Open Markets Details Frontline’s New Report on Amazon and Explains How State Attorneys General Can Appeal a Court Decision Approving T-Mobile’s Purchase of Sprint

Welcome to The Corner. In this issue, we discuss Frontline’s new report on Amazon and Jeff Bezos, explain how state attorneys general can appeal a court decision approving T-Mobile’s purchase of Sprint, and explain some of the flaws in Sen. Hawley’s proposal to restructure the Federal Trade Commission.

New PBS Frontline Documentary Investigates Amazon

The Open Markets team encourages readers of The Corner to watch the new Frontline report titled “Amazon Empire: The Rise and Reign of Jeff Bezos,” which debuted Feb. 18. The documentary provides a strong case that the time has come for Americans to break Amazon’s  immense and fast-growing economic and political power.

The report features many of Open Markets’ closest allies, including Stacy Mitchell, co-director of the Institute for Local Self-Reliance; Franklin Foer, a former Open Markets board member and now a staff writer at The Atlantic; as well as many members of the Athena Coalition. The report also includes an interview with Open Markets Executive Director Barry Lynn.

Watch the episode here.

Read about Open Market’s pioneering fight against Amazon here.

Read the PBS press release about the episode here.

How State AGs Can Appeal the Flawed Decision to Approve T-Mobile’s Purchase of Sprint. 

Last week, Judge Victor Marrero of the District Court for the Southern District of New York resoundingly approved a proposed $26 billion mega-merger between Sprint and T-Mobile, further consolidating one of the most critical sectors in the economy from four firms to three.

Nine states and the District of Columbia were seeking to prohibit the merger between Sprint and T-Mobile on the grounds that the merger would substantially decrease competition in the retail wireless industry, would likely increase prices for consumers, and would increase the likelihood of collusion among the remaining behemoths. The states pursued the case despite the merger’s approval by the Department of Justice (DOJ) and the Federal Communications Commission (FCC).

A close review of the ruling reveals a number of mistakes in the judge’s reasoning, so state attorneys general could base their appeal on several excellent legal arguments. For example, the judge apparently misunderstood or misinterpreted the “efficiencies” defense and the “weakened competitor” defense, and the decision erroneously takes into account theoretical economic benefits, which cannot justify an otherwise illegal merger.

Policy Analyst Daniel Hanley published today an in-depth analysis of what the judge got wrong on ProMarket.org.

Response to Sen. Hawley’s FTC Proposal

Last week, Sen. Josh Hawley released a plan to reorganize the Federal Trade Commission (FTC).

Open Markets recognizes the value of a vibrant, well-staffed, and aggressive FTC to enforce the antitrust laws and promote vigorous competition. However, Sen. Hawley’s plan at best misses the mark and at worst would undermine the goals of the commission. Two aspects of his proposal are especially dangerous.

First, Sen. Hawley calls for the FTC’s enforcement division to be merged with the Department of Justice (DOJ), decreasing the number of federal antitrust agencies from two to one. Unfortunately, this runs directly contrary to the basic goal of Congress when it established the FTC in 1914: to create an organization that both checked the DOJ’s Antitrust Division and supplemented and complemented its powers. Indeed, Congress, in passing the Clayton Antitrust Act that same year, also established the same basic antitrust powers in every state of the union, and—through private right of action—in every citizen. The clear aim was to ensure that even if powerful private actors captured control of an administration or of the entire government in Washington, then the people would still be able to bring real power to bear against their corporations and banks.

Sen. Hawley’s second main error is to call for the leadership of the FTC to transform from a five-person commission into a single director. The main problem with this idea is that it would allow a strong director to hide from the public view most of the deliberations that take place within the FTC, without increasing in the slightest the likelihood that the commission would take strong action against private concentrations of power. The multi-member structure of the commission, combined with the requirement to publish decisions, ensures that debates within the agency help to educate the public and other enforcers, even when these debates do not result in actions against private monopolists.

While we applaud Sen. Hawley calling for more funding for research at the FTC, his present plan would severely weaken the federal government’s antitrust enforcement capacity. Open Markets has published many articles about the special importance and unique tools of the FTC. We encourage Sen. Hawley and other interested parties to consult our extensive work on the commission:

• Sandeep Vaheesan, Resurrecting “A Comprehensive Charter of Economic Liberty”: The Latent Power of the Federal Trade Commission.

• Sandeep Vaheesan, The FTC Might Just Be Progressives’ Secret Weapon.

• Lina Khan & K. Sabeel Rahman, Restoring Competition in the U.S. Economy.

• Open Markets Institute Comment to the FTC, How the Federal Trade Commission Can Help – Instead of Hurt – Workers.

• Open Markets Institute Comment to the FTC, Restoring an Open Marketplace for Product Repairs.

• Open Markets Institute Comment to the FTC, The Failure and Potential Redemption of Federal Merger Policy.

ANTI-MONOPOLY RISING:

• FTC to Examine Past Acquisitions by Large Technology Companies. The FTC last week ordered Amazon, Apple, Google, Facebook, and Microsoft to provide information and documentation on the terms, scope, structure, and purpose of transactions consummated between January 2010 and December 2019. The FTC will use the information to examine trends in acquisitions, the structures of deals, and to assess competitive concerns. Potential mergers the FTC could consider undoing are Google’s acquisition of Waze and Facebook’s acquisition of WhatsApp. FTC Chairman Joe Simons says “[t]his will help us continue to keep tech markets open and competitive, for the benefit of consumers.” (FederalTrade Commission)

• Senators Introduce Bipartisan Legislation to Develop 5G Alternatives to Huawei. The Utilizing Strategic Allies (USA) Telecommunications Act, introduced last month by Sens. Mark Warner (D-VA), Richard Burr (R-NC), Marco Rubio (R-FL), Bob Menendez (D-NJ), John Cornyn (R-TX), Michael Bennet (D-CO), would provide more than $1 billion to invest in domestic alternatives to Huawei and ZTE. The legislation is based on the belief that the internet equipment manufactured by Huawei, the leading Chinese 5G commercial provider, poses multiple threats to the security of the United States and its key democratic allies. (Press Release by Sen.Warner) 

• CIA Design’s Procurement Contract To Distribute Cloud Computing Dependence. The Central Intelligence Agency issued a draft proposal to request multiple companies to supply some of the federal government’s cloud computing needs for up to 15 years. Known as Commercial Cloud Enterprise (C2E), the contract will divide the responsibility to store 17 U.S. intelligence agencies’ information in the cloud among at least three vendors, which may include Amazon, Microsoft, and IBM. The draft also provides additional opportunities for companies to compete throughout the project. The CIA noted that the goal is “diversifying cloud services offerings to promote competition and to capitalize on commercial investment and innovation.” C2E presents an example of government using procurement to combat monopoly and encourage competition. (The Capitol Forum)

WHAT WE’VE BEEN UP TO:

Open Markets submitted a brief to the Montana Supreme Court calling on the court to rule that employee non-compete clauses are unenforceable under state law. The brief was drafted by Thomas Singer and Amanda Hunter at the Axilon Law Group and draws heavily on OMI’s March 2019 petition to the Federal Trade Commission calling for a federal rule to ban non-competes nationwide.

• Sandeep Vaheesan wrote an article in the Washington Monthly calling on state attorneys general to appeal Judge Marrero’s approval of the T-Mobile and Sprint merger. The court’s approval of the merger significantly reduces competition in the wireless market and sets a troubling precedent in the interpretation of the Clayton Act and the types of defenses merging firms can use against antitrust claims.

• Barry Lynn spoke at the Great Good Gathering at Columbia University to discuss how anti-monopoly law can profoundly shape society. Lynn’s speech focused on the intersection of concentrated private power and democracy.

• Barry Lynn spoke to the Financial Times about calls to break up big tech by democratic presidential candidates. Lynn said that presidential candidate Sen. Elizabeth Warren’s 2016 speech on tech policy and antitrust “was the most important speech by a major public figure about the dangerous concentration in the United States since probably the 1930s.”

• Sandeep Vaheesan and Matt Buck wrote an article for ProMarket about the failures of antitrust law to account for the problem of monopsony in labor markets, a problem that harms millions of Americans by suppressing wages. To shed light on the issue, the article cites cases involving the NCAA,  employees of tech giants, and therapists employed by home health agencies, and Peruvian shepherds employed by western ranchers.

• Open Markets’ report on America’s Concentration Crisis was mentioned in Business Insider concerning the growth of CVS’ HealthHub stores and their Medicare Advantage Enrollment Plan.

• Claire Kelloway and Sarah Miller’s report Food and Power: Addressing Monopolization in America’s Food System was cited in The Nation to explain the financial practices that have hurt rural America. The report discusses how the market for hogs, which was once competitive, is now controlled by meatpacking conglomerates. The report was also cited in a new congressional resolution proposed by Sens. Cory Booker (D-NJ) and Jeff Merkley (D-OR) and Reps. Deb Haaland (D-NM) and Chellie Pingree (D-ME). The resolution supports family farmers, ranchers, and agricultural communities in the United States and recommends methods to level the playing field for farmers and ranchers against agricultural giants.

• Sally Hubbard spoke to Bloomberg and was mentioned in Phone Arenaregarding Google’s acquisition of map competitor Waze. Hubbard said, “It was literally Google acquiring its number one competitor in maps. It was a bad deal that should have been blocked.”

• Sally Hubbard spoke to Wired about the Federal Trade Commission’s recently announced antitrust investigation into Amazon, Apple, Facebook, Alphabet, and Microsoft’s acquisitions in the past decade. “We need to have in-depth study and public airing of information, about this history of acquiring competitive threats, growth through acquisition and what it has meant for competition going forward,” Hubbard said.

• Sally Hubbard spoke to Bloomberg about the reasoning that T-Mobile and Sprint used to defend their merger against antitrust action. The failing firm defense relies on a company’s poor financial situation to justify a merger, and more firms could utilize this defense when making deals in the future. It “could certainly embolden merging companies,” said Hubbard.

• Sandeep Vaheesan was quoted in Salon and Common Dreams about the merger between telecom giants T-Mobile and Sprint, which was approved by the U.S. District Court for the Southern District of New York. Vaheesan stated the decision “empowers all corporations seeking dominance through mergers and acquisitions” and “underscores the need for bright-line rules that deter harmful consolidation and channel business strategy toward product improvement and investment in new capacity.”

• Barry Lynn was quoted in Financial Times about European Union Competition Chief Margrethe Vestager’s probes into digital platforms and anti-competitive behavior. “There is a huge global shift from regulators, they are saying they are not going to put up with [anti-competitive behavior] any more,” Lynn said.

• Sally Hubbard was quoted in Bloomberg about pay-for-delay tactics used by pharmaceutical companies that keep cheaper generic drugs off the market. A California drugmaker settled with the state of California for $69 million last year for using this tactic. “It’s incredibly frustrating because even though these dollar amounts sound large, it’s merely a cost of doing business for these drug companies,” Hubbard said.

 VITAL STAT: $13 billion

The amount of the proposed mega-merger between the investment bank Morgan Stanley and the brokerage firm E-Trade. Within the brokerage industry, Charles Schwab has proposed the acquisition of TD Ameritrade.

WHAT WE’RE READING:

• “The Firm Exemption and the Hierarchy of Finance in the Gig Economy”(University of St. Thomas Law Journal, Sanjukta Paul and Nathan Tankus):Focuses on how antitrust law today favors coordination rights and concentrated ownership of business firms rather than democratic participation and cooperation by workers. The case of ride-sharing companies such as Uber illustrates this issue.

• “The Dismal Kingdom” (Foreign Affairs, Paul Romer): Discusses the influence that economists have had in the drafting of U.S. public policy over the past 60 years.

• “The Rural Health Safety Net Under Pressure” (The Chartis Center for Rural Health): Details the crisis of rural hospital closures and investigates the performance of these rural hospitals. The report identifies the factors that contribute to and make hospitals vulnerable to closure.

Open Markets Employment Opportunities

You can find the full job listings here.

Written by: Daniel Hanley, Garphil Julien, Stella Roque, Sanah Shah
Edited by: Barry Lynn, Phil Longman, and Michael Bluhm.