The Corner Newsletter: February 16, 2023
Welcome to The Corner. In this issue, we look back at our the groundbreaking conference we hosted this week, “Renewing the Democratic Republic.” And we ask whether European Commission regulators are fully committed and able to enforce important new legislation to reign in Big Tech’s dominance.
Senator Warren, AAG Kanter, and Other Newsmakers Speak at Open Markets Event
Senator Elizabeth Warren opened Open Market Institute’s “Renewing the Democratic Republic” event on Wednesday with a clarion call for stronger and more wide-ranging enforcement of antimonopoly law. In remarks that received widespread media attention, Sen. Warren urged the administrative agencies to focus on four priorities: 1) breaking up the giants, 2) stopping harmful mergers, 3) prohibiting anticompetitive practices, and 4) putting executives who violate antitrust law behind bars. “It’s time to remind corporate executives and B-school gurus that monopolization is actually a crime… a felony under section 2 of the Sherman Act,” she said.
Later in the day, Jonathan Kanter, assistant attorney general for the antitrust division at the U.S. Department of Justice, spoke about the Biden administration’s reinvigoration in antitrust enforcement, displayed most recently in the antitrust suit it brought against Google. Sara Nelson, international president of the Association of the Flight Attendants-CWA, AFL-CIO, discussed the power of organizing, saying, “There is only one effective check on organized money, and that is organized workers.”
Other speakers included Pulitzer Prize-winning playwright and novelist Ayad Akhtar, the President of Color of Change Rashad Robinson, legal scholar Joey Fishkin, Hewlett Foundation president Larry Kramer, the former acting director at the Office of Information and Regulatory Affairs K. Sabeel Rahman. economist Cristina Caffarra, and finance professor Luigi Zingales. Financial Times global business columnist Rana Foroohar and constitutional scholar Caroline Fredrickson, who directs strategic initiatives at Open Markets, served as co-hosts of the event.
Organizations supporting the event included the Financial Times, Color of Change, and Public Citizen, as well as the Institute for Local Self-Reliance (ILSR), Farm Action, Americans for Financial Reform, Accountable Tech, Demand Progress, Groundwork Collaborative, News Media Alliance, Economic Security Project, Future of Music Coalition, the Revolving Door Project, the American Economic Liberties Project, Free Press, and Public Knowledge.
Senator Warren’s comments were reported in Time, HuffPost, the New Republic, and American Banker among other outlets.
Enforcing the Digital Markets Act: Can Europe Regulators Rise to the Challenge?
Max von Thun
Late last year, the European Union passed landmark legislation striking at the heart of Big Tech’s market power. The Digital Markets Act (DMA) will impose a range of new regulatory obligations – dos and don’ts – on the tech giants with regards to how they treat the users and businesses dependent on their platforms. The DMA represents a big step in the right direction in efforts to break the power of Google, Amazon, Facebook, and Apple on our economies and societies, and is testament to the hard work of European policymakers and legislators from across the political spectrum.
The big question now: will the European Commission officials charged with enforcing the DMA ensure the law lives up to its promise?
A quick recap of how we got here. After nearly a decade of trying to use its existing antitrust toolkit to rein in the power of Google, Facebook, and other powerful platforms by imposing numerous record fines, the Commission eventually came to see the need for new rules that spell out in detail exactly what tech giants can and cannot do, without the need for lengthy investigations. The result was the DMA, which will formally take effect in May this year, after which point the Commission will be able to designate Big Tech platforms as “gatekeepers” subject to the act’s provisions. The actual obligations on tech platforms, however, only come into force in the spring of 2024 at the earliest.
The DMA matters for many reasons. While not perfect, it is the first significant legislation passed anywhere in the world that targets Big Tech’s market dominance, and if successful could provide useful inspiration and guidance to other governments. Among other things, the DMA will compel gatekeepers to allow third-party app stores and payment solutions, enable interoperability between their own services and those of rivals, and provide greater transparency to publishers and advertisers dependent on their platforms. It will ban the platforms from self-preferencing their own services and from using data collected from business users to unfairly compete against them.
