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The Corner Newsletter, February 21, 2019: The Green New Deal’s Key to Success — FTC Commissioner Warns of Monopolists’ Harm to Democracy, Civil Rights

Welcome to The Corner. In this issue, we look at the Green New Deal and how anti-monopoly philosophy is key to reaching this audacious vision. We also highlight a warning by an FTC commissioner on the dangers that platform monopolists pose to democracy and civil rights.

February 21, 2019  |  by Open Markets

Open Markets Supports New Yorkers’ Opposition to Amazon’s Cash Grab

Amazon’s decision last week to abandon its plans to locate a satellite office in New York proved that citizens, grassroots organizers, labor unions, and local lawmakers can stand up even to the biggest corporations, and win. Open Markets helped lead opposition to Amazon’s “Dating Game” tournament approach to expansion, from the first days after it was announced. This work built on Open Markets pioneering efforts to alert citizens to the political dangers of Amazon’s power. And it built on Open Markets pioneering efforts to help working people, unions, and independent businesses come together to restore a democratic economy in America.

Open Markets Board of Directors member Zephyr Teachout, writing for NBC News, describes the “enormous grassroots opposition” to the deal. Amazon’s “capitulation,” Teachout explains, “is just the beginning of pushing back on the unfettered growth of corporate power.”

The next step, Matt Stoller explains in an op-ed for The Guardian, is for New York attorney general Letitia James to “begin investigating the corporation for abusing its power as a monopoly.”

You can read Open Markets’ press release on the decision here.

An Anti-Monopoly Approach for the Green New Deal

In the days since Rep. Alexandria Ocasio-Cortez, D-N.Y., and Sen. Edward Markey, D-Mass., introduced their “Green New Deal” to restructure the U.S. economy to fight climate change and eliminate inequality, their vision has been widely derided by Republicans and even some Democrats as “command and control” socialism. Others, however, have welcomed the boldness of the idea, which calls for a complete mobilization of society to restructure energy, transportation, and agriculture, and just about every other corner of the political economy.

As conservative columnist Ross Douthat put it in The New York Times, there “are virtues in trying to offer not just a technical blueprint but a comprehensive vision of the good society, and virtues as well in insisting that dramatic change is still possible in America, that grand projects and scientific breakthroughs are still within our reach.”

There are also virtues in having a practical way to achieve these goals, and the Green New Deal may actually be closer to having such a plan than most people – including some of its authors – appear to understand. The key lies in the second-to-last provision of the bill, which calls for “ensuring a commercial environment where every business person is free from unfair competition and domination by domestic or international monopolies.”

As Open Markets makes clear through our whole body of work, many if not most of the gravest ills in our society today are caused or made worse by monopolization. Inequality, after all, is largely a function of monopolists driving up prices and driving down wages. Our health care crisis is made worse by monopolistic hospitals and drug companies. Corporate concentration leads to the destruction of family farmsindependentlocally-owned businesses, and to the decline of civic capital and self-governance in communities across our nation.

Sure enough monopoly power is also at the heart of our climate change problem. With the adoption of more regenerative, organic farming practices, for example, today’s industrial agriculture could go from being a major source of pollution to a major means of sequestering carbon and achieving other environmental benefits. Yet anyone who wants to reform today’s industrial food system must deal with the power of agribusiness giants like chemical maker Bayer-Monsanto and slaughterhouse monopolist JBS, as well as with food retail and processing behemoths like Walmart and Kraft Heinz, who all have a deep interest in maintaining the status quo.

Similarly, a cleaner energy system means tackling giant electricity corporations like Exelon, which use their control of transmission lines not only to suppress renewable energy technologies but to protect old and dirty nuclear plants. It means breaking up the power of hydrocarbon giants like Koch Industries. And it means taking on corporations that outsource to China and other countries as a mean of avoiding environmental regulation.

Again, do you want to improve the efficiency of airliners? That means addressing how the Airbus-Boeing duopoly has reduced incentives to improve efficiency. Do you want to build more transit and high-speed rail, or make greater use of photovoltaics? That means standing up to the Chinese state’s efforts to monopolize manufacturing in both of these realms.

Nationalization is not an answer to any of these challenges. Under Communism, Eastern Europe and the Soviet Union promoted dirty heavy industries, and today, China’s state-owned enterprises are among the worst polluters on the planet. Nationalization only raises the question of how the American people would then structure competition within each particular industry to drive both real efficiency and technological innovation.

A just and sustainable future? The way forward is not to put the state in charge, nor to “let the market work.” It is to use the state to engineer competitive markets in every sector of our economy.

