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The Corner Newsletter, September 19, 2019: Why Microsoft Should Not Be Ignored – Two Opportunities to Work at Open Markets

Welcome to The Corner. In this issue, we highlight an important case involving labor and monopoly and weigh in on the building controversy over the “Right to Repair.” We also discuss why Microsoft deserves similar antitrust scrutiny now being applied to Amazon, Apple, Facebook, and Google.

September 19, 2019  |  by Open Markets

Open Markets Institute Files Brief in Support of Migrant Shepherds

The Open Markets Institute filed an amicus brief in the Tenth Circuit Court of Appeals last Friday in support of a class of seasonal Peruvian shepherds alleging wage fixing by Western ranchers. The shepherds accuse the ranchers, operating through two trade associations, of collusively suppressing wage offers. Even though the shepherds showed that the two trade associations set wage offers on behalf of competing ranchers, the Tenth Circuit, in a July decision, dismissed their complaint for failing to establish the existence of an illegal agreement. In supporting the shepherds’ petition for rehearing, the brief argued that the appellate court ignored “decades of Supreme Court precedent,” and threatens to hurt workers and “legalize employer cartels—indeed all cartels—conducted through a joint venture.” You can read the brief here.

Open Markets Files Comment to FTC on “Right to Repair”

In a comment to the Federal Trade Commission, the Open Markets Institute called on the agency to use existing law to address the monopolization of aftermarkets in industries like tractors, automobiles, and mobile phones. Manufacturers of these products often extend their power into aftermarkets, or the markets for repairs or replacement pairs, by compelling consumers to use only their authorized repair shops. This monopolization chokes off opportunities for independent service providers, makes repairs more expensive for consumers, and encourages e-waste. Open Markets argued, “The FTC should draw on existing legal precedents and authorities to ensure that aftermarkets are open to all comers and that owners of durable goods, whether iPhones or tractors, have the right to repair their products where they want .” You can read the comment here.

Open Markets Condemns DOJ’s “Sham” Investigation into Automaker Emission Standards

Last Wednesday, Open Markets Legal Director Sandeep Vaheesan condemned the Justice Department after The Wall Street Journal revealed that its Antitrust Division was investigating Ford, Honda, BMW, and Volkswagen. The investigation reportedly centers on whether the carmakers illegally colluded in agreeing with California over following stricter emission standards.

Vaheesan called the probe an “attempt to deter carmakers from working with government officials in California to regulate emissions standards, air quality, public health and pollution and ensure a safe, healthy, and habitable planet.” He also criticized the probe because it may “undermine support for antitrust law, at a time when it is especially needed to address America’s monopoly crisis.”

You can read Open Markets’ full statement here.

Microsoft Should Not be Ignored

Last week Microsoft’s President Brad Smith released a new book, Tools and Weapons. A major theme of the book is that Microsoft is no longer the apex predator it once was, and that it has learned its lesson about the need to be a responsible corporate citizen.

Smith says Microsoft needed to “look in the mirror” and acknowledge its past mistakes including how it acted prior to the events that culminated in its antitrust case in 2001 where Microsoft leveraged its monopoly in desktop operating systems to inhibit competition in the technology industry. He even goes so far to say that self-regulation alone won’t tame technology companies and calls for a greater role for government in keeping the industry from turning its tools into weapons.

The picture of a reformed Microsoft that Smith paints in his book is at least consistent with an image of the company many people now have, which is that it was asleep at the switch when mobile computing and social media came along and has now become a benign and fading legacy corporation. While alarm builds over the power and predation of Google, Amazon, and Facebook, observers use words like “lumbering,” “boring,” and “lost” to describe Microsoft.

Yet a closer look at Microsoft today shows that the corporation is anything but a benevolent citizen of the technology industry. Not only is it huge; Microsoft’s market capitalization exceeds that of Google, Apple, Facebook, and Amazon. Indeed, its over $1 trillion valuation makes it the world’s largest corporation.

To the extent that Microsoft lags behind Google, Amazon, and Facebook in leveraging a combination of monopoly power and data for predation, it is doing everything it can to catch up. This includes its recent purchase of LinkedIn, which gives it intimate insights into the lives of 645 million people, and the information it gleans from the 300 million monthly active global users for Skype.

Further, Microsoft continues to profit enormously from its monopoly in desktop operating systems where it has maintained a 70 percent market share since 1993. That dominance extends into a range of other markets. Microsoft has 20 percent market share for desktop search, 22 percent in public cloud infrastructure, 43 percent for office suites, and 45 percent in the video game console market. In all of these markets, Microsoft is either the largest or second-largest corporation.

Moreover, Microsoft is behaving in many ways just like the other technology giants. Google and Facebook have repeatedly been charged with copying their competitors’ designs or features, such as when Facebook adopted many Snapchat-like features, including Stories. Not to be outdone, Microsoft’s Teams software has also been accused of copying many features of Slack, which now subsequently has more users in three years than Slack has acquired in six.

Microsoft has also continued to expand the industry “kill-zone” deployed by GoogleAppleFacebook, and Amazon, where investors will not provide needed seed capital to startups because they fear the new ventures will be acquired or squashed by the technology giants. Since 2004, Microsoft has gobbled up at least 138 companies.

Meanwhile, Wall Street finds Microsoft anything but boring and lumbering. A survey by The Wall Street Journal of stock analysts who cover the company shows the overwhelming majority recommending “buy.” Why is the Street so bullish on Microsoft? One example detailed on Investopedia is the allure of the corporation’s “competitive moat” in Windows and other cloud products. Microsoft is now so dominant in the cloud industry, former Oracle Chief Communications Officer Bob Evans recently penned a piece titled “How #1 Microsoft is Beating Amazon, Google And Everyone Else in the Cloud.”

Given these circumstances, why aren’t enforcement agencies bringing an antitrust case like they did in the 1990s? That case ended with a consent degree in which Microsoft agreed to share or license out many technologies embedded in Windows, and in so doing allowed competition to flourish. Both Facebook and Mozilla Firefox were founded in 2004. Apple released their iPod in 2001. Google went public in 2004 and also released Chrome in 2008 while Microsoft was still restrained. In his new book, Zucked, Roger McNamee says, “Without the Microsoft case, it is hard to imagine Google succeeding as it did.”

Instead of reassuring the public of the gentle nature and responsibility Microsoft now has, Smith’s book simply invites enforcers to turn their attention to Microsoft as soon as they’ve tamed Google, Apple, Facebook, and Amazon.

🔊 ANTI-MONOPOLY RISING:

  • A group of fifty attorneys general, led by Texas Attorney General Ken Paxton and District of Columbia Attorney General Karl Racine, announced last week that they will launch an antitrust investigation into Google. In a press conference in front of the Supreme Court, Florida Attorney General Ashley Moody asked, “Is something really free if we are increasingly giving over our privacy information? Is something really free if online ad prices go up based on one company’s control?” The bipartisan investigation includes state attorneys general from 48 states, not including California and Alabama, as well as the attorneys general of the District of Columbia and Puerto Rico.
  • New York Attorney General Letitia James announced that her office would be leading a bipartisan antitrust investigation of Facebook. The attorneys general of Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee, and the District of Columbia are joining the investigation, which will focus on antitrust concerns stemming from Facebook’s market power in the tech and social media advertising sector. James announced the coalition’s intention to “use every investigative tool at our disposal to determine whether Facebook’s actions may have endangered consumer data, reduced the quality of consumers’ choices, or increased the price of advertising.”
  • California Governor Gavin Newsom yesterday signed into law Assembly Bill 5, which would make it harder for corporations like Uber to avoid labor protection laws by misclassify their workers as independent contractors instead of employees.  California Assemblywoman Lorena Gonzalez, who wrote and sponsored the bill, said, “As one of the strongest economies in the world, California is now setting the global standard for worker protections for other states and countries to follow.”
  • Pennsylvania Attorney General Josh Shapiro announced today that he will join the coalition of state attorneys general to block T-Mobile’s $26.5 billion acquisition of Sprint, the third and fourth largest wireless providers in the country. Shapiro, who is the 18th state attorney general to oppose the deal, said the combination “would severely undermine competition in the telecommunications sector, which would hurt Pennsylvanian consumers by driving up prices, limiting coverage, and diminishing quality.”
  • The House Judiciary Committee sent letters to Amazon, Apple, Facebook, and Google last Friday requesting information on the platforms’ lines of business, who they view as their major competitors, and communications involving executives discussing competitors or antitrust litigation. House antitrust subcommittee Chairman David Cicilline, D-R.I., called the letters “an important milestone” in the subcommittee’s investigation into the market power of these online platforms.
  • Members of a Senate antitrust subcommittee urged the heads of the FTC and DOJ to investigate major online platforms at an oversight hearing Tuesday. Sen. Richard Blumenthal, D-Conn., said that the lack of specifics offered by enforcers “reinforces the impression that federal antitrust enforcement is an empty suit.”
  • The Department of Justice has asked Google for documents and other information about past investigations into the behemoth. The Daily Telegraph noted that Google’s disclosure of the request earlier this month confirms that the Justice Department has included the Mountain View, California-based corporation in its review of online platforms.
  • FTC Commissioner Rohit Chopra spoke out last week in favor of stricter penalties and more substantive regulation of dominant online platforms. In an interview with CNBC, he said, “We’re not going to solve some of these problems” posed by Google, Facebook and Amazon “just by small-time fines that aren’t going to change the underlying business model of these firms.”
  • The Federal Trade Commission has interviewed small third-party sellers on Amazon’s online marketplace, potentially in advance of a “sweeping probe to learn how Amazon works, spot practices that break the law, and identify the markets dominated by the company,” Bloomberg reported last week. The merchants said that the interviews have focused on how dependent the businesses were on appearing on Amazon.
  • France and Germany announced last week that they would strongly oppose any efforts by Facebook to introduce its Libra cryptocurrency to Europe. In a joint statement, officials of both countries declared that “no private entity can claim monetary power, which is inherent to the sovereignty of Nations.”
  • UK Business Secretary Andrea Leadsom announced this week that the government would seek to block a US private equity company from acquiring UK defense corporation Cobham, citing “national security” concerns.
  • A coalition of unions and public interest groups – including the American Federation of Teachers (AFT), Service Employees International Union (SEIU)- have asked the Federal Trade Commission to block a planned merger between pharmaceutical giants AbbVie Inc and Allergan Plc.  AbbVie’s purchase of Allergan would result in the creation of the fourth largest pharmaceutical corporation in the market, and comes at a moment of increasing public concern over skyrocketing drug prices.