In short, if implemented effectively, it will make a sizable dent in the anti-competitive fortress Big Tech has erected around itself. In fact, companies including Apple and Google have already begun taking steps to open up their walled gardens well ahead of the DMA taking effect.
Nevertheless, there are concerns about the Commission’s ability to achieve the DMA’s objectives. Despite the scale of the task at hand, which will involve applying a large number of novel and highly complex interventions to some of the largest and most powerful companies in the world, the Commission only plans to allocate around 150 officials (at most) to DMA enforcement, and has not yet increased its budget for such work in any meaningful way. And already, the regulator has admitted to difficulties in recruiting the technical expertise needed to fill even those roles, in part due to the salary gap between the tech industry and the public sector.
Meanwhile, Big Tech is likely to do everything it can to obstruct effective implementation, from legal appeals and disingenuous interpretations of the legislation, to compliance that aligns with the letter, but not the spirit, of the law. Apple’s attempts last year to stifle the Dutch competition authority’s attempt to improve competition in distribution of dating apps hint at the obstructionist tactics we might expect.
The stakes are high. Weak implementation and enforcement of the DMA would undermine the EU’s credibility as a regulator of Big Tech, and also discourage other countries from pursuing similar changes to their own laws. To ensure that scenario does not come to pass, the European Parliament, EU member states, and civil society will need to hold the Commission to account.
For member states, that means giving the Commission, through a permanent increase in its budget, the resources it needs to introduce and enforce the new rules quickly and effectively. The resource gap can also be further narrowed through the formal role in enforcement assigned to member state competition authorities by the DMA, which they should make full use of. For civil society and members of the European Parliament, it means helping to rigorously monitor gatekeepers’ compliance with the DMA, while watching out for any signs of regulatory capture. The European Parliament’s recently established working group on DMA implementation, chaired by MEP and leading competition expert Andreas Schwab, will be critical in this regard.
As for the Commission itself, it must demonstrate it is serious about using the threat of breakups — a measure provided for in the legislation — to force gatekeepers to comply with the law. The Commission’s unwillingness to do so in the past has severely undercut respect for its authority.
Open Markets Urges European Commission to Investigate Amazon iRobot $1.7 Billion Deal
Earlier this week, Open Markets Europe, along with partner organizations Foxglove, the Balanced Economy Project, and SOMO, formally called on the European Commission to review Amazon’s $1.7 billion purchase of iRobot, which would give the retail giant a dangerous stronghold in the nascent market for smart home devices. The submission reads in part: “Consumers risk being further ‘locked’ into Amazon’s powerful ecosystem. Innovation will be stifled. Competitors will face even higher hurdles to compete, not only in the smart vacuum or home robotic devices market, but in nearly every market Amazon’s newly bolstered ecosystem will touch. Consumers and competitors will pay the price.” The joint submission was covered by Bloomberg among other news outlets.
Media reports say the the pressure on the EU has borne fruit and it’s preparing an antitrust case on Amazon’s iRobot deal. According to the Financial Times, regulators have sent Amazon detailed questions over the proposed transaction ahead of a probe.
📝 WHAT WE'VE BEEN UP TO:
Open Markets Institute legal director Sandeep Vaheesan published an article in Bloomberg Law calling on President Biden to make good on past statements supporting a ban on noncompete clauses by filling two vacancies at the Federal Trade Commission with members amenable to freeing workers from the restrictive labor clauses. “In filling these important positions, Biden should select individuals with a demonstrated commitment to taming corporate power,” he writes.
Open Markets Institute Europe director Max von Thun released a statement on the U.K.‘s Competition and Markets Authority (CMA) investigation of Microsoft’s $69 billion takeover of video game company Activision Blizzard. “We share the CMA’s assessment of the threat to fair competition from this deal: Microsoft could use Activision's ‘must-have’ games as a competitive weapon against rivals by withholding titles… entirely or offering them on unfair and discriminatory terms,” von Thun said.
