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The Corner Newsletter, August 8, 2019: Open Markets Opposes Megamergers Throughout Economy – What an Ongoing Lawsuit Says About Google’s Power over Online Travel

Welcome to The Corner. In this issue, we

– condemn the DOJ’s plan to allow T-Mobile to buy Sprint

– detail our letter to the DOJ calling on the Antitrust Division to block a major textbook merger

– call on enforcers to block two other megamergers in the eyewear and generic drug industries, and

– discuss how an ongoing lawsuit illustrates Google’s power over the online travel industry

August 8, 2019  |  by Open Markets

Open Markets Condemns DOJ Plan to Allow T-Mobile to Buy Sprint: Calls on State AGs to Continue to Pursue Challenge to Deal

Last month, the Justice Department allowed T-Mobile’s $26.5 billion acquisition of Sprint to go forward, subject to conditions. The DOJ’s requirement that T-Mobile transfer customers, and sell spectrum and other assets to Dish, as well as allow Dish to use its network as it builds out a separate network, “insults the intelligence of the American public,” the Open Markets Institute said in its press release. “ If Assistant Attorney General for Antitrust Makan Delrahim truly believes there should be four competitors in the U.S. wireless market, he should simply block this deal,” the Open Markets Institute said.

The merger has to clear at least one final hurdle, in the form of a lawsuit filed by state attorneys general. Last week, Texas Attorney General Ken Paxton, a Republican, announced that Texas would be the fourteenth state, in addition to the District of Columbia, to join the states’ lawsuit, set to begin December 9.

Read Open Markets’ press release condemning the DOJ’s decision here.

Open Markets Leads Coalition to Demand DOJ Block Merger in Textbook Industry

Last week, the Open Markets Institute led a coalition of public interest groups, academics, and student groups in demanding that the Justice Department block the proposed merger between textbook publishers Cengage and McGraw-Hill. The combination would create, behind Pearson, the second-largest U.S. provider of textbooks and higher-education materials with $3.16 billion in annual revenue and give the new corporation approximately 40 percent of the higher education textbook market.

“This mega-merger would solidify monopoly power to be leveraged at the expense of debt-burdened students across the country who are effectively captive customers,” said Open Markets Legal Director Sandeep Vaheesan. “It would raise the costs of already expensive textbooks and limit where academic writers can take their work to print.”

Read Open Markets’ letter here.

Open Markets Calls on Antitrust Enforcers to Challenge Megamergers in Eyewear and Generic Drug Industries

The Open Markets Institute last week opposed two multibillion dollar mergers: EssilorLuxottica’s $8 billion acquisition of GrandVision and Mylan’s acquisition of Pfizer’s generic drug unit, Upjohn.

EssilorLuxottica’s acquisition would, in the words of its vice-chairman Hubert Sagnières, “eliminate the competitive threat of GrandVision becoming a force in the US.” Mylan’s merger with Pfizer’s Upjohn, meanwhile, would create a “global generic drug powerhouse,” writes The Hilland threatens to exacerbate already skyrocketing drug prices.

You can read Open Markets’ press release opposing the EssilorLuxottica acquisition here and the release opposing Mylan’s merger with Upjohn here.

What an Ongoing Lawsuit Says About Google’s Power in Online Travel

On July 16, Google representative Adam Cohen argued to the House antitrust subcommittee that the tech giant was an afterthought when people start planning for travel. “When [people] are searching for places to travel, hotels and airlines, they start with dedicated specialist competitors,” Cohen said.

Actually, they don’t.  A full sixty percent of all travel searches today begin on Google and the corporation’s dominance – and its profits from this business – are growing fast.

A class-action lawsuit filed by a class of online purchasers of hotel rooms in mid-2018 reveals much of what Cohen was seeking to hide. Though not specifically about Google, the case’s details highlight Google’s role as an increasingly important intermediary for most online travel today.

The lawsuit accuses five major hotels, InterContinental Hotels Group (IHG), Hyatt, Hilton, Marriott and Wyndham of colluding with each other to manipulate how Google presents searches for hotels.  Specifically, the suit charges that these hotels agreed not to bid on “branded keyword advertising” or advertisements that appear when one searches on Google for a specific hotel chain. Allegedly because of this collusion, Google will list, for example, Hyatt’s Phoenix hotels at the top of the page, and bury other hotels you might want to stay in.

Why would the hotels feel compelled to enter into such a conspiracy?  Because Google has become so dominant in how people make their travel plans that the hotels will go to extraordinary lengths to optimize Google search results. The role of other online travel services, like Hotels.com or Expedia, is fading. By now, three in four people who plan travel online use Google travel tools.

