The Corner Newsletter: January 19, 2023
Welcome to The Corner. In this issue, we look at how the antimonopoly struggle will play out this year on an international, national, and state level. We also see our advocacy come to fruition in the FTC’s proposal to ban non-competes.
Antimonopoly in 2023: New Battles on All Fronts
Karina Montoya
Senator Chuck Schumer’s failure to call a vote on the American Innovation and Choice Online Act during the last Congress angered and disappointed an American public keen to rein in the power of Big Tech. And given the chaos within the Republican Party, the immediate prospects for passing any bill targeting big tech are not bright. But that doesn’t mean the antimonopoly movement won’t notch big wins against the monopolists.
In the year ahead, we’ll be watching—and helping to promote—a wide series of actions that can reduce concentration of power in America in ways that ultimately benefit our democracy, as well as workers, independent businesses, and consumers. We expect this to include:
More Aggressive Use of Rulemaking Authority. The Federal Trade Commission will increasingly use its broad authority to prohibit unfair methods of competition, as granted in its 1914 originating statute. Indeed, the Commission demonstrated how this works right at the beginning of the new year with its initiative to ban non-compete clauses (see box below for more information on this action). Those accustomed to the agency’s previous narrowly defined mandate might call the FTC’s upcoming initiatives a “stretch,” as a Wall Street Journal editorial does. But the truth is that the FTC has always had the authority to issue blanket definitions to describe unfair competition practices. That’s why Open Markets has long led efforts to get the FTC to use its rulemaking power to outlaw non-competes.
A Resurrection by Enforcers of the Robinson-Patman Act and Non-Discrimination Rules. Both the FTC and DOJ are looking at ways to update use of a 1936 landmark legislation known as the Robinson-Patman Act, which prohibits powerful buyers using their dominance to coerce sellers into giving them preferential treatment, and sellers from offering better prices to big buyers at the expense of smaller competitors. Enforcing this Act would increase market fairness by restricting the power of large buyers, and offset the inflationary rise in consumer goods prices that hurt low-income communities. The FTC, for instance, has started investigating price discrimination practices in the soft drink market by targeting Coca-Cola’s and PepsiCo’s selling practices.
More Aggressive Use of Consumer Protection and Data Privacy Rules. Another potential angle of action for the FTC is to use its consumer protection authority to take on commercial surveillance, a practice underlying digital advertising that enables Big Tech to collect massive amounts of data about what Americans do on and off the internet. This practice exposes sensitive data to unmonitored breaches and wide misuse by the platform monopolists and other powerful corporations. The practice also lies at the core of Google and Facebook’s misdirection of ad revenue from news outlets into their own vaults. Last year, the agency received public comments about the harms of this type of online surveillance, and is currently reviewing potential actions.
The Litigators Go Big. The DOJ Antitrust Division, joined by state attorneys general, is reportedly gearing up for a trial against Google over the monopolization of the search and digital advertising markets. The lawsuit, filed in October 2020, primarily accuses Google of unfairly locking in its search engine as the default or sole search engine on smartphones, reinforcing its dominance in the industry, and therefore, perpetuating its dominance in search advertising. It’s not clear whether this lawsuit will also directly tackle Google’s dominion over the $190 billion U.S. digital advertising market. But a 2021 multistate lawsuit led by the Texas attorney general does, and it is also expected to move to trial (or a summary judgment). After the case was moved to a New York federal court in late 2021, the judge denied Google’s attempt to have the case thrown out this past September. Additionally, the DOJ Antitrust Division is reportedly preparing a new separate case on that matter as well.
SCOTUS Gets in the Game. The U.S. Supreme Court will also play a role in efforts to rein in Big Tech. In February, justices will hear two cases that challenge the immunity social media platforms get under Section 230 of the Communications Decency Act. In Gonzalez v. Google and Twitter v. Taamneh, plaintiffs ask to hold Big Tech accountable for recommending content that spurred the rise of the Islamic State, thus violating the Anti-Terrorism Act. The justices’ decisions can upend future considerations of free speech, privacy, and algorithmic liability, all of which affect competition policy.
The European Union’s New Laws Begin to Bite. Abroad, the EU is preparing to implement the Digital Markets Act (DMA) and the Digital Services Act (DSA). The DMA lists a series of practices that will govern the conduct of ‘gatekeepers’ of various services, including digital advertising, search engines, and mobile app stores. By September, the European Commission will designate a list of such gatekeepers. The DSA is rather a product-design policy tool for social media platforms of all sizes, and it seeks to limit arbitrary content moderation and reduce the spread of illegal content. The largest platforms will start providing risk assessments this year, and EU state members should designate a DSA enforcer by 2024.
In Response to Open Markets’ Call, FTC Moves to Ban Non-Compete Agreements
In response to a 2019 petition by Open Markets Institute, the Federal Trade Commission early this year moved to ban the use of non-compete clauses in employment contracts, saying they violate Section 5 of the FTC Act. The agency estimates the proposed rule, which is open to public comment, would increase wages by up to $300 billion every year and expand career opportunities for 30 million workers.
The move is one of the most important uses of competition authority in many decades, and in addition to higher wages would lead to increased job mobility for millions of people. At present, one in five American workers are covered by agreements that prevent them from freely seeking a job with a competing company or starting their own competing business after they leave their post. Extensive research shows non-competes depress wages, stifle innovation, and contribute to widening racial and gender gaps.
Open Markets Institute’s legal director, Sandeep Vaheesan, who spearheaded OMI’s previous advocacy on banning non-compete agreements, applauded the move, saying, “The FTC’s proposal to ban non-compete clauses is an enormous boon to workers all across the United States. For far too long, employers have used non-compete clauses to unfairly restrict job market mobility for millions of workers and, as a result, depressed wages, reduced the creation of new businesses, and prevented workers from leaving abusive and discriminatory workplaces. Banning non-competes will increase worker power and mobility and result in a more dynamic economy that benefits all.”
Vaheesan also encouraged workers, unions and advocacy groups to take advantage of the public comment period to file comments bolstering the case for enacting a full ban.
The Washington Post noted Vaheesan’s years-long advocacy on banning non-competes, quoting from a 2021 Bloomberg Law op-ed: “Noncompetes lock workers in place and rob them of an important source of power: the freedom to find new employment or start a business in their line of work in their community.”
OMI’s Barry Lynn and Phillip Longman Publish Seminal Articles on Industrial Strategy and Non-discrimination Law
Open Markets Institute’s executive director, Barry Lynn, and its policy director, Phillip Longman, contributed keystone articles to Washington Monthly’s January issue devoted to a new vision for America’s political economy, one that would replace the current neoliberal regime.
In an explanatory treatise, Lynn calls for eliminating dangerous chokepoints in international supply chains, grounding his argument in the history of U.S. industrial policy starting with the American Revolution. He writes, “Today, we see increasingly extreme chokepointing within most industrial systems, often to the point where a vital product or key component is manufactured in a single location—sometimes even a single factory—on the other side of the world…Our task, in short, is to design and implement a strategy to widely redistribute industrial capacity, within a world in which production and control are now highly chokepointed, without triggering industrial collapse, provoking a catastrophic conflict, or yielding to industrial coercion.”
Longman’s article offers a solution to today’s wealth inequality and inflation: reviving the dormant Robinson-Patman Act, a New Deal-era statute banning dominant players from offering lower prices to high-volume chains at the expense of small businesses. “Indeed, though it’s only dimly understood by most people—and outright denied by economists on the left and right who should know better—unrestrained growth of monopsony power has become a major source of the stubborn inflation, supply chain fragility, and gross inequities that define today’s economy,” writes Longman.
