Editors’ Briefing: This Week in Political Economy (November 18-December 2)

New report reveals America’s “concentration crisis”; antitrust enforcers and regulators in Europe are going after Amazon, Facebook and Google; Facebook’s ongoing Soros debacle; and why is US life expectancy in decline?

 

 

Makan Delrahim

 

The Monopolization of America

 

  • CNN reported this week that President Trump is considering Assistant Attorney General Makan Delrahim, head of the Justice Department’s Antitrust Division, as his next attorney general. In a speech earlier this month, Delrahim surveyed recent cases brought by the DOJ’s antitrust division, describing 2018 as a “busy year.” The Financial Times, however, reported this week that antitrust enforcement under Trump has fallen from its already low levels under President Obama to its slowest rate since 1972. “The slowdown in fiscal year 2018 followed a similar drop in cases filed the previous year, suggesting a prolonged lull in new indictments of criminal cartels as long-running investigations into the auto parts industry and financial services wind down,” writes the FT’s Kadhim Shubber.

 

  • The Open Markets Institute released an incredibly useful data set on America’s “concentration crisis,” showing the many, many US industries now dominated by monopolistic corporations. “Corporate bigness doesn’t need to be a partisan issue,” writes the New York TimesDavid Leonhardt in his coverage of the report. “It’s time for another political movement,” he writes, one that borrows from the Boston Tea Party, Thomas Jefferson, Teddy Roosevelt “and the other defenders of the economic little guy.” In an interview with Vox, OMI’s deputy director Sarah Miller described the new tool as “an effort to really introduce the fact that you go to the store, you see all of these brands, but guess what? They’re all being operated by the same companies.”

 

 

  • The consumer welfare standard—the core of US antitrust enforcement for the past 40 years—is one of the main contributors to our current age of corporate monopolies, argues Jonathan Tepper in the Financial Times. “American presidents once took pride in ‘trust busting’ and taking apart monopolies. But over the past 40 years, a legal theory has taken hold that has led authorities to wave through giant mergers and given far too free a hand to dominant companies,” he writes.

 

Tepper and his co-author Denise Hearn contributed a piece on Big Tech’s “kill zone” for ProMarket this week. Don’t miss it.

 

  • Also this week, the Trump administration eliminated the Grain Inspection, Packers, and Stockyards Administration (GIPSA), the agency within the US Department of Agriculture responsible for enforcing antitrust laws in the meatpacking business and protecting farmers from predatory behavior.

 

  • A poll conducted by Public Policy Polling in September suggests that the vast majority of Americans are “gravely concerned” about America’s increasing monopolization, reports David Dayen in The Intercept. According to the survey, 76 percent of respondents were either somewhat or very concerned that “big corporations have too much power over your family and your community.” 88 percent were at least somewhat concerned and 71 percent were “very concerned” about the power that big corporations wield over politicians, according to the report. “The poll numbers suggest broad bipartisan support for anti-monopoly politics, which has been largely untested as a front-line platform since Woodrow Wilson’s 1912 presidential campaign or perhaps Franklin D. Roosevelt’s condemning of ‘economic royalists’ in 1936,” Dayen writes.

 

  • As part of its multi-part special report on corporate monopolies, The Economist zeroes in on the three main obstacles hindering effective antitrust enforcement in the US: a lack of intellectual curiosity, lack of clarity about what constitutes “competition,” and the capture of competition regulators by big business. “Competition regulators have a dated view of the economy and, in official forums about how to reform competition policy, lawyers acting for private firms are given undue weight. Academics are paid as witnesses or are sponsored by firms without disclosing it. Officials rotate between the agencies and law firms which defend big companies. Consumers rarely have a voice. In America things have slipped so badly that a material conflict of interest is not considered a disqualifying condition, or even a relevant consideration, for someone to pronounce on antitrust policy and be taken seriously,” the magazine writes.

 

  • In The Nation, Nathan Schneider argues that antitrust enforcers should allow smaller companies to cooperate in order to challenge the power of giant corporate entities like Facebook.

 

  • From Matthew Buck in the Washington Monthly: “America’s railroads are far more monopolized and even less regulated than they were a century ago.”