Sandeep Vaheesan was quoted by Senator Chris Murphy in a press release on the Workforce Mobility Act of 2023, legislation introduced in both houses of Congress by a bipartisan group of lawmakers that would ban the use of noncompete agreements. “Non-compete clauses strengthen the power of employers at the expense of millions of workers across America. These unfair contracts reduce job market mobility and depress competition among employers for workers' services, lowering wages and wage growth and impeding new business creation,” Vaheesan said.
Vice cited OMI senior legal analyst Daniel Hanley in a story about the right-to-repair class action lawsuit brought against John Deere. Hanley referred to a 1992 decision against Eastman Kodak as the last time that a group of plaintiffs won a case in the Supreme Court under Section 2 of the Sherman Act, which bans monopolization.
CBS News quoted OMI executive director Barry Lynn on the DOJ lawsuit against Google as saying, "Today's lawsuit by the Department of Justice against Google for the monopolization of advertising will be remembered as one of the most important antitrust cases in American history.”
The Hill named Open Markets Institute as one of the more than 20 advocacy groups putting pressure on Senate Majority Leader Chuck Schumer to prioritize two bills that target Big Tech’s unfair practices. The bill aim to prevent self-preferencing and other anti-competitive behaviors.
Open Markets Institute is one of the 40 groups calling on the Senate to immediately confirm Gigi Sohn to the fifth seat at the Federal Communications Commission, according to Common Dreams. The groups highlighted concerns over surveillance of women seeking abortions.
🔊 ANTI-MONOPOLY RISING:
President Biden used his State of the Union address to push for bipartisan support of competition and fairer practices in the tech industry. Biden focused on issues stemming from lack of antitrust enforcement such as self-preferencing, data collection, and child safety among others, saying, “Pass bipartisan legislation to strengthen antitrust enforcement and prevent big online platforms from giving their own products an unfair advantage.” (The Verge)
Democrat Rebecca Kelly Slaughter to the Federal Trade Commission, has been officially renominated by the Biden Administration in the same week Republican Commissioner Christine Wilson stepped down from the FTC, citing differences of opinion with FTC Chair Lina Khan and the agency’s current progressive agenda. Open Markets released the following statement on Slaughter’s renomination, “We know Slaughter will continue to do important work for our country in her next term and we urge the Senate to quickly confirm her.” (Reuters)
News reports say the Department of Justice is preparing an antitrust lawsuit against Apple for self-preferencing its own products on its devices and in its App Store. The lawsuit, which could come as early as the spring, would be the second antitrust lawsuit from the DOJ this year following its case against Google for its monopolization of the digital advertising market. (Wall Street Journal)
European telecom companies Deutche Telekom, Orange, Telefonica, and Vodafone won approval from the EU for a joint venture that would take on Meta and Google in the lucrative online advertising sector and diversify their revenue streams. (US News, Reuters)
The National Football League is facing a class action antitrust lawsuit from customers seeking to dismantle licensing deals behind a Sunday night line-up on DirecTV that forces viewers to make all-or-nothing game purchases that can cost $294 per household and far more for commercial customers. (Bloomberg Law)
Sixteen European nations, which include France, Germany, and Italy, have asked the European Commission to investigate Adobe’s $20 billion purchase of web-based design start-up Figma. The commission said in a statement that the deal “threatens to significantly affect competition in the market for interactive product design and whiteboarding software." (The Register)
📈 VITAL STAT:
60%-80%
The share of Connecticut’s specialty healthcare market owned by Hartford Healthcare. Competitor Saint Francis Hospital and Medical Center has accused Hartford of driving up costs and “a campaign of exclusion, acquisition and intimidation” in an antitrust lawsuit against Hartford that is moving forward. (Courant)
📚 WHAT WE'RE READING:
“Journalism, Platforms, and the Challenges of Public Policy.” (Tech Policy Press, Charis Papaevangelou). The author reveals that Google and Facebook have supported more than 6,000 news organizations worldwide (2017- 2022), in ways that help entrench Big Tech's tools and services in news rooms.
“How Twitter Generates Millions in Ad Revenue by Bringing Back Banned Accounts.” (Center for Countering Digital Hate). The report analyzes a sample of ten Twitter accounts out of the thousands reinstated by Elon Musk's "general amnesty," showing how just these accounts would generate about $19 million a year in ad revenues.
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