Open Markets Discusses Our Response to the Criticisms Regarding a Merger Ban During the COVID-19 Pandemic, Commend Newly Proposed Bills to Ban Micro-Targeting, and Highlight the Release of Professor John Kwoka’s Latest Book

Welcome to The Corner. In this issue, we discuss our response to the criticisms regarding a merger ban during the COVID-19 pandemic, commend newly proposed bills to ban micro-targeting, and highlight the release of professor John Kwoka’s latest book. 

To read previous editions of The Corner, click here.

As Big Tech Feasts on Vulnerable Firms, Merger Ban Needed More Than Ever  

Even though the total number of mergers in 2020 through late May was down about 50% compared to last year, Big Tech is going on an acquisition spree at a rate not seen since 2015.

Reports in the Financial Times and The Wall Street Journal make clear that these dominant corporations are taking advantage of the pandemic to acquire rivals or strategic targets weakened by the sharp economic downturn. The flurry of announcements powerfully demonstrates the need for a ban on mergers for the duration of the economic crisis, as Open Markets Institute proposed on March 21.

Recent examples include Facebook’s announcement of plans to spend $400 million to fully acquire Giphy, which allows users to share animated images. Uber, meanwhile, has confirmed it is interested in buying Grubhub for a reported  $4.5 billion. Amazon, meanwhile, the largest e-commerce company in the United States, is reportedly in discussions to purchase AMC Theaters, the world’s largest theater chain, Zoox, an autonomous-vehicle technology company, and JC Penney, one of the largest American department store chains. According to the Financial Times, Big Tech has announced 19 own acquisitions since January, the sector’s highest tally since 2015.

In March, Open Markets called for a ban on all mergers involving corporations with more than $100 million in annual revenue or market capitalization for the duration of the COVID-19 crisis. In that letter, we argued that the Antitrust Division of the Department of Justice (DOJ), the Federal Trade Commission (FTC), and other competition law enforcement agencies cannot effectively evaluate mergers at a time when most government offices are shuttered. More fundamentally, we argued that the ban is needed to prevent a wholesale concentration of additional power by corporations that already dominate or largely dominate their industries. We noted that uncontrolled consolidation in this environment would likely result in the unnecessary firing of thousands of employees, the unnecessary closure of many otherwise viable businesses, and a dramatic slowing of innovation in vital industries such as pharmaceuticals, and a further concentration of power and control dangerous both to our democracy and our open commercial systems.

Shortly after the release of our call for a moratorium, Rep. David Cicilline (RI-1), Sen. Elizabeth Warren (D-MA), and Rep. Alexandria Ocasio-Cortez (NY-14) proposed draft legislation that closely mirrors our proposal. The proposed ban has been criticized by Jason Furman, former deputy director of the National Economic Council under President Barack Obama, and Makan Delrahim, the head of the Justice Department’s antitrust division. Former Vice President Joe Biden, when asked about the proposal, answered that he would want the Justice Department to take a “hard look” at whether mergers increased competition and fostered growth.

Of the recent mergers, Facebook’s acquisition of Giphy presents the most significant concerns. By acquiring Giphy, Facebook will extend its hoard of data to include Giphy’s 200 million daily users and deepen its connection to the various applications that have integrated Giphy.

Uber’s proposed acquisition of Grubhub is also deeply troubling. Such a deal would give Uber control of 50% of the U.S. market for meal delivery.

The rumors surrounding Amazon’s proposed acquisitions are particularly worrisome, as the corporation has profited immensely since the onset of the pandemic, while many of its rivals have stumbled or gone out of business.

Open Markets Applauds Principles of Rep. Cicilline’s and Rep. Eshoo’s Bills Limiting Micro-Targeting 

Rep. David Cicilline (RI-1) and Rep. Anna Eshoo (CA-18) this week introduced separate bills to limit micro-targeting, a form of advertising that allows advertisers to target ads to users based on users’ actions online.

In a statement, Open Markets Director of Enforcement Strategy Sally Hubbard said that the bills are “critical first steps to preserving the integrity of our elections and stopping the manipulation of American voters.”

