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The Corner Newsletter, July 11, 2019: Sally Hubbard on How Monopolies are “Destroying the American Dream” – Why Walmart Wants Antitrust Scrutiny of Amazon

Welcome to The Corner. In this issue, we discuss why “monopolies are destroying the American Dream” and we talk about why giant retailers like Walmart and Target are calling on federal regulators to look into Amazon.

July 12, 2019  |  by Open Markets

“Monopolies are Destroying the American Dream”

Sally Hubbard on Monopolies, Inequality, and Hate for CNN

In an essay for CNN, Open Markets Director of Enforcement Strategy Sally Hubbard explains how monopolies and America’s concentration crisiscontribute to a range of the country’s economic and political woes, from health care, inequality, to wage stagnation. “As monopolies and oligopolies rule most sectors of the economy, they are extracting wealth from everyone else,” Hubbard writes. “Although weakening monopolies’ grip on America will not solve all our problems, we will not be able to solve our problems without doing so.”

The consequences of concentrated rule over American society extend to the horrific abuses of detained migrants at the border between the United States and Mexico. “Widespread inequality has made so many Americans powerless that they rebuke America’s historic role as a haven for the powerless,” Hubbard argues.” The politics of hate have made immigrants the scapegoats for Americans’ powerlessness, while providing cover for the already powerful to amass even more power.”

Read her essay in full here.

Big Box Retailers Discover the Virtues of Antitrust

The Retail Industry Leaders Association, which represents Walmart, Target, Home Depot, and other national retailers, wrote a letter to the Federal Trade Commission last week demanding that the FTC examine “persistent oligopolies in other parts of the retail ecosystem.”

The letter mostly complains about the lack of antitrust enforcement against Amazon and Google. Unmentioned is the irony that Walmart’s growth into a retail Goliath was made possible by a sharp retreat from antitrust and fair-trade law enforcement that began in the late 1970s. Enforcers looked the other way as Walmart gained monopoly power in market after market while using predatory pricing to drive out competitors, as explained by Open Market’s Claire Kelloway in last week’s Food & Power.

Yet now Walmart and other large retailers have to worry about even larger predators. Walmart’s share of consumer retail spending has remained flat since 2014, while Amazon’s share has nearly tripled, according to payments and commerce site PYMNTS.com. Amazon similarly threatens to overtake Walmart within retail product categories like sporting goods or clothing.

Graphs courtesy of PYMNTS.com, edited for visibility by Open Markets.

So Walmart and other members of the RILA have found religion about anti-monopoly. Here are four specific demands they make of the FTC and federal policymakers:

Address Amazon’s (and Google’s) power over the information consumers see. The RILA writes, “It should thus be quite concerning to the Commission that Amazon and Google control the majority of all Internet product search, and can very easily affect whether and how price and product information actually reaches consumers.”  In an email to Open Markets, RILA Vice President Nick Ahrens further explained that “Amazon has demonstrated a willingness to use its product search dominance and marketplace dominance to achieve anticompetitive advantage.” Amazon gathers information not only from its e-commerce business but also from its numerous other businesses including its highly important cloud services and advertising businesses. “To put the matter as simply as possible,” the retailers write, “a firm does not need to have the power to control prices if it has the power to control effective access to price information.”

Put future mergers and behavior by Amazon and Google “underthe heaviest possible scrutiny.” Invoking the “ever-increasing tide of revelations” involving platform companies and user privacy, the RILA says that this record should “easily suffice” to make antitrust authorities suspicious of future mergers and practices. In particular, antitrust authorities should be highly suspicious of actions that “increase the amount of potentially sensitive data [dominant platforms] control.”

Check Amazon’s power over its marketplace for third-party sellers. The retailers encouraged the FTC to be “particularly focused” on instances where Amazon abuses its role as an essential marketplace. Small sellers, the RILA warns, “feel that they have no choice but to operate on Amazon, because Amazon represents nearly half of the e-commerce market.” Because of this, retailers risk “giving Amazon information that allows it to capture their business if the data shows it to be profitable or growing.”

Study Amazon’s use of its logistics business to advantage itself as a seller of goods. Pointing out that Amazon also sells delivery services to many third-party sellers, “Amazon gains an advantage when it wishes to launch a store brand,” RILA writes, raising “clear antitrust concerns.” Furthermore, Amazon’s access to information about third-party sellers’ suppliers “through fulfillment data creates even greater anticompetitive risk.”

