ISDS rules give special rights to multinational corporations that are not available to domestic businesses. They provide corporations with the ability to sue a government for compensation outside of the countries’ domestic legal and court systems. ISDS claims are often in the millions or billions of dollars. An unaccountable three-person tribunal decides the fate of each case. The ISDS regime has been especially detrimental to public health, climate and environmental protections, Indigenous land rights, financial regulations, and democratic sovereignty.

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The paper describes a comprehensive framework for evaluating competition policy, which has been previously published by CFA.^[3]   The framework is based on the works of Louis Brandeis, Joseph Stiglitz and the structure-conduct-performance paradigm that produced the uniquely successful American political economy of the quarter century after World War II.

The paper adds a contemporary updating of that framework by Neo-Brandeisians (Tim Wu and Lina Kahn).  It shows that the 2023 Revision is a return to traditional values in antitrust, values that seek to ensure that the 21^st-century economy returns to the path of competition that produced the remarkable success of the past.

The paper reviews the clear evidence of the failure of lax antitrust and weak competition policy under a 40-reign of ill-considered precedent driven by a misguided economic theory of market fundamentalism that dominated the period from the first revision of the Merger Guidelines in 1982.  The analysis of that failure is described in three chapters that cover three different, but harmful merger waves.

• Mergers in “traditional” sectors that led to excessive concentration in hospitals, airlines, railroads, retail, and the economy in general.
• Mergers that squelched competition in communications, including Business Data Service on which many businesses have come to rely in the digital economy, Broadband Access Service, Wireless, and Cable services.
• The tsunami of mergers involving Big Data Platforms (Google, Amazon, Facebook, and Apple) has resulted in dominant firms abusing bundles of services that lock consumers in and competitors out.

The important changes in the 2023 Revisions to the Merger Guidelines respond to this long record of inadequate antitrust enforcement in two primary ways.

First, with respect to traditional horizontal mergers, where merging firms are in direct, head-to-head competition,

• The guidelines return to the pre-2010 thresholds on mergers that raise anticompetitive concern (Guidelines 1, 2, and 3).
• The Guidelines emphasize the risk of coordination (Guideline 3) and the importance of potential competition (Guideline 4)
• There is a strong indication that the agencies will, in fact, be stricter about the impact of mergers. The 2023 Revisions use stronger and very traditional language throughout the Revision in describing the procompetitive purpose of merger review, particularly in how “relevant markets” will be defined for purposes of merger review (Section II).
• The 2023 Revisions also go to great lengths to identify the heavy burden that the merging parties will bear in bringing forward excuses and explanations, like efficiency gains, to rebut the obvious negative impact of an increase in concentration that the merger creates. The agencies will be appropriately skeptical of these rebuttable presumptions.  (Section III on rebuttable presumptions)

Here it is important to keep in mind that this Guideline merely triggers scrutiny.  Every merger that is scrutinized, however, is not challenged.  Most challenges involve mergers that involve much higher levels of concentration.  Hopefully, the antitrust authorities will take their own Guidelines more seriously.

Second, and of equal, if not greater, importance, the Guidelines take on the unique challenge that excessive concentration and abuse of monopoly power that the new, digital economy poses.  Critics of lax enforcement have raised many of these concerns in the past.

• The Revision directly addresses vertical and conglomerate mergers where bundles create a barrier to entry for competitors or exit for consumers (Guidelines 5, 6 and 7).
• They explicitly raise concerns about multisided platforms and monopsony (buyer market power) (Guidelines 10 and 11).
• They encourage the agencies to address trends, insisting that they should no longer be blinded by that failure to “see the forest for the trees: (Guideline 8, 9).

The Guidelines make it clear that the antitrust authorities will not allow the merger wave that has swept the Big Data Platforms into dominance to continue.  They could do not less.  However, the Guidelines are also an indicator of how the agencies will attempt to reverse past mistakes.

• They recognize the new sources of market power in vertical and conglomerate mergers that have thrived on the bundling around a core of “must have” services that have enabled each Big Data Platform to achieve dominance in their specialized area.
• They also note that the key to that dominance has not been the simple “economics” of digital platforms, it has relied on anticompetitive conduct that has raised switching costs, locking consumers in and competitors out.

It has been clear for over two decades that it is plain old anti-competitive practices that are the glue that holds the dominance together.  As we concluded in response to the first major antitrust case of the digital age, the complaint against Microsoft^[4]:

Because the nature of the industry was not sufficient to entrench its monopoly, Microsoft resorted to repeated, well-documented and protracted campaigns of anti-competitive behaviors to squash its competition… foreclosing the market to competing products… making sure that the dominant browser was explorer, not Navigator… Microsoft should never have threatened to or actually withheld access to interfaces or jolted non-Microsoft products… Microsoft illegally eliminated competition to defend and extend its monopoly and imposed a heavy price on the public.  Consequently, the application of traditional antitrust rules will achieve exactly the reverse of what Microsoft claimed it would – it will promote innovation by allowing potential competitors, who would otherwise be quickly eliminated by the giant’s anti-competitive behaviors, to have a fair chance to enter and eventually discipline the price and quality of Microsoft’s products^[5]

Unfortunately, this 20-year-old precedent was never taken up by the courts or the antitrust authorities who took an extremely pro-business approach and put antitrust enforcement into a “deep freeze.”^[6]  This citation underscores the fact that the proposed Guidelines support every one of their recommended changes with a citation to prior cases. Almost all of these citations antedate the virtual administrative repeal of the antitrust laws by the courts in the last 40 years.  In this sense, the proposed 2023 Revisions of the Merger Guidelines are well within the tradition of antitrust enforcement and a return to the successful model competition on which the success of the American economy was built.

Beyond the technicalities of the proposed Revision of the Guidelines, the comments offer practical advice for enforcement based on the extensive review of the merger waves of the past 40 years.

• Complexity is an inevitable part of the analysis, so clear indications of how key issues, like rebuttable presumptions, will be viewed is called for and helps clarify the process.
• Anti-competitive practices have always been the core concern of procompetitive antitrust. They are more, not less, important in dynamic digital industries.
• Diversity of impacts, by location and consumer characteristics is important. Significant numbers of captives should be protected.
• The standard for how big an impact is a concern must be adjusted to reflect the harm that important groups may suffer, i.e., the average price increase is less important than the price increases for specific subgroups.
• The problem of lock in and switching costs, defined by geography in traditional industries and bundling in digital industries deserves a great deal of attention.
• Recognizing behavioral economics and its implications for manipulation and exploitation of consumers, antitrust and competition authorities must rethink their assumptions about the market. They need to build in greater protective mechanisms for consumers. This does not mean abandoning consumer sovereignty; it means insisting on stronger structures to support consumer sovereignty.
• Potential, nascent, and possible competition is critically important in digital industries. The job and burden of antitrust is not to predict future competition, but to identify and protect the possibilities for competition.
• Innovation that is transformative, not incremental, deserves much greater attention, even though it is difficult to predict. Buying up nascent competition that is innovative should be of great concern.
• Premature deregulation – the assumption the potential competitors can overcome the advantage of incumbents is mistaken. Antitrust and competition authorities should lean the other way, valuing and promoting competition, at the expense of the incumbents.
• Procompetitive, pre-emptive regulation – regulation that strives to increase the possibility of competition – is preferable.
• Recognize the importance and need for dual jurisdiction.
• Recognize that severe market failure is a key aspect of digital communications and build systems that give experts the flexibility and power to restore the balance between benefits and costs.
• Simplistic extremes like utility-style regulation or no regulation are not the answer.

