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The Corner Newsletter, March 21, 2019: Open Markets Coalition Calls on FTC To Ban Noncompetes – UK Reports Fall Short of Fixes

Welcome to The Corner. In this issue, we cover our recent petition to the Federal Trade Commission, calling on it to ban non-compete clauses for all workers. We also discuss how a new report from the United Kingdom on digital competition falls short of actually addressing platform monopolists’ power.

March 21, 2019  |  by Open Markets

Open Markets Leads Broad Coalition Calling on FTC to Ban Non-Compete Clauses 

Joined by the AFL-CIO, the Service Employees International Union, and over 60 other unions, public interest groups, and legal scholars, the Open Markets Institute filed a petition for rulemaking yesterday that calls on the Federal Trade Commission to ban employers from presenting non-competes to workers, conditioning employment on worker acceptance of a non-compete, or enforcing non-competes against workers in court.

Non-compete clauses, by restricting a worker at one business from taking a job at a competitor or starting their own business in the same field or industry for a period of time after leaving, have deprived nearly 30 million workers of their economic freedom. The petition presents evidence that non-competes depress job market mobility and lower wages, wage growth, and new business formation, and rebuts employer arguments in their favor.

In a letter to FTC Chair Joseph Simons also sent yesterday, Sen Richard Blumenthal, D-Conn., called the petition “thoughtful and well-considered” and said, “[The FTC] must act decisively” to address non-competes. Sens. Ben Cardin, D-Md., Sherrod Brown, D-Ohio, Elizabeth Warren, D-Mass., Edward Markey, D-Mass., Chris Van Hollen, D-Md., and Amy Klobuchar, D-Minn., also signed the letter.

You can read Bloomberg’s coverage of the petition here and The Hill’s coverage of the letter here.

You can read the petition, including a full list of signatories, here.

Save the Date – Heartland Forum in Storm Lake, Iowa to Discuss the Rural Economy and Corporate Power 

On Saturday, March 30, from 1-3 p.m. Central Time, the Heartland Forum at Buena Vista University in Storm Lake, Iowa will feature presidential candidates discussing issues facing the rural economy including corporate consolidation. The Open Markets Action Fund will be co-hosting the event alongside The Huffington PostThe Storm Lake Times, and the Iowa Farmers Union. The Storm Lake Times’ Pulitzer Prize-winning editor Art Cullen will moderate, along with The Huffington Post’s Amanda Terkel and Zach Carter.

You can register for or livestream the event here.

Twin U.K. Reports on Platform Monopolies Come Up Short on Fixes

Last week, the U.K. government and the House of Lords each released long reports detailing some of the growing threats that platform monopolies like Facebook, Google, and Amazon pose to individual citizens, businesses, and overall society. Unfortunately, both reports failed to provide a plan to deal effectively with the problem.

Former Obama Council of Economic Advisers Chairman Jason Furman led the Digital Competition Expert Panel, which is the longer, more detailed and more ambitious group charged with considering what the digital economy means for competition policy.  Entitled “Unlocking Digital Competition,” the report acknowledges that platform monopolists like Facebook and Google have “persistent dominance” in markets like digital advertising. Beyond mere dominance, the panel held, “there is reason to be skeptical of the notion that they face serious threats to their dominant positions in the future, unless there are changes to the current policy framework.”

This dominance, according to the panel’s report, can harm users in a variety of ways, including higher prices, lower levels of privacy and security, and slower innovation. The panel also noted how Facebook’s and Google’s dominance in digital advertising markets harms journalism.

The panel called for stronger merger policy to prevent big platforms from acquiring potential rivals, as well as for setting up a new governmental office to oversee digital competition. This office would be in charge of identifying platforms that have captured chokepoint positions in commerce and then would work with these platforms to develop “codes of conduct” to guide their treatment of customers. The panel also called for the UK to require platforms to allow users to move their data between sites to embrace open standards and make certain data, such as for mapping services, available to competitors.

Unfortunately, the panel offered weak, equivocating guidance on how to ensure that these corporations do not exploit their power.  Instead the panel devoted much of its time to defending the flawed and now widely questioned “consumer welfare” philosophy of anti-monopoly enforcement. The panel also embraced the use of the concept of “multi-sided” markets, even while acknowledging that the concept “mak[es] typical market definition exercises more complex.”

The House of Lords Select Committee on Communications’ report, entitled “Regulating in a Digital World,” also does a good job of describing the power of platform monopolists, observing, “Online communications platforms act as gatekeepers for the internet, controlling what users can access and how they behave … Providers of these services currently have little incentive to address concerns about data misuse or online harms, including harms to society.”

But the Committee’s report is even less aggressive than Furman’s in proposing fixes. Instead, it too spends time defending the consumer welfare philosophy, with its focus on narrowly defined efficiency. Perhaps most dangerously, it endorsed the idea of imposing a “duty of care” on the platforms. (For more on this concept, read Lina Khan and David Pozen’s recent paper.)

Other entities have recommended stronger solutions. For example, the Australian Competition and Consumer Commission calls for measures to address Facebook and Google’s power that include uncoupling operating systems from default browsers and search engines. This would begin to address some of Google’s incumbency advantages. Even more boldly, India has already restricted Amazon and Walmart from selling their own products which compete against other vendors hosted on their respective marketplaces.

For robust visions of public regulation in the US, one should look to Sen. Elizabeth Warren’s proposal to break up Amazon, Google, and Facebook. Remarkably, Warren says more in her brief blog post than Furman did in this 150-page report. The Massachusetts senator actually vows to appoint enforcers who would break up past anticompetitive mergers. Not only that, she calls for requiring platforms that bring online users together “to meet a standard of fair, reasonable, and nondiscriminatory dealing with users.” Such a standard, especially its nondiscriminatory part, would restructure online markets away from exploiting individual user characteristics and help realign platform monopolists’ motivations and business models toward working for people, not against them.

Sen. Warren’s Bold Plan to Break Up Big Tech

Sen. Elizabeth Warren, D-Mass., recently put forth a strong position on addressing the power of platform monopolists like Google, Facebook, and Amazon: break them up and make them play fair. In a Medium post, she explained that a Warren administration would introduce and promote legislation to force all platforms to treat their users in a fair way and not engage in price discrimination. This requirement is essential to eliminating the current business incentives that are driving corporations to engage in ever more massive data extraction and invasions of privacy.  The law would also designate larger platforms with annual revenues of $25 billion or more as “platform utilities” and forbid them from both owning and participating in the platform as well as sharing user data with third parties.  

Warren also drew on the country’s “long tradition of breaking up companies when they have become too big and dominant” and said that she would appoint enforcers that would break up mergers that should not have been approved. Warren specifically singled out, among other acquisitions that would be unwound, Amazon’s acquisition of Whole Foods, Facebook’s acquisitions of WhatsApp and Instagram, and Google’s acquisition of DoubleClick.

Look to the Open Markets Action Fund’s Heartland Forum for more on Warren’s plan. There, she’ll be speaking alongside Sen. Amy Klobuchar, D-Minn., Rep. John Delaney, D-Md., Rep. Tim Ryan, D-Ohio, and former Housing and Urban Development Secretary Julián Castro on antitrust and how it can help revitalize rural America.

🔊 ANTI-MONOPOLY RISING:

  • The Washington Post reported last week that state attorneys general from both parties have recently indicated that they intend to confront abuses of platform monopolists. The article pointed specifically to Xavier Becerra, D-Calif., Mark Brnovich, R-Ariz., Keith Ellison, D-Minn., Jim Hood, D-Miss., Jeff Landry, R-La., Karl Racine, D-D.C., and Phil Weiser, D-Colo., as pressing cases against the likes of Google and Facebook. Hood told CNBC that state attorneys general are preparing an antitrust case against Google akin to the Microsoft case. A Bloomberg article also pointed to Nebraska attorney general Doug Peterson, a Republican, as an “emerging leader” against tech companies. Meanwhile, Texas attorney general Ken Paxton said on Bloomberg Technology that he was concerned about the “power and the wealth of” large technology platforms, adding, “We have a history in this country of looking at those issues and breaking up companies that are too big.”
  • House antitrust subcommittee chair David Cicilline, D-R.I., wrote an op-ed in The New York Times on Tuesday making “The Case for Investigating Facebook.” Noting that the FTC, “is facing a massive credibility crisis,” Cicilline writes, “How the commission chooses to respond to Facebook’s repeated abuses will determine whether it is willing or able to promote competition and protect consumers.” “It’s clear,” he concludes, “that serious enforcement is long overdue.”
  • Sen. Amy Klobuchar, D-Minn., talked with NPR about using antitrust laws with the pharmaceutical industry and technology platforms. On platform monopolists, she said that she has “for a long time, … been suspicious” of platform monopolists. “They were making money off of us!” she said, “They were taking our personal information and they were selling it to other people or they were targeting us in such a way that we became even more valuable to them.”
  • Rep. Tulsi Gabbard, D-Hawaiiapplauded and agreed with Sen. Warren’s proposal to break up platform monopolists like Google, Facebook, and Amazon, tweeting, “Absolute power corrupts absolutely. I agree with Senator Warren on the need to break up big tech companies like Facebook, Google, Amazon. Will be introducing similar legislation in U.S. House.”
  • The European Union fined Google $1.7 billion for exploiting its dominance in search, requiring websites that used Google’s search function to display advertising from its own advertising services over that of competitors like Microsoft and Yahoo. EU Competition Commissioner Margrethe Vestager said, “Google has cemented its dominance in online search adverts and shielded itself from competitive pressure by imposing anti-competitive contractual restrictions on third-party websites.”
  • The Securities and Exchange Commission said that it will open an investigation into market concentration among asset fund managers this year. Given the relative growth of asset managers BlackRock and Vanguard, among others, the SEC Director of the Division of Investment Management Dalia Blass said, “I am concerned about what it will mean for investors, particularly main street investors, if the variety and choice offered by small and midsized asset managers becomes lost in a wave of consolidation and fee compression.”
  • Facebook settled a lawsuit with the American Civil Liberties Union, the National Fair Housing Alliance, and the Communications Workers of America by agreeing to stop allowing advertisers on Facebook, Instagram, and Messenger to target ads for housing, employment, or credit by race, gender, or age. A complaint from the Department of Housing and Urban Development on the practice is still pending. Talking to The New York Times, Washington University law professor Pauline Kim said, “Taking the explicit ability to discriminate off the table is an important first step … But I don’t think it solves the problem of the potential for biased serving of ads.”

📝 WHAT WE’VE BEEN UP TO:

