The Corner Newsletter: April 9, 2021
Welcome to The Corner. In this issue, we discuss the Student-Athlete compensation antitrust case at the Supreme Court, Apple's race to acquire AI companies, and comment on the Suez Canal ship incident.
To read previous editions of The Corner, click here.
The Supreme Court Hears Arguments Concerning Student-Athlete Compensation
Last Wednesday, the Supreme Court heard oral argument in NCAA v. Alston, a case in which a group of college basketball and football players challenged the NCAA's collusive rules against paying players. The justices generally expressed sympathy for the players' argument. Justices Samuel Alito and Brett Kavanaugh homed in on the huge sums of money generated by college basketball and football and the paltry compensation to players, sounding unpersuaded by the NCAA’s repeated invocation of “amateurism.” Justice Clarence Thomas asked why the NCAA collusively limits the pay of players, but not coaches. He wondered if there is any principled distinction between the two classes. Justice Neil Gorsuch added the NCAA has “monopsony control over the labor market." Justice Amy Coney Barrett, raising an issue presented in Open Markets' amicus brief in support of the players, asked the solicitor general whether the lower courts should have weighed the harms to the players from the NCAA's trade restraints against their supposed benefits to sports fans.
Apple Races to Acquire AI Companies Despite Resurfaced Privacy Concerns
In 2019, Apple promised to do a better job of protecting its users from the intrusive surveillance of Siri, its voice assistant. The immediate spur was a report in The Guardian that detailed how Siri captured private moments and discussions outside of direct interactions — including those between doctors and patients, business deals, and sexual encounters. “We realize we haven’t been fully living up to our high ideals,” Apple said in response. “For that we apologize.”
Since then, however, Apple appears to have continued to put profit over privacy in its race to keep up with Google and Amazon on artificial intelligence (AI) assistants. This is especially evident in Apple’s decision to continue an acquisition spree that has brought at least 25 AI companies under its control from 2016 to 2020.
Critics say the corporation’s assurances to its users on the safety of their data privacy are, at best, misleading. On February 10, a U.S. district court in Northern California moved to dismiss a class-action lawsuit against Apple for violating federal and state privacy laws through its AI assistant’s surveillance. Despite the dismissal, U.S. District Judge Jeffrey S. White told the plaintiffs to file and serve an amended complaint.
And last May, Thomas Le Bonniec, an Apple contractor turned whistleblower, penned a public statement to the European National Data Protection Authorities, questioning the lack of an investigation against the tech corporation’s invasion of its users’ information and data. “[Apple] announced that they would start to improve their users' privacy, thus tacitly acknowledging that they were using illegal recordings before,” Le Bonniec said. “Nothing has been done to verify if Apple actually stopped the programme. Some sources already confirmed to me that Apple has not.”
Some analysts view Apple’s acquisition spree as a sign of weakness. They say that aside from aiming to improve Siri, the tech titan is also seeking to avoid losing further ground in its competition with Google Assistant and Amazon’s Alexa.
GlobalData senior analyst Nicklas Nilsson says Apple is now playing catch-up. “Siri was first on the market, but it consistently ranks below the two in terms of ‘smartness,’ which is partly why Apple is far behind in smart speaker sales,” Nilsson said.
Some economic experts say the acquisitions aren’t the problem. Kevin Bryan, a professor of strategic management at the University of Toronto, said the issue is ensuring the gap between technological leaders and other competitors doesn’t get too big. Apple’s acquisitions are not “the kind of thing that I think we generally want to ban,” Bryan told Open Markets. “[An] exception is where the acquirer has a lot of market power already and the acquisition essentially entrenches that market power.”
Apple made some improvements to Siri’s privacy protections in response to the 2019 criticisms. This includes adding an ‘opt-in’ option to its Siri-grading process. Those who don’t opt in are still subjected to surveillance as Apple stores and reviews transcripts of interactions with Siri by default.
