine more sectors of the economy and provide policymakers and regulators with solutions. In short, we are at a watershed moment and we’ve come a long way thanks to your support.

🔊 ANTI-MONOPOLY RISING:

  • coalition of states will open an investigation into whether large technology corporations have used their dominance to hurt competition, according to The Wall Street JournalA spokesperson for New York Attorney General Letitia James’s office said, “The attorneys general involved have concerns over the control of personal data by large tech companies and will hold them accountable for anti-competitive practices that endanger privacy and consumer data.”
  • Oregon has joined the coalition of states suing to block the merger of U.S. wireless carriers T-Mobile and Sprint. The sixteen-state group argues that the merger hurts competition for wireless service and will cost Americans more than $4.5 billion annually. “Left unchallenged, the current plan will result in reduced access to affordable wireless service in Oregon — and higher prices,” said Oregon Attorney General Ellen Rosenblum. “Neither is acceptable.”
  • Presidential candidate Sen. Elizabeth Warren, D-Mass. wrote a letter to the FTC’s Inspector General last week, castigating the agency for walking back its claim to pay cash to victims of the 2017 Equifax data breach. Warren argued that the FTC failed to live up to its own standards: “Unfortunately, it appears as though the agency itself may have misled the American public about the terms of the Equifax settlement and their ability to obtain the full reimbursement to which they are entitled.”
  • Sen. Ron Wyden, D.-Ore. asked Facebook and Google executives to “voluntarily suspend micro-targeting of political and issue ads,” during a conversation with CNN. Wyden has joined critics who have decried how micro-targeting techniques have been used to influence people’s voting habits.
  • Earlier this month Sen. Wyden also sent a letter to telecommunications giants AT&T, T-Mobile, Sprint, and Verizon asking them to “protect your customers’ privacy—and U.S. national security—from foreign hackers and spies by limiting the time you keep records about your customers’ communications, web browsing, app usage and movements.”
  • The Justice Department on Tuesday challenged the pending merger between Sabre Corp. and Farelogix, two providers of airline technology services. The suit claims that the $360 million merger would eliminate one of Sabre’s strongest competitors and lead to higher prices and less innovation in the sector.
  • The Russian Federal Antimonopoly Service announced earlier this month that it was investigating whether Apple had violated the country’s competition laws by rejecting a parental control app made by Kaspersky Lab, a Russian cybersecurity company, from its App Store. Apple released its own version of the service shortly after.

📝 WHAT WE’VE BEEN UP TO:

  • The Open Markets Institute filed an amicus brief with Public Justice and the American Association for Justice in support of the consumer antitrust lawsuit against Qualcomm. “The case is important and will have major influence going forward on whether injured consumers, workers, and small businesses can come together to seek justice against corporate wrongdoers,” said Sandeep Vaheesan.
  • Matt Stoller joined The Realignment podcast to discuss the backlash against Silicon Valley technology companies. “They don’t pay attention to the law, so there is a lawlessness in Silicon Valley that is pretty profound. And they have accumulated enormous amounts of power because we don’t enforce the law anymore. So, they are effectively acting as private governments. … [A] monopoly is a private government that sets the terms and conditions over a particular market. These companies are setting terms and conditions over really important markets which are the markets for information and advertising, essentially free press.”
  • Barry Lynn, and Sandeep Vaheesan appeared prominently in an article for The New Yorker discussing presidential candidate Sen. Elizabeth Warren’s plan to break up dominant platforms and its development. Vaheesan said, “I think that her ideas would really challenge the core model of these Big Tech companies. … It would force them to behave in more socially responsible ways.”
  • Barry Lynn spoke with The New York Times about how to handle America’s largest technology companies — namely Apple, Amazon, Facebook, and Google. “The world is going to be better off after we break up these companies,” said Lynn.
  • Sally Hubbard talked in a Mashable video about the rise of dominant platforms. Hubbard said, “If you have a few corporations that are extracting the wealth of all the other sectors of the economy, all the other players in the economy, of course you’re going to get inequality.”
  • Sally Hubbard appeared on Bloomberg Business to discuss the FTC probe into Facebook and Amazon. When asked about the likelihood of stronger enforcement from the FTC and Chairman Joe Simons, Hubbard explained that she “wouldn’t really expect it out of Joe Simons given how he handled the Facebook consent decree violations. He really just gave them a slap on the wrist. I know a $5 billion fine sounds like a lot, but its really not going to change anything or protect the American people from privacy abuses.”
  • Matt Stoller spoke with Bloomberg about the FTC’s investigation into Facebook and their privacy settlement last month. “For any anticompetitive behavior they want to get away with, they’re going to say, ‘The FTC made us,’” Stoller said. “That’s what they bought for $5 billion.”

📈 VITAL STAT:

92%

Percentage of Americans who, according to recent a Gallup-Knight Foundation poll, are “very” or “somewhat” concerned that consolidation in local news outlets means that [t]he political views of owners would influence the fairness of news coverage.”

Seventy-seven percent also said that they were very or somewhat concerned that the new owners “would include more news that is not unique to [their] local area,” while 73% were very or somewhat concerned that the new owners would invest less “than the previous owners on news gathering and reporting.” Newspaper chain GateHouse Media recently announced that it would merge with its closest major competitor Gannett for $1.4 billion, potentially giving one corporation control over 615 newspapers across the country.

📚 WHAT WE’RE READING:

  • “How Amazon and Silicon Valley Seduced the Pentagon”(ProPublica, James Bandler, Anjali Tsui, and Doris Burke):Groundbreaking reporting revealing how former Department of Defense Secretary James Mattis gave Amazon CEO Jeff Bezos and former Google chairman Eric Schmidt “unprecedented access to the Pentagon.”
  • Cancer Patients are Being Denied Drugs, Even with Doctor Prescriptions and Good Insurance” (The Sacramento BeeCarmen George): How private insurers and pharmacy benefit managers pad their profits by preventing or delaying doctors and patients from getting the medicines that they need to live.
  • Can Journalism Be Saved From the Tech Giants?”(Washington Monthly, Grace Gedye): House Subcommittee on Antitrust, Commercial, and Administrative Law Chairman David Cicilline, D-R.I., sits down with the Washington Monthly to discuss journalism, online advertising monopolies, and antitrust.
  • “Three Years of Misery Inside Google, the Happiest Company in Tech” (Wired, Natasha Tiku): A deep, thorough investigation into the awakened and expanding employee movement over what kind of corporation Google is and will be.

Written by: Phil Longman and Krista Brown
Edited by: Phil Longman, Krista Brown, Udit Thakur, Claire Kelloway, Ram Sharma, Garphil Julien, Sandeep Vaheesan, Olivia Webb, Stella Roque, Olivia Webb, and Matt Buck

 

Image credit Joshua Hicks via iStock.com.

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In America today, wealth and political power are more concentrated than at any point in our country’s history.

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