Even longtime critics of Walmart like Stacy Mitchell, co-director of the Institute for Local Self-Reliance and author of a book on mega-retailers,Big-Box Swindle, say that Walmart and other big retailers have good reason to worry. In many ways, Mitchell says, Amazon’s buyer power and steep-price cutting represent “a continuation of Walmart’s playbook.” But she adds that Amazon’s “godlike view” over online commerce, as well as its power over small businesses and logistics reach “make Amazon something else that is much more threatening to economic liberty and democracy than Walmart.”

🔊 ANTI-MONOPOLY RISING:

  • The House Subcommittee on Antitrust, Commercial, and Administrative Law will hold a hearing at 2 p.m. EST Tuesday to study the effect “of market power of online platforms on innovation and entrepreneurship.” The subcommittee will include representatives from Amazon, Apple, Facebook, and Google, as well as Columbia law professor Tim Wu and Institute for Local Self-Reliance Co-Director Stacy Mitchell. You can stream the hearing here.
  • The House Financial Services Committee’s Democratic leadership asked Facebook executives to “immediately agree to a moratorium on any movement forward on Libra – its proposed cryptocurrency and Calibra – its proposed digital wallet.” The leaders said that the risks of a Facebook-run currency “are even more glaring in light of Facebook’s troubled past, where it did not always keep its users’ information safe.”
  • In a hearing before the House Financial Services Committee, Federal Reserve Chair Jerome Powell said that Facebook’s Libra currency “raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability … These are concerns that should be thoroughly and publicly addressed before proceeding.”
  • New York Governor Andrew Cuomo called on the New York Department of Financial Services to investigate whether housing advertisements used Facebook’s targeted advertising technology to illegally discriminate against applicants. Cuomo said that he wants to “help ensure that New Yorkers seeking housing for themselves and their families are not discriminated against in any way.
  • New York State Assemblymen Ron T. Kim and Dan Quart sent a letter asking the New York State Attorney General and Department of Financial Services to investigate Facebook’s proposed Libra currency. Kim and Quart write that Facebook’s “vast market reach, anti-competitive practices, and large privacy violations represent a uniquely dangerous scenario.”
  • The Albuquerque Journal editorial board opposed Facebook’s planned currency, Libra, today. In its editorial, the paper quoted Open Markets Deputy Director Sarah Miller arguing that people should not trust Facebook to launch a global currency safely and that the FTC “needs to rein in Facebook.” “She’s right,” the board wrote.
  • coalition of artists’ groups, including PEN America and the Future of Music Coalition, sent a letter to the Federal Trade Commission arguing that the FTC “has a special responsibility to be attentive to the concerns of artists in their capacity as small business owners” and encouraging the FTC to participate in a “broadened conversation about the methods and mechanisms which may support healthy and competitive markets.”
  • The New York Times Editorial Board called on the federal government to address rising drug costs, in part by “instructing the Federal Trade Commission to crack down on drug companies” that prevent generic drugs from coming to market. “The threat of investigations and steep fines — which the FTC can levy,” the editorial board argues, “may finally succeed where shame has failed.”
  • The European Commission sent questions to Facebook users and competitors last week. According to Bloomberg, the Commission “want[s] information on whether the social network uses its size to squeeze smaller rivals.”
  • The UK’s Competition and Markets Authority has orderedAmazon and the food delivery company Deliveroo to cease integration efforts pending an investigation into potential breaches of competition rules. The agency issued its order against the companies Friday after Amazon bought a stake in Deliveroo, stating that it had “reasonable grounds for suspecting” that Amazon and Deliveroo, have “ceased to be distinct.”
  • France’s legislature approved a tax on large tech corporations like Amazon and Google. The law will apply retroactively to the start of 2019 and levies a 3 percent tax on revenues from online activities like targeted advertising or running a commercial platform in France. French Finance Minister Bruno Le Maire said that his government was open to working on “an international level … Let’s find a solution at the OECD level, and work via agreements rather than threats.”
  • In a profile in The New York Times on Sunday, Germany’s top antitrust enforcer Andreas Mundt explained the strategy behind his office’s February ruling that forbids Facebook from combining user data gathered from across the internet. “We need innovative cases,” Mundt told the Times. “What we have done with Facebook can’t be found in a textbook.”
  • German officials announced a €2 million fine against Facebook on Tuesday for violating the country’s law to combat hate speech online. “Digital platforms have a clear responsibility for the content that is posted on their sites,” Germany’s new Justice Minister Christine Lambrecht said. “What has to be clear is that Facebook’s so-called ‘community standards’ are not above German law.”

