The Corner Newsletter, May 3, 2018: The Coming FTC-FB Clash — House Democrats & Worker Power — DOJ Clearing “Legacy” Decrees

In this issue of The Corner (Vol. 1, No. 10), we explore the coming clash between the FTC and Facebook, look at the ways that House Democrats are changing their party’s understanding of labor markets and power, and highlight how antitrust regulators are rethinking when and how to use consent decrees.

May 3, 2018  |  by Open Markets


On Tuesday, Facebook CEO Mark Zuckerberg created headlines by unveiling plans to introduce a new dating product. He also announced a new feature that will let Facebook users clear their browsing history and invited outside experts to help Facebook investigate whether the corporation is facilitating racial discrimination or blocking conservative publications. This followed last week’s earnings call with Wall Street analysts during which Zuckerberg bragged of record earnings and all but dismissed the idea that the corporation faces any danger of regulatory action by Congress or the Federal Trade Commission.

Not surprisingly, Facebook’s stock price went up, ending Wednesday’s trading more than 10 percent above its level a month ago. The stocks of old and new competitors to Facebook, such as Snapchat and, fell by double digit percentages in the days after the announcement.

Yet a very different sort of announcement the previous Monday will likely prove a much better indicator of Facebook’s fortunes over the long term. This was news that Jan Koum, one of the billionaire co-founders of Facebook subsidiary WhatsApp, is leaving the corporation’s board. According to The Washington Post and others, Koum is upset about Facebook’s attempts to exploit personal data collected from WhatsApp users and to weaken WhatsApp’s encryption system. Coming just as the Senate confirmed a new team of commissioners to the FTC—not least to look into Facebook’s violation of U.S. privacy laws—this high-profile spat among the corporation’s executives indicates Facebook leaders don’t yet know how they will deal with the closer regulatory scrutiny they are likely to face in the near future.

Facebook’s history of abusing user data extends at least as far back as 2007 when the corporation launched Beacon, a feature that automatically publicized a user’s purchases on their Facebook feed. The system accidentally revealed all sorts of secret information—like Blockbuster video rentals and purchases of jewelry—to a user’s friends and family, and proved a public relations disaster.

After years of complaints by consumer rights and privacy groups over this and other violations, the FTC required Facebook to sign a consent order in which it agreed to stop misrepresenting its use of users’ data and promised not to change users’ privacy preferences without first gaining their consent. FTC Chairman at the time, Jon Leibowitz, said that: “Facebook’s innovation does not have to come at the expense of consumer privacy. The FTC action will ensure it will not.”

But, as became clear when Facebook allowed the data-mining firm Cambridge Analytica to access the profile information of 87 million users without their approval, the corporation has not met the terms of the agreement. Given that the consent decree calls for a fine of up to $40,000 per violation, the FTC could conceivably now demand that Facebook pay trillions, a sum that would bankrupt the corporation. In the wake of the Capitol Hill hearings, the FTC announced that it was indeed investigating whether Facebook violated the order.

Koum’s departure indicates that Facebook’s exposure to FTC action may soon become even greater. When Facebook bought WhatsApp in 2014, the FTC warned the corporation that it would have to secure opt-in consent to change data usage for WhatsApp users. Failure to do so, according to the FTC, would constitute an illegal deceptive practice. At the time, Zuckerberg promised, “we are absolutely not going to change plans around WhatsApp and the way it uses user data.”

Nevertheless, in August 2016, WhatsApp announced it would share user information with the “Facebook family of companies,” including for the purpose of “making product suggestions and showing relevant offers and ads.” There was no opt-in consent for this change; instead WhatsApp gave users 30 days to opt-out.

A growing number of investors are, in fact, beginning to take Facebook’s problems with regulators very seriously. As The Economist reported last week, “Jeffrey Gundlach, a celebrated fund manager… made fun of Mr. Zuckerberg before saying Facebook was his best ‘short'” due to the threat of government action. The Economist article also quoted the head of a “megabank” saying that the big tech firms “have no idea what is going to hit them.”



  • Vince Cable, leader of the UK’s Liberal Democratic Party, in a speech called for the breakup of large tech corporations including Google, Facebook, and Amazon. He analogized their “immense and growing power” to that of Standard Oil, the early 20th Century oil monopolist.
  • Rep. Ro Khanna (D-CA) in a Wired profile this past week, called for a re-interpretation of U.S. antitrust law to ensure they take more than harm to the “consumer” into account. He also criticized his fellow members of Congress for their approach to questioning Mark Zuckerberg: “Congresspeople or senators turned to Zuckerberg and said, ‘Tell us what we should do.'” Khanna noted, “If you had the pharmaceutical industry up there or banks up there, you wouldn’t have members of Congress saying, ‘Please tell us how we should regulate you.'”
  • Sen. Ted Cruz (R-TX) criticized the power of tech corporations like Facebook during an interview with Breitbart News Tonight and called for their break up. “By any measure, Facebook is larger and more powerful than…AT&T was when the antitrust laws broke it up,” said Cruz, who once headed the Office of Policy Planning at the Federal Trade Commission. “I think we need to have serious consideration about the massive power we’re seeing of these tech companies to subvert our democratic process.”