Open Markets Hiring Managing Editor & Director of Entrepreneurship and Independent Business

The Open Markets Institute is hiring for two positions: a Managing Editor and a Director of Entrepreneurship and Independent Business.

The Managing Editor will assist the Policy and Editorial Director in managing and editing the work of a team of journalists and policy advocates. Responsibilities will include developing stories, magazine features, op-ed articles, as well as white papers and newsletters. Open Markets is looking for a candidate with excellent editorial and project management skills, three to five years of relevant experience, and a strong interest in business, economics and competition law and policy.

Open Markets is also looking for a Director of Entrepreneurship and Independent Business who will help develop Open Markets’ effort to educate the public and other stakeholders on the importance of competition policy to entrepreneurship and strong independent businesses. Responsibilities will include tracking and working on policy developments, educating policymakers and reporters, and organizing public or private action. Preferred candidates will have experience in entrepreneurship or a strong knowledge base in competition law and policy.

You can find the full job listings here.

📝 WHAT WE’VE BEEN UP TO:

  • Matt Stoller wrote two op-eds for The Guardian last week. One explains why the state attorneys general’s investigation into Google “is a big deal” and that “this is the first real American strike at the problem” of how Google and Facebook “use their control of the flow of information to monopolize advertising revenue.”
  • Matt Stoller’s second op-ed argues that Boeing’s problems with its 737 Max airplane not only demonstrate that the country’s sole civilian aircraft maker has lost the “ability to make safe airplanes,” but that the problem with our economic system today is “not just that it’s unfair. It’s that it’s no longer capable of delivering products that work…” “Our system,” Stoller writes, “is no longer aligning reward with productive skill.”
  • Matt Stoller published an article in ProMarket about the enduring influence of Aaron Director, a founder of the Chicago School of Law and Economics in the 1950s. “Today’s America, where lifespans are declining, where giants like Google and Amazon stride across the land unchallenged, where big banks crush the economy and bring forth men like Donald Trump to lead, is Director’s legacy,” Stoller wrote.
  • Matt Stoller’s upcoming book, The New York Times wrote yesterday, is “insightful” for illustrating “[t]he long history of Democratic populism … unknown to most liberals today.” Columnist Farhad Manjoo called Goliath: The 100-Year War Between Monopoly Power and Democracy “deeply researched” and quotes Stoller writing, “The fight has always been about whether monopolists run our world, or about whether we the people do.”
  • Barry Lynn appeared in a Salon article about how “[t]oday’s ultra-rich,” their power and their ability to “create networks of power that can extend to any – and perhaps every – country in the world.” Salon quoted Lynn saying in 2017, “Individuals, lawmakers, we’re all feeling a rapid loss of control and power around [tech] companies.”
  • Barry Lynn spoke with TIME magazine about the dangers of letting tech executives like Microsoft President Brad Smith prescribe remedies to rebuild consumer trust. “It’s a simple fact that technology has been weaponized by private companies against democracy,” says Lynn. “Corporations are not people. They don’t have souls. They’re institutions designed to make money. And the way the government has always dealt with them is to regulate them to the point where they cease being dangerous to the public.”
  • Sarah Miller appeared on Voice of America’s “Plugged In with Greta Van Susteren” program to discuss social media and whether Facebook has become too powerful. Miller told host Mil Arcega, “The root of the problem is that Facebook is a monopoly that is not accountable to its users and is able to manipulate what billions of people think based on curating information flows that they control.”