According to Apple’s support page, random identifiers are assigned to the data from Siri interactions instead of being tied to a user’s Apple ID. Yet the corporation harvests information ranging from contact names and relationship types to device location and IP address.
In its Siri and Dictation guidelines, Apple says it holds onto the transcripts and audio samples for six months before it removes the identifier from the data. Once the random identifier is stripped, Apple says the transcripts or audio recordings can be kept indefinitely for ongoing improvements to Siri.
As TechCrunch reported last week, Siri handles 25 billion requests on a monthly basis with a reach over 36 countries. If 1% of the requests are chosen for inspection, for instance, then that means 250 million requests are stored and combed through.
What the Suez Canal Incident Tells Us About Supply Chains
Last week, the 400-meter-long container ship Ever Given was dislodged from the banks of the Suez Canal after blocking passage through one of the world’s most important trading routes for almost a week. Although the stoppage affected only 400 ships, the overall effects on world trade will likely last for months. They also provide yet another illustration of two fundamental flaws in the system of global supply chains: the concentration of risk due to monopolization in the production of vital materials and goods and increasing reliance on super-large container ships and lean production systems.
Policymakers have long been aware of the importance of physical chokepoints for trade, such as the Suez Canal. In 2020, 19,000 ships went through the 205-meter-wide waterway, accounting for 13% of total world trade and 30% of the world’s container shipping. The passage is essential for timely and efficient transportation of goods from Asia to Europe, with North America sometimes being an end destination. But Willy Shih, an economist and professor of management at Harvard Business School, says the Ever Given event helps to illustrate how the size of container ships has also become a major factor. The average size of such ships has doubled over the past two decades, and today’s largest vessels carry 24,000 containers. This increase has been spurred by corporations wanting to lower their unit costs, in order to increase profits for shareholders, Shih says. It’s been a “race to the bottom,” he says. “Stockholders are allergic to inventory because it has high carrying costs.”
The large size of ships like the Ever Given also means that any disruption will likely result in wider cascading effects throughout the steamship system. Ships like the Ever Given are too big to serve most U.S. East Coast ports, which means that after reaching Europe, U.S.-bound cargo must be transferred onto smaller ships. Any delay in the arrival of such a large ship can disrupt transport planning across the North Atlantic basin.
Shih says the lesson is not to shift all production back from countries in East Asia, but rather to diversify production and reduce reliance on overly lean inventory management systems. “You get resiliency if you hold more inventory,” he says.
The Open Markets team has pioneered much of the discussion about the economic and national security risks created by concentration of production, in detailing the role of monopolization in creating the risk, and in identifying ways to make international systems more resilient. See the Open Markets primer on supply chain risk here.
🔊 ANTI-MONOPOLY RISING:
Supreme Court Justice Clarence Thomas last week said that platform monopolists such are "sufficiently akin" to common carriers like telephone corporations that they should be "regulated in this manner.” In a case that centered on former President Donald Trump’s blocking of certain followers of his Twitter account, Thomas wrote that today "the right to cut off speech lies most powerfully in the hands of private digital platforms. The extent to which that power matters for purposes of the First Amendment and the extent to which that power could lawfully be modified raise interesting and important questions.” Thomas said that it does not matter whether these corporations “are not the sole means for distributing speech or information… [I]n assessing whether a company exercises substantial market power, what matters is whether the alternatives are comparable. For many of today's digital platforms, nothing is." (NPR)
· Last week the Federal Trade Commission (FTC) filed a suit to block Illumina’s $7.1 billion acquisition of Grail Inc. Illumina develops next-generation sequencing technology that allows companies like Grail to create early-stage cancer detection through the use of liquid biopsies. The challenge is the second to a vertical merger in over 40 years and signals the FTC’s newly aggressive stance in scrutinizing mergers in the pharmaceutical industry. (The Wall Street Journal)
