The Corner Newsletter, April 16, 2020

 

Open Markets Details How the COVID-19 Pandemic is Devastating News Organizations, Announce the Release of Our New Report on Right to Repair, and Invite Readers to Join Our Conference in Cooperation With the OECD

Welcome to The Corner. In this issue, we discuss how the COVID-19 pandemic is devastating news organizations and what we can do about it, we announce the release of our new report on right to repair and our webinar next Tuesday on the topic, and we invite you to join our conference in cooperation with the OECD next Thursday on making systems resilient.

To read previous editions of The Corner, click here.


The COVID-19 Crisis Means Government Must Act Now to Protect Independent Journalism

The COVID-19 pandemic is accelerating the disintegration of American journalism, especially at the local level. Since the outbreak began, news organizations have laid off more than 28,000 journalists. Local newspapers are projecting that they will lose between 30% and 50% of their revenue, largely because of the disappearance of advertising dollars.

To stabilize the industry, a group of organizations led by Free Press sent a letter to Congress requesting that $5 billion in the next COVID-19 relief package go to supporting local journalism.

America’s news media certainly deserve government support during this crisis. But COVID-19 is not the root cause of the industry’s economic devastation. The crisis is only exacerbating the core problem caused by Google and Facebook’smonopolization of the market for digital advertising. These two internet behemoths control which advertising gets displayed on news sites, and the two platform monopolists receive the bulk of the revenue from those ads. COVID-19 is simply worsening an already catastrophic financial situation for news organizations.

The founders believed that the flow of information to citizens was just as important as the freedom of expression, and they believed that ideas should compete on equal terms without any one entity dominating the flow of news. One of the most essential policies the founders enacted was the 1792 Postal Act, which subsidized newspapers – then the primary mediumof information – through the postal system and rapidly expanded the number of post offices so that every citizen would have access to a post office – and to the news. This vision lasted well into the 20th century, when the government was actively involved in promoting both competition and the spread of information on equal terms.

From the 1950s to the 1970s, the Federal Communications Commission enacted several policies to promote these values. For example, in 1953 the commission enacted the National Television Ownership Rules, which prohibited any company from owning more than five TV stations. The commission’s 1970 Financial Interest and Syndication Rules split the largest television networks from the television studios and production houses that produced the networks’ content, so as to prevent any dominant control over the media content broadcast to the public. Each of these policies both limited the dominance that any one communications company could have in one industry and prohibited the companies from leveraging their dominance into other sectors.

Huge, dominant corporations are even taking advantage of the pandemic to extend monopolies that would further harm local journalism. Liberty Media, which owns Sirus/XM satellite radio and Live Nation/Ticketmaster event promotion, is in talks with the Department of Justice (DOJ) to acquire a controlling stake in iHeartMedia, one of the country’s largest owners of radio stations and podcasts. Open Markets issued a statement on Tuesday calling on the DOJ to put a stop to any deal between these two conglomerates, because any such deal would almost certainly lead to layoffs of local journalists and the closing of local news radio stations.

During this time of crisis, local news is more vital than ever. In addition to using COVID-19 relief packages to provide local news with the same support that we have provided to airlines and other essential business, the time has come for Americans to use their government to structure the market for news and information to ensure the viability of independentlocal journalism. One thing this will mean is getting Google and Facebook out of the business of advertising.


Open Markets Releases Report on Right to Repair, Will Co-Host Webinar on April 21

Open Markets Institute on Monday released the report “Fixing America: Breaking Manufacturers’ Aftermarket Monopoly and Restoring Consumers’ Right to Repair,” written by Daniel Hanley, Claire Kelloway, and Sandeep Vaheesan. Open Markets, along with the U.S. Public Interest Research Group (PIRG), will host a webinar on Right to Repair on Tuesday, April 21, from 2-3 p.m. You can register for the webinar here.

The report describes how consumers are losing the freedom to fix the products that they buy, such as their cellphones and laptops, because manufacturers are using a wide array of legal tactics, predatory designs, and even lawbreaking to force consumers to use the manufacturers’ repair services. When repair markets are unrestricted, innovation thrives and systems become more adaptable. For example, doctors and others are right now modifying sleep apnea machines to convert them into ventilators, in an effort to save the lives of individuals suffering from the COVID-19 virus.

Monopolizing repair allows corporations to extract additional revenue during the lifespans of their products, but this profiteering comes at a larger social cost. Repair restrictions drive up costs for consumers, increase wait times, drive out independent repair shops, produce unnecessary waste, and inhibit broader innovation and self-reliance. For example, John Deere uses software that prevents farmers from repairing the John Deere tractors that the farmers paid for. John Deere is forcing these farmers to pay exorbitant fees to the corporation to approve and fix innocuous repairs such a replacing a sensor or diagnosing a glitch. Monopolized supply chains also lead to a less resilient marketplace. Allowing consumers to repair and modify a product, however, can reverse this situation.

Repairability was once a standard and expectation. For example, around the year 1910, automobile wheel rims became detachable from the axle, so car owners could avoid the use of expensive mechanics, who were routinely needed for even minor incidents with an automobile. However, over time, a deadly combination of anemic antitrust enforcement and technological development have allowed manufacturers to adopt exclusionary practices and cut off the tools necessary for repair, in powerful and unprecedented ways. Fortunately, lawmakers, antitrust enforcers, and regulators have many policy mechanisms that can reopen repair markets.

Our paper explores the history of repair markets in the United States, the tactics that manufacturers use to restrict repair, the consequences of restricted repair markets, and the antitrust and other legal tools available to crack open cornered repair markets.

Read our full report here.