🔊 ANTI-MONOPOLY RISING:

  • The Austrian Federal Competition Authority announced that it was opening an investigation into whether Amazon discriminates against small businesses that rely on its platform to reach customers by favoring its own products. The top Austrian antitrust official, Theodor Thanner said, “The digital world is not a legal vacuum … Companies operating on a global scale must adhere to applicable Austrian laws and regulations.”
  • New Zealand Prime Minister Jacinda Ardern said that the country would enact a digital services tax on platform giants like Google and Facebook. The government said that mainly virtual corporations receive enormous income from New Zealanders with fewer tax obligations than other businesses.
  • The United Kingdom’s Competition and Markets Authority said that it has “extensive concerns” about grocery giant Sainsbury’s’ pending acquisition of its competitor, Asda. The decision, along with the conditions that the competition enforcer placed on the merger between the UK’s second- and third-largest grocery chains “basically means,” according to one UK attorney, “no retail consolidation in groceries for the foreseeable future.” (Read Food & Power’s coverage of the deal when it was first announced in May last year.)
  • House antitrust subcommittee chairman David Cicilline, D-R.I., told Politico that he was interested in “modernizing antitrust statutes” to address the power of large platform monopolists like Amazon, Google, and Facebook. He also “expressed broad skepticism” over the pending merger between telecommunications providers T-Mobile and Sprint.
  • Senate Minority Leader Chuck Schumer, D-N.Y., wrote a letter to the president of the hedge fund attempting a hostile takeover of Gannett, which owns over a hundred newspapers. In the letter, Schumer pointed out that the merger might raise antitrust concerns and could harm local communities across the country if subjected to the fund’s history of aggressive cost-cutting.
  • The Washington Times’ Ethan Epstein criticized the FTC’s recent 3-2 decision allowing office supply reseller Staples to purchase office supply wholesaler Essendant, noting, “the FTC’s decision will make these small businesses much harder to operate – let alone for an entrepreneur to enter the business.” Epstein added that “it has become increasingly difficult to start and maintain a small business. While this may have happened by accident, it was the result of policy decisions — policies that can and should be reversed.” (Read The Corner’s criticism of the FTC’s decision earlier this month here.)

📝 WHAT WE’VE BEEN UP TO:

  • Barry Lynn discussed consolidation in the defense industry at the Center for Strategic and International Studies’ event, “Is Bigger Better? Concentration, Competition, and Defense Contracting Outcomes.” Lynnexplained, “When you have all capacity for … vital sources of supply located in one place, that creates a risk of catastrophic failure of systems. That’s a too-big-to-fail issue.”
  • Sandeep Vaheesan spoke on a panel at the University of Chicago titled “Regulating Tech Giants: Competition Policy for the Digital Age.” He argued that monopolistic platforms function as private governments and for the need to consider various tools to address their power including breaking them up, regulating their power, or enabling users to build collective, countervailing power.
  • Matt Stoller spoke last month on a panel at the University of Florida alongside historians and legal scholars about America’s history of anti-monopoly policy. You can now watch the panel on C-SPAN here.
  • Barry Lynn, talking about a hedge fund’s plan to take over the Gannett, which owns hundreds of local newspapers, told The Nation, “We cannot understate the threat monopoly poses to the free press … It’s time our policy-makers and regulators do their jobs and break up these monopolies, before they destroy our democracy.”
  • Talking about the enormous tax gifts New York promised to Amazon in The Hill, Barry Lynn said, “What was so clumsy in the Amazon deal was the greed, the naked greed.” Matt Stoller explained to Vice that the Amazon HQ2 deal in New York made the “dark side to Amazon … very clear.”
  • The Hill reported that 2020 presidential candidates are “eager to challenge tech giants” and quoted Matt Stoller saying that Democratic politicians are “moving away from” their previously close relationships with platform monopolists, but that he also wants candidates to “push even harder” on the likes of Facebook, Google, and Amazon: “Either they run us, or the democracy runs them.”
  • The Huffington Post noted the Democratic Party’s disaffection with Silicon Valley corporations and quoted Matt Stoller saying, “Now, that’s over … Nobody can say we need more Google in government.”
  • Yahoo! News’ coverage of the $66 billion merger of BB&T and SunTrust banks quoted Matt Stoller’s tweet observing the consolidation trend in the banking sector: “Number of banks in the US has fallen 40% since 2000. Concentration concentration concentration!”
  • Open Markets advisory board member Roger McNamee gave an interview to The Guardian about Facebook and his new book, Zucked: Waking Up to the Facebook Catastrophe. McNamee told the paper that Facebook’s destructive actions are indicative of a problem “bigger than Facebook. This is a problem with the entire internet platform industry, and Mark [Zuckerberg] is just one of the two most successful practitioners of it.”
  • The Los Angeles Review of Books reviewed Tim Wu’s The Curse of Bigness and Matthew Hindman’s The Internet Trap. The review notes that the rise of scholars like Wu and Lina Khan indicates that “the pendulum may be finally swinging against bigness.”
  • Gizmodo reporter Kashmir Hill talked with Chris Hayes for his “Why is This Happening?” podcast about her time cutting herself off from Facebook, Google, Amazon and other platform monopolists and cited Lina Khan’s “blockbuster” Yale Law Journal paper as making the case that “Amazon’s already a monopoly.”

FTC Commissioner Sounds Alarm on Platform Monopolists’ Threat to Democracy

Federal Trade Commission Commissioner Rohit Chopra last week warned that platform monopolists pose an increasingly dangerous threat to American democracy as well as to the civil rights of individuals.

Speaking at the University of Colorado Law School, Chopra focused closely on the ways that platform monopolists harm news and book publishers and stunt and warp the spread of ideas. The monopolization of the online advertising market by Google and Facebook has “reshaped” advertising so that success is “increasingly driven by a contest on who has more data,” Chopra said. One result is less “transparency and accountability for town halls, police department, and school districts all over America.”

Chopra’s statement makes the FTC the second official agency – after the European Data Protection Supervisor – to warn of the dangers to democracy posed by the concentration of power and control by Google and Facebook over news media markets and news flows.

In a separate part of the speech, Chopra warned that the power of platform monopolies poses serious threats to the civil rights of individuals. Referring to reports of algorithmic bias reinforcing racism and sexism in the hiring process, Chopra said, “If we still want to move toward a society where each of us has equal opportunities, we need to investigate whether these black box models, protected as trade secrets, are undermining that goal.”

Americans “should never assume that algorithms will be free of bias,” Chopra said. “Mathematical models now help determine not only whether we can get a job, a loan, or an apartment, but even whether we’ll see a listing for one in the first place. Our civil rights and anti-discrimination laws seek to keep certain elements out of the equation. We’ve put these laws into place with the goal of making our society more just and fair.”

Chopra said solutions must aim “to reduce conflicts of interest and exclusionary conduct, increase transparency and auditability of algorithms, and advance structural reforms.” The first step is simply to investigate. “FTC fact gathering can help us lay the groundwork for more effective enforcement, legislation, and regulations to protect our economy, society, and democracy.”

In related news, an independent UK study undertaken at the request of Prime Minister Theresa May found a similar cause for the decline of the news media in Europe. Noting that Google and Facebook “appear to have captured” most online ad revenue, the Cairncross Review called for a regulator to oversee new “codes of conduct” that would govern relationships between Facebook, Google, and Apple on one side and news publishers on the other. The paper also called on the UK’s antitrust enforcer, the Competition and Markets Authority, study the online advertising industry and recommend ways to make the system more open and competitive.

📈 VITAL STAT:

-1%

Effective federal tax rate of Amazon in 2018, according to an Institute for Taxation and Economic Policy analysis reported on by The Washington Post. Thanks to tax breaks, Amazon actually received a rebate of $129 million last year. The lowest federal income tax rate last year was 10 percent.

📚 WHAT WE’RE READING:

  • “The Antitrust Case Against Facebook: A Monopolist’s Journey Toward Pervasive Surveillance in Spite of Consumers’ Preference for Privacy” (Berkeley Business Law Journal, Dina Srinivasan): A detailed history of how Facebook’s flagrant privacy violations benefits from its monopoly power as well as a legacy of deception.
  • “Behind the Scenes, Health Insurers Use Cash and Gifts to Sway Which Benefits Employers Choose” (ProPublica, Marshall Allen): Health insurance brokers help employers choose and manage health insurance plans for their employees. Yet in “a classic conflict of interest,” brokers can receive enormous sums from health insurers in exchange for steering employers to more lucrative plans, resulting in wealthier insurers, wealthier brokers, and cheated employers and workers.
  • “Unicorns, Cheshire Cats, and the New Dilemmas of Entrepreneurial Finance” (Forthcoming in Venture Capital: An International Journal of Entrepreneurial Finance, Martin Kenney and John Zysman): A forthcoming paper questions whether the current model of private venture capital funding start-up companies, especially its encouragement to pursue “growth-at-all-costs,” actually “destroy[s] economic value” and produces “disruption without social benefit.”
  • “The Power of Corporations in the Digital World” (Discussion paper, Curbing Corporate Power): A thoughtful discussion of the place of competition policy to address online platform power. Its proposals include “Re-thinking existing economic principles and the objectives of competition law” and “Prohibiting and Breaking Up Monopolies.”

Written by: Barry Lynn, Phil Longman, and Matt Buck
Edited by: Barry Lynn, Phil Longman, Matt Stoller, Claire Kelloway, 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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