It’s actually sweeter than that for Google. Not only does the tech giant receive ad revenue, but when you book through Google, they get a commission as well. The result, says George Schaal, executive editor of travel industry website Skift, is that Google gets paid at every stage of the booking process.

Google is increasingly leveraging its dominance in online travel search to favor its own travel planning and booking tools over those offered by the hotels and Online Travel Agencies (OTAs). Google’s favoring of its own travel tools also steers consumers away from direct bookings on hotel websites. Direct bookings are crucial for hotels to capture as much revenue as possible. In short, in addition to all its other lines of business, Google has become an online travel agency of its own.

Why does this matter?

In addition to the dangers posed by this further concentration of wealth, power, information, and control in the hands of one of the most powerful corporations in human history, Google’s search bias in travel appears also to mean less choice and higher prices for you and your family. One way this happens is when Google prevents users from becoming aware of lower cost options listed on travel industry competitors such as the OTAs. According to Jeannie Evans, a lead attorney on the hotels case, less comparative information means that prices on hotel rooms would go up for consumers.

A judge ruled in March that there is “certainly sufficient evidence” to allow the class action to go forward.

🔊 ANTI-MONOPOLY RISING:

  • Following the Australian Competition and Consumer Commission’s final report for the Digital Platforms Inquiry, the Australian government announced plans to address the damages that Facebook and Google are causing businesses, consumers, and the media. “Make no mistake, these companies are among the most powerful and valuable in the world,” said Josh Frydenberg, Australia’s treasurer. “They need to be held to account and their activities need to be more transparent.
  • Sen. Josh Hawley, R-Mo.introduced a bill that would ban automatic content additions, as seen in features like infinite scroll or autoplay on social media sites such as Facebook and YouTube. “Big tech has embraced a business model of addiction,” Hawley said in a statement. “Too much of the ‘innovation’ in this space is designed not to create better products, but to capture more attention by using psychological tricks that make it difficult to look away.”
  • The UK’s Financial Reporting Council issued nearly three times more sanctions against UK accountants last year, with record penalties against the Big Four auditors. Elizabeth Barrett, the FRC’s director of enforcement, said that “the purpose of the sanctions is to deter bad behaviour and send a message to the market … A large fine that has both a monetary and reputational impact is important.”
  • This week, the New York Attorney General subpoenaeddrugmakers Sanofi, Eli Lilly, and Novo Nordisk over the pricing and sales of their insulin products. According to Eli Lilly’s most recent 10-Q filing, the drugmaker has also received “two requests from the House of Representatives’ Committee on Energy and Commerce,” as well as one request each from the House Committee on Oversight and Reform, the Senate Banking Committee, and the Senate Committee on Health, Education, Labor, and Pensions.
  • As part of its antitrust investigation into Facebook, the Federal Trade Commission is looking into whether the social media giant purchased startups to eliminate potential competition, according to The Wall Street Journal. The Journal’s report quotes FTC Bureau of Competition Director Bruce Hoffman saying last year that such a charge “is a completely legitimate and real theory of competitive harm.”
  • Following the Capital One hack, where over 100 million Capital One credit card records were stolen, raising questions about potential security weaknesses in Amazon’s cloud service, Sen. Ron Wyden, D-Ore.sent a letter to Amazon CEO Jeff Bezos requesting information around the security of Amazon’s cloud computing products. “If Amazon’s cloud computing services are found to be the common element in a series of high-profile hacks targeting large corporations, it would raise serious questions about whether other corporations and government entities that use Amazon’s cloud computing products are also vulnerable.”
  • Agustín Carstens, head of the Bank of International Settlements, which supports central banks and the international financial system, told the Financial Times that the organization is supporting central banks creating digital versions of state currencies. Carstens said, “Many central banks are working on it; we are working on it, supporting them, and it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.”
  • In a letter to Google CEO Sundar Pichai, Sen. Sherrod Brown, D-Ohio, alongside nine other senators, pressured Google to give full-time status to its more than 120,000 temporary and contract workers. “Temporary workers and independent contractors are by definition intended for short-term and non-core work, and we urge Google to end any abuse of these worker classifications and treat all Google workers equally … Google is valued at more than $100 billion, and your personal compensation topped $400 million in 2018, which makes it that much more difficult to stomach the mistreatment of these workers.”
  • UK’s Information Commissioner’s Office put out a statement to Libra Association members articulating concerns that it has about the potential privacy risks of the proposed Libra digital currency and infrastructure. The statement, co-signed policymakers including American Federal Trade Commissioner Rohit Chopra and European Data Protection Supervisor Giovanni Buttarelli, also requested details on how the Libra Association will comply with data protection laws.

📝 WHAT WE’VE BEEN UP TO:

  • Sally Hubbard wrote for CNN Business criticizing the FTC’s recent decision “letting Facebook off the hook,” with a $5 billion fine, arguing that instead of fines, “changing destructive business models and anti-competitive practices is the only way to lessen the platforms’ harms.” She offers a catchall framework to categorize the fixes that regulators should pursue, spelling out the acronym PAIN: Privacy, Antitrust, Interoperability and Non-discrimination.
  • Barry Lynn talked with Politico about the importance of stronger antitrust action against companies like Facebook and Google, to addressing issues like disinformation. “That’s something that is really fundamentally important for democracy,” Lynn said. “It’s something competition policy enforcers can absolutely have a major hand in fixing.”
  • Sally Hubbard spoke with The Verge about a reported Federal Trade Commission investigation into Apple’s listing iPhone sales directly on Amazon last year. Allegations that third-party sellers of iPhones were kicked off of Amazon shortly after could be an example of illegal “brand gating” or “put[ting] a gate around the brand and say all the third-party sellers of whatever that brand is get a notice saying you can no longer sell this product on our platform unless you get authorization from the brand … Problem is that it’s illegal under antitrust law.”
  • Sandeep Vaheesan spoke with Inside Higher Ed about Open Markets’ recent letter to the U.S. Department of Justice, opposing the merger between textbook publishers Cengage and McGraw-Hill Education. The merger would lead to substantially less competition in the higher education textbook market, as Vaheesan explained, making it “unlawful under long-standing antitrust law.”
  • The Chronicle of Higher Education’s weekly newsletter quoted Open Markets’ recent letter to the U.S. Department of Justice, opposing the planned merger between textbook publishers Cengage and McGraw-Hill, as its quote of the week. Open Markets wrote, in collaboration with the U.S. Public Interest Research Group Education Fund, “The textbook industry, once a robust market with a multitude of competing publishers, is now dominated by a handful of giants.”
  • Salon cited Open Markets’ work on healthcare monopolies in an article analyzing Presidential candidate Senator Kamala Harris’ recent health plan. The article emphasizes the need to address the problem of market power in the health insurance industry, where “the top four largest insurers increased from 48 to 61 percent nationwide between 2007 and 2015.”

📈 VITAL STAT:

75%

Percent of small businesses who rated the danger posed by Amazon to their livelihoods as “significant” or “extremely significant,” according to a newly released study by the Institute for Local Self-Reliance (ILSR). ILSR surveyed more than 1,000 independent businesses across the country and asked them a range of questions about the issues most concerning to them. Results included not only Amazon, but credit card swipe fees and healthcare policy too.

📚 WHAT WE’RE READING:

  • “Recovering Labor Antimonopoly”(New Labor Forum, Sanjukta Paul): A sharp essay on the history and place of the labor component of the anti-monopoly movement and why today’s movement should not only address market structure, butwork to extend the “economic coordination rights” that large corporations enjoy to small businesses and workers. “Labor antimonopoly,” Paul explains, “contested the consolidation of control over the process of production in the hands of a few …, while broader antimonopoly politics contested the consolidation of power and control over economic life more generally.” (For a copy of the paper, you can contact Professor Paul here or on Twitter at @sanjuktampaul.)
  • “Why Google Employees are Donating to Warren and Sanders – Presidential Candidates Who Want to Break Up Google”(Recode, Rani Molla and Shirin Ghaffary): Why Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-V.T., are the most popular recipients of donations to presidential candidates from Google employees: “…[T]hese tech workers don’t hate their jobs. In fact, they think breaking Google up would be good for it.”
  • “Amazon Squeezes Sellers That Offer Better Prices on Walmart” (Bloomberg, Spencer Soper): How Amazon actually pushes the prices of goods up by punishing sellers who offer consumers a better deal elsewhere on the internet. As the Washington Center for Equitable Growth’s Michael Kades tells Bloomberg, if antitrust enforcers can prove Amazon is “causing merchants to raise prices on other platforms … Amazon loses the argument that their policies are all about giving everyone lower prices.”

 

 

Image credit: Andrey Popov via iStock.com and Google.com.

Written by: Phil Longman, Ram Sharma, and Matt Buck
Edited by: Barry Lynn, Phil Longman, Katherine Dill, Garphil Julien, Krista Brown, Olivia Webb, Udit Thakur, and Matt Buck

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

The Open Markets Institute, formerly the Open Markets program at New America, was founded to protect liberty and democracy from these extreme -- and growing -- concentrations of private power.

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