The Corner Newsletter, May 14, 2020
Open Markets Discusses a New Report on Amazon Exploiting its Gatekeeper Position and Our Proposal to Use Anti-Monopoly Law to Address the COVID-19 Crisis Within America's Meatpacking Industry
Welcome to The Corner. In this issue, we discuss a new report that Amazon is exploiting its gatekeeper position to take other companies’ businesses, and we discuss the Open Markets proposal to use anti-monopoly law to address the COVID-19 crisis within America’s dangerously consolidated meatpacking industry.
To read previous editions of The Corner, click here.
Pressure on Amazon Grows During the Pandemic
The House subcommittee investigating Amazon has called Amazon CEO Jeff Bezos to testify, after The Wall Street Journal revealed that Amazon had been abusing its dominant gatekeeper position to steer business away from independent sellers to Amazon-branded products. Open Markets has long criticized the threats of Amazon’s position as both marketplace and seller, a critique detailed last month in testimony given to a Senate subcommittee by Open Markets’ Director of Enforcement Strategy Sally Hubbard.
According to the Journal, 20 former employees confirmed that Amazon routinely exploited its dominant position to harvest data from third-party sellers on Amazon’s platform. According to the report, the corporation then used the data to determine the most efficient pricing for products, as well as to analyze the strongest and weakest features of competitors’ products and to analyze which markets Amazon should enter or avoid. Not only do these practices allow Amazon to eliminate competitors from lucrative product markets, the Journal reported, but the practices also stymie competition by deterring market entry by rivals afraid of having their products copied by Amazon.
The revelations about Amazon’s use of data to target other people's businesses would directly contradict Congressional testimony by Amazon’s associate general counsel, Nate Sutton. A bipartisan group of members of the the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law sent a sharply worded letter to Bezos demanding that he testify in person to address these potentially “criminally false or perjurious” misrepresentations by Sutton.
Hubbard, in testimony in March to the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, wrote at length about the danger that Amazon and other platform monopolists could abuse their dominant positions to promote their own interests over those of their customers, who depend on Amazon’s services. Hubbard presented many of the remedies that Open Markets has long advocated to address these monopolies. These include common carrier law and structural separation, a historically important remedy that would prohibit technology platforms from competing in multiple markets that they can manipulate in their favor.
The House demand that Bezos testify came as labor groups stepped up their efforts against Amazon’s business practices. Labor groups staged a protest on April 30 in front of Bezos’ D.C. home to demand that the corporation take actions to better protect employees against COVID-19. In solidarity with hundreds of thousands of workers nationwide, many employees from Amazon went on a one-day strike on May 1 to demand sick time, protective equipment, and increased transparency about COVID-19 cases in their facilities.
The House Judiciary letter to Jeff Bezos is here.
Hubbard’s letter to the House subcommittee can be viewed here.
Hubbard’s Senate subcommittee testimony can be viewed here.
The Senate subcommittee hearing featuring Hubbard can be watched here.
Restructuring America’s Meatpacking Industry
Two weeks ago, President Trump classified meatpacking plants as essential infrastructure under the Defense Production Act. Meatpacking plants have suffered large outbreaks of COVID-19 among workers, and the White House depicted the move as an effort to ensure a steady supply of meat to American eaters. Open Markets Institute responded quickly, saying that the executive order fails to address the real issues threatening the industry, which are that meat processing has been concentrated in too few facilities and that these facilities do not adequately protect workers. Open Markets on May 1 published a proposal, signed by 14 leading food and agricultural organizations, to solve the problems of consolidation that drive the crisis in the industry.
Our proposal calls for the executive order to be repealed, because the administration and law enforcement agencies can use existing anti-monopoly authority to address the issue. Agricultural industry mergers should be blocked, and past mergers resulting in market concentrations of more than 10% should be reversed. Executive agencies should enforce the Packers and Stockyards Act, and the USDA should reinstate the Grain Inspection, Packers and Stockyards Administration. Additionally, the USDA should revoke all line speed increases put in place under the New Poultry and Pork Inspection Programs and related waivers. This would lead to better labor conditions for workers and food safety inspectors.
Open Markets’ proposal can be read here.
🔊 ANTI-MONOPOLY RISING:
Warren, Ocasio-Cortez Propose Halt to Big Mergers During Coronavirus Pandemic. Sen. Elizabeth Warren (D-MA) and Rep. Alexandria Ocasio-Cortez (D-NY) proposed a moratorium on mergers and acquisitions late last month for large companies during the coronavirus pandemic. “Every day, we’re hearing stories of desperate small businesses struggling to survive during this crisis,” Warren said in a statement to NBC News. “We have to make sure we protect workers, small businesses, and entrepreneurs so they are not squeezed ever further by harmful mergers now or in any future emergency.”(NBC News)
Bipartisan Pair of Senators Request Antitrust Probe Into Meatpacking Industry. Sens. Josh Hawley (R-MO) and Tammy Baldwin (D-WI) asked the Federal Trade Commission late last month to investigate the meatpacking industry. “Following a spate of COVID-19 infections among plant workers, in recent days these oligopolistic companies have closed three pork plants indefinitely, resulting in the shutdown of a staggering 15 percent of America’s pork production,” the senators wrote. “We write to urge you to exercise that authority to investigate the growing concentration in the meatpacking and processing industry, and any anti-competitive behavior resulting from this concentration,” they wrote. (The Hill)
Textbook Companies Cengage, McGraw-Hill Scrap Merger. The second- and third-largest U.S. college textbook companies, Cengage and McGraw-Hill, canceled on Monday their planned merger, after sustained scrutiny by antitrust regulators in the U.S. and Britain. Cengage officials said that the decision was “due to a prolonged regulatory review process and the inability to agree to a divestitures package with the U.S. Department of Justice." (Yahoo Finance)
The Open Markets Institute and a coalition of public interest groups and scholars wrote a letter to the Department of Justice Antitrust Division last July, to lay out the potential public harms posed by this merger and to urge the DOJ to block the merger.
📝 WHAT WE'VE BEEN UP TO:
Claire Kelloway and Daniel Hanley published an article in The American Prospect on the right to repair and how the coronavirus has exacerbated problems caused by dominant manufacturers’ restrictions on repair. The right to repair would ensure that consumers can find replacement parts and repair manuals that allow them to fix the products that they’ve purchased.
Sandeep Vaheesan wrote a piece on ProMarket examining the influence that economists have had on antitrust law. Vaheesan makes the case that the executive branch and the judiciary have managed to gut checks on corporate power and consolidation thanks to the use of specious arguments by economists that are clearly contradicted by empirical data.
Sandeep Vaheesan and Sanjukta Paul were panelists on the Committee to Support Antitrust Laws online panel. The panel was titled “Has the COVID-19 Pandemic Changed the Way We Should Think About Antitrust Law?”
Sandeep Vaheesan spoke on the Rick Ungar Show podcast about the merger moratorium proposed by Sen. Elizabeth Warren (D-MA) and Rep. Alexandria Ocasio-Cortez (D-NY). Vaheesan discussed the need for a merger ban and the use of antitrust principles to halt consolidation during the pandemic.
Barry Lynn was quoted in the Associated Press regarding Open Markets’ call to ban mergers and acquisitions during the pandemic. “You’ve got Apple and Google and Amazon with these massive piles of cash, the Saudis and others with these massive piles of cash, and everyone else is half-bankrupt and paralyzed,” Lynn said.
Liza Lovdahl Gormsen, a member of Open Markets’ academic advisory board, was featured in the Stigler Center’s online conference on monopolies and the rise of Nazism in Germany. Gormsen discussed the relationship between Nazism and industrial cartels.
The recent Open Markets-OECD conference about international supply chains, risk, and resiliency was covered in the Financial Times. The event, “Shock Proof: Building Resilient Systems in the 21st Century,” discussed how competition policy can structure resilient supply chains that can withstand pandemics and natural disasters.
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📈 VITAL STAT: $62 billion
The value of the Allergan’s acquisition by AbbVie, which was recently approved by the Federal Trade Commission.
📚 WHAT WE'RE READING:
“Punching Steph Curry” (The Atlantic, Gene Sperling): Gene Sperling, the director of the National Economic Council under Presidents Bill Clinton and Barack Obama, authored a piece in The Atlantic mentioning Barry Lynn and former Open Markets Legal Director Lina Khan. Sperling argues that the government should structure markets to ensure economic dignity and fair participation in the economy.
“How Local Providers Built the Nation’s Best Internet Access in Rural North Dakota” (Institute for Local Self-Reliance, Katie Kienbaum, Ny Ony Razafindrabe, Michelle Andrews, and Christopher Mitchell): Describing North Dakota’s exceptional internet service, which the authors trace back to the 1990s, when local companies and telephone cooperatives acquired US West’s (now CenturyLink’s) network to provide low-cost and nearly universal fiber optic coverage.
“The Sherman Act Is a No-Fault Monopolization Statute: A Textualist Demonstration” (American University Law Review, Robert Lande, and Richard Zerbe): Conducts a textualist analysis of the Sherman Act to demonstrate that Section 2, the anti-monopolization provision, was not limited to monopolies acquired through anti-competitive conduct but has a much broader application that sanctions all monopolies and attempts to monopolize.
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