 

European Regulators Zero in on Tech Platforms

 

  • No matter how you slice it, this was a bad week for dominant tech platforms. In an extraordinary move, the British Parliament seized internal Facebook documents “alleged to contain significant revelations about Facebook decisions on data and privacy controls that led to the Cambridge Analytica scandal,” reports The Guardian’s Carole Cadwalladr. Earlier this week, a Facebook vice president was grilled by members of nine different parliaments about the company’s failure to prevent the spread of fake news. In Europe, the EU’s competition regulators are looking into Google again, this time asking Google’s rivals if the company has unfairly demoted local search competitors. The move follows a complaint by Yelp and other Google rivals and could lead to a fourth antitrust case against the internet giant, according to Reuters. The news about the potential EU investigation came days before Google CEO Sundar Pichai will face the House Judiciary Committee to answer questions regarding potential bias in search results. Consumer advocacy groups from four European countries have also filed complaints against Google, alleging that Google violated the EU’s GDPR regulations. And antitrust authorities in Germany have launched an investigation into Amazon’s treatment of third-party sellers on its platform, focusing on its “double role” as both the country’s largest retailer and also the biggest online platform for smaller online retailers.

 

  • The ongoing scandal over Facebook’s relationship with the GOP-linked (and reportedly also Tory-linked) opposition research firm Definers Public Affairs continues to develop, as the New York TimesNicholas Confessore and Matthew Rosenberg and BuzzFeed’s Ryan Mac reported that Facebook COO Sheryl Sandberg herself asked the company’s communications staff to research George Soros’s financial interests. While Facebook continued to claim that Sandberg had no knowledge of Definers’ attempts to smear Facebook critics by linking them with Soros, the company did acknowledge reports that Sandberg requested information on Soros following critical comments he made about the company during the World Economic Forum in January.

 

  • On Thanksgiving eve, Facebook also confirmed the Times’ earlier reporting and acknowledged that it hired Definers to push negative stories about the company’s critics. Facebook’s outgoing communications and policy chief, Elliot Schrage—apparently the company’s official “fall guy”—said he hired Definers in order to help protect Facebook’s image. CNBC has a useful breakdown of how Facebook’s explanations regarding its relationship with Definers developed over the past two and a half weeks.

 

  • The latest revelations have focused attention on Sandberg, who is widely credited for Facebook’s revenue growth and who in recent years served as the company’s public face. Facebook employees interviewed by Bloomberg have blamed Sandberg for Facebook’s current troubles, claiming that “at times, she prioritized her own brand over Facebook’s; surrounded herself with trusted lieutenants who filtered bad news; and didn’t address problems quickly enough or treated them as perception issues not opportunities for real change.” In Vanity Fair, Duff McDonald argues that Sandberg’s Harvard Business School education contributed to her “[lacking] a functioning moral compass.”

 

  • Despite the outrage surrounding its ties to Definers, TechCrunch’s Taylor Hatmaker reports that Facebook has hired yet another strategy firm with deep ties to the GOP. While its work with Targeted Victory isn’t cause for controversy, “Facebook’s work with Republican groups does call into question the ongoing narrative that Facebook operates with an anti-conservative bias,” he writes.

 

  • Internal Facebook emails revealed by the Wall Street Journal show that several years ago, Facebook considered charging advertisers and other companies for access to user data. The emails, explain Deepa Seetharaman and Kirsten Grind, are mostly from 2012 to 2014 and “far from conclusive,” but they do show Facebook discussing ways to monetize user data that are markedly different than Mark Zuckerberg’s approach to the monetization of user data during his Congressional testimony in April, in which he said: “I can’t be clearer on this topic: We don’t sell data.”

 

  • In Bloomberg, Joe Nocera endorses what he calls the “easiest fix” for Facebook’s problematic behavior: breaking it up.

 

  • Meanwhile, Facebook will reportedly release a progress report on its investigation into civil rights violations on the platform, following a meeting between Sandberg and the civil rights group Color Of Change, one of the groups targeted by Definers for its criticism of Facebook.

 

  • As Amazon charges full speed ahead in its quest to become the next online advertising giant, it also faces a revolt by some third-party sellers due to its attempts to tighten control over how retailers sell their products on its platform. “Over the past few months, Amazon has applied intense pressure to consumer brands across different product categories—seizing more control over what, where and how they can sell their goods on the so-called everything store,” reports Recode’s Jason Del Rey. According to the report, Amazon is “telling these brands that they can no longer sell directly to customers as an independent seller on the Amazon platform for third-party merchants known as the Amazon Marketplace,” instead notifying them that “they can only sell items to Amazon’s retail group at wholesale cost, and let Amazon act as the seller and determine the retail cost.”

 

  • On Monday, the Supreme Court heard oral arguments in the antimonopoly lawsuit Apple v. Pepper, which claims that Apple artificially inflates the prices of apps by forcing developers to go through the iOs App Store and then taking a 30 percent commission on sales. “The justices, including several of the court’s conservatives, seemed sympathetic to the arguments presented by the iPhone owners who brought the case,” reported CNBC. The justices seemed particularly skeptical of Apple’s claim that it merely serves as a “pipeline” connecting consumers with app developers, while two of the court’s conservative justices, Samuel Alito and Neil Gorsuch, suggested that the Supreme Court precedent on which Apple based its argument—a 1977 ruling that determined only direct purchasers of a product can bring federal antitrust suits for overpricing—may need to be revisited in light of the changing economy.

 

  • A new report from The Intercept’s Ryan Gallagher explores efforts by Google executives to sideline the company’s privacy and security teams during the development of the company’s controversial censored Chinese search engine (also known as “Dragonfly“), rushing through the normal review process and ignoring human rights concerns expressed by employees. “Google’s leadership considered Dragonfly so sensitive that they would often communicate only verbally about it and would not take written notes during high-level meetings to reduce the paper trail,” said sources quoted by Gallagher. Jack Poulson, a former research scientist at Google who resigned in protest over the Dragonfly project, took to The Intercept to publicly call the company to give up the project. Meanwhile, CNBC reports that some Google employees are considering a strike. 

 

Brexit, Opioids and Predatory Lenders

 

 

  • German authorities conducted a two-day raid on Deutsche Bank’s offices as part of an investigation into whether the bank helped clients launder money through offshore tax havens. Deutsche Bank’s CEO Christian Sewing said the two employees being investigated as part of the probe should not be “prejudged” until proven guilty. The latest scandal puts a dent in Sewing’s efforts to rehabilitate the bank’s reputation. 

 

  • As Theresa May struggles to sell her unpopular Brexit deal at home and abroad, the EU is saying: it’s either May’s deal or bust.

 

  • From Motherboard: US wireless data prices are among the most expensive on earth.

 

  • A Miami Herald investigation by Julie K. Brown detailed how Labor Secretary Alexander Acosta got alleged serial sex abuser Jeffrey Epstein “the deal of a lifetime” back when he served as a federal prosecutor in Miami in 2008, leading Democratic lawmakers to call for a DOJ investigation into the allegations.

 

  • From Bloomberg: Meet New York City’s highest-earning official. He’s a debt collector for predatory lenders.

 

  • From the Washington Post: US life expectancy declined again in 2017, a “dismal trend not seen since World War I.” A new GoodRx survey finds that more than 40 percent of Americans still struggle to pay for their medications.

 

  • Eight members of the Sackler family, which owns OxyContin manufacturer Purdue Pharma, have been sued by New York’s Suffolk County over Purdue’s role in facilitating America’s opioid epidemic. The lawsuit alleges that members of the family across three generations “actively participated in conspiracy and fraud to portray the prescription painkiller as non-addictive, even though they knew it was dangerously addictive,” reports The Guardian. According to the report, prosecutors in Connecticut and New York are also considering “criminal fraud and racketeering charges against leading family members over the way OxyContin has allegedly been dangerously overprescribed and deceptively marketed to doctors and the public over the years.”

 

  • This New York Times story by Patrick Kingsley and Benjamin Novak follows the cautionary tale of Hungarian news site Origo, once an independent source and today one of prime minister Viktor Orban’s “most dutiful media boosters, parroting his attacks on migrants and on George Soros.”

 

  • From Sludge’s Alex Kotch: disclosed tax forms reveal Charles Koch’s funding of rightwing, pro-Trump media outlets.

 

From the Law and Political Economy blog: Frank Pasquale and Sandeep Vaheesan on the uneasy case against occupational licensing.

 

Stigler Center Goings-On

 

In the first of a two-part look at global inequality, Capitalisn’t hosts Kate Waldock and Luigi Zingales talk about the upside of globalization: a decrease in income inequality between countries over the last few decades. How much of this can be attributed to China, and what was the secret to their success?

 

Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy