The Corner Newsletter: January 14, 2022
Welcome to The Corner. In this issue, we discuss how Europe’s Digital Markets Act could make a global impact and the risks of Big Tech’s payment systems. We also take a look at Open Markets’ top accomplishments in 2021.
To read previous editions of The Corner, click here.
Europe’s Digital Markets Act Breaks New Ground in Regulating Big Tech Behavior
Karina Montoya
The Digital Markets Act — the latest European effort to regulate how Big Tech exercises power over communications and commerce — is nearing its final version after the EU Parliament greenlighted the bill in December 2021. The DMA defines, for the first time, acceptable business practices for corporations identified as “gatekeepers” of core Internet services such as web search, social media, cloud computing, video sharing, and advertising. In that sense, the law is poised to have global effects.
One key part of the bill has the potential to significantly curb the surveillance advertising systems of the platforms, especially Google. Article 5 limits how gatekeepers can use data for purposes other than for what it was originally collected. If strongly enforced, this would largely prevent Google from combining user data from its search engine with data collected from YouTube, Maps, Gmail, Android, Chrome, and its other tech platforms to track and target individual users.
The DMA marks a major step forward from Europe’s General Data Protection Regulation, which became law in 2016. The GDPR was the first EU data regulation aimed at enhancing users’ control over the privacy of their data. But critics faulted the GDPR for its lack of enforcement by member states and a flawed design of consent notices. The DMA gives new powers to the EU Commission to centralize enforcement and seeks to stop the practice of data cross-use without proper consent, which the GDPR did not cover.
For the DMA to become law, the EU Parliament needs to reach an agreement with the EU Council — composed of the member states — on the final text, then both legislative bodies must vote to pass the bill. The EU Commission mediates the negotiations, known as “trilogue,” which started this week. No unanimity in the Council votes is needed. This year, France is leading the EU Council, and President Emmanuel Macron is looking to reach an agreement in the first half of 2022, Euractiv reports. On Tuesday, Macron gave a speech slamming Big Tech foreign platforms for their role in amplifying disinformation.
Antitrust and data privacy activists welcomed the strength of the DMA but said additional efforts are still needed, both in Europe and in the United States. “These are global companies, which require global intervention,” Tommaso Valletti, former chief economist of the EU Directorate General for Competition, told Open Markets.
Civil society groups such as the Irish Council for Civil Liberties warn that Article 5 makes it too easy for tech firms to avoid the limits on cross-use of data. Since the law only requires platforms to offer a single consent to users to combine and cross-use their data, this creates an ambiguity that can be exploited to avoid enforcement, according to Johnny Ryan, a senior fellow with the ICCL and a fellow and strategic adviser at Open Markets. ICCL also warned lawmakers about the vague wording in Article 5 that asks gatekeepers to “refrain” from cross-using data rather than to outright “ban” such behavior without proper consent. The ICCL said this wording leaves too much leeway for the platforms to continue this practice.
Valletti also warns that enforcement will be key. The DMA does create more enforcement tools, but their effectiveness remains to be seen. For example, the EU Commission will be able to directly dictate compliance measures without having to test gatekeepers’ remedies first (which is what currently happens). As an extra measure, a report from a panel of experts that assessed the DMA recommends allowing independent auditors to have direct access to algorithms and use of data to evaluate their compliance.
Open Markets Details Dangers of Big Tech Payment Systems in Comments to CFPB
In October, the Consumer Financial Protection Bureau ordered six Big Tech firms — Google, Apple, Facebook, Amazon, Square, and PayPal — to disclose information about their payment system practices. Open Markets praised the action at the time, and in December we submitted detailed comments about the dangers of Big Tech rushing to build entirely new payment systems designed to circumvent existing systems of regulation.
Our comment letter highlights concerns about the potential for Big Tech to use payments for self-preferencing and steering, extractive business practices, enhanced data for manipulative algorithms and the potential for financial surveillance. It also details the unique risks of crypto asset projects undertaken by Big Tech. You can read the full comment letter here. The comment was mentioned in U.S. PIRG, ConnPIRG, and Communications Daily.
Open Markets’
Best of 2021
2021 was a productive and influential year for Open Markets. Here’s a compilation of some of our team’s top accomplishments.
🔊 ANTI-MONOPOLY RISING:
Earlier this week, U.S. District Judge James Boasberg rejected Facebook’s motion to dismiss illegal monopolization claims by the Federal Trade Commission. The action followed the agency’s decision to amend its original 2020 case against the corporation after Judge Boasberg said it lacked sufficient information. The amended complaint features a more detailed account of Facebook’s monopoly power and anti-competitive behavior. The court also dismissed Facebook’s request to invalidate the complaint because FTC Chair Lina Khan has not recused herself from the case. (CNBC)
Last month, the FTC opened an investigation into Facebook’s $400 million acquisition of virtual reality fitness app Supernatural. The probe comes over concerns that Facebook may be cornering the VR startup market. Facebook is believed to have a majority market share of much of the VR industry. (The Verge)
On Dec. 28, hospital bed-maker Linet filed an antitrust lawsuit against rival Hillrom alleging monopolization of the hospital bed market. In the lawsuit, Hillrom was accused of anti-competitive practices such as exclusive and coercive agreements with health systems. According to Linet, the market for hospital beds will experience limited innovation and supply if Hillrom, which has a 70 percent market share in intensive, standard, and birthing beds at U.S. hospitals, is allowed to continue its “illegal” practices. (Chicago Tribune)
Four former minor league baseball teams filed an antitrust lawsuit Dec. 20 against Major League Baseball for violating the Sherman Act. The four clubs allege that MLB engaged in anti-competitive behavior by improperly influencing the success of club affiliates when it ended its affiliation with 40 minor league clubs last year. The lawsuit also argues that the MLB’s antitrust exemption has allowed it to violate antitrust laws and cited the Supreme Court’s skepticism about the exemption in the landmark NCAA v. Alston case last year. (The Washington Post)
Last week, Germany’s Federal Cartel Office (the Bundeskartellamt) decided that Google met the special threshold for abuse control updated last year in the German Act Against Restraints of Competition. The office found that Google has “paramount significance across markets” such as search, advertising, data, and other gatekeeping roles. The significant designation will allow the office to immediately take antitrust action against identified anti-competitive behavior. (TechCrunch)on. (American Banker) See the Open Markets statement applauding the vote here. The statement was published in Common Dreams.
