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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.

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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.”

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.

Reporter Ben Kahn is a graduate of University of Baltimore and the National Journalism Center. His work has appeared in Washington Jewish Week and The Center Square, among other publications. He he covered almost every beat at Broadband Breakfast.

Antitrust

Key Republican: Anticompetitive Practices of Big Tech Present a Threat to Innovation

Rep. Ken Buck said tech companies’ practices are anticompetitive and threaten innovation, free speech and national security.

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Screenshot of Rep. Ken Buck from the Heritage Foundation webcast

WASHINGTON, January 13, 2023 — Rep. Ken Buck, R-Colo., argued on Wednesday that the anticompetitive practices of large tech companies present a threat to innovation, free speech and national security — and that even Republicans who are traditionally wary of antitrust legislation should view it as a key tool for curbing Big Tech’s power.

“I’m a free market person — I apply that principle to just about everywhere — but if you don’t have a market, you can’t have a free market,” Buck said at a Heritage Foundation event. “And when Google controls 94 percent of the online searches in this country, you don’t have a free market.”

Buck said that it was the responsibility of Congress to actively shape antitrust law, rather than “leaving it up to the courts to create something over the next 30 years.”

Among the several anti-Big Tech bills that have been proposed, Buck highlighted as his priority legislation that would prevent certain companies from acting as both buyers and sellers in digital advertising markets.

The bill applies to companies that generate more than $20 billion in digital ad revenues — specifically targeting Google and Facebook — and has so far received bipartisan support in both the House and the Senate.

Tech companies have spent millions of dollars lobbying against proposed antitrust bills, making it politically precarious for some members of Congress to support them, Buck said. Still, he urged his colleagues to consider the harms allegedly caused by social media platforms.

“We know that Instagram recognized that there was body shaming going on, there was depression among teenage girls, there was a higher suicide rate among teenage girls, and they doubled down,” Buck said. “They didn’t just say, ‘We’ve got to deal with this issue’ — they decided they were going to start marketing to a younger group.”

More competition in the market could give teens and parents access to better alternatives, Buck said, but the power held by the largest platforms makes it nearly impossible for competitors to emerge.

Rep. Buck linked free speech issues for tech industry to antitrust

“How do you have free speech, how do you have competition in the marketplace when you’ve got four companies that are so big that they can wipe out any kind of competitor?” he asked.

Buck has long been a critic of Big Tech, and introduced legislation to ban the TikTok app from U.S. government devices more than a year before similar legislation was passed as part of the bipartisan spending bill in December. This decision had nothing to do with fear of TikTok as a competitor to U.S. companies, he said.

“TikTok is dangerous, not because of its competition in the marketplace — I think it’s healthy in that sense; if Microsoft or some company had bought it, I’d be all in favor of that kind of competition for Facebook — but the bottom line is [that] how it’s being used by an adversary is dangerous and concerning.”

Although the TikTok ban won broad Republican support, alongside a variety of proposals to target tech companies’ privacy or content moderation practices, many antitrust bills have been less popular.

Buck has been open about his struggles in convincing other Republicans to pursue antitrust action, telling The Washington Post in March that “the antitrust bills that we are currently considering will not move forward under Republican leadership, and that’s been a very clear signal that has been sent.”

And now that the House is under Republican control, several experts have predicted that antitrust legislation is unlikely to move forward any time soon.

In an op-ed published Wednesday, President Joe Biden called on members of Congress to overcome partisan disagreements and keep tech companies in check by passing digital privacy, antitrust and content moderation legislation.

Rep. Cathy McMorris Rodgers, R-Wash., who chairs the House Energy and Commerce Committee, responded to Biden’s comments in a statement that agreed with the need for privacy and content moderation action but did not mention antitrust.

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Antitrust

‘Time is Now’ for Separate Big Tech Regulatory Agency, Public Interest Group Says

‘We need to recognize that absolutely the time is now. It is neither too soon nor too late.’

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Photo of Harold Feld, senior vice president at Public Knowledge

WASHINGTON, June 21, 2022 – Public Knowledge, non-profit public interest group, further advocated Thursday support for the Digital Platform Commission Act introduced in the Senate in May that would create a new federal agency designed to regulate digital platforms on an ongoing basis.

“We need to recognize that absolutely the time is now. It is neither too soon nor too late,” said Harold Feld, senior vice president at Public Knowledge.

The DPCA, introduced by Senator Michael Bennet, D-CO., and Representative Peter Welch, D-VT., would, if adopted, create a new federal agency designed to “provide comprehensive, sector-specific regulation of digital platforms to protect consumers, promote competition, and defend the public interest.”

The independent body would conduct hearings, research and investigations all while promoting competition and establishing rules with appropriate penalties.

Public Knowledge primarily focuses on competition in the digital marketplace. It champions for open internet and has openly advocated for antitrust legislation that would limit Big Tech action in favor of fair competition in the digital marketspace.

Feld published a book in 2019 titled, “The Case for the Digital Platform Act: Breakups, Starfish Problems and Tech Regulation.” In it, Feld explains the need for a separate government agency to regulate digital platforms.

Digital regulation is new but has rapidly become critical to the economy, continued Feld. As such, it is necessary for the government to create a completely new agency in order to provide the proper oversight.

In the past, Congress empowered independent bodies with effective tools and expert teams when it lacked expertise to oversee complex sectors of the economy but there is no such body for digital platforms, said Feld.

“The reality is that [Congress] can’t keep up,” said Welch. This comes at a time when antitrust action continues to pile up in Congress, sparking debate across all sides of the issue.

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Antitrust

FTC Commissioner Concerned About Antitrust Impact on Already Rising Consumer Prices

Noah Phillips said Tuesday he wants the commission to think about the impact of antitrust rules on rising prices.

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Screenshot of Federal Trade Commissioner Noah Phillips

WASHINGTON, May 17, 2022 – Rising inflation should be a primary concern for the Federal Trade Commission when considering antitrust regulations on Big Tech, said Commissioner Noah Phillips Tuesday.

When considering laws, “the important thing is what impact it has on the consumer,” said Phillips. “We need to continue to guard like a hawk against conduct and against laws that have the effect of raising prices for consumers.”

Current record highs in the inflation rate, which means money is becoming less valuable as products become more expensive, has meant Washington must become sensitive to further price increases that could come out of such antitrust legislation, the commissioner said.

Phillips did not comment on how such movies would mean higher prices, but that signals, such as theHouse Judiciary Committee’s antitrust report two years ago, that reign in Big Tech companies and bring back enforcement of laws could mean higher prices. He raised concerns that recent policies are prohibiting competition rather than facilitating it.

This follows recent concerns that the American Innovation and Choice Online Act, currently awaiting Senate floor consideration, will inhibit America’s global competitiveness by weakening major American companies, thus impairing the American economy. That legislation would prohibit platform owners from giving preference to their products against third-party products.

This act is one of many currently under consideration at Congress, including Ending Platform Monopolies Act and Platform Competition and Opportunity Act.

Small businesses have worried that by enacting some legislation targeting Big Tech, they would be impacted because they rely on such platforms for success.

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