· Small Business Rising, a newly formed national coalition of merchant trade groups representing thousands of small businesses, is creating a campaign to pressure lawmakers for updates and enforcement to existing antitrust law. The group is pushing for these laws in an effort to protect its businesses from the anti-competitive actions of companies such as Amazon. The group hopes legislation will be enacted that leads to the breakup of Amazon. (The Wall Street Journal)
· The U.K. Competition and Markets Authority (CMA) is investigating Facebook’s $400 million acquisition of photography platform Giphy. The CMA is investigating whether the acquisition reduces competition in the digital advertising market and will report on its findings by Sept. 15. (TechCrunch)
· The European Union is considering an investigation into whether Facebook’s $1 billion takeover of Kustomer, a customer service management platform, is reviewable under Article 22 of the EU merger regulation. The article allows member states of the EU to flag the acquisition even if it passes the national threshold requirements. (TechCrunch)
· Last week in the Illinois Legislature, the Commerce Committee unanimously passed Senate Bill 134, also known as the “Local Journalism Task Force” introduced by Democratic state Sen. Steve Stadelman. The bill, which now heads to the state Senate floor, would create a task force dedicated to studying the decline in local journalism and making recommendations on how to revive the industry. (Galesburg Register-Mail)
📝 WHAT WE'VE BEEN UP TO:
Sandeep Vaheesan published an op-ed in The Washington Post about using antitrust law to stop the NCAA’s racist cartel over student-athletes. “There is reason, though, to hope that the majority will ultimately find that the lower courts did not go far enough. Our antitrust laws protect workers and other producers, just as much as they protect consumers.” This piece also ran in The Bulletin and Scranton Times-Tribune, and Vaheesan was also interviewed for the We The People podcast and quoted in Moguldom Nation.
· Phillip Longman highlighted how monopoly power in health care compromises public health and threatens democracy in a review of Brian Alexander’s new book, “The Hospital,” in The Washington Monthly. “Large, rich health care systems have the reserves to easily endure the financial strains brought on by the pandemic. But for small independent hospitals, like small independent businesses generally, surviving COVID-19 has become far less likely, so the monopolization of health care and the wider economy continues to accelerate.” Longman was also mentioned in another Washington Monthly book review.
· Daniel Hanley published a piece in The Reboot arguing that reforming Section 230 is not a panacea solution for stopping Big Tech’s iron grip on the digital world. “But critically, lawmakers must recognize that reforming Section 230 is not a panacea for all of the ills that are facilitated by tech giants. To fully address the problems existing in our digital ecosystem, it’s vital that Congress maintains its attention on the monopolization of essential communications infrastructure by private corporations.”
· Daniel Hanley published a piece in Slate arguing that if Congress is going to spend time amending the antitrust laws, any new proposed legislation must include clear, bright-line rules.
· Sandeep Vaheesan co-published a chapter called “How Antitrust Law Can Help - Instead of Hurt - Workers” in a new Brookings Institute book titled “Inequality and the Labor Market.”
· Open Markets Institute was mentioned in multiple reports on the nomination of former Open Markets legal director Lina Khan to the FTC. This includes Vice, Yahoo! Finance, The Hustle, The Miracle Tech, ProPakistani.PK, and India West.
· Johnny Ryan was mentioned in Politico.EU, Silicon Republic, and Duo, reiterating that tech corporations like Google need to respect user privacy. “Any company, including the iPhone maker, should not be allowed to use people’s data inside its own digital empire in ways that others in the wider world are barred from doing.”
· Open Markets Institute’s paper on Amazon's surveillance was mentioned in The Independent. Amazon’s relationship with its employees and delivery drivers has historically been rocky, as it was accused of using surveillance technology on workers to stop them from forming unions and to boost worker productivity, according to a research paper released by Open Markets.
· Sandeep Vaheesan was quoted in The Washington Examiner urging the FTC to focus on banning non-compete clauses and exclusionary contracts. “Two other issues that the trade commission is likely to focus on are banning non-compete clauses for all workers, which Amazon and other companies have used to great effect, and banning exclusionary contracts between companies, like Google and Apple's exclusive search deal, said Sandeep Vaheesan, legal director at the Open Markets Institute, an anti-monopoly think tank.”