  • Rolling Stone profiled Barry Lynn as driving “perhaps the larger resurgence in public understanding and desire for action around antitrust and monopolies.” Open Markets board member Tim Wu said, “I sometimes think of him like Captain America, frozen in a block of ice after World War II and returning to do battle with the values and rhetoric of another generation.”
  • Sandeep Vaheesan wrote an article for the Law and Political Economy blog on how deregulation of energy markets has resulted in “a dramatic erosion of public control over public utilities.” To take back control of energy utilities, he writes, will mean “reviving public utility rules and replacing private ownership of natural monopolies with public ownership.”
  • Coverage of Sen. Elizabeth Warren’s plan to break up platform monopolists turned to the staff at the Open Markets Institute. Matt Stoller called the proposals “practical” and “necessary” in The New York Times, adding that “these companies have the moral frame of Big Tobacco.” Other outlets covering the decision quoting Open Markets staff included BuzzFeedThe Daily Beast twiceThe RingerVoxWired, and Yahoo! Finance.
  • Bloomberg said that Warren’s plan “all but ensures that restraining the power of dominant companies will be a focus of the 2020 campaign as Democrats seek to unseat President Donald Trump.” Its article credited Barry Lynn and the Open Markets Institute with being “part of a wider rethinking of antitrust enforcement in the U.S. that until now has been mostly relegated to legal conferences and academic papers.”
  • The Hill reported that major 2020 presidential candidates will meet in Storm Lake, Iowa, later this month to speak at the Open Markets Action Fund’s Heartland Forum, co-sponsored by The Huffington PostThe Storm Lake Times, and the Iowa Farmers Union. Sarah Miller said, “The overall frame will be about how monopoly power has led to economic disparities and decline in rural America.”
  • Sally Hubbard participated in a Forbes “Washington Bytes” chat about consumer protection, competition policy, and Facebook. Among other points, Hubbard called for algorithmic transparency: “The current consumer protection framework – where companies can invade consumers’ privacy as long as they disclose it in terms of services no one has the time to read – doesn’t cut it.”
  • The Economist quoted Barry Lynn talking about the Federal Trade Commission’s investigation into Facebook’s breach of its 2011 consent decree with the agency saying that “The ‘effectiveness’ of the FTC ‘is going to be weighed to a large degree by their actions on Facebook.’”
  • In The Mercury NewsSarah Miller called Facebook CEO Mark Zuckerberg’s declared plans to bolster privacy protections on the platform “totally a PR move … Facebook is saying ‘we got this, trust us this time’ as it faces threats of antitrust enforcement.”
  • Commenting to CNN about the recent widespread outages experienced at Facebook, Sarah Miller said, “The more integrated a platform becomes, the greater the risk and reach of epic failures like this one.”
  • After Spotify filed a complaint against Apple before European antitrust enforcers, alleging Apple of abusing its monopoly over the distribution of apps in its App Store, Matt Stoller explained to Business Insider that Apple’s control over the App Store “is a monopoly, at least to an important set of Spotify customers.”
  • CBS wrote last week that “Democrats have a new 2020 bogeyman: Big tech,” and quoted Matt Stoller multiple times, including him saying that Americans “understand these companies are doing things they really like, but that doesn’t make them immune from criticism.”
  • The Washington Monthly noted that recent developments show that reinvigorating antitrust enforcement could develop into a prominent issue in 2020. One of those recent developments included Sen. Bernie Sanders, I-V.T., arguing that helping rural American should include taking on agriculture monopolies, which sounded “strikingly similar” to Claire Kelloway’s recent Washington Monthly feature and Austin Frerick’s article in The American Conservative.
  • Printing ImpressionsPublishing Executive, and a Forbes commentator reported on the Open Markets Institute’s letter, co-signed by the Authors Guild and PEN America, to the Justice Department calling on its Antitrust Division to block the pending merger between two of the biggest printers in the country. Because these are the only two printers of large circulation magazines and many types of books, “the three nonprofit organizations rushed in where publishers feared to tread,” the Printing Impressions and Publishing Executive articles wrote.
  • Wired recently published an exposé on the ways that Google exerts significant pressure on ostensible experts to advocate for favorable policies. The article quoted Matt Stoller observing, in response to Google-aligned experts saying that Google’s funding does not affect them, “It’s funny that economists think that incentives work on everybody but economists.”

📈 VITAL STAT:

25%

Increase in price that AT&T’s DirecTV Now subscribers will pay for basic service, even as basic service will no longer include offerings like MTV, Discovery, and the Food Network. When the Justice Department challenged AT&T’s merger with Time Warner, AT&T claimed in court that “consumer prices will not go up.”

📚 WHAT WE’RE READING:

  • “How Google Influences the Conversation in Washington” (Wired, Nitasha Tiku): Some of the many ways Google reaches into technology policy conversations and exerts enormous influence in the country’s capital.
  • “’No Conflict, No Interest:’ How the Major Hollywood Talent Agencies Put Their Interests Ahead of Their Clients’ Interests” (Writers Guild of America): This report details how Hollywood talent agencies have “become a cartel dominated by a few powerful agencies that use their control of talent primarily to enrich themselves.” It also shows why those agencies’ dual presence in production and agenting may be an antitrust violation. (Take a look at another report from the WGA on how private equity takeovers of talent agencies has “inhibited agencies from fulfilling the legal and ethical obligations of talent representation.”)
  • “What Democrats Need to Know to Win in Rural America” (The New York Times, Robert Leonard and Matt Russell): The issues that presidential candidates could use to reach Iowans and rural voters, including “a great opportunity this month to embrace these issues at the Heartland Forum at Buena Vista University in Storm Lake.”

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

Image credit: rabbit75_ist via iStock.

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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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