WASHINGTON, June 13, 2018 – Was a federal district court judge’s decision to permit AT&T’s merger with Time Warner a victory for the rule or law over politics – or was it instead another defeat for the consumer at the hand of ever-consolidating mega-entities?
That question permeated Tuesday’s conference on “Free Speech and Democracy in the Age of Platform Monopoly” hosted by the Open Markets Institute think tank – even before Judge Richard Leon ruled late in the date that AT&T may consummate its merger over the objection of the Justice Department.
Speaking in the morning, before Leon’s ruling, Assistant Attorney General Makan Delrahim said, “The career staff put together a straightforward consumer welfare analysis that showed that merger would unlawfully raise prices for cable TV subscribers, and harm online innovation.”
Delrahim called the merger an “anti-competitive acquisition,” accused AT&T of using it as a way to monopolize the pay TV business.
Rule of Law, or political meddling in antitrust enforcement?
The Trump administration position was supported by many left-leaning consumer groups, even as they warily considered the role that President Trump’s well-known aversion to CNN – which is owned by Time Warner – might have played in the decision to sue AT&T.
On the other hand, free market groups such as TechFreedom celebrated Judge Leon’s decision. President Berin Szoka released a statement celebrating the outcome of the merger case, and accusing the Trump administration of meddling in the law.
“Today’s decision is a victory for the rule of law,” said Szóka. “This lawsuit was never intended to do what antitrust is supposed to do: protect consumers from the abuse of market power…The Trump [Department of Justice’s] legal and economic theories were so baseless that the court went out of its way to urge the DOJ not to appeal or even to seek a stay upon appeal. This wasn’t a remotely political decision: it was simply an application of well-established antitrust principles to the facts of this case.”
“At least in antitrust law, the courts, not Trump officials, will have the final say on what the law really is,” said Szóka.
Dancing around the elephant in the room: Donald Trump’s personal vendettas
Delrahim denied any political involvement in Justice Department’s decision to bring the AT&T merger to court – and even expressed the importance of not allowing political viewpoints to interfere in antitrust enforcement.
Beyond his argument that this particular merger might squeeze out competition, Delrahim expressed concerns over the political landscape negatively influencing decisions in antitrust cases.
“When we were preparing our complaint in the AT&T Time Warner case, we received a curious request from an unnamed state antitrust enforcer,” Delrahim said.
“They told us that they would join our case if we provided written assurances that no divestiture of that transaction would go to Fox, or to Rupert Murdoch. They actually wanted to direct a divestiture based on the viewpoint of the buyer, not on what benefits competition or consumers, as defined by the consumer welfare standard.”
”We of course rejected that request because it would have been unconstitutional,” Delrahim said.
“Is that really where we want antitrust enforcement to go? To pick winners and losers based on ideology?” Delrahim said. “Political positions should have no role in determining the propriety of antitrust enforcement action.”
(Photo of Delrahim speaking at an antitrust division roundtable courtesy Department of Justice.)
Consolidation, Bloat, and a Waning American ‘Brand’ Hurt the Economy, Says Tim Wu
He argued that fundamental changes must be made to restore peoples’ faith in an American system that works for everyone.
WASHINGTON, January 26, 2022 –White House Special Assistant Tim Wu said Wednesday that the U.S. economy is over-consolidated and bloated in the middle.
Speaking at an event hosted by the Institute for Local Self-Reliance, Wu, a member of the National Economic Council with a portfolio over Technology and Competition Policy, argued that that the “American dream” has suffered major setbacks in recent decades.
Wu, who is credited with coining the term “net neutrality” and a longstanding critic of telecom monopolies, has more recently become an outspoken critic of big technology companies.
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“We can see very vividly how fragile this concentrated economic system we built has been and how poorly it is working for the whole country,” Wu said.
“Our country has become too centralized. It is too national in its character – in terms of where businesses are location – too centered on consumption, as opposed to production.
“Too many of the [economic] returns go to too few people who often live very far away from the communities they serve.”
Hearkening to the post-World War II decades in which Western nations endorsed significant government intervention in the economy as part of social democracy, Wu said that America is “relearning the virtues and merits of a mixed economy – that is the truer American tradition of small and medium business – market structures where [people] can all survive and prosper; what [President Joe Biden] calls ‘an economy that works for everyone.’”
Can elements of a new form of social democracy be revived in a technology-drenched age?
Wu distilled his criticisms to three primary points: Too many industries have become too consolidated, a bloated “middleman” economy has emerged, and the “American brand” has diminished.
“We have all seen so many industries consolidate into just the ‘big three’ or ‘big four,’” Wu said. “That is a traditional problem that I think extracts a lot from the economy.”
Wu went on to explain the “middleman” economy – a rise of a “highly concentrated middle layer” across many industries. This bloat on the processing end takes place somewhere between the inception of a product or service and the consumer is extracting too much revenue, Wu said.
“When you think about monopoly – which is just high prices – it leads to this problem where the middlemen have power over their suppliers and are able to squeeze their suppliers and also often able to squeeze their employees,” Wu said. This is “a new kind of problem for the economy, and one that we need to face.”
What is the ‘American brand’?
Wu’s final point related to what he referred to as the “American brand.”
“There has been a real sense that the sense of opportunity that has been the ‘American brand’ has diminished,” he said. “The statistics are a little depressing that confirm this.”
75 percent of U.S. industries are controlled by fewer companies than they were 20 years ago, Wu said. He pointed to mergers that skyrocketed in the 1980s and predicted that 2022 will feature a record number of mergers.
“These are real challenges and I just want to assure you that the administration of the White House is very focused on [them] and we see it not just in terms of the economy, but in terms of the Democratic soul of this nation,” Wu said. “Freedom and opportunity are not trivial things when it comes to describing what democracy is all about.
FTC Mum on Microsoft-Activision Deal, Proposes Review of Merger Guidelines
The deal would elevate Microsoft in an even more favorable position in the games-as-a-service market.
WASHINGTON, January 24, 2022 – As Federal Trade Commission Chairwoman Lina Khan does media rounds this past week, she has refused to comment on last week’s news that Microsoft has agreed to buy video game making giant Activision-Blizzard for nearly $70 billion.
As per policy, the FTC and the Department of Justice, which on Tuesday jointly held a press conference on merger reform on the same day of the announced consolidation, said they could not comment on the deal, which would increase the Xbox maker’s gaming market share and allow it to better compete with Japanese behemoth Sony.
During the press conference, Khan, installed as chairwoman in June as an already outspoken critic of certain big tech practices, announced that the organizations would be launching a review of merger guidelines. Khan stressed that the current guidelines do not adequately protect consumers and promote competition in the era of the digital economy.
“While the current merger boom has delivered massive fees for investment banks, evidence suggests that many Americans historically have washed out with diminished opportunity, higher prices, lower wages, and lagging innovation,” she said. “These facts invite us to assess how our merger policy tools can better equip us to discharge our statutory obligations and halt this trend.”
She reiterated those goals on a CNBC interview on Wednesday. The purchase of the highly influential Call of Duty franchise maker will have to go through her office. It also presents another stress test for the office, as it is already engaged in an existing lawsuit against Facebook practices. Both Facebook and Amazon have asked for Khan to be recused from investigations in their companies because of her past positions on them.
The deal would significantly expand Microsoft’s Game Pass platform, which offers free games to play for a monthly subscription. Microsoft announced on the day of the proposed deal that Game Pass surpassed 25 million subscriptions.
“Upon close, we will offer as many Activision Blizzard games as we can within Xbox Game Pass and PC Game Pass, both new titles and games from Activision Blizzard’s incredible catalog,” said Microsoft Gaming CEO Phil Spencer said in a statement.
Despite its numerous successful intellectual properties, Activision Blizzard has been marred with scandal in recent years. In 2021, the company was sued by California Department of Fair Employment and Housing for promoting a “frat boy” culture, whereby female employees were not only allegedly discriminated against, but also subjected to sexual assault and misconduct.
American Innovation and Choice Online Act Advances to Senate Floor With Bipartisan Alliance
Klobuchar was able to rally Democrats and Republicans to support her bill, but its future depends upon a shaky alliance.
WASHINGTON, January 21, 2022 – Senators on the Senate Judiciary Committee have formed a tenuous, bipartisan alliance to curb allegedly anticompetitive behavior by large tech companies.
During a Thursday markup, the Senate Judiciary Committee voted 16-6 to send the American Innovation and Choice Online Act, S. 2992, to the Senate floor. The bill would prohibit certain companies with online platforms from engaging in behavior that discriminates against their competitors.
There is a laundry list of violations and unlawful behaviors enumerated in the bill, including unfairly preferencing products, limiting another business’ ability to operate on a platform, or discriminating against competing products and services.
This bill would only apply to companies with online platforms that meet one of the following criteria:
- Has at least 50,000,000 United States-based monthly active users on the online platform or 100,000 United States-based monthly active business users on the online platform
- Is owned or controlled by a person with United States net annual sales or a market capitalization greater than $550,000,000,000, adjusted for inflation on the basis of the Consumer Price Index and is a critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform
Sen. Amy Klobuchar, D-Minn., the sponsor of the bill, referred to the bipartisan effort as “the Ocean’s 11 of co-sponsors,” featuring a diverse line-up of legislators, from Sen. Josh Hawley, R-Miss., and Sen. John Kennedy, R-La., to Sen. Dick Durban, D-Ill., and Sen. Richard Blumenthal, D-Conn.
Senators embrace specific and direct targeting of Big Tech
Klobuchar spoke directly about the need to target large companies, “We have to look at this differently that just startup in a garage – that is not what they are anymore. They may have started small, but they are [now] dominant platforms,” she said. “For the first time, the monopoly power is going to be challenged in what I consider to be a smart way.”
At the outset of the meeting, there were more than 100 amendments proposed by members of the committee, but by its conclusion, more than 80 of them had been withdrawn.
One of the amendments that worked its way into the bill was a markup that exempted subscription-based services from complying with the legislation, allowing services like Amazon Prime and Netflix to promote their own content above others’.
“The bill strikes the right balance between preventing the conduct that hurts competition, while also ensuring that platforms can continue to provide privacy and data security features to their users, compete against rivals in the United States and abroad, and maintain services that benefit consumers,” Klobuchar said.
A fragile alliance between read-meat Republicans and progressive Democrats
Though there were big names on both sides of the aisle supporting the bill, the alliance seemed fraught. Despite being supportive of the bill, Kennedy made it clear that his support was conditional. “I am a co-sponsor of this bill, but this bill is going to change – it is going to change dramatically,” he said. “I hope to be in the room when those changes are made, otherwise I will be off this bill faster than you can say ‘Big Tech.’”
Some of Kennedy’s criticisms harkened back to Section 230 issues raised by former President Donald Trump – calling some of the targeted companies “killing fields for the truth,” and stating that “their censorship is a threat to the first amendment.”
Despite his criticisms, Kennedy echoed other senators, both Republican and Democrat, who emphasized that they did not want the perfect to become the enemy of the good. “All we have done [for five years] is strut around, issue press releases, hold hearings, and do nothing. So, this is a start.”
Klobuchar also received push-back from members of her own party, with Sen. Dianne Feinstein, D-Calif., stating that she was critical of the bill because it is designed to specifically target large tech companies, many of which are based out of California (though she ultimately voted to advance the bill to the Senate floor).
Hawley rebuffed Feinstein in his comments, stating that he supports the bill for the same reason Feinstein refuses to. “[Feinstein] pointed out – I think rightly – that this bill is very specific and does target specific behavior – anti-competitive behavior – in a specific set of markets. I think that that’s a virtue and not a vice.”
The measure must be passed by the full Senate, as well as the House, before it goes to the president for his signature.
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