Welcome to The Corner. In this issue, we discuss how the misinterpretation of common carriage law by conservative courts threatens social media networks’ ability to de-platform users spreading misinformation in a case now headed to the Supreme Court. 

Will the Courts Botch Reform of Big Tech Monopoly Power?

Karina Montoya

After Twitter “de-platformed” former president Donald Trump for spreading lies about the results of the 2020 elections, Texas passed a law banning major social media platforms from removing content based on the “viewpoint” of the user. In mid-September, the U.S. Court of Appeals for the Fifth Circuit upheld the Texas law, contradicting a previous ruling by the Eleventh Circuit that struck down a similar Florida statute. The case is now headed for the Supreme Court where the justices could well decide in a way that makes the problems of disinformation and monopoly power worse.

The Fifth Circuit opinion relied heavily on flawed application of a legal principle known as “common carriage” that has long governed essential facilities, from ferries and inns in colonial times to railroads, airlines, and communications networks in the modern era. Under common carriage laws, the owners of such essential infrastructure are not allowed to arbitrarily discriminate against different individual customers. The Fifth Circuit reasoned that the common carriage law should apply to social media networks. In doing so, it echoed the reasoning used by Supreme Court Justice Clarence Thomas, who in another case last year argued that the non-discriminatory principle embedded in common carriage law could be used to deny Big Tech the “right to exclude” certain users.

But while social media networks are indeed akin to essential facilities and should be subject to common carrier principles, it does not follow that doing so would prevent them from excluding people who spread disinformation or hate speech. Common carriage has never meant that no standards apply; it means that standards have to be announced and applied evenly to everyone. For instance, an airline can say they will not carry anyone who gets dangerously drunk, insults other passengers, or screams obscenities in a flight. But it must apply this standard to everyone, not just to individual passengers it doesn’t want to carry.

The Fifth Circuit also forgets, as does Justice Thomas, that historically Americans have never allowed common carriers to engage in adjacent lines of business. You could be a telephone company or an advertising agency, or a publisher, but you could not be all three, as Google and Facebook are. True reform of today’s platform monopolies involves not just treating them as common carriers, but breaking them up.

The Fifth Circuit’s decision also makes a hash of Section 230, the controversial provision in federal law that allows digital platforms to escape liability for the content they publish while simultaneously giving them the privilege to curate content. The ruling notes the hypocrisy of this legislation, but it favors even less platform liability. The most likely outcome of this approach is that it will continue to deepen the well-documented problems of Section 230, including the ability of extremist groups to continue spreading the Big Lie and organize racist events like the 2017 Unite the Right rally.

This week the Supreme Court agreed to hear two other cases that challenge Section 230 protections to Google, Twitter, and Facebook in relation to how they recommend third-party content that would violate the Anti-Terrorism Act. Rather than passing legislation that addresses the type of competition we want in the digital markets, along with data privacy and free speech protections that foster self-governance, we are allowing unelected judges to further erode the foundations of true democracy. 

Extreme Monopolization in Railroad Industry is a Fast Track to Nowhere Good

Last week the nation narrowly avoided a rail strike that could have brought much of the economy to a halt. The sweep of media coverage detailed how disruptive such an action would have been. But let’s not blame workers for this threat. The looting of America’s railroads by private equity has been disrupting the U.S. economy for years. And despite the Biden administration's timely and necessary intervention to prevent the strike, these poorly regulated monopolies continue to threaten our security and prosperity.

Case in point: Early this summer, Foster Poultry Farms, California’s largest chicken grower and processor, filed an emergency order with the Surface Transportation Board because the Union Pacific railroad had continually delayed deliveries of animal feed. Without the deliveries, millions of the farm's chickens and other livestock would die. The Board averted this needless destruction — and the health hazard it would have caused — by issuing an emergency order to Union Pacific to prioritize Foster Farms.

This is just one example of a general breakdown in rail service that’s featured in an increasing number of complaints to Congress and regulators by businesses who say they are being squeezed and in some cases bankrupted by these corporations. The basic equation is simple. On one side monopolies cut essential services — and even entire rail lines — in ways that strand shippers, exacerbate supply chain disruptions, and drive inflation, among other problems described below. On the other side the corporations record the highest profit margins in the entire economy.

The origins of the problem date to 1980 when President Jimmy Carter signed the Staggers Act, which largely deregulated the railroads. Since then, the industry has consolidated from around 40 major railroad companies to just seven today, four of which control some 90 percent of the freight rail market. Most regions of the country are served by just two railroad companies, while most shippers have access to only a single line.

After deregulation, railroads became highly attractive investments for Wall Street firms. Private equity and institutional investors now control all major railroads and use their power to demand cost-cutting measures to boost short-term returns even when it means stripping out capacity and losing market share to trucks. Wall Street calls this practice “precision scheduled railroading,” an Orwellian term designed to hide radical cuts in service and the firing of workers.

Over the past six years, the Big Seven carriers cut their workforces by 29 percent, amounting to a net loss of about 45,000 employees. During this same period, the railroads also diverted much of their cargo onto long-haul trucks that clog roads, burn carbon, and increase the numbers of people killed or hurt in accidents.

To fix the railroads, we'll first need to ensure that rail workers have adequate safety protections and the kind of benefits that used to make it one of the most stable middle class professions. Unionized workers have long served as one of the best checks on the predations of extractive capitalists, in part by using their power to protect the quality and reliability of essential services.

We'll also need to rebuild regulatory guardrails to curb the industry's worst practices and limit financiers' control of railroads. As Policy Director Phil Longman proposed in the Washington Monthly last year, the most effective way to accomplish that would be to make railroads live up to common carriage obligations, forcing them to accept business from everyone on equal terms. 

Another potential solution would be to nationalize the rail infrastructure and allow private companies to run just the trains alone, similar to how rail works in Europe. A Europe-like model would force rail companies to compete over services and prices, undermining the apparent benefits of Wall Street's draconian PSR system.

Last week, Longman issued a statement on the nation’s current railroad crisis, calling for solutions that would lead to a more sustainable industry, including opening it up to competition.

Open Markets Institute to Cohost Antimonopoly Conference in Brussels Next Week

The Open Markets Institute will cohost a conference entitled “How Monopoly Threatens Democracy and Security: The Next Stage of the Fight in Europe” in Brussels on Thursday, October 13. Speakers will include European parliament members Stephanie Yon-Courtin and Paul Tang and former EU antitrust economist Tommaso Valletti. In addition to working with three European antimonopoly allies to host the event, OMI Executive Director Barry Lynn will speak about the dangers to European and U.S. security and sovereignty posed by extreme concentration within industrial supply chains.

OMI Legal Director Submitted Testimony to New Jersey in Support of Non-Compete Bill

Last week, Open Markets’ Legal Director Sandeep Vaheesan submitted written testimony to the New Jersey Senate Labor Committee in support of a bill that would restrict the use of non-compete clauses and no-poach agreements in the state. Senate No. 1410 prohibits non-compete clauses for a substantial fraction of the state’s labor force (including independent contractors and low-wage workers) and limits the use of these contracts for other workers in the state. For low-wage workers, the bill also bans no-poach agreements in which employers agree not to recruit or hire each other’s employees. In his testimony, Vaheesan explained that these restraints reduce labor market mobility, thereby depressing wages and small business formation. 

OMI’s Garphil Julien Goes to National Economic Council to Work on Supply Chain Issues

Garphil Julien of Open Markets has joined the National Economic Council in the White House to work on diversifying and strengthening America's supply chains. Garphil worked with OMI for more than two years, after joining as an intern. During his time with OMI Garphil produced deeply researched reports on supply chain risk, as well as incisive commentary on pressing political economic issues. Garphil will have plenty of OMI company in the administration. FTC Chair Lina Khan, DOJ Special Counsel Sally Hubbard (pictured with Garphil on the White House lawn), CFPB Senior Advisor Alexis Goldstein, and U.S. Trade Representative Strategic Advisor Beth Baltzan all worked for OMI. In addition many long-time OMI allies are now in the administration, including Assistant Attorney General for Antitrust Jonathan Kanter, Consumer Financial Protection Bureau Director Rohit Chopra, NEC competition coordinator Tim Wu, and acting director of the Office of Information and Regulatory Affairs Sabeel Rahman, among others. 