Open Markets, Joined by 10 Advocacy Groups, Urges Regulators to Block Railroad Merger
Open Markets Institute’s Strategic Councilor on Democracy and Power Caroline Fredrickson last week spoke at a House Judiciary Committee hearing on how conservative activists have long coordinated campaigns to influence Supreme Court justices. Entitled “Undue Influence: ‘Operation Higher Court’ and Politicking at SCOTUS,” the hearing was held in the wake of an eye-opening report from the New York Times, which was based on allegations from whistleblower Rev. Robert Schenck, who also spoke at the committee hearing.
📝 WHAT WE'VE BEEN UP TO:
Open Markets Institute senior legal analyst Daniel Hanley and Center for Journalism & Liberty reporter Karina Montoya published an article in the year-end issue of Competition Policy International’s Antitrust Chronicle describing the ways antitrust enforcement can provide baseline data privacy protections for consumers in the absence of a comprehensive federal privacy law.
Senior legal analyst Daniel Hanley published an article in The Sling shining a spotlight on the overlooked role exclusive dealing played in Ticketmaster’s recent ticket-selling debacles involving superstars Taylor Swift and Bad Bunny. Hanley proposes a solution to the use of exclusive dealing by dominant players like Ticketmaster, writing, “Fortunately, it’s not too late for the federal regulators to remedy the mess.”
Senior fellow Johnny Ryan was quoted by New York Times on the $414 million fine imposed on Meta by the European Union for deceptive practices. Ryan suggested the move may augur far more such regulation of Big Tech by European regulators as they enforce the region’s 2018 data-privacy law, the General Data Protection Regulation. “European enforcement has not yet delivered on the promise of the GDPR,” Ryan said, predicting that “Big Tech may be in for a far bumpier ride.”
Executive director Barry Lynn was featured on WBUR’s On Point radio program discussing his mentorship of FTC Chair Lina Khan as well as the history and evolution of antitrust thought in the United States, with particular focus on the ill-conceived consumer welfare standard propagated by Robert Bork.
Barry Lynn was quoted in CNET dismissing Amazon’s bid to downplay its market power. Responding to the retail giant’s insistence that it only constitutes 1% of global retail, Lynn said, "It doesn't matter to Americans what Amazon's global number is. It matters what their control is in the U.S." He rejected 1% as "a nonsense number.”
🔊 ANTI-MONOPOLY RISING:
The FTC is currently investigating beverage giants Coca-Cola and PepsiCo for alleged price discrimination in the soft drink industry. In scrutinizing the companies’ pricing strategies, the FTC is reviving the lapsed Robinson-Patman Act, which prohibits suppliers from offering better prices to large retailers at the expense of their smaller competitors. The FTC has reached out to Walmart and other large retailers to gather information on how they purchase and price soft drinks. (Politico)
An internet standards group has rebuffed Google's proposal to discontinue the use of tracking cookies as “maintain[ing] the status quo of inappropriate surveillance on the web.” The Technical Architecture division of the World Wide Web consortium has asked Google to abandon its Topics API proposal, which would allow advertisers to target ads to users based on broad topics, rather than identifying the user to the advertiser or their adtech vendors. Google has set a 2024 deadline for phasing out third-party cookies from Chrome, the world's most popular web browser. (Business Insider)
A law capping prescription drug prices embedded in the Inflation Reduction Act that was passed last summer is estimated to reduce Big Pharma’s revenues by about $40 billion through 2032. In the near term as details of the law are being finalized, however, pharmaceutical companies may resort to raising prices on existing drugs and launch new drugs at higher prices. (The Wall Street Journal)
📈 VITAL STAT:
50%
Amazon's estimated share of the U.S. e-commerce market. The company doesn't disclose its overall share of US e-commerce, but estimates from multiple sources have shown the company hovering under 50% for years. (CNET)
📚 WHAT WE'RE READING:
“The Code: Silicon Valley and the Remaking of America.” (Penguin Random House, Margaret O'Mara). In her book, O’Mara chronicles the evolution of the Silicon Valley mythos, including how the Reagan era’s unlikely public funding proved foundational to the U.S. tech industry and to laying the groundwork for the new breed of today's tech moguls who reshaped America and the world.
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🔎 TIPS? COMMENTS? SUGGESTIONS?
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