Welcome to The Corner. In this edition, we ask if the FTC’s big series of hearings is just a big waste of public money. And we point out the dangers – and hypocrisies – in the DOJ’s approval of the Cigna-Express Scripts merger.

FTC Old Guard Devotes First Hearings to Attacking Its Critics

Last Thursday, the Federal Trade Commission launched its most wide-ranging study of concentration in America in 23 years with the first of a series of planned hearings. Chairman Joseph Simons started the day saying the agency is serious about looking into consolidation and its causes: “I approach all of these issues with a very open mind, very much willing to be influenced by what I see and hear.”

Yet Chairman Simons heard a very narrow range of opinion and data. Despite growing alarm on Capitol Hill about the economic and political effects of concentration – especially by platform monopolies like Amazon and Google – none of the first-day speakers rejected the philosophy of the law and economics movement undergirding antitrust law since the 1970s.

The first panel led off with Jason Furman, the former chair of President Obama’s Council of Economic Advisers and now a Harvard economist. Furman has moved far from his 2005 defense of Walmart as a “progressive success story.” At the hearing, he said that growing concentration appeared to increase inequality, slow productivity growth, and cut business dynamism and investment. Yet Furman’s recommendations were modest, as he called merely for “think[ing] about ways we need our policy to address” these ills.

The next speaker, former Republican FTC Chairman Tim Muris, denied there was a consolidation problem at all, and instead warned about “populism” in antitrust, characterizing calls for more active antitrust enforcement as “misguided.” Next, self-described “progressive Democrat” Janet McDavid, an antitrust attorney who has represented SABMiller, Verizon, American Express, and IBM, fretted that stronger antitrust enforcement might harm the giant corporations she represents. “I think that including populist antitrust concepts would make the task that I undertake for my clients much more difficult,” she said.

The second panel settled into a similar pattern: American University law professor Jonathan Baker presented strong evidence that market power has grown in the economy over the past few decades. But he and his fellow panelists saw little occasion for much more than study and a more assertive application of the same failed approach to competition policy we have used since the 1970s.

Yale economist Steven Berry said, “I think ultimately we’re going to have to do studies of individual important industries and ask what is going on.” When the panelists were asked if they were aware of any antitrust case the government should have brought against Amazon, they all agreed: No. There was such reluctance to challenge orthodoxy that the moderator actually ran out of questions and ended the panel early.

Conspicuously absent from the proceeding were farmers, workers, independent business owners, hospital patients, book authors, musicians, journalists, or any other individual who has actually suffered harm from today’s massive consolidation of power.

On a brighter note, at least one FTC Commissioner, Rohit Chopra, understands the problem and wants to use the agency’s powers to fight monopoly as Congress originally intended. The “status quo lacks adequate democratic participation,” Chopra wrote in a comment submitted for the hearings. To “bolster antitrust enforcement,” Chopra proposed that the FTC use its rulemaking authority under Section 5 of the Federal Trade Commission Act, which allows the FTC to regulate “unfair methods of competition.”

The FTC plans to hold at least 17 more hearings. The question that FTC staff must now answer is whether these will be remembered as thoughtful conversations on antitrust and anti-monopoly, or a waste of time and public money.

ANTI-MONOPOLY RISING:

• Last Friday, Sen. Elizabeth Warren, D-M.A., called for breaking up Amazon, condemning its practice of competing against companies that rely on it to sell to customers. “You can’t be in both” retailing and manufacturing the senator told The New York Times.

• Citi Research, an arm of Citigroup, recommended on Monday that Amazon “separat[e] [its] retail and [Amazon Web Services] businesses,” in order to “minimize or avoid the risk of increased regulatory pressure.”

• European Union Commissioner for Competition Margrethe Vestager announced plans yesterday to investigate whether Amazon gains an unfair advantage from the data it collects on merchants who both rely on the platform for access to customers and compete with it for those same customers.

• Hillary Clinton, the 2016 Democratic Party presidential nominee, in an article in The Atlantic last week, placed part of the blame for America’s political crisis today on “unregulated, predatory capitalism,” writing, “Massive economic inequality and corporate monopoly power are antidemocratic and corrode the American way of life.”

• Securities and Exchange Commission Commissioner Robert Jackson criticized the SEC for allowing stock exchanges, like the New York Stock Exchange and the NASDAQ, to abuse their position as chokepoints for investing in order to enrich themselves and exploit investors. Jackson said, “I believe the Commission is finally ready to take off the kid gloves we’ve been using on our stock exchanges—and start to ask hard questions about our country’s stock market structure.”

WHAT WE’VE BEEN UP TO:

• Matt Stoller published “The Bailouts for the Rich are Why America is So Screwed Right Now” in Vice. In the article, Matt imagined how the bailouts stemming from the 2007-2008 financial crisis could have looked if they had turned to the New Deal for guidance. “[New Deal] Democrats did more than save the economy—they also restructured it along democratic lines,” Matt writes. Matt will be appearing at the Reboot conference today in San Francisco.

• Talking about the EU’s new investigation into Amazon, Barry Lynntold The Washington Post, “It’s about time. We’ve been encouraging enforcers on both sides of the Atlantic to [investigate Amazon] for a number of years now.” Fortune and The Los Angeles Times pointed to Lina Khan and her article, “Amazon’s Antitrust Paradox,” for context.

• New York Times reporter David Streitfeld profiled Lina Khan’s writings on Amazon – carried out over Lina’s seven years as an employee and fellow at Open Markets. Bloomberg’s Matt Levine covered the profile in his column last week too. Elsewhere, The Teal Mango cited the profile in its own profile of Lina, and The Daily Beast referred to it in coverage of Amazon’s poor treatment of its workers.

