Welcome to The Corner. In this issue, we identify the real cause behind this year’s recent wave of layoffs and shutdown in journalism, which is the monopoly power of Google and Facebook.

Even Facing ‘Extinction,’ Journalists Still Cannot Name the Monopoly Problem

Austin Ahlman

January marked a new low in the precipitous decline of the American journalism industry, as newsrooms across the country laid off unprecedented numbers of reporters. The hundred-plus jobs slashed by West Coast newspaper of record, the Los Angeles Times, grabbed the most headlines, while magazine Time trimmed dozens of staff roles and leading digital news publisher Business Insider reportedly cut eight percent of its workforce. Meanwhile, landmark publications like Sports Illustrated and Pitchfork — which helped develop and define the industries they covered  — were all but shuttered. As if to put a fine point on the carnage, the much-publicized digital media startup The Messenger folded altogether on January 31.

The series of layoffs set off another wave of hand-wringing across the industry. The New York Times lamented that “The News About the News Business is Getting Grimmer.” Axios and Fox Business both described the layoffs — and the ones that preceded them in recent years — as a “bloodbath.” And in The Atlantic, longtime media reporter and analyst Paul Farhi — who grappled with the realities of the new media ecosystem himself when he took a buyout from the Washington Post just last year — pondered whether “American Journalism [is] Headed Toward an ‘Extinction-Level Event.’”

But while journalists across the industry have awakened to the existential nature of the industry’s crisis, these and other leading media writers remain obtuse to the underlying reason: the predations of illegal monopolies. Tens of billions in annual advertising revenue that should be going to support the cost of producing journalism is instead being siphoned into the vaults of Google, Facebook, and Amazon through their control over and manipulation of the markets for digital ads. 

The Department of Justice has brought a massive antitrust case against Google over such abuses. Though the suit has been dubbed the “biggest tech monopoly trial of the 21st century,” it is rarely given serious weight in most accounts of what has gone wrong with the business model for journalism. Instead, columnists like the New York Times’ Ezra Klein have used their increasingly rare real estate to muse over the economics of Substack subscriptions and mourn a missing “middle” in an industry that is experiencing disaster across the board.

Klein is far from an outlier. Take Farhi’s piece, for example. His explanation of why “the meltdown has come amid — and in seeming defiance of — a generally booming economy,” is woefully insufficient. While he makes a passing reference to the “ad revenue-gobbling tech giants Google and Meta,” he focuses mainly on amorphous problems like “news and subscription fatigue” and “trust in media.” While these trends are no doubt a factor, Farhi never stops to consider whether they, too, are part of a larger story.

By the time his lamentation reaches its solutions section (if one were generous enough to call it that), readers are left with the impression that the gradual collapse of American journalism is an unalterable act of fate, rather than the clearly traceable result of decisions made by policymakers and tech monopolists in recent decades. In Farhi’s telling, the only hope for salvation is the charity of private donors and foundations, or the creation of novel compensation systems that take the current platform-ad tech monopoly dynamic as a given.

Open Markets first warned of these threats in June 2016 and in June 2018 held an all-day conference on the threat, with speeches by Senator Amy Klobuchar and the CEOs of the New York Times and NewsCorp, among others.  Policy director Phil Longman updated and expanded the analysis late last year in a definitive report on the industry’s woes titled “Democracy, Journalism, and Monopoly.” In a cover story for the Washington Monthly in mid-January, Longman crystallized that report’s argument when he ascribed journalism’s collapse to the “repealing or failing to enforce basic market rules that had long contained concentrated corporate power.”

In prior eras, policymakers took a positive approach to using market rules to protect free speech and thought from corporate power. Today the News Media Alliance and a few members of Congress continue that effort. Yet the very people who should be leading the fight — America’s journalists — are failing to do the most basic forms of reporting on their own plight.

Allowing communications monopolies to exploit the data of their users was unthinkable before the platform era. And it can be made unthinkable again today. As the Open Markets team and some of our allies have made clear repeatedly in Congressional testimony,  articles, amicus briefs, and public policy statements, there is a simple solution, one that has underpinned all telecommunications regulation since the invention of the telegraph in the 1830s. This is to understand that the platform monopolies provide essential infrastructural services and to impose traditional common carrier, non-discrimination rules to their behavior.

The first task is simply to do a better job of explaining this to the public and policymakers, which is where today’s generation of journalists if failing. As Longman warns, to “ensure that policy makers have the political cover they need to take on today’s unprecedented concentrations of corporate power over what we can say and hear, journalists have to understand, and help the public to understand, what the real stakes are.”

Amazon Ditches iRobot Deal After European Commission Opens Investigation

Amazon has abandoned its proposed acquisition of iRobot in light of the European Commission’s investigation of the deal, which it opened after Open Markets Institute and its European partners made a detailed submission highlighting concerns that Amazon would gain a dangerous foothold in the nascent market for smart home devices. OMI Europe director Max von Thun welcomed the breakup of the deal, saying, ”Today’s momentous news isn’t just about robot vacuums — it’s about checking the growing power a handful of giants have over our increasingly digital lives, including the devices we use within the four walls of our homes. The Commission should be applauded for standing up to Amazon and stopping it from adding yet another fiefdom to its sweeping digital empire.” Von Thun’s comments were reprinted in The Guardian.

Open Markets Files Brief Over States’ Rights to Designate Companies as Common Carriers

The Open Markets Institute filed an amicus brief in two combined cases, Moody v. NetChoice and NetChoice v Paxton,  currently being heard by the Supreme Court over whether states have the ability to apply common carrier regulations to corporations that operate in the public interest. Written by Open Markets policy counsel Tara Pincock, Open Markets legal director Sandeep Vaheesan, and Jay Himes, the counsel of record and a strategic advisor to Open Markets, the brief examines how internet platforms differ from news publications: “Platforms do not resemble newspaper editors making considered decisions based on human judgment —sometimes individual and sometimes collective — about what content to include or exclude in a publication. Instead, they are more like shopping center owners anxious to connect shoppers with retailers,” the authors write. They go on to argue that because the court has ruled that states can impose common carrier-like rules on shopping centers — as well as on railroads and telecommunications companies that the public can also broadly access — states should also be able to apply common carrier-style rules to internet platforms. Read the full amicus brief here.

Open Markets Institute Applauds FTC for Probing Microsoft/Open AI and Similar Relationships

Open Markets’ executive director Barry Lynn welcomed the news that the Federal Trade Commission will investigate partnerships between dominant tech giants and artificial intelligence companies, including Microsoft and OpenAI, Amazon and Anthropic, and Google and Anthropic. “This action makes clear that regulatory authorities in the U.S. — as well as in Europe and the UK — are paying attention to our warnings and those of other leading public interest groups that Microsoft, Google, and Amazon are already positioned to dominate AI technology and services up and down the tech stack.” In November, Open Markets and the Center for Journalism and Liberty released a report, entitled AI in the Public Interest: Confronting the Monopoly Threat, that details many of the threats posed by these partnerships and calls on U.S. and European law enforcers to clearly separate the platforms from ownership of these technologies. 

📝 WHAT WE'VE BEEN UP TO:

• Open Market Institute’s policy director Phillip Longman published an article in The Atlantic applauding the milestone decision by a federal judge to block JetBlue’s acquisition of Spirit Airlines while calling for price regulation in the airline industry. “After years of lax antitrust enforcement and major mergers, the U.S. airline industry is indeed dangerously consolidated. But the fundamental problem in air travel today is not lack of competition; it’s the lack of sensible regulation to channel competition to public purposes,” Longman writes.
   

• Open Markets Institute’s executive director Barry Lynn spoke at the Antitrust, Regulation and the Next World Order conference, held in Brussels on January 31. It is vital, he said, to admit that “the monopoly platforms are choking human autonomy, are crushing the free press, are amplifying the disinformation that is subverting our democracies.”  Lynn was joined on the panel by Rohit Chopra, director of the Consumer Financial Protection Bureau, and Rana Foroohar of the Financial Times. Other speakers at the conference included Federal Trade Commission chair Lina Khan, U.S. trade ambassador Katherine Tai, European Commissioner for Justice Didier Reynders, and Department of Justice assistant attorney-general for antitrust Jonathan Kanter. The conference was sponsored by Cristina Caffarra and The Capitol Forum.
   

• Center for Journalism & Liberty director Courtney Radsch published an article in Cal Matters calling for the passage of the California Journalism Preservation Act, which would require Big Tech platforms to help fund news outlets, whose content greatly contributes to the companies’ profits. “The California Journalism Preservation Act is an opening salvo in the battle to rein in the power of Big Tech and establish a more equitable negotiation process with a fairer distribution of profits,” Radsch writes, adding that the bill “makes a valiant effort to create new funds for hiring journalists and supporting media outlets that serve California’s citizens.”
   

• OMI Europe director Max von Thun published an article in Euractiv urging Brussels to use its existing powers under competition law and the Digital Markets Act to challenge Big Tech’s growing influence over AI. “The good news is that Brussels doesn’t need to wait for the AI Act to start shaping the technology’s future for the better,” von Thun writes. “It already possesses powerful tools that it could use right now to promote a fairer, safer, and more open AI ecosystem.”
   

• Von Thun was quoted in a Wired article commenting on how new European regulations aimed at forcing Apple to release its stranglehold over its App Store have only led Apple to issue new fees that reinforce its control. “This new cost structure, including the core tech fee, will disincentivize lots of developers from moving to the new system,” he said. “Especially for the big app developers with loads of downloads, who are the ones that really Apple make all their money from, that will rack up to a very high cost very quickly.” 
   

• Open Markets Institute’s food and agriculture systems program manager Claire Kelloway cowrote a paper published in Yale Law & Policy Review with Matthew Buck, senior fellow at American Economic Liberties Project, examining exclusionary payments as an unfair tactic used by dominant retailers to abuse their market power to corner food retail markets and marginalize new and community-based producers. “As exclusionary payments become a greater part of the food retail business model, dominant firms can corner the lion’s share of retailers’ food spending and shelf space, excluding rivals and limiting growth for new and community-based businesses,” they write, adding that “policymakers have several legislative and administrative options to contain exclusive arrangements.”
   

• Progressive Farmer listed the Open Markets Institute among the groups that have signed onto a letter opposing Koch Industries’ purchase of OCI Global’s Iowa Fertilizer Company for $3.6 billion, which would further consolidate the industry and damage competition and prices.

  🔊 ANTI-MONOPOLY RISING: 

• Regulators in the United Kingdom announced an investigation into the $19 billion merger of mobile companies Three UK and Vodafone UK. The review is the first step in blocking a deal that would reduce the number of major cell network operators in the nation from four to three. (Reuters)
   

• More elite universities settled cases accusing them of collusion over their financial aid offers to low-income applicants. Eight of the seventeen defendant universities have settled the case so far, with each agreeing to pay tens of millions of dollars in restitution to students. (Axios)
   

• Tire manufacturers across the European Union were raided this week as part of an ongoing investigation into whether the companies have been coordinating prices. (Reuters)
   

• The attorneys general of Virginia and Tennessee filed a federal lawsuit against the NCAA this week over licensing rules governing the names and images of student athletes. The suit, filed in the Eastern District of Tennessee, accuses the sports association of violating the Sherman Act by barring athletes from discussing potential deals prior to recruitment. (Courthouse News)
   

• The Department of Transportation ordered Delta Airlines to unwind its partnership with Aeromexico, citing moves from the Mexican government that restricted American airline companies’ ability to fairly compete for traffic. (The Points Guy)

  📈 VITAL STAT:

$7.4 million

The amount Cygient has agreed to pay in a federal lawsuit accusing the Connecticut-based engineering services firm and others of suppressing wages and agreeing not to hire one another's employees. The other companies involved in the suit have also agreed to settle for undisclosed terms. (Reuters)

📚 WHAT WE'RE READING:

The Rebels: Journalist Joshua Green traces the resurgence of populist economics within the Democratic party through the careers of Elizabeth Warren, Bernie Sanders, and Alexandria Ocasio-Cortez. Building off his previous book Devil’s Bargain, which looked at populist trends within the Republican party, Green explores how Democrats strayed from their class-based roots beginning in the late 20th century and extending into the early 21st, before the shocks of the financial crisis forced a reckoning over growing coziness with corporate interests. In the process, he makes a compelling argument that the movement to rein in corporate power — which has found an ally in the Biden administration — will determine the fate of the United States itself.

🔎 TIPS? COMMENTS? SUGGESTIONS?

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