The Corner Newsletter: November 5, 2021
Welcome to The Corner. In this issue, we take a closer look at the DOJ’s move to block Penguin Random House’s proposed takeover of Simon & Schuster, and how surveillance advertising has harmed user privacy.
To read previous editions of The Corner, click here.
The DOJ's Move to Block Takeover of Simon & Schuster Is Major Advance in Fight to Rebuild U.S. Market for Books
On Tuesday, the Department of Justice sued to block Penguin Random House’s planned $2.18 billion acquisition of rival book publisher Simon & Schuster. The DOJ alleged that the merger would give Penguin — which is owned by the German corporation Bertelsmann and is already the world’s largest publisher — too great of an influence over the books being published in the U.S. and the pay for authors of the books. The Wall Street Journal noted that the lawsuit represents an effort to shift antitrust policy away from economic efficiency and consumer prices to broader attempts to protect economic opportunity.
The action by the DOJ amounted to a major win for Open Markets, which has long focused closely on the dangers posed by consolidation of power over the U.S. marketplace for books by Amazon and by super-large publishers. In January, Open Markets submitted a letter to the DOJ opposing the merger — cosigned by the Authors Guild and other groups. After the decision, Open Markets Executive Director Barry Lynn issued a statement celebrating the move. Lynn also discussed the decision on Cheddar TV News.
Beyond Surveillance Advertising: Insights From Media Scholar Matthew Crain
Karina Montoya
A new book offers a timely examination on surveillance advertising, an issue perhaps not as widely chronicled in the Facebook Files fallout as human trafficking or how Instagram distorts the self-image of teenagers, but one that has all but destroyed the privacy of users and deeply damaged the economic foundations of journalism.
Communications researcher Matthew Crain, a media professor at Miami University of Ohio, in September released Profit over Privacy: How Surveillance Advertising Conquered the Internet. Law professor Frank Pasquale has called it the “definitive history of the evisceration of internet privacy.”
Crain explores roads not taken that could have led to a far different web — one not dominated by the Google and Facebook digital advertising duopoly that threatens independent journalism. In a different iteration of the web, a more competitive news media, and noncommercial undertakings, including the efforts to curtail online surveillance, could have flourished. To learn more about Crain’s thinking, read the full extended interview. Here are some highlights:
On better ways to design an advertising ecosystem:
“There is no technical or even business reason that ads must be surveillance-based. Take contextual ads, for example: If you’re going to search for Hawaii, we’re going to show you ads based on it. Money can still be made, goods can still be marketed, but no privacy needs to be violated. Google did this for the first years of its existence, and it made a ton of money by simply showing ads relevant to context without collecting any personal data.
“Today, Facebook and Google have such control over the advertising market that when they decide to do things a certain way, the smaller players follow suit. The fact that they can create a ‘standard’ is more a reflection of the public policy [enabling this system] and their power to shape markets, than a reflection of what good advertising is.
On structural changes to rein in Facebook and Google, including Europe’s get-tougher policies:
“It’s very exciting that antitrust is part of the conversation. An important discussion for me that I hope gets more traction is a federal privacy law. Imagine a law that limits microtargeting to something like a zip code, or that prohibits holding consumer profile information to no more than 10 days. This is akin to what the GDPR [General Data Protection Regulation] calls ‘data minimization.’ It does something to level the playing field, and it makes contextual advertising a more exciting prospect.
“I don’t think breaking a monopoly into a triopoly or anything similar is the best solution if you address the surveillance advertising business model. I definitely think that cutting this business model off at the kneecaps would open the door for others that don’t run on surveillance. Therefore, small publishers and medium-size publishers can compete for advertising dollars on a more leveled playing field.
On news publishers’ efforts to respect privacy while still delivering effective advertising:
“Publishers can lead this change. They are being squeezed in all senses, forced to race to the bottom and to accept the terms of their ad partners [Google, Facebook and other ad tech platforms] just to get the scraps after sharing revenue with them. I can see how they would be interested in moving away from these practices. Publishers didn’t have much choice, but once they decided to get in bed with these surveillance advertisers, they undermined their own product in nasty ways. That is part of what has been contributing to this vicious cycle of the journalism crisis.”
Continue reading more remarks here.
🔊 ANTI-MONOPOLY RISING:
The Federal Trade Commission last week announced it would require companies to seek prior approval for future transactions. The requirement restores a prior practice at the agency and applies to companies both seeking small deals and those that have won deals through divestitures. (Reuters) Read the Open Markets statement supporting the FTC policy here.
The Senate Judiciary Committee last week approved the nomination of Jonathan Kanter as Assistant Attorney General for the Antitrust Division at the Department of Justice. Kanter, as a lawyer in private practice, has represented plaintiffs filing lawsuits alleging violations of antitrust laws by tech giants. Kanter’s nomination moves to the Senate for a final vote. (The New York Times)
📝 WHAT WE'VE BEEN UP TO:
Sandeep Vaheesan published a piece in LPE Project on fair competition. “Speaking of fair versus unfair competition is, moreover, an intellectual advance over the dominant modes of antitrust discourse,” Vaheesan wrote.
After the White House released a report on stablecoins, Open Markets issued a statement urging regulators to use existing tools to protect investors and mitigate systemic risks. “Addressing threats to fair competition, and investors and consumers should come before facilitating the growth of private money.”
Barry Lynn’s body of work warning about the peril of relying on dangerously concentrated supply chains was covered The New York Review of Books and The Seattle Times. “Journalist Barry Lynn warned early on that the downside of cheap, efficient goods from Asia created a fragile situation. He first saw this when a 1999 Taiwan earthquake led to a semiconductor shortage that shut down factories in California and Texas,” the Times wrote. Lynn’s 2002 essay, “Unmade in America,” meanwhile, was mentioned in Daily Maverick for “[encapsulating] all the arguments for and against globalization succinctly.”
Barry Lynn’s observations about how containerized ships off-loading at ports overwhelms supply chains were cited in The American Prospect. “Only a few ports, such as the Port of L.A., can handle ships this large. At the Port of Oakland, Lynn reports, there are empty gantry cranes, because they cannot handle the largest ships. The U.S. government could limit the size of container ships and spread out the traffic.”
Alexis Goldstein was featured on CNBC’s “Squawk Box" show discussing how giant mega-corporations are able to use their power and amassed wealth to pay lower effective tax rates than working people like firefighters and janitors and teachers.
Sandeep Vaheesan was mentioned in Bloomberg commenting on the power that states have to help push forward antitrust lawsuits to grant collective bargaining rights to misclassified or properly classified workers. “I want strong labor and employment rights under federal law that protects all workers regardless of whether they’re in Mississippi or Illinois. I think a federal solution is best but we might have to contend ourselves with state level fixes for the time being,” Vaheesan said.
Daniel Hanley was quoted by S&P Global Market Intelligence asserting the likelihood of incoming regulation of Facebook. "I can see some Congressional action being taken within the next year," Hanley said. “Such action may be as large as a divestiture of Facebook's assets, including Instagram and messaging app WhatsApp Inc,” he added.
Open Markets sent a letter to Secretary Janet Yellen along with Americans for Financial Reform, The Center for Responsible Lending, National Community Reinvestment Coalition, and National Consumer Law Center in opposition to a bank charter for stablecoin issuers. “We support greater regulation of stablecoin issuers,” the statement said. “But bank charters have been used to escape consumer protection laws, and we strongly oppose giving bank privileges to entities that do not carry the full responsibilities of traditional banks.”
Johnny Ryan was quoted in Vice and Indepedent.ie detailing the danger of Huq, an established data vendor. receiving location data without consent reflecting a wider pattern of behavior. “The industry standard consent system (IAB Transparency and Consent Framework) has no technology built in to it to stop data being passed around, so it does not matter what people click,” Ryan said. “In other words, the mere appearance of control.”
Open Markets’ comments on Twitter celebrating CFPB’s order to Facebook, Google, Apple, Amazon, Square, and PayPal to turn over key info about their payment products, were quoted in The Balance. “’Today’s CFPB action is big for many reasons,’ the Open Markets Institute, an anti-monopoly advocacy group, wrote on Twitter. ‘Just as tech firms are expanding consumer-facing financial services, these orders legally compel transparency about how exactly the firms are monetizing data they collect about how we spend our money.’”
Nikki Usher was interviewed by Illinois Newsroom about her work revealing how some outlets are taking advantage of an information vacuum. “Local is going to respond to state and national. People’s attention at this point is primarily focused on national news and information. Part of that is demand driven, because the drama of national news is just more interesting sometimes than what’s happening at a mundane level. It’s also arguably more important, because that’s where the nation’s policies are being set and discussed.” Usher was also interviewed by Tri States Public Radio and Illinois NPR.
Brian Callaci’s testimony about noncompetes was mentioned by Public Citizen: The article paraphrased Callaci as saying that “if there’s an overwhelmingly powerful boss in town, they can set the salary to whatever they want without fear of competition.”
Barry Lynn was quoted supporting Lina Khan in New York Magazine’s Intelligencer. “’This is a David-and-Goliath story,” Lynn said. “And she’s the perfect David.’”
Sally Hubbard was quoted in a Retail Dive piece about the risks of acquisitions. "This idea that every company has to exit by acquisition is pathological,” Hubbard said. “It's a business model or an entrepreneurial model that can only lead to a monopolized economy.”
Sandeep Vaheesan published an article in the Japanese news outlet The Nikkei about the limits of competition policy and law as it currently stands, and how to improve it. “Trying to enforce a pro-monopoly set of rules to achieve anti-monopoly results will, at best, have only modest effect,” Vaheesan said. “To advance its aims, the Biden administration should reconstruct the rules themselves to make clear that monopolistic practices and mega-mergers will not be tolerated in any sector.”
📈 VITAL STAT: $5-$20
How much Facebook is now claiming to pay its creators for every new subscriber it gets through the end of the year, as part of Meta's $1 billion investment in creators it made earlier this year. This move comes amid ongoing tension with Apple for reaping 15-30% of Facebook creators’ earnings.
📚 WHAT WE'RE READING:
“Farmer Cooperatives ’Take Cover’: The Capper-Volstead Exemption is Under Siege” (Arkansas Law Review, Donald M. Barnes & Jay L. Levine): Barnes and Levine detail how the broad protections provided by the Capper-Volstead Act to cooperatives have been increasingly narrowed by the judiciary over the past 20 years.
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
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