House Democrats introduced four bills last week that would reduce businesses’ power over their employees and give workers more freedom to change jobs. The legislation’s focus on corporate control over markets and workers represents a fundamental shift for a party that has long held that education and skills training are the main way to help workers and boost the American economy.

“I am proud to join my colleagues in introducing this package of bold legislation to protect the economic opportunity and freedom of working Americans through the full benefits of competition,” Rep. Jerrold Nadler (D-NY) said.

The new bills are backed by an ideologically diverse group of Democrats and signal a willingness within the party to actively confront the monopolies that control the lives and fortunes of a growing number of American workers. When corporations capture control over large swaths of any specific labor market, workers often find it much harder to bargain for higher wages and benefits. As a recent series of economics studies have shown, the effects on wages have been dramatic.

Rep. Keith Ellison’s (D-MN) End Employer Collusion Act targets employer power in labor markets. Like a similar bill introduced by Sen. Cory Booker (D-NJ) and co-sponsored by Sen. Elizabeth Warren (D-MA) in March, Ellison’s bill would outlaw no-poaching agreements under which employers agree not to recruit each others’ workers. One of the most notorious recent examples of such a labor cartel was an agreement in the mid to late 2000s in which Apple, Google, Intel, and Adobe, as well as five other prominent corporations agreed not to recruit each others’ employees. Apple, Google, Intel, and Adobe later settled a 2015 class-action antitrust suit on behalf of 64,000 affected workers by agreeing to pay $415 million to the workers and their attorneys.

Rep. Joe Crowley’s (D-NY) Workforce Mobility Act, meanwhile, would ban non-compete clauses. These are provisions in employment contracts that restrict where an employee can work in the future.

Two other bills would require antitrust enforcers to consider the effects that a prospective merger would have on employment. These are the Restoring and Improving Merger Enforcement Act and the Economic Freedom and Financial Security for Working People Act of 2018, sponsored by Reps. Nadler (D-NY) and David Cicilline (D-RI), respectively.

Rep. Nadler’s (D-NY) bill would forbid antitrust enforcers from taking corporate promises to lay off workers into account when evaluating the supposed public benefits of a proposed merger. Rep. Cicilline’s (D-RI) bill would outright ban corporate mergers that tend to create a monopsony, or a corporation with buying power over its suppliers.

Past Democratic standard-bearers Barack Obama and Bill Clinton tended to emphasize the importance of education and skills training to workers’ livelihoods. As recently as October 2016, President Obama touted the dramatic increases that higher education could produce in peoples’ wages. Skills and proper training, Democrats seemed to believe, would be enough to make sure that workers prosper.

However, recent research suggests that increasing concentration in the American economy has given corporations increasing power over workers and helped to suppress wages. One estimate from 2014 found that roughly one in five workers in the United States were bound by non-compete clauses.

The head of the Department of Justice’s Antitrust Division, Makan Delrahim, last month announced a civil settlement between the government and two rail equipment suppliers over no-poaching agreements the two corporations were using to restrict the wages and mobility of their employees.



  • Brian S. Feldman testified at the second session of the Department of Justice’s Antitrust Division’s Roundtable Series on Competition and Deregulation. He presented Open Markets’ written statement and argued that blocking mergers from the outset more effectively sustains competition than does imposing consent decrees on merging corporations.
  • Barry C. Lynn and Lina Khan spoke at the 2018 Antitrust and Competition Conference: Digital Platforms and Concentration, hosted by the University of Chicago’s Stigler Center. On a panel entitled “The Big Five and Political Power,” Lynn discussed how concentrated economic power breeds concentrated political power and threatens democracy. On “The Amazon Phenomenon,” Khan illustrated how Amazon’s business model evades antitrust scrutiny under the “consumer welfare” standard.
  • Phil Longman’s Washington Monthly article advocating a single-price healthcare system was cited by The Washington Post columnist Robert J. Samuelson as “a genuine solution to our health-care problem.” He also presented an address on the problem of monopoly to Progressive for Positive Change in Bucks County, Pennsylvania.
  • The Open Markets Institute was cited by David Leonhardt of The New York Times as providing a “strong response to growing corporate power and consolidation.”



In a quiet move last week, the Department of Justice’s (DOJ) Antitrust Division announced the creation of the Office of Decree Enforcement. This small office will review the Department’s antitrust consent decrees—those little known but often powerful settlements the DOJ negotiates with merging corporations or with corporations that engage in anti-competitive behavior.

In part, the move is simply a matter of cleaning up the books. Since 1979, the government has limited all consent decrees to a period of five to ten years. But from the early days of the Sherman Antitrust Act to 1979, the DOJ and the Federal Trade Commission (FTC) entered into consent decrees that did not include explicit termination dates. As a result, more than 1,300 “perpetual” decrees remain on the books, serving in essence as law over entire sectors of the U.S. political economy. The new DOJ initiative is based on the idea that such “legacy” decrees have become generally unenforceable, are untethered from the realities of today’s marketplace, or cover firms and even industries that no longer exist.