· Barry Lynn was featured in a Mother Jones story about the push to stop Big Ag along with Big Tech and other monopolistic market players. “A dawning sense came over the party that the Obama administration’s failure to challenge corporate consolidation had helped stoke the emergence of Donald Trump—from the rise of giant tech platforms that facilitated the spread of misinformation, to Big Ag’s tendency to drain wealth and people from rural areas, leaving behind fertile ground for right-wing populism.”
· Nikki Usher was quoted in an Adweek piece about The New York Times requiring approval for reporter publishing outside of the organization. “’However, this is problematic because the labor instability and fragility of employees at The Times and other top-flight national news organizations are far different than those at a regional daily or even a small local newspaper,’ she added. ‘If what The Times says becomes standard, that could become really problematic for those just starting out at, say, a local TV station.’”
· Sandeep Vaheesan spoke on an LPE Project panel titled, “Network for a new political economy: Big Tech: What is the nature of the challenge, and what should we do?” He also appeared on a Stanford Cyber Policy Center webinar speaking about recent antitrust developments.
· Claire Kelloway was quoted in Winsight Grocery Business emphasizing the window for achieving increased antitrust enforcement. “President Joe Biden’s recent nomination of Lina Khan, a pro-antitrust scholar, for commissioner of the Federal Trade Commission signals that if there was a time to be asking for increased enforcement of antitrust laws, as well as new direction and guidance for enforcers, now is a ‘time that’s ripe to ask,’ said Claire Kelloway, a reporter and researcher with the Open Markets Institute.”
· Sandeep Vaheesan was mentioned in Protocol for his participation in an ABA panel about the future of antitrust. "The ABA is the association of the corporate defense bar," as opposed to being a neutral body, Vaheesan said. "The big tech companies generate a lot of business and a lot of fees for large corporate law firms, so the ABA's institutional views and their events reflect that basic bias and orientation."
· Sally Hubbard was mentioned in Vox Recode, Tech Centry, and World News Era for our work to stop Big Tech monopolies. “In addition to Rep. [David] Cicilline, we spoke with a range of experts, including DuckDuckGo founder Gabriel Weinberg and Sally Hubbard of the Open Markets Institute, who made the case that Google is, in their view, a monopoly power that needs government intervention.”
· Daniel Hanley was quoted in CNN Business and WENY News pushing back against Amazon’s union-busting in Alabama. “Likewise, Daniel Hanley, a reporter-policy analyst with the Open Markets Institute, an advocacy group critical of Big Tech's influence and power, said Amazon ’fears having a union because it knows it will lose the ability to exploit workers and that its operations will have checks and balances by the people who endure its decisions -- as it should be.’"
📈 VITAL STAT: 1%
The percentage of total advertising dollars spent by a deeply monopolized corporate America that went to black-owned media companies.
📚 WHAT WE'RE READING:
“Why You Can't Sue Your Broadband Monopoly” (Josh Srago, Electronic Frontier Foundation): Srago examines how FCC policy combined with two decisions by the Supreme Court have created a market in which the regulation of broadband networks is deferred to the regulatory agency and legal recourse for citizens who wish to pursue a claim under antitrust laws is restricted.
Barry Lynn’s New Book:
Liberty From All Masters
The New American Autocracy vs. The Will of the People
St. Martins Press will publish Open Markets Executive Director Barry Lynn’s new book, Liberty From All Masters, on September 29. The book is Barry’s first since Cornered, in 2010. In it, he details how Google, Amazon, and Facebook developed the ability to manipulate the flow of news, information, and business in America, and are transforming this power into autocratic systems of control. Barry then details how Americans over the course of two centuries built a “System of Liberty,” and shows how we Americans can put this system to work again today. Purchase your copy here.
Open Markets Employment Opportunities
You can find the full job listings here.
🔎 TIPS? COMMENTS? SUGGESTIONS?
We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue.