The Corner Newsletter: May 6, 2022
Welcome to The Corner. In this issue, we take a closer look at Elon Musk’s bid for Twitter, our amicus brief filed in support of the City of Oakland’s antitrust suit against the NFL’s Oakland Raiders, and our comment to the FTC and DOJ on merger enforcement.
Musk’s Twitter Play Must Run Gantlet of Agencies
Luke Goldstein
The digital townsquare may soon have a new gatekeeper. Two weeks ago, Twitter’s board seemed intent on blocking Elon Musk's bid to take over the corporation. But after the world's richest man patched together financing for a $43 billion dollar cash offer, the board reconsidered. The subsequent deal sent shockwaves around the world. Although Twitter draws significantly less advertising revenue than other platforms like Facebook and carries fewer users, it plays an enormously important role in shaping political discourse. The editorial decisions and content moderation policies it sets have wide-ranging ramifications for the United States and democracies around the world.
Billionaires owning major communications channels and media companies isn't new, of course, and Musk may prove to be a better steward of public communications and debate than Facebook or Google. But the prospect of Musk controlling Twitter does raise a number of concerns, due to his extreme laissez-faire views on free speech, notorious online stunts, stock market machinations, and the simple fact that a Musk takeover of Twitter would concentrate enormous power in the hands of one person. And indeed, regulators and lawmakers around the world are already scrutinizing the deal.
Another problem is that the deal would create potential conflicts of interest with Musk’s other business operations. Musk already controls a major internet service provider, Starlink, which provides broadband via satellites to a rapidly growing number of customers worldwide, initially mainly in remote areas without reliable internet connections. Starlink already boasts 250,000 customers and has been growing quickly. In many respects, the deal resembles AT&T’s 2017 takeover of TimeWarner, which was strongly opposed by the Department of Justice on the grounds that it would consolidate too much power across related lines of business.
Musk’s business ties with foreign countries are another potential concern. One big fear is that China could gain sway over Twitter's policies. In recent years, the government in Beijing has routinely leveraged its market power to force foreign corporations to heed various political commands. Even executives long accustomed to bullying Congress and the executive branch have learned to heed the Chinese government’s commands, including Apple’s Tim Cook, JP Morgan Chase’s Jamie Dimon, and most of Hollywood.
In Musk's case, the danger comes from the fact that China is the second-largest market for Musk's electric vehicle company Tesla and a major supplier of the corporation’s lithium batteries and other key components. China banned Twitter in 2009 and the CCP state media outlets are currently either blocked from the site or flagged with extensive content warnings.
Scott Kennedy, an expert in Chinese economic policy at the Center for Strategic and International Studies, said in an interview with NBC News, “There certainly is the potential that the Chinese could directly or indirectly put pressure on Musk to constrain how Twitter talks about China. He’s supposed to be a guardian of the public square. That understandably raises questions given how invested Tesla is in China.”
There are also questions about how Musk is floating the debt to finance the deal. Initial reports on his financing plans indicate that Musk's takeover will expand Saudi Arabia's already large influence over the platform. Prince Alwaleed bin Talal, the founder of Kingdom Holding Company, the largest private investment holding company in Saudi Arabia, committed $1.9 billion for Musk's takeover and is already a major investor in Twitter. The kingdom has a clear interest in the rules and governance that run Twitter. Saudi Arabia's Crown Prince Mohammed bin Salman has extensively used bot campaigns on the platform to try and shape opinion about his government.
With a list of investors that also includes Qatari financiers, Musk’s Twitter deal could draw the scrutiny of the Committee on Foreign Investment in the United States. CFIUS is an interagency committee that reviews large foreign transactions involving U.S. companies to evaluate national security risks. After reviewing a transaction, CFIUS can take its findings directly to the president, who can then block the deal.
Open Markets Files Amicus Brief in City of Oakland v. Oakland Raiders
On April 11, the Open Markets Institute filed an amicus brief in City of Oakland v. Oakland Raiders. The City of Oakland filed an antitrust suit against the Raiders and the National Football League for collusively relocating the team to Las Vegas and preventing Oakland from hosting another NFL team. Although the City suffered substantial economic harm and lost the team beloved to residents (a fan base famously known as “Raider Nation”), the 9th Circuit affirmed dismissal of the City’s complaint on the grounds it did not show antitrust standing. The City of Oakland petitioned the Supreme Court to review the case. In supporting the City’s petition, Open Markets called on the Supreme Court to hear the case and to restore the private remedies Congress established for antitrust violations.
Open Markets Submits Comment to FTC, DOJ on Merger Enforcement
Open Markets submitted a comment in April to the Federal Trade Commission and the Department of Justice’s Antitrust Division in response to their request for ideas and information on how to reform their guidelines for shaping merger enforcement. The comments were the culmination of Open Markets’ pioneering work demonstrating the devastating effects of the radical changes in competition philosophy in the early years of the Reagan administration, under the influence of Robert Bork, Richard Posner, and other “Chicago School” theorists. The comment was mentioned in Common Dreams. Read our submission here.
Hubbard Joins DOJ Antitrust Division
Last week Sally Hubbard, Open Markets’ director of enforcement strategy, joined the front office staff of the Antitrust Division of the Justice Department. Hubbard will serve as special counsel to Jonathan Kanter, assistant attorney general for the Antitrust Division. During her time at Open Markets, Hubbard testified multiple times before Congress, worked closely with the offices of states’ attorneys general to strengthen antitrust enforcement, and published the book Monopolies Suck: 7 Ways Big Corporations Rule Your Life, with Simon & Schuster. Earlier in her career, Hubbard worked for 10 years as a law enforcer in the antitrust division of the New York state government. Hubbard joins a long list of Open Markets employees and board members who have joined the administration, including FTC Chair Lina Khan, Alexis Goldstein at the Consumer Financial Protection Bureau, and Elizabeth Baltzan at the Office of the United States Trade Representative.
🔊 ANTI-MONOPOLY RISING:
Last week, the European Commission accused Apple of breaking EU law over its governance of Apple Pay. The Commission alleges that Apple broke EU law by blocking competitors such as PayPal and other banks from using its NFC, or “near field communication” system, which allows for the linking of debit and credit cards to its payments system. Apple, under the charges, would be fined up to 10 percent of global turnover. (Financial Times)
The Department of Commerce announced last week that it would support the American Innovation and Choice Online Act being currently debated by Congress. The act would restrict tech giants from self-preferencing, or the act of favoring their own proprietary services and subsidiaries over their competitors on large platforms the tech giants own. The announcement is significant as it signals that the bill has the full backing of Biden administration agencies. (CNN)
Late last month, the Federal Trade Commission began investigating semiconductor company Broadcom over exclusive dealing agreements with customers. Broadcom is allegedly using supply chain arguments to justify its forced dealing arrangements with customers. Broadcom supplies WiFi and Bluetooth chips to customers, including Apple. (Reuters)
Earlier this week, Spirit Airlines rejected JetBlue Airways’ $3.6 billion attempted takeover of the company after citing its low likelihood of antitrust approval by federal regulators. Spirit stated that the Department of Justice would be concerned that JetBlue’s acquisition would eliminate an ultra-low-cost carrier and remove half of the capacity in the market. (WSJ, Reuters)
📝 WHAT WE'VE BEEN UP TO:
Barry Lynn’s comments in April at the “Competition and Regulation in Disrupted Times” conference in Brussels were widely covered, including in Politico. The following week, Lynn delivered the opening remarks on the Chair’s Showcase at the American Bar Association meeting in Washington. Lynn’s remarks were covered by Bloomberg and The Information, among others.
Open Markets’ last week released a statement that detailed some potential dangers to public discourse posed by Elon Musk’s proposed purchase of Twitter, and that made clear that law enforcers have many tools to use to block the deal, if they choose to do so. Read the statement here. The statement was covered by Reuters, Reason, NextTV, Bloomberg Law, Fox Business, and Ars Technica, among others.
Brian Callaci wrote an article in Democracy Journal about the return of fair competition codes in proposed legislation to regulate the fast food and nail salon industries. “While modern antitrust reformers are preoccupied with the amount of competition—the more competition the better—early twentieth century antitrust activists argued that the quality of competition mattered too: Were companies competing on the basis of superior efficiency and innovation, or were they unfairly pricing below cost, reducing quality and engaging in ruthless wage-cutting? The proposed fast food and nail salon bills follow in this tradition by confronting the market conditions and competitive practices driving exploitative business models.”
Sandeep Vaheesan co-authored an op-ed in The American Prospect about how Major League’s Baseball’s antitrust exemption perpetuates the collusive exploitation of minor league players. “Today, minor league baseball players labor under systematic employer collusion, thanks to the industry’s unique antitrust exemption. And unlike their major league counterparts, they do not have a union to challenge the power of team owners. For tens of thousands of minor leaguers, the consequences have been dire. MLB team owners collude openly to suppress wages and limit player mobility in the minor leagues for their own financial benefit.”
Sandeep Vaheesan's article in The New Republic shines a light on a recent court of appeals decision that opens the door for unionizing, collective bargaining, and strikes by gig workers and other workers classified as independent contractors. “The First Circuit’s ruling creates space for organizing by gig workers. Under the court’s test for the labor exemption, independent contractors can strike for higher wages without violating the antitrust laws.”
Barry Lynn was quoted in Roll Call discussing Rep. David Cicilline’s role in bringing antitrust to the forefront in Congress. “The person who actually took it and made it a politically salient issue that started to really drive this in a way that would lead to, hopefully, actual legislation — that was Congressman Cicilline,” Lynn said.
Alexis Goldstein’s work on cryptocurrencies and digital assets during her tenure at Open Markets was mentioned in The Block: “In January, the bureau hired Alexis Goldstein from the antimonopoly Open Markets Institute to lead its digital asset response. Goldstein had spent much of 2021 appearing in Congressional hearings on cryptocurrencies, in which she was consistently critical of the industry. She frequently compared crypto today to Wall Street in the lead up to 2007.”
Open Markets’ research about consolidation in the meat processing industry was cited by WSAW-TV in a story about processing delays in Wisconsin. “According to Open Markets Institute, four processing firms handle 85% of the beef market, four firms control 54% of the poultry market, and four firms control 70% of the pork market."
An Open Markets’ 2019 report on concentrated power in America’s food system was cited in Time. "Dwindling profits are driving independent cattle ranchers to give up the trade, according to a 2019 report by the Open Markets Institute, an anti-monopoly think-tank. Since 1980, an average of nearly 17,000 cattle ranchers have gone out of business each year, the report said.”
Garphil Julien was quoted in an article in The Markup discussing the app Upside, which offers personalized gas pricing for customers at participating locations. The app uses user data and machine learning to calculate participants’ willingness to pay. Julien was reported as stating “that it appears what Upside could do with its personalized promotions is charge customers the maximum price they’re willing to pay.’”
📈 VITAL STAT:
$64 Billion
The five largest container-shipping companies collectively made profits of more than $64 billion last year — an increase of $41 billion from the previous year — according to a report compiled by Accountable.US, a watchdog organization.
📚 WHAT WE'RE READING:
“The Relationship Between Privacy and Antitrust” (Notre Dame Law Review, Maurice Stucke): The author details how policymakers, enforcers, and scholars view the relationship between antitrust and privacy and analyzes the themes between both subjects.
Nikki Usher’s 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.
🔎 TIPS? COMMENTS? SUGGESTIONS?
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