📝 WHAT WE’VE BEEN UP TO:

  • In an essay for The American ProspectSandeep Vaheesan argues that the Supreme Court’s decision in Tennessee Wine and Spirits Retailers Association v. Thomas marked a defeat for democratic governance of local economies. “Unelected federal judges now have expansive power to strike down state rules they dislike and let Amazon, Costco, Total Wine, and other powerful retailers overrun the market for beer, wine, and spirits,” Vaheesan wrote. Read the Open Markets Institute’s November amicus brief in the case here.
  • Sally Hubbard spoke yesterday with the Yahoo News podcast “The Long Game” about Facebook, Google, and Amazon. “The amount of data that Facebook and Google are collecting about the average person is absolutely insane, massive, widespread, ubiquitous, and I think honestly, a fraud on the American people that the people don’t understand that this is happening,” said Hubbard.
  • Barry Lynn explained to Yahoo! Finance that Facebook’s planned Libra cryptocurrency comes amidst heavy scrutiny from governments around the world. “This is a corporation that’s got fires all over the world with regulators,” Lynn said. “It’s only going to get worse.”
  • Barry Lynn told Fortune on Tuesday that by examining technology monopolists in upcoming hearings, House antitrust subcommittee chair David Cicilline, D-R.I., and his Republican colleagues’ are fighting “the most powerful corporations we’ve seen in the world for at least 100 years.”
  • Sarah Miller spoke with NPR about progressives’ perception of corporations like Facebook and Google, noting that progressives had thought of the giants “as doing a social good, as socially progressive, as being from areas represented by progressives.” Miller added,  “I don’t think that progressives really understood the core business models of these companies and how they are based on deep surveillance of their users, and then using that data … to target advertising in ways that we’ve seen are incredibly dangerous for democratic societies.”
  • Sally Hubbard talked with Politico about Justice Department Antitrust Division head Makan Delrahim’s private practice work in helping Google acquire advertising firm DoubleClick in 2007. European and American enforcers approved the deal, though Hubbard said, “The DoubleClick merger is one of those deals you look back on and say, ‘That was a mistake.’”
  • Citing Sen. Josh Hawley’s sharp criticisms of platform monopolists like Facebook, Google, and Amazon, Matt Stoller called the Missouri Republican “definitely the most aggressive and assertive antimonopolist on the Republican side” in a Politico profile on the senator.
  • The Open Markets Institute joined a coalition of 32 public interest groups in sending a letter to legislators and federal regulators calling on them to impose a moratorium on Facebook’s introduction of its Libra currency. “All of us believe the risks posed by Facebook’s proposal are too great to allow the plan to proceed with so many unanswered questions,” the letter wrote.

 

📈 VITAL STAT:

>$10 million

Amount that billionaire Charles Koch’s various organizations have spent on “academics and think tanks, support for state and local legal battles, and political ad campaigns” over the last four years, according to CNBC. The effort includes running ads after Massachusetts Sen. Elizabeth Warren proposed breaking up Facebook, Google, and Amazon, warning policymakers against using antitrust law as a “political weapon.”

📚 WHAT WE’RE READING:

  • “Superpredators” (Washington Monthly, Shaoul Sussman):How Amazon may be illegally driving competitors out of business and what Congress and law enforcers can do about it.
  • “The Power of Google and Amazon Looms Over Tech IPOs”(Bloomberg, Gerrit De Vynck): How startups that don’t get bought out or crushed by Amazon or Google still are “beholden to the tech giants in other ways.”
  • “How the Adtech Market Incentivizes Profit-Driven Disinformation” (ProMarket, Joshua Braun): How the “real-time bidding” system of placing ads online drives disinformation, fraud, and ineffective ads, and what can be done about it.
  • “Warehouses” (HBO, Last Week Tonight with John Oliver): The unseen, back-breaking costs that go into Amazon’s lightning fast shipping.

 

Image courtesy of Andrei Stanescu via iStock and PYMNTS.com.

 

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