The Corner Newsletter, January 10, 2019: New House To Put Pressure on Antitrust Enforcement — Merger to Monopoly in Printing Industry

Happy New Year, and welcome to The Corner. In this issue, we offer a preview of what’s to come with the new Democratic House majority. And we reveal the merger to monopoly that could put control of every national print magazine in one corporation.

January 10, 2019  |  by Open Markets

Open Markets Submits Comment to FTC Recommending New Vertical Merger Guidelines

On December 31, the Open Markets Institute submitted a comment to the Federal Trade Commission for its fifth session in its “Competition and Consumer Protection in the 21st Century” hearings.

In “The Urgent Need for Strong Vertical Merger Guidelines,” OMI discusses the Clayton Act’s objective of stopping mergers that threaten decentralized market structures, the harms from vertically integrated corporate power, why new guidelines are necessary, and the principles that new guidelines should follow. In particular, OMI argues that enforcers should model new guidelines on the 1968 Merger Guidelines’ section on vertical mergers. Two principles of those guidelines, clear market share thresholds and the rejection of an efficiencies defense, provide a worthy template on which enforcers should build.

New House Gears Up to Pressure DOJ and FTC on Antitrust Enforcement

Over the last year, Federal Trade Commission Chairman Joe Simons has been strongly criticized for his failure to enforce the agency’s 2011 consent decree on Facebook but has largely skirted scrutiny of his unwillingness to address the ongoing merger frenzy in any meaningful way. Department of Justice Antitrust Division chief Makan Delrahim, meanwhile, has largely escaped the public spotlight, with the notable exception of his agency’s poorly thought-out case to block AT&T’s merger with Time Warner. The new Democratic majority in Congress means this is now likely to change.

The new Chairman of the House Antitrust Subcommittee is likely to be Congressman David Cicilline, a Rhode Island Democrat and member of the Democratic House leadership. Cicilline is an aggressive anti-monopolist and has a track record of skepticism towards tech platforms. He has written legislation allowing newspapers to bargain collectively over advertising revenues with large online ad companies and has pledged to author new legislation expanding antitrust authority against dominant platforms.

Cicilline is also willing to act. Last month, he questioned Google CEO Sundar Pichai on the search giant’s plans to launch a Chinese product. He said Facebook executives “will always put their massive profits ahead of the interests of their customers” and noted that “it is long past time for us to take action.” In 2017, Cicilline called for hearings on the Amazon-Whole Foods merger. With his new authority, Cicilline can now bring pressure on both agencies to actually do the jobs they were hired to do. Delrahim’s failure to take on corporate concentration has been especially striking. Early on, Delrahim pledged to be a strong enforcer, portraying himself as a traditional pro-competition conservative. Delrahim attacked the idea of complex deals designed to let mergers go in exchange for conditions that require the agency to monitor a corporation’s post-deal behavior. Instead, he advocated preventing mergers outright, and took an especially strong stance against vertical integration, like in the tie-up between AT&T and Time Warner. Delrahim even called for jail time for employers engaging in wage-fixing against employees.

But in recent months, the Antitrust Division seems to have closed up shop even before the government shutdown took effect. Delrahim’s team conditionally cleared the drug store giant CVS to acquire insurance company Aetna, despite innumerable conflicts of interest such a vertical deal creates, incurring the wrath of a generally pro-monopoly Judge Richard Leon. The DOJ also intervened in favor of Apple in the Supreme Court case Apple v. Pepper, which asks whether iPhone users can sue Apple for abusing its monopoly over the sale of apps. Delrahim has also not followed through on pledges to file criminal charges against wage-fixers. Perhaps most disturbingly, the DOJ has moved to restrict the rights of state enforcers and private plaintiffs to bring cases against instances of monopolization.

The libertarian anti-enforcement bent of the DOJ’s political team was made clear in recent comments by Deputy Assistant Attorney General Andrew Finch, who argued in a December speech at a Capitol Forumconference that “consumers often benefit from concentration” and that antitrust laws “are concerned with competition, not concentration.” He called suggestions to break up or regulate tech platforms “drastic” and warned that any such actions would reduce entrepreneurial activity.

Simons and Delrahim came into their offices with strong words for would-be monopolists. In 2019, Simons and Delrahim can expect at least one congressional committee chairman to demand answers on why this has not happened.

For a longer look at antitrust in the coming year, read Matt Stoller’s new article in The New Republic

As 2018 came to an end, Open Markets’ Matt Stoller wrote an article in The New Republic about the broad political appeal of anti-monopoly policies and action. Stoller also laid out a few steps that enforcers and legislators could take today to begin to address concentrated corporate power.


  • Sen. Elizabeth Warren, D-Mass., announced last week that she was forming a presidential exploratory committee, signaling that she will likely be running for President in 2020. Ron Knox in Slate thinks that Warren could “revolutionize” antitrust enforcement for the better, while The Washington Post’s Jeff Stein sees Warren as championing policies “to use the federal government’s power to restructure markets.”
  • The Financial Times editorial board, writing about the prospects of giant technology corporations falling under further antitrust scrutiny, said that “regulators will have to find a way to show that consumer harm, the measure of monopoly power in the US, is based on more than just consumer prices, since Big Tech’s opaque transactions are typically done in data, not dollars.”
  • In an editorialThe Houston Chronicle criticized national leaders’ for “allow[ing] technology companies to exploit their customers’ deepening reliance on their products.” The Chronicle said that Barry Lynn and Matt Stoller’s nine-point plan in The Guardian “can start the discussion,” but that Congress has to get involved.
  • Daily Princetonian opinion editor Jon Ort criticized Princeton’s new joint artificial intelligence lab that the university is opening with Google. Pointing to Google’s past use of Princeton researchers to defend itself from federal investigation, Ort warns that “powerful though the incentives of profit, prestige, and politics may be, the University should know better than to take corporate beneficence for granted.”
  • Yesterday, Judge James Gritzner of the U.S. District Court for the Southern District of Iowa ruled that an agribusiness-backed Iowa law outlawing covert recording at animal facilities unconstitutionally violates the First Amendment’s freedom of speech.
  • Writing in his column for The New York Times about the suggestion by Rep. Alexandria Ocasio-Cortez, D-N.Y., to raise the marginal income tax rate on the highest earners to 60 to 70 percent, Paul Krugman explained some justifications for such a rate. One includes monopoly power; because many markets aren’t competitive, many high-income earners are simply receiving “a lot” of monopoly profits.


  • Bloomberg‘s Shira Ovide named Lina Khan and the Open Markets Institute among its “People of the Year in Technology,” for their work “becoming an underpinning for economic critiques of big internet companies.”
  • The French newspaper Le Figaro interviewed Barry Lynn on the ways that platform monopolies like Amazon and Google endanger democracy and how to rein them in. You can watch or read his interview here.
  • The French news and commentary magazine Challenges published an interview with Barry Lynn about the political and commercial threats posed by Amazon, Facebook, Apple, and Google.
  • Tim Wu talked to the ProMarket blog about his new book, The Curse of Bigness, and why breaking up big, dominant corporations like Facebook is vital to maintaining open markets and a democratic society.
  • The Washington Post’s coverage of Sen. Elizabeth Warren, D-Mass., and her policies quoted Matt Stoller explaining that Sen. Warren’s June 2016 speech hosted by Open Markets was “the first time a politician had criticized big tech for being monopolistic in a big way.”
  • An article in The New York Times focused on the “growing attack[s]” on the FTC “for what critics say is a systemic failure to police Silicon Valley’s giants and their enormous appetite for personal data.” The article quoted Matt Stoller saying, “They think of themselves as deal-makers, not cops … They have an institutional culture of deference.”
  • Matt Stoller talked with WTIC’s Todd Feinburg about Amazon’s harms to society and the dangers of monopolies generally.
  • David Dayen, in In These Times, cited Phillip Longman’s Democracy article, “Time to Fight Health-Care Monopolization,” pointing out that “in over 40 percent of the country, a single entity controls all local hospitals.”
  • InsideClimate News covered the Federal Crop Insurance Program and how it discourages unsustainable agricultural practices. Austin Frerick explained the role of the Farm Bureau – which sells crop insurance – in creating this problem.
  • America magazine cited the Open Markets Institute’s “America’s Concentration Crisis” report showing that Amazon controls 49 percent of e-commerce in an article criticizing Amazon’s second headquarters and the subsidies it extracted from New York and Virginia.
  • The BBC, exploring what might happen to Facebook in 2019, suggested that Facebook “might be broken up” and cited the Freedom From Facebook campaign’s call to break up Facebook into four pieces.
  • Lina Khan explained to BuzzFeed News, “It’s possible for someone both to love Amazon as a consumer and to worry about the predatory business practices and exploitative conduct that enable those consumer conveniences.”
  • Lina Khan spoke to Yahoo! Finance about how concerns about Facebook are made worse by its enormous size: “Facebook’s scale coupled with its business model are dangerous.”

The Merger That Could Kill Your Favorite Magazine

Google’s and Facebook’s ever-tightening control over online advertising spending in the United States continues to make it harder for magazine publishers to keep their businesses alive. But publishers’ jobs may soon get even more difficult if the Department of Justice fails to block printer Quad/Graphics’ $1.4 billion bid to buy its only major competitor in the business of printing physical magazines, LSC Communications.

Quad and LSC have argued that the deal is necessary in the face of contracting demand for printed magazines. But the effect of the deal could be to exacerbate the decline in magazine publishing more than would otherwise occur.

Even with the spread of digital publications, many readers, publishers, and advertisers still see value in physical copies. Indeed, some magazines – including Rolling Stone – have recommitted over the last year to printing their product.  Yet if the deal is approved, even major publications like Sports IllustratedNational Geographic, and Reader’s Digest will become dependent on Quad/Graphics to print and distribute their product.

Announced in late 2018, Quad’s all-stock purchase of LSC would cap off a wave of consolidation in the printing industry and create a corporation with combined annual sales of approximately $8 billion. Some of Quad’s notable acquisitions include Brown Printing in 2014 and World Color Press in 2010, for $100 million and $1.3 billion, respectively.

LSC, meanwhile, went on its own acquisition spree after being spun off in October 2016 from the conglomerate RR Donnelley & Sons. Over a two-month span in 2017, LSC bought up smaller competitors Publishers Press and Creel Printing.

Royle Printing account executive Dan Weber, who has worked in the industry for over 30 years, including at Publishers Press and Quad, says there were probably six printers ten years ago that could do so-called long-run magazine prints jobs, or jobs involving several hundred thousand or more copies. The Quad-LSC merger “really consolidates all those handfuls into one,” Weber says.

Few magazine publishers were willing to talk to Open Markets on the record. One exception was an industry source who writes under the pseudonym D. Eadward Tree, for the trade journal Publishing Executive. According to “Tree,”  “the concentration of printers reduces competition, which drives up printing prices and can stifle innovation.”

Weber agrees. Even with only two printers in business, he says, publishers “could always leverage one against the other to get better pricing or at least maintain a good deal … [One] kept the other honest.”

What makes the deal even more troubling is that a combined Quad-LSC would also control the logistics of distributing print magazines throughout the country. Once a magazine is printed, USPS gives discounts on postage to printers that have the ability to sort and bundle different titles together before sending the magazines through the mail. Until two years ago, a printer could turn to Quad or three other logistics companies to handle such sorting and bundling work. But LSC has bought all three of them over the last two years. Weber says this power over distribution would give Quad-LSC the ability to block smaller printers from competing for publishers’ business.

Promisingly, the Justice Department last month requested additional documents from Quad and LSC for its review of the deal. But industry insiders still fear the government will end up allowing the deal.

John Conley, CEO of the print strategy firm Borderland Advisors notes that, “Any time there’s been a merger that either Quad or Donnelly has done in the last 25 years, the Justice Department has always ruled in favor.” He says that’s because the antitrust enforcers don’t understand the difference between the printing of magazines, catalogs, directories, business forms, labels, or legal documents. They put all “into the same pot,” he says, then conclude that any one deal amounts only to “a small part of a big pot.”

Tree agreed about the Department of Justice’s past approach to deals in the industry. It’s “like saying that Ford, Southwest Airlines, Uber, and Canadian Pacific are all in the transportation industry,” he says. “It’s true, but irrelevant to competition” for the business of high-quality magazines, he says.

If enforcers ever do look at individual markets, they shouldn’t just stick to the magazine industry. Quad and LSC are also the two biggest printers of books, together bringing in $1 billion more in sales than the prospective conglomerate’s next closest competitor.


$23 billion

Amount that Google saved on its foreign taxes by moving money through a Dutch shell company to Bermuda in 2017. Reuters reported that Google’s arrangement allowed it “to enjoy an effective tax rate in the single digits on its non-U.S. profits.”


  • “Progressive Labor Standards,” (Democracy, Nick Hanauer): Entrepreneur and venture capitalist Hanauer proposes requiring greater responsibilities on larger corporations. Such policies, Hanauer argues, are “squarely on the side of farmers, workers, and small businesses, and against the corrupting influence of concentrated market power … [and would] spark the political realignment our suddenly fragile republic so desperately needs.”
    Read Matt Stoller’s response to Hanauer’s essay here.
  • “Revisiting the Political Content of Antitrust: The Changing Role of Speech,” in Frédéric Jenny: Standing Up for Convergence and Relevance in Antitrust (Concurrences, Albert Foer): One of a collection of articles honoring antitrust professor Frédéric Jenny, Foer’s essay builds off of Robert Pitofsky’s “The Political Content of Antitrust,” and considers the role that non-economic values, especially free speech, do, and should, play in competition policy.
  • “The Case for Why Big Tech is Violating Antitrust Laws,” (CNN, Sally Hubbard): The Capitol Forum senior editor lays out a clear case for how Amazon, Google, and Facebook are illegally exploiting their monopoly power.
  • “Why Regulators Went Soft on Monopolies,” (The American Conservative, Jonathan Tepper): Tepper documents antitrust enforcers who cycle in and out of the government and public practice, and how they’ve helped bring about enormous industrial concentration, hurting workers and aggravating inequality.

Written by: Barry Lynn, Phil Longman, Matt Stoller, and Matt Buck
Edited by: Barry Lynn, Phil Longman, Sandeep Vaheesan, Katherine Dill, Claire Kelloway, and Matt Buck

Image credit: LPETTET, sykono, and kirill4mula via iStock.

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