The Corner Newsletter: The US Election and US Democracy (November 8, 2024)

Welcome to The Corner. In this issue, we look at the lessons of the U.S. presidential election, and some next steps. We also explore how the EU’s AI strategy might concentrate even more power in the hands of Big Tech.

Trump and Monopoly Power — A Note from Barry Lynn

Dear Friends,

President Trump won Tuesday’s presidential elections, and it’s hard to spin any silver lining from the results. After 40 years of destructive pro-monopoly policy by Democratic and Republican administrations, President Biden radical strengthening of antimonopoly enforcement policy in 2021 put us on track to rebuild our democracy and prosperity. Now it appears likely President-elect Trump will stride back into the Oval Office hand in hand with some of the most powerful corporate lords in history.

As you know, our team at Open Markets pioneered the analysis, strategy, and narrative behind the antimonopoly movement and Biden’s antimonopoly revolution (as I wrote about recently on the cover of Harper’s). We are proud of the many great pro-democracy victories we won over the years. We are proud to have worked closely with people from across the political spectrum and around the world.

I’d be lying if I told you that we have already devised a plan for the next stage in this fight. But we are working on it, and we’ll soon have news to share. Meanwhile, I want to emphasize two points.

First, it’s vital to take the right lessons from this loss. Yes, there are many reasons the Harris campaign fell short. But biggest was their failure to wield their most potent weapon. Over the last four years the Biden-Harris team revolutionized how we regulate corporate power and behavior, in ways designed specifically to make the American economy more fair, open, inclusive, sustainable, and dynamic. This was a great political victory. It was also a great moral victory.

Yet the Harris campaign chose not to sing of these battles on behalf of the American people, even when repeatedly challenged to support the work of one of America’s great defenders of democracy, Lina Khan. This made it a lot harder for the Vice President to connect with voters still outraged by 40 years of being bullied, bankrupted, and belittled by the monopolists who still control vast swaths of America’s political economy.

This is not just me talking. As my friend Frank Foer reported yesterday in The Atlantic, much of President Biden’s team is saying the same thing.

Second, we still have many levers of real power in our hands. This includes our state governments, which is where we and our allies first developed many of the antimonopoly cases now working their way through Federal courts. It also includes the European Union and the nation-states of Europe, where Open Markets has already played a leading role in awakening lawmakers and policymakers to the true threats posed by concentrated power and control.

My hope is that one day soon we’ll look back at these dark days as the time when we relearned the true story of American democracy. In the four years since President Biden took office, the old pro-monopoly wing of the Democratic Party has waged a steady under-the-radar war against his policies. One result is that the party — as a whole — never fully embraced its most important achievement since the Civil Rights Act of 1964. And thus we failed to distill Biden’s revolution into a narrative of American purpose and promise simple enough to win the support of most of the American people.

Fix that, and the future is still ours.

Europe’s ‘AI Continent’ Vision Risks Handing More Power to Tech Giants

Michelle Nie

Henna Virkkunen, the EU’s incoming tech commissioner, recently announced her ambition to transform Europe into the “AI Continent.” Yet, this bold endeavor raises a critical question: might some efforts to boost Europe’s AI capabilities actually further concentrate power in the hands of the U.S. tech giants that already dominate these technologies?

Consider a proposed Cloud and AI Development Act that would invest in European computing capacity to promote the development of AI across the continent. In her written responses to questions from the EU parliament, Virkkunen wrote that “the Act should give priority to large-scale investments in cloud and AI facilities considered ‘first-of-a-kind’” in terms of environmental sustainability and innovation.

But without additional rules, such a strategy could end up further entrenching the largest cloud computing corporations — Amazon, Microsoft, and Google. These U.S.-based incumbents already hold 72 percent of the cloud market in Europe. Their vast financial resources, economies of scale, extensive partnerships with local internet service providers, and anti-competitive behaviors make it nearly impossible for other actors to compete absent an explicit government plan to promote alternatives. Virkkunen, who stressed the importance of remaining “open to third-country providers,” does not seem to recognize the problem.

Dependence on foreign cloud giants for such critical infrastructure also undermines another increasingly urgent European goal: protecting the sovereignty of the EU and its individual nation states. Defined as the ability of a nation or jurisdiction to make decisions independently, technological sovereignty has been at the forefront of the EU’s digital agenda since 2020. Recently it gained renewed attention with publication of a major report, by former European Central Bank president Mario Draghi, on how to strengthen European growth and innovation.

The focus on sovereignty reflects growing concern across the EU about the risks of relying on a few overseas tech monopolies for critical communications and other digital infrastructure. These include potential threats to data privacy, systemic vulnerabilities due to extreme concentration of physical computing capacity, the bankrupting of domestic companies pushed out of these markets, even risk of loss of state access to vital systems if the dominant corporations decide to cut service for politically motivated reasons.

Another factor driving the focus on sovereignty is the ongoing AI boom. The EU is keen to play a leading role in the development of “trustworthy” AI and to reap real economic benefits from the new technology. But so far most of the EU’s efforts to develop locally controlled technologies and services have either lacked the necessary scale to challenge the dominance of the tech giants or have been captured by those giants themselves.

Consider Gaia-X, a €1.7 billion Franco-German initiative launched in 2019 to create a sovereign European digital infrastructure. The project rapidly morphed into a fragmented federation of over 350 businesses, plagued by internal disagreements and tensions. Despite the initial aims of the project, U.S. Big Tech corporations have succeeded in leveraging their power and political capital to shape Gaia-X's direction in their favor.

The news is not all bad. The EU has had some success with the launch of its AI Factories initiative. AI Factories is designed to give startups access to public supercomputers and exascale computing resources through the EuroHPC Joint Undertaking project. Since the initiative uses public computing resources, it’s less vulnerable to being captured by the tech monopolists and will effectively reduce companies’ dependence on them.

Arguably the most powerful action the EU could take is to restructure and comprehensively regulate the dominant cloud operators themselves. The incumbents currently rely on a variety of anti-competitive behaviors — including discriminatory pricing, bundling, self-preferencing, and restrictions on customer switching — to maintain their dominance. Measures that would require the separation of these businesses would begin to create space for alternatives, public and private, to emerge. So would measures to enforce interoperability and data portability.

The European Commission — and national governments of member states — could also start to designate the cloud giants as public utilities, as they do with dominant corporations in other critical sectors. This could entail legislation forcing cloud operators to provide fair pricing and non-discriminatory access to customers, in addition to sector-specific obligations relating to data privacy, cybersecurity, sustainability, and resilience.

The EU and its member states already treat many modern digital services, including internet service providers, as de facto utilities and require them to ensure steady service and to treat all traffic equally. Applying similar rules to cloud would be a major step towards transforming private monopoly infrastructure into de facto public infrastructure.

Open Markets Publishes Three Articles in next Issue of The Washington Monthly

The Open Markets Institute published three seminal articles in the Washington Monthly’s November/December issue.

In the first, policy director Phillip Longman argues that restoring American manufacturing depends on a robust freight rail system, while also detailing how the exact opposite is taking place today as financiers radically downsize the network in pursuit of short-term profit.

In the second article, Center for Journalism & Liberty director Dr. Courtney Radsch argues that journalists, artists, and other content creators have more leverage over today’s AI developers than they might realize. “As the spread of AI makes it harder and harder to find quality data for training AI bots,” she writes.

In the third, Fredrickson sounds the alarm on how far a MAGA White House could go in curbing reproductive rights by outlawing abortion pills and approve other draconian restrictions. “There’s no need for a national abortion ban if the courts can get there under ‘constitutional law’ and thereby take the decision away from the public,” she warns.

New CJL Report on Big Tech and Media Freedom

The Organization for Security and Co-operation in Europe (OSCE) Representative on Freedom of the Media (RFoM) this week published a new report on Big Tech and media freedom by Dr. Courtney C. Radsch, the director of the Center for Journalism and Liberty at Open Markets. The report connects press freedom with the monopolization of information systems and seeks structural solutions. Specific recommendations for the OSCE’s 57 member states include regulating platform monopolies to prevent anti-competitive practices, establishing fair compensation for content creators, and supporting investigative journalism. “Expanding the frameworks and tools used by States and civil society is essential to uphold media freedom and human rights,” Dr. Radsch writes.

📝 WHAT WE'VE BEEN UP TO:

Open Markets legal director Sandeep Vaheesan published an op-ed in Project Syndicate, calling on the next presidential administration to permit independent businesses to cooperate with one another to counter the power of large corporations. “Antitrust law should no longer be used, as it has been in recent decades, to disempower small businesses, he wrote.
CJL director Radsch published a post for the Brookings Institution assessing the effects of President Biden’s pioneering Executive Order on AI over the year since it was first published. Dr. Radsch notes that Big Tech’s monopolistic practices continue unabated. “Advancing AI and integrating it into the government without any laws to ensure competition and protection of the public interest will further entrench the power of the handful of Big Tech corporations that have access to the data, compute, and talent needed to develop and deploy advanced AI systems,” Dr. Radsch wrote.
Open Markets Institute’s EU research fellow Claire Lavin published an op-ed in Euractiv calling for the EU and US to coordinate in bringing Google to account for its monopolization of the adtech industry. “This fight is too important to leave to one region alone,” Lavin writes. “The U.S. and EU must work together, sharing information and coordinating remedies.”
The American Prospect published a profile by OMI reporter Austin Ahlman of Nebraska’s independent Senate candidate Dan Osborn on the eve of the 2024 election. “If he wins, Osborn’s unapologetic anti-corporate message would throw a wrench into the business-friendly approach of both parties,” Ahlman wrote.
Vaheesan appeared on a podcast in USA Today to discuss the role of property management software company RealPage in driving up rental prices, which went up nearly 35% during the last five years. “The algorithmic aspect is interesting in that RealPage is putting very powerful computers and software and a massive volume of data to do collusion in a very sophisticated and precise manner,” he said.
Japan’s leading newspaper Asahi Shimbun quoted Open Markets executive director Barry Lynn in an article on the antitrust revolution in the U.S. "Concentration of power can be dangerous for citizens, politics, and democracy," Lynn said, adding that since the founding of the country, "freedom" has not only meant freedom for citizens from the government, but also freedom from powerful corporations and wealthy individuals.
Wired quoted OMI Europe director Max von Thun on whether the EU will find an ally in the new presidential administration on regulating Big Tech. “Under Trump or really even under [former president Barack] Obama, there was this feeling that if the EU went too far, there would be a backlash from the U.S.,” explains von Thun, noting that this was at odds with aggressive antitrust enforcement by the Biden administration.
After making a back-of-the-napkin calculation, Open Markets chief economist Brian Callaci confirmed to Marketplace that McDonald’s claim of 1 in 8 Americans having at one time worked at the fast food chain was credible. He said McDonald’s message appeared to be “everyone has worked at McDonald’s as a teenager, but no one stays: they go on to better things,” which he noted was being used to justify low wages.
Open Markets Institute’s food program director Claire Kelloway was quoted in the Voice of Alexandria saying the best way to address consolidation is by aggressively going after violations of antitrust laws and enforcing the Packers and Stockyards Act. "There's various levels of exclusive dealing, commercial bribery, predatory marketing practices and advantages that large companies have,” she pointed out.
🔊 ANTI-MONOPOLY RISING:
The EU slapped a massive fine on Apple for violating the Digital Markets Act by failing to meet interoperability requirements. The size of the fine has yet to be determined but could amount to 10 percent of the company’s global annual revenue. (Reuters)
The EU opened a probe of mobile device glass giant Corning this week over a series of several anti-competitive agreements with manufacturers in the mobile device supply chain. (TechCrunch)
The European Commission levied a $500 million fine on Teva, the world’s biggest generic drug maker, for abusing its dominant position to delay competition to its blockbuster multiple sclerosis medicine Copaxone. (STAT)
Canada’s Industry Minister requested a formal investigation into whether rental companies used algorithmic software like RealPage to set housing prices. (Competition Policy International)
Apotex and Heritage Pharmaceuticals settled a lawsuit brought by dozens of state attorney generals accusing the drug manufacturers of colluding on the price of medicines. The two companies are expected to cooperate in the ongoing investigations into other pharmaceutical companies suspected to be a part of the price-fixing scheme. (Reuters)

📈 VITAL STAT:

$35.3 billion

The value of the proposed merger between Capital One and Discover Financial Services, currently under investigation by New York Attorney General Letitia James. The two corporations respectively have more than $9.5 billion and $6.5 billion of credit card loans in the state. (Reuters)

📚 WHAT WE'RE READING:

The Big Fix: How Companies Capture Markets and Harm Canadians — Author and researcher Denise Hearn and McMaster University’s Public Policy in Digital Society program director Vass Bednar explain the decline in competition across Canadian markets and the impact on the country’s workers and consumers. Hearn and Bednar make the case for a reconceptualization of Canadian antitrust regulation that prioritizes innovation, fair competition, and shared growth.

Order Sandeep Vaheesan’s forthcoming book:

Sandeep Vaheesan, the legal director at the Open Markets Institute, will publish his first book Democracy in Power: A History of Electrification in the United States on December 3. Vaheesan examines the history—and presents a possible future—of the people of the United States wresting control of the power sector from Wall Street, including through institutions like the Tennessee Valley Authority and rural electric cooperatives.