• Next Big Future noted that Barry Lynn and Open Markets have led the movement to challenge the consumer welfare standard and its fixation on short-term price.

• The New York Times, Axios, CNN and the Financial Times pointed to the Open Markets Institute as instrumental in pushing for antitrust reform. The Financial Times reported that the impetus came from “progressive think-tanks such as the Open Markets Institute … [who] have posed an intellectual challenge to the antitrust consensus in place since the late 1980s…”

• Rana Foroohar, writing in the Financial Times about the FTC’s Competition and Consumer Protection in the 21st Century hearings, said she was particularly “interested in the session that will take place … on the consumer welfare standard in antitrust law. Two very smart sources will be speaking: Barry Lynn…and Tim Wu.”

• Federal Trade Commissioner Rohit Chopra, in his comment letterproposing increased competition rulemaking by the FTC under Section 5 of the FTC Act, cited Sandeep Vaheesan’s article “Resurrecting ‘A Comprehensive Charter of Economic Liberty’: The Latent Power of the Federal Trade Commission.”

• Sandeep Vaheesan was quoted by The Hill in an article about Sen. Bernie Sanders’, D-V.T., attacks on Amazon. Sandeep explained that when Amazon does offer lower prices, it often does so “at the expense of its suppliers and workers.” Matt Stoller told Vox that Sanders’ remarks need to be part of a larger criticism of Amazon: “It’s a basic abuse of power problem, and Bernie is shining a light on one part of it…”

• Matt Stoller told The Wall Street Journal that Attorney General Jeff Sessions and other state attorneys are right to question whether big tech platforms are using their power to suppress political speech. He expressed similar concerns to The Boston Globe and AL.com.

• Time magazine quoted Matt Stoller explaining growing disillusionment with Big Tech corporations: “Before 2016, there was this sense that these companies were cool, progressive techies who did magic … Now it’s like, ‘Oh. You’re Big Tobacco.'”

• Talking to the BBC about insurance company John Hancock’s shift to only selling “interactive” life insurance policies that require and use health data from wearable technology, Matt Stoller condemned the move: “Naturally the American dystopian surveillance state will combine insurance with fat-shaming. Welcome to hell.”

• John Naughton cited Lina Khan’s work in an op-ed for The Guardian as “reveal[ing] how Amazon exploits outdated thinking about competition.” The Daily Beast’s coverage of Amazon moving into the Christmas tree retail business relied on Lina’s “Amazon’s Antitrust Paradox” paper to point out the dependent nature of independent businesses on Amazon’s markets.

• On Tuesday, Lina Khan and Sandeep Vaheesan talked about “tackling monopoly power” with the Current Affairs’ podcast.

• Mashable cited the Freedom From Facebook coalition as one piece of the “momentum behind the idea that the government should break up Facebook as a monopoly.”

Cigna-Express Scripts Deal Upends Drug and Insurance Markets – And DOJ’s New Philosophy

The Department of Justice said Monday that it would allow the health insurer Cigna to acquire the nation’s largest pharmacy benefit manager Express Scripts for $52 billion dollars. A few key takeaways:

Higher Prices for Drugs: A pharmacy benefit manager is supposed to negotiate on behalf of insurers to get better drug prices from manufacturers. But for PBMs to play a constructive role in the market, they have to be independent actors, as Brian Feldman wrote for Open Markets in 2016. Cigna’s takeover of Express Scripts, by contrast, means that other insurers will no longer be able to take advantage of the bargaining power of the giant PBM.

Bigger Profits for Cigna Shareholders. Cigna’s acquisition of Express Scripts could cut what the insurer pays for drugs. But with little competition in the insurer market, Cigna has little if any reason to pass those savings on to its customers in the form of lower premiums or deductibles. George Slover, senior policy counsel for Consumers Union, said back when this deal was announced in March, “This type of merger would create a merger-straddling giant … ultimately leading to higher costs and potentially poorer coverage and care for consumers.”

A Big DOJ Retreat on Vertical Mergers: DOJ’s approval of this deal is inconsistent with the stance it took on the AT&T/Time Warner merger. Back then, the DOJ pointed to the dangers of vertical integration, arguing the combination of a giant telecommunication company and giant content provider would foreclose competition from other content providers. But now, in a case that could similarly forestall competition among health insurers, DOJ seems to have abandoned its concern with the anti-competitive effects of vertical mergers.

Up next – More Insurer-PBM Combos: DOJ is also likely to approve the $69 billion purchase by CVS – which has its own large PBM – of insurance giant Aetna. Meanwhile, UnitedHealth has already developed its own PBM, with Optum.

What’s the Solution? Clear separation of PBMs from buyers and makers of drugs, as the FTC did in the 1990s when the agency prevented pharmaceutical companies from purchasing PBMs.

VITAL STAT: $16.5 trillion

Value of assets held by asset managers BlackRock, Vanguard, State Street, and Fidelity Investments in 2017 – roughly twice as much as in 2009, according to The Wall Street Journal. In contrast, that same year, JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley held just over $10 trillion in assets.

WHAT WE’RE READING:

• “Banks Jump on the Fintech Bandwagon” (Financial Times, Rana Foroohar): Drawing on Cornell law professor Saule Omarova’s new research, Foroohar points out some of the risks of banks working more closely with giant technology corporations.

• “Facebook Is Letting Job Advertisers Target Only Men” (ProPublica, Ariana Tobin and Jeremy B. Merrill): A troubling report finding that Facebook allowed job advertisers, including Uber, to target their postings exclusively to men.

• “Silicon Valley Needs Regulation” (The New York Times, Marcus Ryu): A reminder that “many of us have become so accustomed to despising the people we elect that we have forgotten that rational and apolitical regulation is essential for our capitalist engine to function.”

Image by gerenme via iStock.