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The Corner Newsletter, June 28, 2019: Facebook’s Libra is a “Bold, Bad Move” – To Navigate Facebook and Google, Giant Printers Argue for Own Monopoly

Welcome to The Corner. In this issue, the problem with Facebook’s new Libra currency and why Facebook’s and Google’s power over digital media doesn’t mean the US should tolerate other powerful corporations.

June 29, 2019  |  by Open Markets

2020 Democratic Presidential Candidates Talk Monopoly and Corporate Concentration at First Debate

The first Democratic presidential debate on Wednesday night focused at the outset on the issue of monopoly and corporate concentration. Multiple presidential candidates acknowledged the serious issue of corporate power in American society.

Sen. Elizabeth Warren, D-Mass., railed against “too much consolidation now,” which she said hurts workers, small businesses, and independent farmers while “constrict[ing] real innovation and growth.” Warren said that Washington has lacked “courage … to take on the giants. That’s part of the corruption in this system.”

“I want to return government to the people and that means calling out the names of the monopolists and saying, ‘I have the courage to go after them.’”

Sen. Cory Booker, D-N.J., elaborated on previous statements where he said calls to break up corporations “sounds more like a Donald Trump thing to say.” Asked why he disagreed with Warren’s plan to break up Facebook, Amazon, and Google, Booker said, “I don’t think I disagree. I think we have a serious problem in our country with corporate consolidation.”

Booker noted the issues of wage stagnation, high drug prices “by pharmaceutical companies that often have a monopolistic hold on drugs,” and “an economy that’s hurting small businesses and not allowing them to compete.” “I feel very strongly,” he said, “about the need to check corporate consolidation and let the free market work.”

New York City Mayor Bill de Blasio observed that “what we’re hearing here already in the first round of questions is that battle for the heart and soul of our party. Yes, we’re supposed to be for a 70 percent tax rate on the wealthy. Yes, we’re supposed to be for free college, free public college, for our young people. We are supposed to break up big corporations when they’re not serving our democracy.”

Warren capped off the opening discussion on antitrust and monopoly, saying, “We’ve had an industrial policy in the United States for decades now, and it’s basically been let giant corporations do whatever they want to do.”

Open Markets Condemns Supreme Court’s Tennessee Wine Ruling Allowing Monopolists to Take Over Alcohol Markets

On Wednesday, the Supreme Court ruled 7-2 in Tennessee Wine and Spirits Retailers Association v. Thomas that states could not pass laws that distinguish between in-state and out-of-state distributors and retailers of alcohol. The Open Markets Institute filed an amicus curiae brief before the Court in November, arguing that “states have the authority to structure commerce in alcohol to advance a range of public aims,” including public health and ensuring decentralized alcohol markets. Open Markets Legal Director Sandeep Vaheesan warned that the ruling could empower giant retailers like Amazon or Walmart to control American markets for beer, wine, and spirits. “This decision weakens the constitutional right of citizens to structure state alcohol markets for the safety and well-being of their communities,” said Vaheesan.

Read Open Markets’ amicus brief here and its press release commenting on the decision here.

Why Facebook’s New Global Currency is a “Bold, Bad Move”

Last Wednesday, Open Markets Fellow Matt Stoller wrote an op-ed for The New York Times criticizing Facebook’s announced new digital currency, which it would run in partnership with Uber, Spotify, PayPal, and VISA. Stoller sharply criticized Facebook’s “Libra” currency as a bad idea for at least four reasons, including that it could contribute to instability, criminal activity, and tax evasion. Stoller writes, “The way we structure money and payments is a question for democratic institutions. Any company big enough to start its own currency is just too big.”

Stoller’s op-ed shaped much of the subsequent coverage and debate over Facebook’s proposal, including in the Financial Times. The Houston Chronicle editorial board, citing Stoller’s op-ed, said, “If Facebook is going to operate like a bank, it ought to be regulated like one.” Sarah Miller strongly criticized the idea to Slate and Mashable, and told the Associated Press, “The FTC needs to rein in Facebook before the corporation puts our financial information and currency systems at risk too.”

The Senate and the House of Representatives will hold hearings on Facebook’s Libra on July 16 and July 17, respectively. House Banking Committee Chairwoman Maxine Waters, D-Calif., asked Facebook for a “moratorium on any movement” in developing its currency until regulators have had a chance to consider it. International regulators at the Financial Stability Board and the UK’s Financial Conduct Authority and central bankhave already said they will not allow the currency without further study.

Must Big Beget Big? Why Monopolization Is Not the Answer to Monopolization

Last Thursday, the Justice Department (DOJ) sued to prevent printing giant Quad from acquiring its main competitor, LSC Communications. The $1.4 billion deal between “the two most significant magazine, catalog, and book printers in the United States,” the DOJ’s Antitrust Division wrote in its complaint, “threatens to increase prices, reduce quality, and limit availability of printed material that millions of Americans rely on to receive and disseminate information and ideas.” (Read Open Markets’ March letter to the DOJ detailing potential harms from the merger here.)

In response to the lawsuit, Quad vowed to “vigorously defend” the deal and insisted that their competitors are “not only other printers, but also other forms of media,” especially “digital giants such as Google and Facebook.” The DOJ, Quad said in a press release, “does not appear to recognize the competitive effect of digital media on the print industry.”

The DOJ bluntly and appropriately rejected this argument, writing, “Publishers and their customers will continue to demand printed magazines, catalogs, and books in the future.” Indeed, as Open Markets detailed in its letter, many publications have actually expanded their print products over the last year. And when it comes to book printing, as The New York Times reported in December, there has already been shortages of printing services for book publishers.

Yet the decision also underscores a deeper, perverse irony. Both print and digital journalism are indeed threatened by the increasing dominance of giant, digital platform monopolies, specifically when it comes to thecompetition over advertising dollars. As Slate’s Ben Mathis-Lilley noted in January, “… it’s gotten harder and harder for news outlets to make money off of the readers they have because such a huge share of advertising spending is sucked up by Facebook and Google, with what’s left increasingly going to Amazon.”

But that problem isn’t solved by either preventing or encouraging concentration among the nation’s few remaining printers. The answer is increased enforcement of anti-monopoly laws where they matter most.  Since 2000, Google has acquired over 270 companies, including advertising technology companies like Doubleclick and AdMob that have bolstered its dominance in online advertising.  Enforcers have similarly allowed Facebook to expand vertically and horizontally in ways that make a mockery of traditional American competition policies. Let’s hope that DOJ uses its power prevent and break up corporate concentration, not just among traditional printers, but among the digital platform monopolies that are causing so much more damage to our economy and our politics.

🔊 ANTI-MONOPOLY RISING:

  • New Jersey Congressman Bill Pascrell, Jr.alongside Reps. Mark Amodei, R-Nev., and Ayanna Pressley, D-Mass., introduced an amendment to an appropriations bill that would provide $1,000,000 to establish a postal banking system, which passed the House of Representatives on Tuesday. Sixty-eight million Americans lack access to adequate banking services, Pascrell said. “They are often shut out of banks because of fees tied to minimum balances, overdrafts, direct deposit penalties, and ATM charges. Or worse, many live in ‘bank deserts’ because incredibly, even in 2019, their community lacks a bank or credit union altogether.”
  • Sens. Elizabeth Warren, D-Mass., and Cory Booker, D-N.J., and Rep. David Cicilline, D-R.I., sent a letter to the leaders of the Department of Justice’s Antitrust Division and the Federal Trade Commission, “urging them to reconsider the merger between two of the four largest student loan servicers, Nelnet and Great Lakes Educational Loan Services Inc.” The letter noted that the Justice Department had already approved the merger last year “despite concerns over potential effects” on competition, but called on antitrust enforcers “to retroactively review this merger.”
  • Sen. Amy Klobuchar, D-Minn., joined by Sens. Patrick Leahy, D-Vt., Richard Blumenthal, D-Conn., Cory Booker, D-N.J., Tammy Baldwin, D-Wisc., Edward Markey, D-Mass., and Tina Smith, D-Minn., wrote two letters to the Federal Trade Commission and Department of Justice asking for details about possible antitrust investigations into Amazon, Facebook, Google, and Apple. “Given the silence of the FTC and the Justice Department, the truth is that we still do not know if these investigations have actually been initiated and neither do the American people,” wrote the senators.
  • Sen. Josh Hawley, R-Mo., sent a letter to Google CEO Sundar Pichai expressing concern over the giant’s role in Hong Kong’s pro-democracy rally. Hawley argued that errors in Google Translate “aligned with the narrative advanced by the Government of the People’s Republic of China concerning the protests” and urged Google to “take this cause as seriously as those using its platforms to fight for their freedom.”
  • Sens. Mark Warner, D-Va., and Hawley introduced the Dashboard Act on Monday requiring corporations with more than 100 million users to disclose the type and value of data that they collect on their users. In a press release, Warner said, “For years, social media companies have told consumers that their products are free to the user. But that’s not true – you are paying with your data instead of your wallet.”
  • Hawaii, Massachusetts, Minnesota, and Nevada last week joinedthe federal lawsuit brought by 10 other states attempting to block T-Mobile’s $26 billion acquisition of wireless competitor Sprint. California Attorney General Xavier Becerra, who is leading the suit alongside New York Attorney General Letitia James, said, “We’ll do everything necessary to block unlawful mergers, including filing a preliminary injunction, if necessary, as part of our litigation.”
  • The Democratic Party’s nominee for Queens District Attorney, Tiffany Cabán, vowed in her campaign to “establish corporate crime, consumer protection, wage theft and antitrust units,” in the Queens law enforcement office. “With Amazon declaring its intention to move in,” Cabán wrote, “the most vulnerable communities are likely to get disrupted and marginalized again unless we pursue innovative and proactive enforcement against discriminatory, monopolistic policies and practices that destroy our neighborhood economies.”
  • The Air Force official in charge of acquisitions raised the alarm over concentration among aerospace contractors. After World War II “over a dozen companies could make airplanes,” reported Reuters. “Right now,” Assistant Secretary of the Air Force Will Roper said in Singapore, “we are down to just a couple of companies who can build tactical airplanes for us. We need to do everything in our power to start opening up that envelope again.”
  • Federal Communications Commissioner Jessica Rosenworcel criticized the FCC’s review of T-Mobile’s acquisition of Sprint, arguing that the commissions lacked the proper economic or legal analysis before a majority of commissioners voiced their support for the deal.
  • The Federal Trade Commission is in the “late stages,” The Washington Post reported, of an investigation into how Google subsidiary YouTube violated minors’ privacy. According to anonymous sources cited by the Post, the FTC opened the investigation after consumer and privacy groups complained to the enforcement agency.
  • FTC Commissioners Rohit Chopra and Rebecca Kelly Slaughterissued a statement criticizing an FTC report on using Section 5 of the FTC Act to address high drug prices. Writing that the Commission’s report “does not fully outline” the FTC’s Section 5 power, Chopra and Slaughter said, “While the problem of excessive drug prices for off-patent pharmaceuticals involves a complex set of issues, the stakes are too high to rely on the agency’s standard approach.”
  • Twenty-one Democratic presidential candidates answered a series of questions from The New York Times, including “Should tech giants like Facebook, Amazon and Google be broken up?” All candidates expressed concern about the power of monopolies and concentrated corporate power today. You can watch their responses here.

📝 WHAT WE’VE BEEN UP TO:

  • Matt Stoller co-wrote an essay for The American Conservative with Lucas Kunce on how America has weakened its ability to produce high-quality technology and research. “Because of the public policies focused on finance instead of production,” Stoller and Kunce write, “the United States increasingly cannot produce or maintain vital systems upon which our economy, our military, and our allies rely.”
  • Sally Hubbard wrote an essay for the ProMarket blog, “The Decline of American Journalism is an Antitrust Problem.” In it, Hubbard explains, “Facebook and Google exploit their middlemen positions to divert ad revenue away from publishers and into their own pockets.” “Weak antitrust enforcement” gave Facebook and Google these powerful middlemen positions, Hubbard argues, “much as monopolies are extracting wealth across most sectors of our economy.”
  • Barry Lynn talked about breaking up companies like Facebook, Google, Apple, and Amazon on the National Constitution Center’s “Wethe People” podcast with the center’s President and CEO, Jeffrey Rosen, as well as a conservative researcher. Lynn said that the problem with Facebook is not simply that they are big, but that “their entire business model is essentially built on the idea of hoovering up all this information on people, studying what people do and then using this information to manipulate people into certain actions. And then selling this service of manipulating people to advertisers who want to get you to do something or to foreign powers who want to get you to vote in a different way.”
  • In a panel entitled “Antitrust in the Amazon Era: The New Brandeis Movement, Consumer Welfare, and the Future of Antitrust Theory,”Sandeep Vaheesan debated Elyse Dorsey (from the office of FTC Commissioner Noah Phillips) on the appropriate objectives and rules for antitrust law.
  • Politico profiled the Open Markets Institute as “a liberal think tank [that] is driving 2020 Dems to crack down on Big Tech.” The article writes, “Despite its small size … Open Markets is exercising outsized influence these days, helping to shape Washington’s intensifying scrutiny of giant tech companies and their vast influence on American society.”
  • Sarah Miller commented on efforts to remove Facebook CEO Mark Zuckerberg from leadership over the giant corporation to Mashable, saying that the primary focus should be on pressuring enforcers and legislators to enforce the law: “ … Facebook is one of the world’s most dangerous monopolies and only the government is in the position to change that.”
  • In Gizmodo story on Amazon’s expansion into logistics and other shipping markets, Matt Stoller said that Amazon CEO “Jeff Bezos wants Amazon to be the core infrastructure on which everyone depends, and then use this power to exclude competitors and privileges his own businesses … He doesn’t seek to run a business, but to govern all commerce.”
  • Sally Hubbard’s testimony about Facebook’s and Google’s effects on free speech and a free press before the House antitrust subcommittee appeared in coverage on CBS and twice on Yahoo! Finance.
  • Sarah Miller talked about House antitrust subcommittee chair David Cicilline’s set of hearings into platforms’ market power with Bloomberg, saying, “This investigation provides a channel for uncovering so much material that makes clear [aggressive] solutions are necessary.”
  • Slate wrote about Rep. Alexandria Ocasio-Cortez, D-N.Y., agreeing with Matt Stoller on the issue of cost of living adjustment to the pay of members of Congress. Stoller said, “[I]f you cut the pay of public servants for a decade you get bribery and corruption.”
  • Reporting on the Justice Department’s lawsuit to block the merger of printing giants Quad and LSC, The New York Times noted, “the Justice Department had two allies from the community of writers,” the Authors Guild and PEN America. The two groups opposed the merger and signed on to a March letter from the Open Markets Institute to the Justice Department laying out the potential harms of the combination.

📈 VITAL STAT:

69%

Percentage of Americans who have “not too much” confidence or “none at all” in social media companies to properly determine what offensive conduct should be removed from their platforms, according to a Pew Research survey released last week.

📚 WHAT WE’RE READING:

  • “Antitrust Deficit” (Democracy, Zephyr Teachout): Why American University law professor Jonathan Baker, in his new book on antitrust, The Antitrust Paradigm, has made both “an extremely valuable contribution” to understanding the state of antitrust law but is ultimately “unconvincing on his major theses.”
  • “Walmart’s Monopolization of Local Grocery Markets”(Institute for Local Self-Reliance, Stacy Mitchell): Walmart captures more than half of all grocery sales in 43 metropolitan areas and one in four grocery dollars nationwide, writes Mitchell. Why Walmart’s dominance shows that reinvigorating antitrust policy should go further than merger policy, and include addressing concentrated economic power directly.

 

Image courtesy of nicescene via iStock.

Written by: Barry Lynn, Phil Longman, and Matt Buck
Edited by: Barry Lynn, Phil Longman, Sandeep Vaheesan, Katherine Dill, Stella Roque, Garphil Julien, Krista Brown, Olivia Webb, 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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