Open Markets and OECD to Co-Host Conference on April 23 on Building Resilient Systems for the 21st Century

Open Markets Institute and the OECD’s New Approaches to Economic Challenges initiative are convening some of the world’s leading political economic thinkers on Thursday, April 23, to start developing a set of principles and rules that policymakers can use to shock-proof all vital human-made systems.

The COVID-19 pandemic has bluntly reminded us of the fragility of some of our most basic human-made systems, so Open Markets and the OECD are hosting this conference to discuss strategies and policies to make our systems more resilient. The immediate goals are to clarify the role played by competition policy in determining industrial structures and to ensure that policymakers fully understand how regulation of competition can affect the stability and resilience of systems.

Conference participants include Nobel Prize-winning economist Paul Romer, FTC Commissioner Rohit Chopra, Rep. David Cicilline, and epidemiologist Michael Osterholm, director of the Center for Infectious Disease Research and Policy.

You can register to attend the conference here.

ANTI-MONOPOLY RISING:

  • FTC Sues to Unwind Altria’s $12.8 Billion Investment in Competitor Juul. The Federal Trade Commission (FTC) in early April alleged that competitors in the e-cigarette market, Altria and Juul, closely monitored each other’s prices and that Altria leveraged its market power to get shelf space over Juul. When Juul became the leading brand in the market, Altria agreed not to compete in exchange for an ownership interest in Juul. (Federal Trade Commission)

  • French Antitrust Regulators Order Google to Pay Publishers to Display Excerpts. Last week, the French competition authority, the Autorité de la concurrence, gave Google three months to reach agreements with publishers and agencies on how Google will compensate them. European publishers have been submitting complaints to regulators for a decade to explain how publishers lose advertising revenue when Google unfairly displays excerpts of the publishers’ content and keeps all ad revenue from those pages. French regulators now say that Google’s actions have caused “serious and immediate harm to media.” (The Washington Post)

  • Indian Court Pressed to Restart Antitrust Probe of Amazon, Flipkart, and Uber. India’s recent deal with Flipkart to deliver “everyday essentials” has renewed concerns about the market power of the company in India, as well as the market power of Amazon and Uber there. Although the COVID-19 pandemic caused the Indian competition authority to pause its investigation of all three, the Confederation of All India Traders, a leading advocate for small traders and businesses in India, is urging the commission to restart its antitrust probe. (PYMNTS)


WHAT WE’VE BEEN UP TO:

  • Open Markets’ new initiative, the Center for Journalism and Liberty, was mentioned in CNN’s newsletter Reliable Sources with Brian Stelter. Journalism scholar and consultant Dr. Jody Brannon will be the director of the center, and Dr. Nikki Usher is the center’s first fellow.

  • Sandeep Vaheesan wrote an article in The American Prospect on the FTC’s proposed settlement of a suit with three major rent-to-own companies concerning the firms’ illegal, predatory practices. The FTC is choosing not to punish the companies, despite their admission of an illegal collusion to allocate markets around the country.

  • Daniel Hanley wrote a piece for ProMarket on the monopolization of cloud computing by Amazon Web Services (AWS).Internet-based services made suddenly vital by the COVID-19 crisis, such as Zoom, rely heavily on cloud computing, a market that AWS dominates with a 48% market share.

  • Barry Lynn spoke with Le Monde about how online services such as Amazon seem more essential during the pandemic, which provides them an opportunity to repair their tarnished image. “The pandemic is going to change the image of the big platforms for the better but also for the worse. … [Amazon] is the company that’s hiring in the middle of a crisis and allowing people to get products – but it’s also the one whose employees are accusing it of putting them in danger,” Lynn said.

  • Barry Lynn spoke with El Confidencial about the consequences of market consolidation and concentrated supply chains in the wake of the COVID-19 pandemic. The article focuses on the unlearned lessons that Lynn revealed in his pioneering 2005 book End of the Line and in his 2010 book Cornered. The pieces quotes Lynn discussing a 1999 earthquake in Taiwan, which caused global disruption in the distribution of electronic microchips because of a concentrated supply chain.

  • Philip Longman spoke to Slate about the potential for increased tensions among millennials and baby boomers after the COVID-19 pandemic subsides. Longman stated the pandemic will “pit young and old against each other.” Longman also pointed out that “there’s an almost literal conflict of generations when there’s an 85-year-old on a ventilator and meanwhile there’s an automobile accident outside and two millennials are wheeled in and the capacity isn’t there to deal with them.”

  • Sally Hubbard spoke to Recode about how tech giants are benefiting from the COVID-19 pandemic and why they will continue to consolidate power after the crisis. “As one crisis comes and destroys so many people’s livelihoods, they’re going to say, ‘Wait, why were these the only companies that were strong enough to weather this?’” Hubbard said.

  • Sandeep Vaheesan spoke to Salon about Federal Trade Commission efforts to stop price gouging during the COVID-19 pandemic. “I'm sure the FTC will be pleading helplessness in the coming weeks and months when they are asked to go after price gouging,” said Veheesan.

  • Daniel Hanley spoke with Earther about how the rapidly increasing amount of e-waste could be reduced by enhancing consumers’ right to repair the products they own and by federal enforcement of the nation’s antitrust laws. “[The]problem with how much of the waste that we’re generating is entirely unnecessary, or even more nefariously, is purposely created because of these restrictions. It doesn’t have to be this way,” said Hanley.


VITAL STAT: $63 BILLION

The value of the proposed merger between pharmaceutical giants AbbVie and Allergan. The potential deal, which was announced in June 2019, would create the world’s fourth largest pharmaceutical company. The two pharma behemoths signed a consent decree with the FTC on March 17 to sell off three drugs, in order to win FTC approval of the deal. Abbvie says it expects to close the deal in May.


WHAT WE’RE READING:

Open Markets Employment Opportunities

You can find the full job listings here.

 
NewslettersOpen Markets2020, April 2020