Consider, for instance, a 1931 decree designed to combat a price-setting conspiracy among Washington, DC-based dyers of textiles, yarns, and wools. In the years since, every DC-based retail dyer has gone out of business, rendering the purpose of the decree obsolete. As Assistant Attorney General Makan Delrahim put it during a speech last week: “the vast majority of them no longer protect competition because of changes in industry conditions, changes in economics, [or] changes in law.”

At a more fundamental level, the creation of the office comes at a time when DOJ antirust enforcers are increasingly skeptical of the value of consent decrees and other orders designed to regulate behavior by imposing conditions on a firm’s conduct. These measures, known as behavioral remedies, can include the implementation of ‘firewalls’ between a business’s financial units, or even a requirement to donate to charities. Unlike when the government prohibits a merger or forces the breakup of a corporation, such behavioral decrees require law enforcers in the DOJ or the FTC to keep watch to ensure the targeted corporations are meeting the terms of the agreement. In practice, compliance often ends up depending on third-party competitors making enforcers aware of violations.

Behavioral decrees also can prove futile because they fail to address the underlying imbalances of market power. Consider, for example, the 2010 decree imposed on concert promoter Live Nation and ticketing company Ticketmaster. As part of its final judgment, the Antitrust Division imposed an “anti-retaliatory” clause intended to prevent the merged entity from threatening any concert venue that attempts to switch to a competing ticketing agency.

In reality, however, such clauses have proven to be largely toothless. Unless the Antitrust Division monitors the internal decision-making process within a corporation, it is nearly impossible to prove a retaliatory motive. In the case of the U.S. concert market, the terms of the 2010 decree have done little to restore competition. Ticket prices are now at record highs and Live Nation continues to be accused with pressuring venues to contract with Ticketmaster.

One major exception to this rule are the consent decrees that have been used to force large corporations to license out patents. For instance, a 1954 consent decree that abolished Kodak’s monopoly of color film processing by requiring the licensing of its patents led to new entrants entering that market. Similarly, a 1956 consent decree against AT&T is widely recognized as spurring innovation in electronics. More recently, a suite of decreesimposed on the pharmaceutical industry has increased investment in research & development and lowered costs. (For more on OMI’s views of consent decrees, read the testimony Brian S. Feldman presented to the Antitrust Division last week.)

Over the coming months, look for the Department of Justice to propose more decrees for removal on its Judgment Termination Initiative website. “The antitrust agencies [must] find the right tools to address the issues presented,” Attorney General Delrahim noted. “However, the tool picked for a company in 1920 may not be the same tool that’s right for the job today.”



  • “The Watchdogs That Didn’t Bark” (Slate, April Glaser): How Silicon Valley donors appear to have led some digital privacy organizations to steer clear of speaking out against Facebook’s data collection practices.
  • “The Real Villain Behind Our New Gilded Age,” (The New York Times, Eric Posner & Glen Weyl): An op-ed that argues that income inequality is not the result of impersonal forces of globalization or automation, but the result of real monopoly power across the U.S. economy.
  • “Competition is at the Heart of Facebook’s Privacy Problem” (Wired, Rep. David N. Cicilline and Terrell McSweeny): How making data portable and letting users move their information between platforms can strike at Facebook’s privacy problem. The authors also argue, importantly, that competition policy can help solve the problem.
  • “Hipster Antitrust Meets Public Choice Economics” (Competition Policy International, Elyse Dorsey, Jan M. Rybnicek, and Josh Wright): An analysis by the pro-monopoly wing of the antitrust academy that argues the philosophy of the New Brandeis Movement “threatens to send antitrust policy careening back to the field’s equivalent of the Stone Age.”




The expected market share of the top two UK grocers, according to an April 2018 Sainsbury’s investor presentation, if the proposed merger between the UK’s second- and third-largest grocers, Sainsbury’s and Walmart’s subsidiary Asda, respectively, clears. The deal fits into a larger pattern of consolidation among supermarkets, given the pending acquisition of US-based Rite Aid by US-based Albertsons and the 2016 combination of Dutch Royal Ahold and Belgian Delhaize.



  • If It Walks Like A Bank: In an online debate hosted by the Financial Times last week, UK finance enforcers suggested regulating tech platforms like banks. The comments come in light of Facebook subsidiary WhatsApp’s launch of a payments service in India. WhatsApp’s privacy policy allows the corporation to share financial data with third-parties, including Facebook. Their concerns are another indication that enforcers are increasingly viewing tech corporations like Facebook not as neutral platforms, but as critical intermediaries subject to oversight.
  • A New Tune at the EU? Last week, European antitrust enforcers announced they would investigate Apple’s purchase of Shazam, an app that can identify songs. European Commissioner for Competition Margrethe Vestager expressed concern that Apple could use Shazam to steer its users to its music streaming service, Apple Music. The EU’s decision in the Apple-Shazam merger could help explain how antitrust enforcers should think about data in competition, and what Commissioner Vestager meant when she said, “companies need to make sure they don’t use data in a way that stops others from competing.”



We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue.

Join the Movement

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.

Stay updated

Sign up to stay informed.