[1] U.S. Department of Justice and Federal Trade Commission, 2023, Merger Guidelines, Draft of Public Comment, July 19.

[2] The tight oligopoly in communications involves high concentration, multimarket contact, technological specialization, and product segmentation, while the steroid involves their history and grounding in geographic franchise monopolies.  The tight oligopoly in the case of Big Data Platforms, involves high concentration, multimarket contact, technological specialization, and product segmentation, while the steroids are the bundle of services that they offer which are wrapped around a “must have” core.

[3] July 12, 2022: Rebooting and Recalibrating Competition Policy

September 14, 2020: Big Data Platforms, a New Chokepoint in the Digital Communications Sector

September 3, 2020: Business Data Services

August 26, 2020: Pragmatic, Progressive Capitalism At Its Best: Network Neutrality

August 13, 2020: Pragmatic, Progressive Capitalism

[4] The Guidelines invoke this case in precisely this way (Guideline 7) in connection with the entrenchment of a dominant position with anti-competitive tactics, United States v. Microsoft Corp., 253 F.3d 34, 79 (D.C. Cir. 2001) (en banc) (per curiam) (“[I]t would be inimical to the purpose of the Sherman Act to allow monopolists free reign to squash nascent, albeit unproven, competitors at will[.]”)

[5] Antitrust As Consumer Protection in The New Economy: Lessons from The Microsoft Case, Hastings Law Journal, 52: 4, April 2001, first presented at Conference on Antitrust Law in the 21st Century Hasting Law School, February 10, 2000

[6] Tim Wu, The Curse of Bigness, p.

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CFA urged the Commission to seize the opportunity to make it clear that this an instance where intellectual property and antitrust law converge so there is no conflict between the two legal standards. In doing so, it would strike a blow for competition, the best form of consumer protection, and the superior approach to defending and promoting the public interest

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“This is a vitally important piece of legislation,” said Rachel Weintraub, CFA’s Legislative Director and General Counsel, “that addresses the most important competitive problem in the digital communications sector, the abuse of market power by Big Data Platforms, which are precisely defined as “covered entities.”

“This bill seeks to reduce or eliminate abuses of market power in digital services that are widely used by consumers but have become riddled with anticompetitive practices that raise consumer costs, lower quality, deny them effective choice to meet their needs, and slow innovation,” Weintraub added. “But, it takes a balanced and cautious approach, which ensures that the platforms will continue to be able to innovate and deliver services if they can effectively compete on the merits with independent developers of applications.”

The Issue Brief is entitled Rebooting and Recalibrating Competition Policy: S. 2992, American Innovation and Choice Online Act, an Important First Step to Apply Brandeis’ Antitrust Principles to Rebuild the Uniquely Successful American Economic Model. It evaluates the legislation from the perspective of four lengthy analyses prepared by CFA of the challenges facing competition policy in the 21^st-century economy, as well as CFA’s previous testimony and Hill communications on related issues.

CFA’s analysis identifies six features of S. 2992 that embody the values expressed in over a century of competition policy in America. The 1) long history of competition policy, 2) the legislative intent of antitrust is critical to ensuring that policymakers and the public know where reformers are coming from, 3) the nature of the political economy for which reformers advocate, 4) the empirical record of the performance of the political economy is important because it shows policymakers and the public where the reformers want to go, 5) rebooting, and 6)  recalibrating competition policy (antitrust and regulation) are both important so that policymakers and the public understand what it takes to achieve the reforms that are the goal.

“We find that S. 2992 is a balanced and careful approach to an area of immense consumer activity that has not been overseen effectively since its inception by handling eight policy issues in a reasonable manner,” said Mark Cooper, Senior Fellow at CFA, and author of the underlying documents.

The report identifies the key elements of effective “recalibration,” that are needed, and which S. 2992 supplies:

• The broad agenda for legislative changes that remains within the antitrust tradition that led the economy to great heights in the “Golden Age of Capitalism.”
• Recapturing the goals of competition policy to prevent excessive concentration, which has the benefit of controlling the potential for abuse of political power and influence.
• Thresholds for review and scrutiny that are lowered and address key challenges confronted by those charged with executing competition policy.
• Allowing defendants to show that they merit an exception subject to very stringent conditions.
• Conflicts of interest and self-preferencing, which are central to the abuse of market power must be controlled. This can be accomplished without undermining the incentive of platforms to innovate and offer higher quality services to the public.
• Enhance agency oversight by providing the tools and resources necessary to effectively oversee competition and undertake new responsibilities.
• Restore effective consumer sovereignty by requiring transparency and ex ante conditions for true consumer choice.
• Dual Jurisdiction including antitrust and regulation has been successfully applied to the communications network for over a century.

“While there are other issues that need to be addressed, like privacy, data abuses and resources,” Weintraub added, “S. 2992 is an ideal starting point because it takes exactly the approach that legislating (recalibrating) competition policy should take. And, it reinforces the other “rebooting” activities being undertaken by the executive branch, independent agencies, state Attorneys General, and even private parties.”

“S. 2992 is the right approach to an important part of the problem,” Weintraub concluded. “It deserves a vote and passage in the Senate, so that the House can vote on and pass the legislation later this month.”

Contacts:
Mark Cooper, 301-384-2204
Rachel Weintraub, 202-904-4953

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Earlier, we called on Congress to take steps to end practices that block entry by independent application developers, lower consumer prices, increase consumer choice, and stimulate innovation.[1]  We based this call on an extensive analysis of the terrain of competition policy that we described in four lengthy historical papers.[2]

Based on that broad, general research, this analysis examines S. 2992, The American Innovation and Choice Online Act.  We conclude that it is a vital step toward promoting competition in the digital communications sector.  We see it as an important, cautious law to revitalize competition policy in general and antitrust in particular, after a long period of lax enforcement that put the nation’s competition laws into a “deep freeze.”

Overview of the Analysis

This analysis focuses on six lessons that are extremely important for the current debate.

• The history of the moment, and
• legislative intent of antitrust are critical to ensuring that policymakers and the public know where reformers are coming from.
• The nature of the political economy for which reformers advocate, and
• the empirical record of the performance of the political economy is important because it shows policymakers and the public where the reformers want to go.
• Rebooting, and
• recalibrating competition policy (antitrust and regulation) are both important so that policymakers and the public understand what it takes to achieve the reforms that are the goal.

The earlier analysis draws a direct link between Louis Brandeis, a leading and highly influential advocate in the formative years of pragmatic, progressive capitalism, and Joseph Stiglitz, a contemporary advocate of that approach to political economy.  It argues that the remarkably successful, uniquely American approach should be the model for the future.  The struggle to implement this model in the four decades before the Depression (1890-1930) is linked to the success of the economy during the “Golden Age of Capitalism” (1948-1972).  The Neo-Brandeisian approach to antitrust plays a key role and is very much the approach needed to revitalize competition policy at present.  Our analysis turned to the challenges of the digital economy by reviewing a number of academic studies and the ongoing activities of antitrust practitioners.  Table 1 summarizes the findings of that earlier analysis.

Actions to Revitalize Competition Policy in the 21^st Century Economy

Here we apply the general framework we developed to analyze S.2992, which should be voted on as soon as possible in the Senate.  In order to appreciate the important role that S.2992, which recalibrates the antitrust laws, can play, it is important to be cognizant of the ongoing efforts to revitalize antitrust practice.

The “rebooting” of competition policy is well underway with the Executive Order entitled “Promoting Competition in the American Economy.” The Biden Administration signaled its intention to revitalize competition policy by listing 72 specific steps that can be taken by Federal agencies to “reboot” competition policy after a long period of lax enforcement that has put antitrust into a “deep freeze.”

For example, during the Biden administration, the Department of Justice (DOJ) has challenged well over a dozen mergers, with half resulting in divestitures, several withdrawn, and the remainder pending trial.  Some of these involved “cutting edge,” challenges.  DOJ challenged a merger between the number 4 and 5 publishing firms (Penguin Random House’s Acquisition of Rival Publisher Simon & Schuster), since the Merger Guidelines clearly indicate that four is too few.  The challenge is also a pure monopsony/harm theory (never litigated as the sole basis for a merger challenge).  The United Health/Health Change merger is being challenged as an aggregation of data resulting in market power for various health insurance analytics.  The American Airlines/JetBlue merger “agreement to share slots and revenue” is being challenged as a back-door merger— in an effort to prevent more direct and indirect coordination in the airline market.  This is in addition to vigorous enforcement of existing antitrust laws in price-fixing, bid rigging, money laundering, and labor market abuses.

The Federal Trade Commission (FTC) has challenged two dozen mergers, more than half of which resulted in the withdrawal of the proposed acquisitions, in sectors that were a particular public concern, health care, pharmaceuticals, and energy.  It challenged two vertical mergers, one in key digital technologies, and one in aerospace technology.  Such challenges were almost unheard of in the prior 40 years.  Perhaps the most aggressive example is the FTC’s proposal of a series of rulemakings under authority that had been dormant for a long period of time.

State Attorneys General also pursued complaints against Facebook and Google, and many other entities for violations of antitrust laws.

A private antitrust lawsuit, important in earlier antitrust practice, but also chilled by the “deep freeze,” has challenged Apple’s practices in restricting the behavior of application developers.  The Consumer Federation of America filed an amicus brief in that case.

Senator Amy Klobuchar, Chair of the Competition, Policy, Antitrust, and Consumer Rights Subcommittee of the Senate Judiciary Committee has not only shepherded bipartisan legislation through Committee, but has also written a lengthy text that analyzes the history of and lays out an agenda for revitalizing antitrust.  She cites Brandeis a dozen times, more than any other advocate of progressive capitalism, echoing his belief in competitive markets as the key to economic success and political democracy.

Indeed, to maintain a healthy economy, it turns out we need both sensible regulation and antitrust enforcement to protect against abuses of power… It is now crystal clear that the antitrust laws must be updated and made relevant again as part of a reinvigorated American competition policy.  We need to incentivize more competition and more innovation, not less, and need to make sure that American capitalism allows all to compete.  Everyone in America deserves a fair shot – and an honest opportunity – when it comes to realizing the American Dream… [T]here must be – at all times – an appropriate balance between antitrust and regulation.[3]

The American Innovation and Choice Online Act, S. 2992, addresses the key issues in a sector of the digital economy that has not been addressed by competition policy and antitrust law.  It targets Big Data Platforms, which can abuse their market power as gatekeepers and vertically integrated firms, using self-preferencing and data to block competition from independent developers of applications.  Harming competition in this sector can raise consumer prices, restrict consumer choice, and slow innovation.  Our framework shows that the approach taken in S. 2992 is balanced, allowing platforms to develop services, without undermining competition.

1. The broad agenda for legislative changes can remain within the antitrust tradition that led the economy to great heights in the “Golden Age of Capitalism.” Congress needs to set these goals and parameters without drawing too many hard lines in a dynamic economy, which we have had and want.
2. Recapturing the goals of competition policy is also important. 2992 uses a broad economic concept to prevent concentration, which has the benefit of controlling the potential for abuse of political power and influence.  Short-term price effects on consumer welfare remain important, but in the broader long-term evaluation of the living standard of all citizens is as, if not more, important.
3. Thresholds for review and scrutiny should be lowered and address key challenges. These include: defining relevant markets rigorously and narrowly to make the thresholds more effective; defining suspect behaviors broadly to cover the problem of oligopoly and behavioral manipulation and exploitation based on the immense and recent increase in the ability to gather, analyze, and weaponize data: and ensuring competition policy has the old tools (and some new ones) to address abuse of market power.
4. Presumptions should be shifted in favor of competition. Defendants can show that they merit an exception subject to stringent conditions.
5. Conflicts of interest and self-preferencing must be controlled in a networked society dominated by digital technology, where access to the core network is essential. Where conflicts of interest are too profound to be effectively regulated, structural separations or bans are called for.
6. Enhance agency oversight by providing new tools and the resources necessary to effectively oversee competition and undertake new responsibilities.
7. Restore effective consumer sovereignty by requiring transparency and ex ante conditions for true consumer choice. The design of the consumer choice regime must reflect and address the full range of behavioral challenges that have been exploited by dominant Big Data Platforms.
8. Antitrust addresses some, but not all challenges, so structural remedies should be preferred but not required. Where behavioral remedies are necessary, regulatory agencies should take on the task of oversight.  The dual jurisdiction of antitrust and regulation has been successfully applied to the communications network for over a century.  However, the update must make it clear that the regulatory authority has the obligation to promote competition, where it is possible.

This is an ideal moment for Congress to play its important role in reinvigorating competition policy.  Addressing key aspects of Big Data Platforms is a good place to start, since this is an area of new and important economic activity and new challenges that have not been easily tackled by traditional oversight.

The American innovation and Choice Online Act, S. 2992, targets the sector with specificity, while ensuring a balance that invites innovation and practices by the incumbents that are not anticompetitive.  It sweeps in the traditional aspect of antitrust that practitioners have already begun to rebuild.  There are other areas of the digital economy that may also need Congressional action, like privacy, data use and abuse, and resources for responsible agencies.  However, the principle of tailoring the specific oversight to the specific challenges with a balanced approach is consistent with a century-long history of filling gaps in competition policy.  S. 2992 is the right approach to an important part of the problem.  It deserves a vote and passage in the Senate, so that the House can vote on and pass the bill later this month.