  • Sarah Miller commented on the state-led investigations into Google’s and Facebook’s market dominance on Al Jazeera. Miller called the probes “historic” and said that they are both signs of “an unprecedented bipartisan effort to protect democracy and commerce from two of the most dangerous monopolies on the planet.”
  • Sally Hubbard discussed with The Atlantic the opaque, deadly private jail health care industry and how hundreds of communities and hundreds of thousands of patients are stuck with one corporation, Wellpath. “Private equity is known for rolling up entire industries. Their strategy is to make industries and companies ruthlessly efficient and to extract more revenue from the business than there was before they acquired it,” Hubbard said.
  • Sally Hubbard spoke with Vox about why the FTC’s $5 billion fine on Facebook for violating its users’ privacy is inadequate. Hubbard said, “If the FTC was willing to wield the power that it has, what it would do is to say Facebook, we have the legal ability to fine you trillions of dollars unless you [agree to a certain set of conditions], because at that point, it’s a negotiation.”
  • Sandeep Vaheesan commented on the state attorneys general investigation to radio station KPFA and the Los Angeles Times, telling them that, “the Trump administration has done virtually nothing on antitrust across the board. Despite some noises on Twitter from Trump, he has shown no interest in investigating, let alone prosecuting, companies like Google and Facebook. I think the states have realized that unless they come together and act, nothing is going to happen.” The Open Markets Institute released a statement applauding the investigation, which was covered in Consumer Affairs. 
  • Matt Stoller told Politico that EU competition head Margrethe Vestager is “an enforcer who has failed to keep [large technology] companies in check,” but added that “if she learns from those failures, she could be a powerful force.”
  • Matt Stoller discussed President Barack Obama’s legacy in the Democratic Party with The New York Times. Stoller said that he was “still waiting for that moment when Democrats are going to have to make [a] choice” between, as the Times put it, “Mr. Obama’s center-left policy framework and the agendas of liberal candidates they now favor.”
  • Last newsletter, we covered Washingtonian magazine’s profile of the Open Markets Institute and Executive Director Barry Lynn as being at the “center” of how antitrust “made it into the headlines of 21st-century America.” The article is now available online and you can read it here.

📈 VITAL STAT:

2 out of 3

Proportion of Americans that support breaking up big tech companies like Google, Amazon, and Facebook, to bolster competition in the future, according to a new poll from Data for Progress and YouGov Blue.  Nearly seven in ten support breaking up corporations to make sure that corporations “don’t prioritize content they benefit from financially.”

📚 WHAT WE’RE READING:

  • “Law and the Future of Gig Work in California: Problems and Potentials” Part 1 and Part 2 (On Labor, Veena Dubal and Sanjukta Paul): Two leading legal scholars explain why California’s new law – which would give Uber and Lyft drivers employee status – would not necessarily hurt drivers’ schedule flexibility nor entrench Uber or Lyft’s dominance.
  • “The Modern Company Town” (Center for American Progress, Zoe Willingham and Olugbenga Ajilore): An informative report on concentration in the markets for people’s labor and what can be done about it.
  • “Amazon Changed Search Algorithm in Ways That Boost Its Own Products” (The Wall Street Journal, Dana Mattioli): How Amazon manipulates search results on its Marketplace to favor more profitable options, often its own.
  • “How Apple’s Apps Topped Rivals in the App Store It Controls” (The New York Times, Jack Nicas & Keith Collins): How search results in Apple’s App Store favored Apple’s own applications over its rivals.

 

Image courtesy of troyek via iStock.

Written by Barry Lynn, Phil Longman, and Daniel Hanley

Edited by Barry Lynn, Phil Longman, Daniel Hanley, Olivia Webb, Udit Thakur, Krista Brown, 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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