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Washington’s Antitrust Push Could Create ‘Chilling Effect’ on Startups, Observers Say

There is concern that an FTC focused on ‘big is bad’ will stunt economic growth in the future.

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FTC Chairwoman Lina Khan

WASHINGTON, September 23, 2021 – Advocates for less government encroachment on big technology companies are warning that antitrust is being weaponized for political ends that may end up placing a “chilling effect” on innovative businesses.

The Institute for Policy Innovation held a web event Wednesday to discuss antitrust and the modern economy. Panelists noted their concern that antitrust law may be welded with political aims that will ultimately create a precedent whereby the federal government will stifle innovators who get too big.

Jessica Melugin, the director of the Center for Technology and Innovation, said technology companies could see what’s happening in Washington – with lots of talk of breaking up companies deemed too big – and be uncertain of the future.

She noted that growing companies largely seek one of two things to make it big: grow to file an initial public offering, where the company’s shares are publicly traded, or wait until a large company buys you out. She said talk emanating from the White House and Washington generally about regulating the industry could deter larger companies from acquiring them, and onerous financial regulations could put a damper on IPO dreams.

“If you start robbing companies of other smaller companies they purchased, it’s going to give a lot of entrepreneurs and a lot of funders in Silicon Valley pause,” Melugin said. “If another path to success gets blocked – the IPO is now harder, and now acquisitions are a little bit questionable…that’s a chilling effect.”

President Joe Biden has made a number of appointments to key positions that is bringing more attention on Big Tech, including known Amazon critic Lina Khan to chair the Federal Trade Commission, which recently filed an amended case against Facebook for alleged anticompetitive practices. He also appointed antitrust expert and Google critic Jonathan Kanter as assistant attorney general in the Justice Department’s antitrust division.

FTC could set a bad precedent if focus is ‘big is bad’ 

Christopher Koopman, the executive director at the Center for Growth and Opportunity at Utah State University, said he’s concerned about the precedent Khan could set for big companies.

He said the odds are that once Khan starts, she will continue down “this path of ‘big is bad’ because that’s a prior that she has and she’s continued to operate on her entire professional career. It just so happens that the focus of this is on tech companies.

“We may be building a regulatory apparatus that will continue to burrow a hole right down the middle of the American economy before we even have a chance to ask if that’s really what we want,” Koopman added. “We just have to recognize that it doesn’t matter, really, who is running the FTC – once we tell the FTC to go break up big companies, they’re going to go break up big companies.”

And the concern for Carl Szabo, vice president and general counsel of lobby group NetChoice, which advocates for less government regulation on the future of technology, is not just a domestic problem, but an international one, too.

“I really do worry about us shanking our innovation and essentially giving a free kick to our competitors and that seems to be what we’re doing,” Szabo said. “Right now, we lead the world.

“This is an international issue, this is a national issue, and we really need to – whether Conservative or Democrat – as Americans we need to see the forest from the trees. And if we want to put corporations ahead of competitors and think those are good democratic values, go ahead and do it.

The House has before it six antitrust bills targeting big technology companies, which passed the chamber’s judiciary committee in June. The goal of the bills is to rein in the power of Big Tech through new antitrust liability provisions, including new merger and acquisition review, measures to prevent anticompetitive activity, and providing government enforcers more power to break-up or separate big businesses.

Federal Communications Commissioner Brendan Carr said earlier this year that Big Tech has too much influence and power, citing the ability of Apple and Google to remove applications like controversial chat website Parler from its app stores.  Carr recently recommended that Big Tech contribute to the Universal Service Fund, which supports broadband expansion in low-income and rural areas of the country, because these companies benefit from broadband.

Assistant Editor Ahmad Hathout has spent the last half-decade reporting on the Canadian telecommunications and media industries for leading publications. He started the scoop-driven news site downup.io to make Canadian telecom news more accessible and digestible. Follow him on Twitter @ackmet

Antitrust

Former Federal Trade Commission Chairman Says Biden is Inappropriately Exhorting the Agency

Former Chairman William Kovacic said that Biden’s direction of the FTC raises expectations for the agency.

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Photo of George Washington University professor William Kovacic giving a lecture in 2017 from the university

WASHINGTON, January 28, 2022 – A former Federal Trade Commission chairman criticized the Biden administration’s direction of the FTC to accomplish the president’s antitrust goals.

At a Wednesday forum of the Mercatus Institute, former FTC Chairman William Kovacic criticized Joe Biden’s “instruction, direction, and exhortation” to the FTC, which is an independent agency and not part of the executive branch.

In July, President Biden directed regulators to craft rules preventing manufacturers like Microsoft and Apple from restrict consumers’ ability to fix their own devices. After the FTC voted unanimously to increase its enforcement against “right to repair” restrictions, both Microsoft and Apple announced plans for consumers to repair their own products.

Kovacic said that Biden almost appears to have the attitude that he “gave [the FTC and DOJ] an assignment” to advance the Biden administration’s consumer protection goals.

Then imagining that he was arguing from the perspective of the Biden administration, Kovacic said Biden could argue that he gave the FTC “an assignment to work on those guidelines and an exhortation to the FTC to get the work done,” as opposed to specific marching orders on the topics.

Mismatched capabilities at the FTC

Kovacic, who served as a commissioner at the FTC beginning in 2006, and who chaired the agency from 2008 to 2009, said the FTC has a history of mismatching its commitments with its capabilities.

In developing consumer protection programs, currently a professor of law at George Washington University, said the FTC often fails to ask “basic questions about who would do it, how long it would take, how much it would cost, and whether or not the institution has the credibility or capacity” to administer successful programs.

Kovacic said that in order to achieve a successful regulatory agenda, there must be a “stability of perspectives” that will endure across administrations.

Policymakers should be mindful not to abandon the resistance from total regulatory overhaul that he said “afflicted” his predecessors as chairs of the agency.

“Everybody will step forward and say, ‘I have my list.’ I suspect the Commission already is getting a letter each day from members of Congress saying, ‘here’s another one.’”

Recalling the many prior presidents’ push for regulators to control petroleum prices – including by President Biden in November – Kovacic said the FTC can’t always deliver.

“Whenever there’s going to be a problem the new leadership, seen as competition policy superheroes, will be exhorted to do something, and it will not be an adequate response to say, ‘we’ve already got a lot on the agenda, we’ll get to it when we can.'”

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International

Facebook is Failing Iranians, and Iran’s Leaders Are About to Launch a Censored Internet

Social media platforms are harming Iran due to their ignorance of Iranian culture and the nation’s primary dialects.

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Photo of Mahsa Alimardani, Iran program officer for Article19, from March 2018 by ITU Pictures

WASHINGTON, January 28, 2022 – A lack of cultural understanding by Facebook, Instagram, and other social media platforms is a prevailing reason for inaccurate content moderation in Iran, Middle East experts said.

Moreover, and they said, Iran’s proposed international internet replacement, the National Information Network, is dangerously close to coming into effect.

Speaking at a Thursday event of the Atlantic Council designed to draw attention to the current status of social media in Iran, a human rights expert said that Big Tech’s chronic misunderstanding of the Persian language leads to censorship of content that is either entertainment-based or posted by Iranian activists.

Panelists at the event also highlighted a new report “Iranians on #SocialMedia,” as the inspiration for the discussion.

Facebook “needs someone who actually understands what is going on on the ground,” claimed Simin Kargar, a human rights and technology research fellow at Digital Forensic Research Lab. Because the company don’t employ or contract with such people, said Kargar, the platform and its sister Instagram are inappropriately censoring posts in the country.

Because of the platforms’ negligence in understanding and adapting to local concerns, the Iranian people are not benefiting from the internet.

And – because Iran also heavily monitoring and censoring the internet within its borders, the Iranian people end up being hindered by the double-whammy of Iranian and Facebook censorship, Kargar said.

Iranian censorship and Facebook censorship

Mahsa Alimardani, a researcher with the human rights organization Article19, agreed that misconceptions due to language are a dangerous foe. She made this comment when asked what America can do to help and whether American sanctions have played play a part in the rise in content moderation.

All panelists at the event said that while American sanctions against Iran impact the internet in the country, they are not responsible for what is currently happening in Iran.

However, Alimardani also blamed Meta, the new corporate name for the company that runs Facebook and Instagram, for improper and excessive content moderation.

She said Facebook currently flag anything related to the Iranian guard after the Trump Administration created a list of dangerous people that should be restricted on social media. She disagreed that the Islamic Revolutionary Guard Corps should be listed as a foreign terrorist organization.

Is the National Information Network a new model for authoritarian regimes?

The National Information Network, the new censored internet that Iran is currently working to implement, had been planned to launch in March. Alimardani said she believes that the release will be postponed because of disagreements about who within the government will control content moderation, and the impact the firewall could have on Iranian tech companies.

Alimardani highlighted the unique nature of the Iranian law that created the national internet. Instead of being voted on by the Iranian Parliament, the legislative body deferred action on the creation of a permanent national internet only until after an experimental period with the firewall, she said.

Yet the government has been pushing its own online streaming and video platforms. These platforms are part of the government’s attempt to incentivize an Iranian national “internet.”

Throwing cheap broadband into a censored internet to sweeten the pot?

Essentially, said Kargar, the government is promising more bandwidth at a lower cost through the National Information Network. The new network is also appealing to Iranian consumers because the NIN will primarily be in the country’s major dialect.

Holly Dagres, a nonresident fellow with the Atlantic Council’s Middle East Programs and the author of the “Iranians on #SocialMedia”, also spoke on the NIN. She said it would take Iran back to the Middle Ages, and also limit communication with other Iranians and with the outside world.

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Antitrust

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.

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Photo of Tim Wu from January 2017 on Wikipedia Day used with permission

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.

See also:

“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.”

ILSR’s Stacey Mitchell and Tim Wu.

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.

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