📝 WHAT WE'VE BEEN UP TO:

• Financial Times global business columnist Rana Foroohar, who serves on Open Markets Institute’s board, released a trenchant documentary, “Homecoming: The Path to Prosperity in a Post-Global World,” exploring neoliberalism’s role in today’s broken agriculture supply chains. The documentary features Barry Lynn as well as OMI board member Joe Maxwell, president of Farm Action.

• Sandeep Vaheesan was quoted in Bloomberg Law discussing the Federal Trade Commission’s plan to hold gig companies to account for misclassifying workers. “’That puts others on notice: If you engage in similar practices, you run the risk of facing an FTC investigation or lawsuit,” said Vaheesan.

• The Minneapolis Star Tribune and Supermarket News took note of FTC Commissioner Alvaro Bedoya’s appearance at the Midwest Forum on Fair Markets, which the Open Market Institute co-hosted with the Institute for Local Self-Reliance in Minneapolis last month. Supermarket News quoted Bedoya calling for greater enforcement of the 1936 Robinson-Patman Act: “When it passed that law, Congress went out of its way to keep open the door of opportunity for the small-business man as well as large.”

• Insider Radio quoted from Sandeep Vaheesan’s written testimony to the New Jersey state legislature, which said its proposed ban on non-compete clauses was a step in the right direction as non-competes depress wages, wage growth, and small business formation.

• Congressman David Cicilline cited Open Markets among a list of coalition members who advocated for last week’s passage of the Merger Filing Fee Modernization Act, which is aimed at bolstering antitrust legislation.

  🔊 ANTI-MONOPOLY RISING:

• The House of Representatives last week passed an antitrust bill, the Merger Filing Fee Modernization Act, that would in large part target mergers by Big Tech companies. The bill would increase filing fees paid by companies to federal agencies for all proposed mergers worth $500 million or more, while reducing fees for small and medium-sized transactions. (Fox Business)

• The Korean antitrust authority carried out a dawn raid on Apple’s offices in the city of Gangnam-gu to investigate claims that Apple effectively charges some developers even more than a 30% cut, which has itself come under fire. (9to5mac)

• Congress allowed an antitrust exemption for Ivy League college athletics to expire last week, which will make the league more vulnerable to lawsuits that claim schools are colluding with one another in order to avoid competing for the most talented students. (ESPN)

  📈 VITAL STAT:

$700 Million

The amount in extra annual costs travelers will face if the proposed alliance between American Airlines and Jet Blue goes through. The Justice Department, six states, and the District of Columbia have called the alliance a "de facto merger" of the two airlines’ Boston and New York operations and have filed a case to block the alliance. (US News)

📚 WHAT WE'RE READING:

• “Merger Policy for a Dynamic and Digital Canadian Economy.” (Keldon Bester, Center for International Governance Innovation). The author explores how merger law in Canada is particularly permissive in digital markets and offers solutions on strengthening the ability of the country's competition authority to detect potentially harmful transactions in this space.

• “Political Power and Market Power.” (Bo Cowgill, Andrea Prat, and Tommaso Valletti, Centre for Economic Policy Research). This paper represents the first such study to link political influence with industrial concentration in the United States. With 20 years of data on lobby spending, mergers, and campaign contributions, the study finds evidence that mergers are associated with an increase in a firm's political influence spending.

You can find the full job listings here. 

🔎 TIPS? COMMENTS? SUGGESTIONS?

We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue. 

SUBSCRIBE TO OUR NEWSLETTER

DONATE