📝 WHAT WE'VE BEEN UP TO:
Open Markets released a statement in response to Amazon Web Services’ massive outage and deal to host NASDAQ, highlighting the urgent need for strict regulation. The statement references Open Markets' recent letter calling for U.S. financial regulators to regulate AWS as a Systemically Important Financial Market Utility. “The message we’ve been sending about the need for enhanced regulation of AWS was made crystal clear yesterday: If AWS hiccups, the rest of the economy can suffer a stroke.”
Open Markets released a statement lamenting Professor Saule Omarova’s withdrawal of her nomination to head the Office of the Comptroller of the Currency. “I have worked with Professor Omarova for more than a decade, and she has long served on the Open Markets advisory board. I know through personal experience that Professor Omarova is a true patriot who has dedicated her life to protecting the American people against dangerous concentrations of power, at home and abroad. It is unfortunate that entrepreneurs, communities, families, and consumers across the United States will not have Professor Omarova to defend against reckless Big Banks.”
Sandeep Vaheesan spoke at a Justice Department and Federal Trade Commission workshop on “Making Competition Work: Promoting Competition in Labor Markets.” “Section 6 of the Clayton Act does not distinguish between employees and independent contractors. This law was passed not so much to legalize primary strikes and boycotts by unions but to permit secondary strikes and boycotts by unions. So a group of workers striking their employer was never prosecuted under federal antitrust law.”
Jody Brannon provided a prediction for Nieman Lab about the future of journalism in 2022: “I expect more institutions and journalistic enterprises to build on efforts to protect democracy.”
Daniel Hanley and Sally Hubbard were both quoted in a Vox Recode article about Apple’s App Store monopoly. “What Apple realized is that if they could control the App Store, they really control the rest of the game,” Hanley told Recode. The article also mentioned Hubbard’s book Monopolies Suck and noted that Hubbard had “described Apple as a warm and fuzzy monopolist when compared to Facebook, Google, and Amazon, the other three companies in the so-called Big Four that have been accused of being too big.”
Nikki Usher’s book News for the Rich, White, and Blue continued to receive coverage. including in Columbia Journalism Review, Nieman Lab, and Deseret News. “Nikki Usher’s recent book, News for the Rich, White, and Blue helps to explain why these trends might have contributed especially to the alienation of conservatives from the news, as many of the leading (and surviving) legacy news organizations have identified white, affluent, and liberal people as their core target audience, producing journalism that is most attuned to the tastes and preoccupations of this group.”
Open Markets’ concentration data was cited in The New Republic in an article about how the car company Hertz went from bankruptcy to buybacks in six months. “The case that Hertz is a fabulously successful company begins with the fact that its market share is a very healthy 15 percent, according to a 2018 calculation by the Open Markets Institute.”
Johnny Ryan and his group, the Irish Council for Civil Liberties, received in-depth coverage from Yahoo! Finance for their work to hold Europe’s ad industry to account. “Ryan ended his statement by saying that he hopes that the final decision, when it is released, ’will finally force the online advertising industry to reform.’” Ryan received similar coverage in the Silicon Republic.
Daniel Hanley commented on the relationship between Amazon’s worker surveillance and unions in an article co-published by Newsweek and Capital & Main. “The key, according to Hanley, is to incorporate workers into the decision-making process. ‘What are their health and safety concerns? Maybe they say, you know what? This technology, we actually could use it,’ said Hanley. ‘But that’s for them to decide.'”
Open Markets’ letter to financial regulators sounding the alarm about Facebook’s crypto-asset pilot project was referenced in Truthout. “Considering ‘Facebook’s track record of violating user privacy, and Facebook’s ongoing need to find new profit centers,’ the Open Markets Institute warned, ‘there is absolutely no reason to believe its promises today that it will not find a way to monetize its digital assets pilot project.'” It was also mentioned in a Nairametrics article.
📈 VITAL STAT: 100+
The number of Sonos patents violated by Google, according to the speaker manufacturer. Sonos proposed a licensing deal to Google, but the two companies failed to reach an agreement. A trade court ruled last week that Google infringed on five audio technology patents held by Sonos and is barred from importing products into the U.S. that infringe on those patents. (The New York Times)
📚 WHAT WE'RE READING:
“Police Foundations: A Corporate Sponsored Threat to Democracy and Black Lives” (Color of Change): This report details the hidden and often intimate relationships corporations have with police departments throughout the nation. Often, private corporations create police foundations to funnel corporate money into police departments. As the report details, such practices inflate police budgets, lead to the militarization of police departments, and, without a change in policy, expand the presence of policing and surveillance of Black, brown, and Indigenous neighborhoods.
Nikki Usher’s New Book:
News for the Rich, White, and Blue: How Place and Power Distort American Journalism
Nikki Usher, a senior fellow at Open Markets Institute’s Center for Journalism & Liberty, has released her third book, News for the Rich, White, and Blue: How Place and Power Distort American Journalism. In her latest work, Usher offers a frank examination of the inequalities driving not just America’s journalism crisis but also certain portions of the movement to save it.
Open Markets Employment Opportunities
You can find the full job listings here.
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