The Corner Newsletter, October 31, 2019
Welcome to The Corner. In this issue, we share an amicus brief involving antitrust law and workers we filed with Change to Win, the National Employment Law Project, and three economics and legal professors. And we talk about why Facebook’s new News tab initiative does little to fix the threat the corporation poses to journalism.
Open Markets Institute, Change to Win, National Employment Law Project, and Professors Support College Athletes’ Lawsuit Against NCAA
Yesterday, the Open Markets Institute filed an amicus brief supporting current and former college basketball and football players in a class-action antitrust lawsuit seeking to end the National Collegiate Athletic Association’s (NCAA) caps on compensation schools can provide. The brief argues that college athletes “are sellers of athletic services to the member colleges of the [NCAA]” and thus should be protected against the NCAA’s effective cartel of schools. The brief also warns that the lower court’s decision, which justified limits on player compensation because of the supposed value college sports fans get from watching unpaid athletes, could have the perverse effect of allowing employers to justify exploiting workers to benefit consumers.
Open Markets Legal Director Sandeep Vaheesan said, “For far too long, the NCAA has robbed college athletes’ of competitive compensation for their skills and talent, in much the same way corporations in health care and tech have colluded against their nurses and engineers. The NCAA’s collusion deepens racial injustice, transferring income from a group of largely African American college athletes to mostly white administrators and coaches.” Change to Win, the National Employment Law Project, and professors Veena Dubal, Sanjukta Paul, and Marshall Steinbaum also signed on to the brief in the class action case, which is on appeal before the Ninth Circuit Court of Appeals. (You can read the brief here.)
Facebook’s News Tab Only Tightens Its Grip on Journalism and Democracy
Last Friday, Facebook announced Facebook News, a tab for personalized news articles on the Facebook App. The feature includes content from 200 publishers, such as The New York Times, The Wall Street Journal, Politico, and BuzzFeed, some of which Facebook will pay licensing rights to. Each user’s News tab will include a compilation of articles chosen by professional journalists and tailored content based on predicting user’s interests.
Facebook executive Campbell Brown says the new feature positions them as a “champion for great reporting.” But, far from fixing the problem, the News tab only amplifies Facebook’s ability to use its monopolistic power to further distort the news environment and undermine the economic foundations of journalism.
Facebook’s threats to journalism begin with its gobbling up the advertising revenue that news organizations need to sustain their work, as even Facebook CEO Mark Zuckerberg has acknowledged in other contexts. “Advertising revenue that used to support journalism now goes to companies like mine,” Zuckerberg wrote in a recent op-ed for The New York Times. This year, that revenue is expected to reach more than $60 billion. How much of that $60 billion does Facebook plan to share with the top publishers on its News tab? About $3 million each, max, or 0.005 percent.
That even giant publishers like News Corp are accepting such a deal shows how all-powerful Facebook has become. As Emily Bell, Director at the Tow Center for Digital Journalism at Columbia Journalism School, notes, “When press companies like News Corp surrender their editorial independence—for a relatively small sum…—then it is not really a win for journalism; it’s a sacrifice.”
A recent lawsuit in video ad metrics reveals Facebook’s power to misdirect the entire media industry. In early October, a group of advertisers sued Facebook for inflating the average viewing time for video ads by 900 percent between 2014 and 2016. The advertisers proposed a $40 million settlement for misleading them in how many people actually watched their ads. Beyond advertisers, Facebook’s inflated metrics pushed major media outlets to lay-off reporters and invest in video in an effort to survive. A Nieman Lab report found that sites like Mashable, Fox Sports, Vice, and MTV News made “major editorial decisions and laid off writers based on what they believed to be unstoppable trends that would apply to the news business,” trends that turned out, to be exaggerated.
Facebook’s size undermines American democracy in other ways as well. Wherever you are on the political spectrum, you have to worry that Facebook’s algorithms and editorial decisions are either purposely or accidentally tilting the balance of power against you. Many Republicans have long charged that Facebook favors liberals and mutes conservative voices. Meanwhile, a recent report from Popular Information charges that Facebook executive Joel Kaplan actively intervened to stop Facebook from taking down Breitbart and The Daily Wire posts when the two far-right outlets appeared to break Facebook’s rules on deceptive posting. Regardless of the merits of such claims, the fact remains that Facebook has become such a monolith that even the smallest changes in how it presents and curates information and misinformation now play a giant role in determining who wins and who loses.
At least some members of Congress are starting to understand the threat that Facebook’s size poses. Questioning Zuckerberg last week during a hearing, Congressman Jesús García, D-Ill., said: “You have unilateral control of Facebook, and as other people have said, you act as a government.” Alluding to Zuckerberg’s majority ownership of Facebook, García added, “You aren’t even accountable to shareholders on your board.” “From all that I have heard,” García concluded, “I think Facebook has too much power and is too big. And we should seriously consider breaking it up.”
ANTI-MONOPOLY RISING:
The House Banking Committee had tough questions for Facebook CEO Mark Zuckerberg during last week’s hearing on his proposed Libra currency. Rep. Cindy Axne, D-Iowa, challenged Zuckerberg on Facebook’s data collection practices. Rep. Ayanna Pressley, D-Mass., said that Zuckerberg failed to understand that poorer people are underbanked, not because they lack access to a mobile service like Facebook’s Libra, but because “people are broke.”Open Markets’ Sarah Miller discussed the hearing on Bloomberg TV, saying, “The idea that regulators in the US or around the world are going to allow Mark Zuckerberg to potentially undermine the entire US financial system is highly unlikely at this point.” And Matt Stoller said on CNBC that Facebook’s Libra “introduces too many problems into the monetary system: systemic risk, national security problems, privacy problems, competition problems.”
Senator and 2020 Presidential candidate Bernie Sanders announced last Wednesday that if elected he plans to pursue criminal charges against corporate executives that use their monopolies unfairly. Decrying rampant concentration “in every sector of our economy, including Wall Street,” Sanders vowed to revive criminal monopoly provisions of the Sherman Act. Fellow 2020 Presidential candidate and Senator Elizabeth Warren said that she would also use the criminal provisions of the Sherman Act to deter and punish monopolistic behavior by corporate executives.
Forty-seven state attorneys general are investigating Facebook for possible antitrust violations. New York Attorney General Letitia James, whose office is leading the investigation, said that all 47 attorneys general are “concerned that Facebook may have put consumer data at risk, reduced the quality of consumers’ choices, and increased the price of advertising,” and that they intend “to use every investigative tool at our disposal to determine whether Facebook’s actions stifled competition and put users at risk.”
The European Union’s antitrust official Margrethe Vestager on Tuesday floated the idea of shifting the legal burden of proof in antitrust cases to large internet platforms charged with abusive behavior, decrying the market power of firms like Facebook that operate as “de facto regulators.” Vestager said she was considering a plan that would require large online platforms, as opposed to the EU, to demonstrate the benefits of a challenged business practice or decision first.
Bruno Le Maire, French Minister of the Economy and Finance, opposed Facebook’s digital currency, Libra, in an op-ed for the Financial Times. Characterizing the digital currency as evidence of Facebook’s “economic and political ambitions,” Le Maire condemned Libra as an “unacceptable” infringement on national sovereignty and called on fellow European leaders and G7 members to pursue cross-border payment methods and digital currencies of their own as an alternative to privately-led initiatives.
Senators Ron Wyden, D-Ore., and Elizabeth Warren, D-Mass., called on the Federal Trade Commission (FTC) to investigate Amazon for security failures that may have enabled a major breach of Capital One customer data. In a letter to the FTC last Thursday, the senators drew attention to Amazon’s inability to prevent one of the largest thefts of banking records in history and suggested that the FTC consider the breach an “unfair business practice” in violation of federal antitrust law.
Rep. David Cicilline, D-R.I., announced last week his intention to introduce legislation that would prohibit Facebook from allowing politicians to advertise fraudulent information on its platform. Cicilline said that he plans to research the issue and introduce a bill that draws from existing standards in consumer protection and Federal Communications Commission regulations.
Sens. Charles Schumer, D-N.Y., and Tom Cotton, R-Ark., voiced concerns and called for strict scrutiny of Chinese-owned social-networking app TikTok, in a letter to acting director of national intelligence Joseph Maguire last week. The letter from Sens. Schumer and Cotton asked for a full assessment of the potential “national security risks” posed by TikTok, characterizing it as “a potential counterintelligence threat we cannot ignore.” (Read Open Markets’ press release on the letter here, quoted in The Hill.)
WHAT WE’VE BEEN UP TO:
Lina Khan and her 2017 Yale Law Journal article, Amazon’s Antitrust Paradox, based largely on work done at Open Markets, were cited in Wired’s article, “Stories of People Who Are Racing to Save Us” as being “foundational” to Massachusetts Senator and presidential candidate Elizabeth Warren’s plan to break up large, dominant platforms. Barry Lynn said that the article “gave people something you could point to and say, ‘Read that and you’ll understand.’”
Bloomberg gave the Open Markets Institute and Barry Lynn “credit for injecting anti-monopoly issues into the 2020 presidential campaign.” In an article about Facebook co-founder Chris Hughes’ new anti-monopoly project, Bloomberg also quoted former Representative Thomas Perriello calling Lynn and Open Markets the “thought leaders” in the ongoing conversation over how to address dominant online platforms and their harms.
Barry Lynn testified before the Ohio Senate Judiciary Committee on October 17 as the state considers revising its antitrust laws to address competition harms from dominant online platforms like Amazon, Facebook, and Google. Lynn argued, “Breaking up these corporations is a necessary, albeit a second-level action, one that can be used to buttress the neutrality of the platforms, and also to engineer competition in ways that ensure more constructive forms of technological and business process innovation, as well as a strengthening of American democracy through a radical increase in the opportunity for any individual to take full part in our political economy.” (You can read Lynn’s testimony here.)
Barry Lynn debated with Joshua Wright, a former FTC Commissioner and current professor at George Mason University’s law school, on the “Regulation of Big Tech” at a Federalist Society conference last Thursday in Philadelphia. Lynn said, “The concentration of control by Google, Facebook, and Amazon poses the biggest threat to America’s democratic institutions since the Civil War.”
Sarah Miller spoke with The Guardian about Zuckerberg’s resistance and internal campaign against Elizabeth Warren who has proposed breaking up the tech titans. Miller said that tech CEOs are “begging for regulation because they know they game it, they know they can shape it, they know they can avoid it and they know that it will likely inhibit their competitors who won’t have the same resources. But, more than anything, they do not want to be broken up.”
Sally Hubbard appeared on Bloomberg Markets to discuss Google’s potential acquisition of Fitbit and how it would strengthen Google’s dominance. “Antitrust enforcers need to take a really close look at this acquisition and see how the types of data that Google will be acquiring may be fortifying its existing monopoly power,” Hubbard said.
Sally Hubbard spoke with Reuters before Google’s quarterly earnings call and compared the current investigations by state and federal enforcers to the FTC’s 2013 antitrust probe into Google. Hubbard thinks that the current effort may be different: “The political winds have shifted … There’s a lot more momentum to fix the situation.”
Matt Stoller explained to The Intercept that Bernie Sanders’ promise to bring back criminal enforcement of the Sherman Act against monopolies is not unprecedented. “[Franklin] Roosevelt’s antitrust chief Thurman Arnold used to criminally indict business executives and fingerprint them like ordinary criminals. As soon as he did this, amazingly, monopolistic practices in those industries would cease.”
Matt Stoller explained to the Financial Times that the pressure around antitrust and big tech is not like it was in the 1990s when regulators were investigating Microsoft. “This is much bigger — it is the 1930s or the 1900s. It is Standard Oil or J.P. Morgan,” said Stoller.
Matt Stoller appeared in an article from The Daily Beast discussing how “Bush-era Democratic insurgents” are finding a wider audience for their ideas today. The Daily Beast noted that “even bloggers like Matt Stoller—who is, perhaps, the epitome of anti-establishmentarianism on the left—have become major players on the political scene.”
Matt Stoller spoke with Recode about Josh Hawley’s fight against monopolistic platforms, and how Hawley has worked with Democrats on issues like content moderation and data privacy. “[Hawley’s approach] is not how I would talk about the world, but it is a coherent belief system and he executed on it,” Stoller said.
Matt Stoller told Yahoo Finance that the controversy around censorship on Facebook is exactly what Mark Zuckerberg wants people to focus on. “Mark Zuckerberg wants the question to be anything but the real issue at hand, which is advertising money,” said Stoller. “They have a large set of communication networks that they use to manipulate people, and they sell the ability to manipulate people to advertisers. That’s what this is really about.”
VITAL STAT: 73%
Percentage of US adults who said that they “strongly” or “somewhat” agreed that “Facebook should ban political ads on the platform,” according to a new survey conducted by CivicScience. The survey also found that 55 percent of Republicans agreed with banning all political ads on the platform.
WHAT WE’RE READING:
“The Constitutional Role of Economic Coordination Rights” (Law and Political Economy, Sanjukta Paul): How examining some of the foundations of antitrust and corporate law can challenge the weak foundations of the conservative Law and Economics movement and how this exposes the false conflict between a fair and “efficient” society.
“Big Tech Acquisitions and the Potential Competition Doctrine: The Case of Facebook” (INET Working Paper, Mark Glick and Catherine Ruetschlin): Why challenging dominant firms’ acquisitions of potential competitors — such as Facebook’s acquisitions of Instagram and WhatsApp — is so hard and what can be done about it.
“How Economic Concentration and Crony Capitalism Led to the Chaos in Chile” (ProMarket, Daniel Matamala): How anger at extreme corporate concentration in Chile has contributed to the protests against the Chilean government.
“The U.S. Only Pretends to Have Free Markets” (The Atlantic, Thomas Philippon): How restoring competition in American industries – from cell phone and internet service to airlines and banking – to roughly their year 2000 levels “would increase [GDP] by almost $1 trillion and labor income by about $1.25 trillion.”
Written by: Barry Lynn, Phil Longman, and Krista Brown
Edited by: Barry Lynn, Phil Longman, Krista Brown, Udit Thakur, Claire Kelloway, Daniel A. Hanley, and Matt Buck