Hubbard submitted a letter in April to the House Subcommittee on Antitrust about the dangers that micro-targeting poses to democracy and individual freedom. Hubbard explained that platforms such as Google and Facebook surveil their users and then allow disinformation agents to target propaganda at users based on comprehensive and intimate data profiles. Foreign agents can easily interfere with our elections because of Facebook's and Google’s targeted advertising business models, Hubbard wrote. “These grave threats to our democracy are not inevitable, but rather result from business choices that prioritize profits over free and fair elections,” she wrote. In her letter, Hubbard called for a ban on all targeted advertising and, at minimum, a ban on micro-targeted ads.

The Open Markets Institute commends both Rep. Cicilline’s and Rep. Eshoo’s bills as important advances in the right direction, and Open Markets applauds the lawmakers for taking much needed action on this issue.

Professor John Kwoka’s New Book Offers Diagnosis and Cure for Merger Ills

John Kwoka, a professor at Northeastern University and a member of Open Markets Institute’s academic advisory board, has published a new book titled Controlling Mergers and Market Power: A Program for Reviving Antitrust in America. 

In his new book, Kwoka explains how specific policy choices have led to the current feeble merger policy in the United States. Kwoka details how antitrust enforcers failed to enforce merger guidelines, failed to challenge large mergers, and implemented remedies with “dubious effectiveness.” Kwoka argues that the failure of today’s merger policy has led to markets that are drastically more concentrated and controlled by dominant firms.

To remedy this failure, Kwoka provides 44 policy recommendations that represent a comprehensive guide to invigorating merger policy. The recommendations include a renewed reliance on the structural presumption, a new definition of an anti-competitive mergers, greater scrutiny of mergers that create barriers to entry, and a reduced use of the current, toothless remedies to anti-competitive mergers.

The new work is a comprehensive follow-up to Kwoka’s previous, groundbreaking book, Mergers, Merger Controls, and Remedies, in which Kwoka systematically demonstrated how American merger policy failed to lower prices, to increase output, or to increase competition.

Kwoka’s new book can be purchased from the Competition Policy International website.

🔊 ANTI-MONOPOLY RISING:

• Ninth Circuit Upholds Ruling That NCAA Violated Antitrust Law; Judge Describes College Sports As ‘Cartel.’ The U.S. Court of Appeals for the Ninth Circuit ruled last week in the NCAA Grant-In-Aid Cap Litigation case that NCAA rules limiting college athletes’ education-related benefits violate Section 1 of the Sherman Antitrust Act as an illegal and anti-competitive agreement. In his powerful concurring opinion, Judge Milan Smith described the NCAA as “a cartel of buyers acting in concert to artificially depress the price that sellers could otherwise receive for their services,” adding that “our antitrust laws were originally meant to prohibit exactly this sort of distortion.” Last October, Open Markets and our allies submitted a brief in support of the NCAA athletes. Be sure to check Open Markets Legal Director Sandeep Vaheesan’s incisive twitter thread for more background on the case and a look at how Judge Smith adopted many of the assertions made by Open Markets. (Forbes)

• Klobuchar and Democrats Push Antitrust Regulators to Scrutinize Uber’s Potential Deal for Grubhub. Sens. Amy Klobuchar (D-MN), Patrick Leahy (D-VT), Richard Blumenthal (D-CT), and Cory Booker (D-NJ) wrote a letter to the country’s lead antitrust officials – Assistant Attorney General Makan Delrahim and Federal Trade Commission Chairman Joseph Simons – urging them to scrutinize Uber’s potential acquisition of Grubhub. “A merger of Uber Eats and Grubhub would combine two of the three largest food delivery application providers and raise serious competition issues,” they wrote. “We urge the Department of Justice and the Federal Trade Commission to closely monitor the negotiations of this potential transaction and to initiate an investigation if the parties reach an agreement to merge.” (CNBC)

📝 WHAT WE'VE BEEN UP TO:

• Sandeep Vaheesan co-authored an article in the Washington Monthly on the merger moratorium proposed by Rep. Alexandra Ocasio-Cortez and Sen. Elizabeth Warren. The article discusses the benefits on federal merger policy of their Pandemic Anti-Monopoly Act, which would ban all mergers involving corporations with more than $100 million in annual revenue.

• Claire Kelloway and Daniel Hanley wrote an article in The Hill about the disastrous environmental and health consequences of the e-waste created by product manufacturers’ monopolies on repair markets. Manufacturers narrowly limit the repair of the items they sell, which allows producers to extract predatory profits from repair markets and often forces consumers to discard products – a major factor behind the spiraling amount of e-waste.

• Sandeep Vaheesan was part of a panel, co-sponsored by Rust Consulting and the Committee to Support Antitrust Laws, to discuss how the COVID-19 crisis has influenced our thinking on antitrust law.

• Sandeep Vaheesan was a panelist at a web conference sponsored by the Systemic Justice Project at Harvard Law School. The panel discussed how the COVID-19 pandemic brought to light economic inequities in the U.S. economy.

• Sally Hubbard was quoted in Mother Jones on the origins of the medical supply chain crisis during the COVID-19 pandemic. Hubbard spoke about monopoly power in the medical supply industry, saying that “the fact that the states have to bid and compete against each other to get a product from a monopolist is an atrocity.”

• Barry Lynn was quoted in The Spectator discussing President Donald Trump’s position on the United States’ dependence on global supply chains. The article also discusses Lynn’s view on fragility of supply chains: “We had put all our eggs in one basket, and that basket was really far away from us,” said Lynn.

• Barry Lynn, Tim Wu, and Lina Khan were mentioned in New York magazine’s Intelligencer regarding the Obama administration’s regulation of Big Tech. Lynn was mentioned in journalist Kara Swisher’s interview of economist Gene Sperling, who said that the dominant antitrust policy developed by Robert Bork and the Chicago School “should take a backseat to people like” Lynn, Wu, and Khan. Sperling was director of the National Economic Council under Presidents Bill Clinton and Barack Obama.

• Barry Lynn and Claire Kelloway were mentioned in Michael Pollan’s article in The New York Review of Books on how the COVID-19 pandemic has revealed the weakness of America’s food supply chains. In his conclusion, Pollan condemns antitrust and agricultural policies as primary culprits responsible for America’s abysmal food chain.

• Open Markets was mentioned in a Forbes article about Big Tech’s new advocacy group, the American Edge Project, which will work to blunt the antitrust scrutiny faced by the industry. The article calls Open Markets a “formidable counterweight” to the new project.

• Open Markets was mentioned in The American Prospect in an article outlining a national economic strategy for the United States. The article discussed the recent conference co-hosted by Open Markets and the OECD on building resilient production and trade systems free from monopolization and able to withstand natural disasters and other shocks.

• Open Markets signed a letter calling on the Senate Judiciary Committee to reject calls from businesses for immunity from worker and consumer lawsuits during the COVID-19 pandemic.

• Open Markets was mentioned in Politico in an article about potential price-fixing and manipulation in the meat industry. The article mentions Open Markets’ proposal to break up the big four meatpackers so that no one corporation has more than a 10% market share of the industry.

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📈 VITAL STAT: 200 million

The number of daily active users Giphy has on its platform for sharing animated images. Giphy will provide Facebook access to the millions of interactions that users have with the various communications platforms that are integrated with the service.

📚 WHAT WE'RE READING:

• “Roadmap for a Digital Advertising Monopolization Case Against Google” (Omidyar Network, Fiona M. Scott Morton and David C. Dinielli): Describes a potential monopolization case against Google by analyzing the corporation’s conduct to obtain and maintain its dominance in the digital advertising industry.

• “The Antitrust Case Against the Apple App Store” (Damien Geradin and Dimitrios Katsifis): Discusses the anti-competitive policies and potential antitrust case against Apple for its dominance and gatekeeping role in the distribution of iOS applications and in the App Store fees charged to developers.

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