[1]  “Issue Brief: Rebooting and Recalibrating Competition Policy” (January 19, 2022); Amicus Brief of Consumer Federation of America, et al., in Epic Games v. Apple (United States District Court Northern District Of California, Oakland Division, 2022),  letter to the House urging an “Overhaul of Antitrust Oversight to Recalibrate Regulations for a Digital Age (June 14, 2021),; Senate Testimony (Testimony of Dr. Mark Cooper, on Antitrust Applied: Examining Competition in App Stores Senate Committee on the Judiciary, Subcommittee on Competition Policy, Antitrust, and Consumer Rights (April 21, 2021).  

[2] Big Data Platforms, a New Chokepoint in the Digital Communications Sector Meeting New Challenges with Successful Progressive Principles, September 14, 2020; Business Data Services: Another Failure of Free Market Fundamentalism to Promote Competition or Prevent Abuse of Market Power, September 3, 2020; Pragmatic, Progressive Capitalism At Its Best: Network Neutrality: How an Entrepreneurial State Used Public Policy to Foster Experimental Entrepreneurialism and Create the Internet, August 26, 2020; Pragmatic, Progressive Capitalism, Roadmap to a Remarkably Successful, Uniquely American Political Economy From Brandeis to Stiglitz & Beyond the 2020 Election, August 13, 2020

[3] Amy Klobuchar, 2021, Antitrust: Taking on Market Power form the Gilded Age to the Digital Age, pp. 353…355

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“This decision not only impacts the ability of the EPA to regulate under the Clean Air Act, but also could have vast implications on rulemaking by agencies generally,” stated Rachel Weintraub, Legislative Director and General Counsel with Consumer Federation of America.  “Americans depend upon all of our regulatory agencies to protect them: to ensure the air they breathe, products they purchase and food they eat are safe, and that our financial services and marketplace are fair. This decision gives regulated market participants and others who want to oppose regulations another tool to thwart necessary protections.”

Contact: Rachel Weintraub, 202-939-1012

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 “CFA believes that the bill strikes the right balance in the effort to restore decentralized, competitive markets in the digital sector and throughout the economy,” Dr. Mark Cooper, CFA’s director of research, and author of the Issue Brief, said.  “The dynamic economy that the uniquely American commitment to guardrails and guidance provided by antitrust and regulation requires aggressive, but disciplined action to reverse the mistakes of the past four decades.”

“A great deal of “unsound” precedent must be overcome, and that is where legislation may be necessary to recalibrate the practice of competition policy,” Cooper added, “but the practitioners of competition policy (federal and state antitrust and regulatory agencies, and private actors) have moved swiftly to challenge those erroneous precedents.

“Above all,” Cooper said, “it is possible to rebalance competition policy without abandoning the fundamental principles that served the U.S. economy well.” The rebalancing that enjoys widespread support among the analyses reviewed includes:

• shifting burdens of proof,
• adopting narrow definitions of relevant markets,
• adopting broad definitions of harm,
• focusing on competition and inequality,
• resurrecting structural solutions,
• putting efficiency and consumer welfare in its proper, long-term place by including quality, consumer choice, and innovation, and
• directing courts to place competition at the center of antitrust policy,
  • to stop giving dominant firms the “benefit of the doubt,” and
  • to treat anticompetitive conduct as the serious threat to consumer interests that it is.

The Issue Brief builds on five background analyses published in 2020, as well as a dozen and half peer-reviewed articles published from 2000 to 2016.

The forthcoming analyses summarized in the Issue Brief begins with the work of Louis Brandeis and concludes with Amy Klobuchar’s book Antitrust. In between the series looks at the Neo-Brandeisians, updates before broadband, the Golden Age of Capitalism, the challenges of digital technology, contemporary federal antitrust practice, other antitrust practitioners (state attorneys general and private antitrust activities), and legislative proposals for recalibrating competition policy.

• The analysis identifies 20 specific concerns about lax enforcement or the recent near total neglect of competition policy, organized in five broad categories (I. Lax Enforcement, II. Traditional Challenges, III. Long Standing Issues, IV. Magnified Old Abuses, V. New Challenges).
• It then outlines over two dozen proposed responses, organized in seven categories ( Purpose & Need for Reform, VII. Recalibration, VIII. Regulation, IX, Measuring Value, X. Rebooting, XI. Political Action: Collective, XII. Political Action: Individual).

The key principles to guide reform that appear in a straight line from Brandeis to Klobuchar, and almost all the analysts in between, include the following elements.

• Regulated competition (Brandeis’ term) is very much a capitalist undertaking with the goal of restoring and promoting a decentralized market economy.
• Efficiency is important (as Brandeis emphasized in his support for scientific management), because it yields economic progress for all involved in the production process.
• But, only if economic market power is not abused and political power does not multiply the advantage of dominant firms, their owners and highly skilled labor (as argued by Shepherd).
• Competition is the disciplining force, but it is not likely to occur or endure on its own. The capitalist solution strikes a balance between innovation and entrepreneurship, on the one hand, and the guardrails and guidance of antitrust and regulation, on the other.
• The key constraints require checks and balances to prevent barriers to entry and abuse of economic and political power, horizontally (across the branches of government), vertically (across the levels of government, i.e., federalism), and internally (through industrial democracy within productive enterprises).

“The big digital platforms are rightly the central focus at present because they have become so important and because they have been allowed to get away with so much consumer harm,” Cooper concluded, “but ultimately the entire economy is afflicted by a market power problem that should be addressed.”

Contact: Mark Cooper, 301-384-2204

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In addition to taking a broad view of competition and consumer protection, the Consumer Federation of America (CFA) believes the bill strikes the right balance.  It will significantly benefit consumers by restoring competition on big data platforms because it addresses one of the critical problems that has emerged in the digital sector, anticompetitive conflicts of interest, but it will not stifle innovation by being overly prescriptive.

Everyone, except the big data platforms, seems to agree that the Klobuchar/Grassley bill is a good start on defining competition policy in a manner that reforms antitrust practice.  The Consumer Federation of America believes it is more than that.  It is a roadmap to effective competition policy in the digital economy.

First and foremost, it will restore and ensure that competition from products that use the platform to reach consumers will be decided on the merits and no longer be victimized by the self-preferencing behavior of dominant platform providers.  Choice and innovation will be unleashed so that consumers are restored to a position of sovereignty and can choose the combination of services and suppliers that best meets their needs. This bill does enough to make a big difference.

Second, and of great importance, it does so within the framework of the competition policy of traditional antitrust law.  The recent economic theory that put competition policy into a “deep freeze” was a radical narrowing and misinterpretation of the principles of that guided the political economy to a remarkably successful, pragmatic, progressive, decentralized competitive market in the 20^th century. This bill changes that in a manner that is faithful to the long tradition of competition policy.

Third, it adopts a lower standard of proof, a preponderance of evidence that gives both sides an opportunity to make their case on a level playing field (i.e., where precedent is not a barrier to enforcement). This bill provides essential relief in a new and challenging area by going back to what worked, not trying to invent a new theory of competitive market and antitrust.

Fourth, while it focuses on the traditional antitrust approach of dealing with anticompetitive conduct under the antitrust laws after the abuse has occurred (ex post), it contains elements of “before-the-fact” (ex ante) rulemaking by defining a violation of the law as a potentially “unfair method of competition.”  The bill makes any such conduct a violation (rather than demanding a case-by-case demonstration of abuse), for this kind of conduct in this sector.

Fifth, the bill identifies and addresses the structural problem (the market power of large dominant platforms) that give rise to the significant avenues of abuse of power (leverage, grounded in vertical integration, foreclosure and exclusion, grounded in gatekeeping, and undermining potential competition, grounded in the exploitation and abuse of data).

Finally, as a practical matter, the bicameral, bipartisan support for this legislation that defines competition policy actually has a good chance of passing.  Because it is solid on policy grounds and feasible on political grounds, it is a clear signal of how to reform competition policy and antitrust in the digital age.

It would be possible to tweak this bill to make it stronger and remain within the parameter of the above principles, and other legislation may be necessary to address competition problems more broadly (above all increasing the resources of those with responsibility for enforcing competition policy, e.g., Competition and Antitrust Law Enforcement Reform Act.  However, it also seems clear that vigorous enforcement of the new authority and power in this bill will address the key problem in the digital communications sector in an effective and balanced manner.

For this reason, we view this bill as more than a first step. It is an important template. Those who want to do less to reboot competition policy are likely to fail to meet the new challenges to competition.  Those who wish to alter the underlying nature of competition policy (expressed in antitrust law) may be seeking unnecessary changes that could do more harm than good and may fail to garner the necessary support in Congress.  Thus, those who want to do too little or too much are likely to leave consumers and the economy much worse off.

Contact: Mark Cooper, 301-384-2204

[1] CFA took this view over two decades ago in the Microsoft case and reiterated it last year in the case of big data platforms: Mark Cooper, Monopoly Power, Anticompetitive Business Practices and Consumer Harm in the Microsoft Case (Consumer Federation of America), December 1999, Mark Cooper, “Antitrust as Consumer Protection In The New Economy: Lessons From The Microsoft Case, Hastings Law Journal, 52: 4, April 2001, first presented at Conference On Antitrust Law In The 21^st Century Hasting Law School, February 10, 2000; Mark Cooper, Amina Abdu, Big Data Platforms, A New Chokepoint in the Digital Communications Sector Meeting New Challenges with Successful Progressive Principles, Working Papers on Pragmatic, Progressive Capitalism, WP # 4, September 2020. Senator Amy Klobuchar, Chair of the United States Senate Judiciary Subcommittee on Competition Policy, Antitrust and Consumer Rights, argues for this view of policy in Antitrust: Taking on Monopoly Power from the Guilded Age to the Digital Age (Alfred A. Knopf, 2012),Top 25 policies,  #24, pp. 347-348.  

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The post CFA Urges Energy Policy Leaders to Focus Decarbonization Efforts on Focus on Renewables, Efficiency & Smart Grid Management appeared first on Consumer Federation of America.

“The technological revolution of the past quarter century has dramatically lowered the cost of four important resources that constitute a 21^st century electricity system,” Cooper noted. “There are: two supply-side options, onshore wind and utility photovoltaics (PV), and two demand-side approaches, efficiency and intelligent management of the grid to match supply and demand by utilizing digital communications, computational capacity and advanced control technologies,” he specified.

The presentation, entitled Building a Least-Cost, Low-Carbon, Electricity System with Wind, Solar, Efficiency, & Intelligent Grid Management: Electricity is the Core Infrastructure of the 21^st Century, Digital Economy, is based on three research reports published by CFA.[2] In addition to attendees to the workshop, CFA shared its view on the consumer benefits of decarbonization in a letter to key policy makers in the Administration and Congress.

The presentation identifies six advantages of the emerging electricity system:

1. Least Cost
2. Low Carbon
3. Large Macroeconomic Expansion
4. Millions of New Jobs, Dispersed Across the Nation
5. Improvement of Public Health and Safety
6. Greatest Decarbonization at the Least Cost

“Even if the public did not care one bit about climate change, the environment and decarbonization,” Cooper pointed out, “they should be fully supportive of the transformation of the electricity system and the technologies.  Moreover, according to recent public opinion polls, it turns out that they do care.[3]  They are quite concerned about the environment and climate change, perhaps because of the negative effects that have become obvious.  They strongly prefer efficiency and renewables as the solution over central station approaches.”

With all this going for the transformation of the electricity sector, the presentation asks and answers the question, “why it needs a boost from public policy.”

1. The need for speed is urgent.  Alternatives will not be deployed fast enough on their own without a significant policy push.
2. The rules that have been put in place over the past century favor central station approaches that are hostile to the alternative.
3. The powerful interests that have grown up around the existing, 20^th century approach, will resist and frustrate change that threatens to reduce their power.

The presentation also explains why the focus on buildings is so important.

1. Buildings represent about two-fifths (40%) of the primary energy consumption in the U.S.
2. Best practices could cut that in half and aggressive implementation of efficiency measures could increase the energy savings by another 10%.
3. Efficiency is among the lowest cost approaches to decarbonization.
4. Building efficiency relieves the pressure on supply-side sources.
5. Commercial and industrial buildings are particularly important for the dynamic matching of supply and demand.
6. Rooftop generation provides “behind-the-meter” benefits that are increasingly being recognized in utility regulation which must be carefully developed over the course of the next decade.

Yet, energy efficiency in buildings confronts numerous market barriers and imperfections that inhibit investment, research and deployment of efficiency enhancing technology – 30 specific imperfections were identified by McKinsey and Company over a decade ago.

CFA’s analyses over the past decade have shown that a “command-but-not-control” approach to implementing policies is best to accelerate efficiency and decarbonization.  This is a “pragmatic, progressive capitalist approach,” that relies on markets and innovation by adhering to six principles.  It must be:

1. long-term,
2. technology-neutral,
3. product neutral,
4. responsive to industry needs,
5. responsive to consumer needs, and
6. procompetitive.

“The result is to give consumers the maximum range of choices that comply with the standards,” Cooper concluded, “while capitalists are driven by consumer sovereignty to do what they do best, minimize cost.”

The presentation slides are available here.

[1] California Energy Commission, IEPR Workshop on Consumers, Financing, and Workforce, July 12.

[2] 2021: https://consumerfed.org/wp-content/uploads/2021/04/Building-a-21st-Century-Electricity-Sector-Report.pdf;    2017: https://consumerfed.org/wp-content/uploads/2017/12/two-trillion-dollar-mistake.pdf                                           2013: https://consumerfed.org/pdfs/Energy_Efficiency_Performance_Standards_Report.pdf

[3] Source: Gallop, Historical Trends: Energy. https://news.gallup.com/poll/2167/energy.aspx

Contact: Mark Cooper, 301-384-2204

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“This withdrawal by the Department of Justice is good news for consumers for two reasons: first, the proposed settlement would not have significantly advanced price competition in a marketplace with high, fairly uniform commissions; and second, the settlement threatened to undercut several class-action lawsuits that seek to remove the most important barrier to price competition,” stated Stephen Brobeck, a senior fellow at the Consumer Federation of America (CFA).

The key elements of the proposed settlement were that (1) brokers were to make the commission offered to buyer agents on multiple listing services (MLS) publicly available, and (2) buyer agents were prohibited from representing their services as free to consumers.  “Although the proposed settlement would have given buyers more information about buy-side commissions, it would not have given these home purchasers adequate opportunity to negotiate these fees,” noted CFA’s Brobeck.  “This opportunity would only occur if buyer and seller commissions were uncoupled, the main goal of class-action lawsuits that have advanced in the courts,” he added.

Proposed Settlement Would Not Have Created Price Competition

The key barrier to price competition is the NAR’s buyer broker commission rule that requires all brokers to make a blanket, non-negotiable offer of buyer broker compensation to participants in the MLS.  This rule institutionalizes a very strange and anti-competitive method of broker compensation.  Sellers and their listing agents decide the commission to be paid to the buyer broker working with the home purchaser.  Buyers not only cannot negotiate this commission but usually are not aware of its level because buyer brokers either do not discuss it with them or inform them that it is paid by the seller.

On the other hand, sellers have little ability to negotiate the commission rate down.  If asked, their agents will correctly inform sellers that if they offer a low buyer broker commission, buyer agents may steer prospective buyers away from their property.  While sellers ostensibly have the ability to negotiate the commission they pay to their own agent, research by CFA shows that when home sellers ask agents whether they would lower this commission, three-quarters refused to do so.

“Real estate agents compete vigorously for clients but not by offering lower commissions,” said CFA’s Brobeck.  “As a result, commissions remain high and fairly uniform,” he added.  A large majority of commissions range from five to six percent and are the same in a particular area.  Listing agents, though, will sometimes cut one-half or one percent off their commission if the home is expensive, they are the sole agent involved in the sale, or if they help a consumer sell their home and purchase a new one.  Even then, the agent usually receives at least $20,000 in commission on the sale of a $400,000 home.  In England, by comparison, real estate agents typically receive less than two percent for facilitating the sale of a home.

The proposed settlement would, depending on the effectiveness of the buyer agent commission disclosures, have discouraged steering.  But it would not have given buyers the ability to negotiate these commissions.  A CFA analysis of the proposed settlement noted several ways that agents could easily thwart the intention of the fee disclosure.

Proposed Settlement Would Have Undercut Class Action Antitrust Lawsuits

Several class-action lawsuits seek remedies for lack of price competition by requiring an uncoupling of listing broker and buyer broker commissions.  Both buyers and sellers would negotiate and pay their own commissions.  Buyers would then have the ability to negotiate down buyer agent commissions that are usually 2.5 to 3 percent.  More sellers would be likely to seek a lower commission from their listing agent.  Discount brokers using MLSs, now hamstrung by coupled commissions forcing them to offer buyer brokers the going commission rate, would be free to offer real discounts.  The practice of newly licensed, unskilled agents charging the same commission as highly competent, experienced agents would no longer be supported by industry rules.

In the first two lawsuits – Moehrl v. NAR and Sitzer v. NAR – the courts have already rejected the request of the NAR for dismissal of the cases.  The 25-page decision of the court hearing on Moehrl found:  “In sum Plaintiffs allegations plausibly show that the Buyer-Broker Commission Rules prevent effective negotiation over commission rates and cause an artificial inflation of buyer-broker commission rates.”  The court noted that it’s decision was “in accord with conclusions reached by a district court addressing the same issues in Sitzer v. NAR.”

The proposed settlement would have undercut these class action lawsuits.  An opinion piece written by a real estate broker and published in Inman News (Michael Lissack, November 23, 2020) asserted that “the Moehrl lawsuit has thus been rendered moot.  The DOJ has taken action on the two claims at issue, and it disagreed with Moehrl’s proposed remedy.”  The author added: “The DOJ-NAR settlement works to pre-empt alternative resolutions of the issues common to all three lawsuits: disclosure and rules.”  Noted CFA’s Brobeck: “While it may be an exaggeration to say that the lawsuit was ‘rendered moot,’ the proposed settlement would certainly have been used by the NAR in its defense and possibly to great effect.”

Did the NAR Cut a Deal With Trump Officials to Undermine the Lawsuits? 

There is no disputing that the proposed settlement would have posed challenges to plaintiffs in the class action lawsuits.  And there is some circumstantial evidence to suggest that the NAR cut a deal with Trump officials to undermine the lawsuit.

• As noted above, the proposed settlement would have weakened and possibly devastated the claims of plaintiffs in the class action lawsuits against the NAR and other industry groups.
• The settlement would have limited DOJ’s pursuit of other antitrust claims against the NAR.
• The NAR appears to have readily assented to the proposed settlement even though it had previously defended NAR Rules that forbid MLSs from making buyer broker commissions public.
• The proposed settlement was announced in November 2020 just after the election.
• The Assistant Attorney-General heading the Antitrust Division and the Division Deputy Assistant Attorney-General who signed the original complaint both joined the Department of Justice and received these appointments during the Trump Administration. Both left DOJ after the election in early 2021.
• The Biden administration appointed a career DOJ official to the position of Assistant Attorney-General heading antitrust. The Deputy Assistant-General position is now vacant.
• It is very unusual for DOJ to withdraw a proposed antitrust settlement. The NAR called it a “complete, unprecedented breach of agreement.”

Noted CFA’s Brobeck:  “One can speculate that the proposed settlement received strong pushback from some career officials strongly committed to impartial antitrust enforcement.  After the election, these officials were able to delay a final settlement until after the departure of the Trump appointees and their replacement by career officials.  There ensued a months-long negotiation with the NAR to give the DOJ greater ability to continue pursuing anti-competitive practices by the industry.  When the NAR refused to budge, or budged only a little, the DOJ decided to withdraw the proposed settlement.”

Contact: Stephen Brobeck, sbrobeck@consumerfed.org

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“The industry has taken the position that any constraint on its actions will end the digital revolution and dramatically increase costs for consumers. The Consumer Federation of America emphatically disagrees,” said Mark Cooper, CFA’s Director of Research.

“The House Judiciary Committee and Antitrust Subcommittee is doing exactly what Congress should do to reboot needed oversight of the dominant incumbent digital platforms. The Committees have identified general practices that must be reformed, given concrete recommendations, and provided increased resources for implementing these needed actions,” Cooper added.

Finally, said Cooper, “We also support and recognize that the recommendations keep Congress out of the business of trying to pick winners, when they are just as likely to pick losers. Instead, all the remedies on the table empower antitrust and regulatory experts to use their judgement, based on the clear goals defined by Congress, to build adequate consumer protections in the world of big data.”

Contacts:
Mark Cooper, 301-384-2204
Amina Abdu, 202-656-1282

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“This is exciting news from the FTC,” said Amina Abdu, CFA’s Antitrust Advocacy Associate. “The new group sends a clear signal that the FTC intends to use all the tools at its disposal to curb anti-consumer and anti-competitive practices. We are hopeful that rulemaking will allow the agency to act more efficiently to promote competition than enforcement alone. That’s key in digital markets where things move quickly.”

CFA has advocated in the past for agency rules to increase consumer protections, make the marketplace fairer, and supplement antitrust law in promoting competition, ranging from interoperability and nondiscrimination to banning deceptive terms and conditions. CFA has long supported strengthening the FTC’s Funeral Rule, first adopted in 1984. CFA has also advocated for increased resources for the FTC, which will be crucial as it undertakes new rulemaking.

“This is a very promising first step,” said Susan Grant, CFA’s Director of Consumer Protection and Privacy. “We now know that all solutions are on the table when it comes to the FTC’s mandate to protect consumers from unfair and deceptive practices. We look forward to working with Chairwoman Slaughter and the FTC in its efforts to promote consumer interests and corporate accountability.”

Contact: Amina Abdu, 202-656-1282

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“Senator Klobuchar’s bill is an important step in the right direction,” said Amina Abdu, CFA’s Antitrust Advocacy Associate. “For decades, market power has been allowed to grow unchecked, with little scrutiny given to blatantly anticompetitive mergers or conduct. This bill is a long overdue effort to redress these harms and protect consumers from rampant market power abuse.”

“Enforcement has always been the cornerstone of antitrust. We are excited to see a bill that recognizes this and takes steps to strengthen oversight, while refusing to have Congress try to make decisions that are better left to the expert agencies,” said Mark Cooper, CFA’s Director of Research.  “Klobuchar recognizes what Congress should and should not do.  Her bill reaffirms and clarifies goals, encourages and supports enforcement, and weeds out practices and defenses that should never have been allowed but have become embedded in antitrust practice. Importantly, it does all of this without setting specific limits or picking winners and losers among companies.”

In a recent article in Competition International, we have outlined the steps necessary for “Rebooting Antitrust and Regulation for Digital Communications.”

After the Trump administration’s effort to essentially repeal the Communications Act of 1934 and abandon the Federal Communications Commission’s (FCC) authority to other agencies, the U.S. must restore effective oversight and pull the strands of policy into a coherent overall approach. This effort will require a mix of regulatory and legislative actions including:

1. Reversing the theory of “sufficient” competition and the deregulation to which it gave rise
2. Asserting full Title II authority over nondiscrimination and universal service
3. Bringing the full weight of Title II authority to bear on achieving universal service to broadband
4. Restoring full dual jurisdiction by repealing the Trinko decision that quashes antitrust even when there is only a whiff of regulation present

The principles of antitrust and regulation must also be adapted to new industries given the enormous power wielded by dominant players in emerging industries such as Big Data Platforms. While the principles on which antitrust and regulation rest remain the same, these practices must be adapted to the new techno-economic relationships in the economy[i]. Antitrust and regulation need to be rebooted, after a long period of inactivity and explicitly redefined to meet the challenges of the new economy.

“We commend Senator Klobuchar for proposing a balanced and thoughtful approach to rebooting antitrust.  Congress needs to enact this legislation and let the agencies do their job before it tries to micromanage the structure of this vital sector,” concluded Cooper.

[i] Other recent CFA papers provide the historical grounding of this approach;  From Brandeis To Stiglitz: Into & Beyond The 2020 Election: The Brandeis Protocol and the Stiglitz Model Create a  Framework for Pragmatic, Progressive Capitalism, especially Chapter 4, https://consumerfed.org/wp-content/uploads/2020/08/Pragmatic-Progressive-Capitalism-Report-8-13-20.pdf, and a detailed discussion of Big Data Platforms, A New Chokepoint in the Digital Communications Sector Meeting New Challenges with Successful Progressive Principles, especially, Chapter 5. https://consumerfed.org/reports/big-data-platforms-a-new-chokepoint-in-the-digital-communications-sector/

Contacts:
Mark Cooper, 301-384-2204
Amina Abdu, 202-656-1282

[i] Other recent CFA papers provide the historical grounding of this approach;  From Brandeis To Stiglitz: Into & Beyond The 2020 Election: The Brandeis Protocol and the Stiglitz Model Create a  Framework for Pragmatic, Progressive Capitalism, especially Chapter 4, https://consumerfed.org/wp-content/uploads/2020/08/Pragmatic-Progressive-Capitalism-Report-8-13-20.pdf, and a detailed discussion of Big Data Platforms, A New Chokepoint in the Digital Communications Sector Meeting New Challenges with Successful Progressive Principles, especially, Chapter 5. https://consumerfed.org/reports/big-data-platforms-a-new-chokepoint-in-the-digital-communications-sector/

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The Coalition for Sensible Safeguards (CSS) – led by Public Citizen, Consumer Federation of America, the AFL-CIO, the Center for Progressive Reform, the Economic Policy Institute and the Union of Concerned Scientists – is touting the poll’s findings, saying they bolster the case that the Biden administration should rebuild the regulatory process to better serve people and communities.

“Our message to the incoming administration is this: Likely voters support bold regulatory action. Government officials should not be afraid to commit to rebuilding our weakened regulatory system and resolutely advancing the public interest through effective use of regulations,” the polling memo reads.

The polling found that:

• 81% of Democrats and 62% of Republicans back regulation;
• 65% of voters want public and community input reflected in the rulemaking process, including input from workers (64%) and scientists (51%), while 55% want billionaires to have less of a say in federal regulation;
• At least three out of four voters want regulators to safeguard workers (81%), protect everyday people (77%), save lives and reduce injuries (76%), and protect our environment (75%);
• At least three out of five voters want regulators to deal with climate change (67%), reduce income inequality (65%) and promote gender equality (60%);
• Nearly three out of four voters want to depoliticize the rulemaking process by requiring disclosure of White House interference in the rulemaking process; and
• In addressing the coronavirus, voters want protecting public health prioritized over the economy when they conflict by a 35-point margin.

“This polling serves as a correction to the conventional wisdom that ‘regulation’ is a dirty word,” said Ethan Winter, analyst for Data for Progress. “A majority of voters – including a 62% of Republicans – think that regulations serve an important role in protecting the environment, keeping workers safe and ensuring a fair economy. President-Elect Joe Biden should take his election for what it is: a mandate from the voters to use aggressive regulatory action for the benefit of everyday Americans.”

“The American people want their government to act to keep their food safe, their water clean, their air breathable and their pharmaceuticals affordable,” said Robert Weismann, president of Public Citizen and co-chair of CSS. “They want safe workplaces and an end to financial rip-offs. That means – as the data show – they want strong regulatory protections and enforcement.”

“The results of this important poll are clear: The majority of Americans simply believe that regulations are needed to protect them from unsafe food, dangerous products and unfair financial services,” said Jack Gillis, executive director of Consumer Federation of America and co-chair of CSS. “Sensible safeguards in the marketplace not only meet consumer expectations for fairness, health and safety, but protect companies from substandard competition.”

Contact: Rachel Weintraub, 202-904-4953

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The groups released a joint statement raising three key issues that regulators must prioritize during their ongoing merger review: Google’s ability to limit interoperability between their Android smartphone operating system and competitors’ wearables, Google’s potential limiting rival’s access to wearables data, and Google further entrenching their well-established dominance in the digital advertising market, which relies heavily on data access.

“A Google takeover of Fitbit would give Google a significant foothold in both the wearables and digital health markets overnight, potentially with long-term privacy implications in these sensitive markets,” said Amina Abdu, an Antitrust Advocate at CFA. “On top of that, Google would extend its ability to exploit its already massive market power in digital advertising.”

This is not the first time consumer groups have expressed concerns about this very takeover. In July, CFA and a coalition of 20 consumer groups called on regulators to scrutinize the deal, and in April CFA partnered with Public Knowledge on a letter to the Department of Justice about the merger’s potential harms.

Recent reports, however, suggest that regulators are seeking commitments from Google to allow them to clear this deal. The latest statement focuses on the critical safeguards that must be in place to protect consumers if the merger is allowed to go through: “(1) continued complete wearables interoperability with Android, (2) that digital health markets remain competitive and innovative with high levels of data security and privacy protection, (3) that Google is prevented from further increasing its dominance in online advertising, and (4) include safeguards to ensure the effects of the commitments are not neutralized in practice.”

“It is not enough to just accept Google’s word on these commitments, which have serious implications in multiple markets from wearables, to health, to digital advertising,” said Abdu. “Google has backed out of its promises in the past. After claiming they would not combine Google’s personally identifiable information with DoubleClick’s advertising data, they changed their policies with little regard for consumer privacy.”

“Whatever decision regulators make, they should take a hard look at the implications, both now and in the future,” added Abdu. “If a remedy remains in place only as long as it is convenient for Google, it is not really a remedy at all.”

Contact: Amina Abdu, 202-656-1282

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The letter raised three key issues that regulators must prioritize during their ongoing merger review: Google’s ability to limit interoperability between their Android smartphone operating system and competitors’ wearables, Google’s potential limiting rivals access to wearables data, and Google further entrenching their well-established dominance in the digital advertising market, which relies heavily on data access.

The post Google’s Proposed Takeover of Fitbit Raises Alarm Bells for Consumer & Citizen Groups appeared first on Consumer Federation of America.

“We fully expect the U.S. to witness a similar debate and adopt policy to end the abuses of these dominant digital platforms,” said CFA’s Director of Research Mark Cooper.

To that end, CFA is releasing the fourth in a series of working papers that provides detailed historical and economic analysis of the abuses in the two most important segments of the digital communication sector — Big Broadband Networks and Big Data Platforms. The report, entitled Big Data Platforms, a New Chokepoint in the Digital Communications Sector: Meeting New Challenges with Successful Progressive Principles, outlines the primary challenge facing regulators today: harnessing the benefits of emerging technology, while ensuring that consumers, rather than a select few companies, are able to reap the benefits of innovation today and in the future.

The new paper addresses the structural features of digital markets that have given the largest tech companies outsized influence over the economy and over communications.  The paper puts big data platforms in the larger context of structurally similar markets, like big broadband networks, internet service providers, and business data services, to understand the progressive policies that have been successful in the past and can be adapted for the digital age.

“Network effects and economies of scope and of scale — structural characteristics that are particularly strong in these infrastructure industries — can make promoting competition a tricky task,” said Cooper. “But it’s a task we’ve faced before in other industries with pragmatic steps like sector-specific expert agencies and simple bright lines to prevent the worst abuses.”

Of particular concern are “gatekeepers,” companies that control access to customers or key infrastructure. In the absence of regulation and oversight, gatekeepers have every incentive to abuse their status in order to harm competitors, who rely on these gatekeepers to access the market.

As part of its investigation into a new competition tool, the European Commission is looking into a number of structural challenges, including gatekeeper control. CFA is hopeful that, if done well, the European Commission’s new tool can itself become a global model for competition policy.

“We applaud the European Commission for taking an important first step to acknowledge and address the existing gaps in competition regulation and enforcement,” said Amina Abdu, an Antitrust Advocate at CFA. “But these issues extend beyond Europe. The difficulty of protecting consumer welfare while promoting efficiency and innovation is a problem with which many governments are grappling. The solution will require re-envisioning the status quo and developing new and creative pro-competitive, pro-consumer regulation.”

Contacts:
Mark Cooper, 301-384-2204
Amina Abdu, 202-656-1282

The post U.S. Way Behind in Protecting Competition Among Big Data and Big Broadband — Costing Consumers appeared first on Consumer Federation of America.

This report addresses the structural features of digital markets that have given the largest tech companies outsized influence over the economy and over communications.  The paper puts big data platforms in the larger context of structurally similar markets, like big broadband networks, internet service providers, and business data services, to understand the progressive policies that have been successful in the past and can be adapted for the digital age.

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“The policy failures and lack of competition we’ve seen in Business Data Services epitomize the challenges of building a dynamic, competitive communications sector in the digital age,” said Dr. Mark Cooper, CFA’s Director of Research. “While the growth of BDS embodies the immense progress that has taken place during the digital revolution, these services exhibit ongoing problems in market structure, conduct and performance that have made BDS a key chokepoint in the communications sector.”

The report, entitled Business Data Services: Another Failure of Free Market Fundamentalism to Promote Competition or Prevent Abuse of Market Power, proposes a conceptual and empirical framework to analyze core concerns about market power both for Business Data Services and beyond. It shows that the early deregulation of the BDS industry was based on erroneous theories of contestable markets and sufficient competition that did not play out in reality. These theories continue to drive free market fundamentalism to this day, culminating in the Federal Communications Commission (FCC)’s “Flip-Flop” order in 2017, which reversed the 1996 Communications Act’s emphasis on competition in favor of abandoning federal oversight.

The report argues that this decision was an enormous policy failure that will have disastrous effects for consumers, deregulating the key chokepoint where the ocean of data flowing through the digital communications sector becomes a stream delivered to individual customers.  The sector is dominated by a “tight oligopoly on steroids” where the market power that results in high levels of concentration is magnified by strategies of geographic separation, technological specialization, and product segmentation that all of the dominant firms use to diminish rivalry by avoiding head-to-head competition.

“The evidence is clear that two firms are not enough to ensure competition. Sometimes six firms is not enough to ensure competition,” said Amina Abdu, CFA’s Antitrust Advocacy Associate. “And yet, we’ve allowed a handful of companies to control this crucial bottleneck in the digital economy because of a notion of potential competition that never materialized. That’s a problem.”

“Local phone companies used their control of the network inherited from the franchise monopoly period to raise prices, increase profits and undermine competition,” concluded Cooper. “Antitrust and regulatory oversight must be restored in the communications sector. This is not just a problem with Business Data Services, but a larger problem of abuse of market power in tight oligopolies across digital markets.”

Contacts:

Mark Cooper, 301-384-2204

Amina Abdu, 202-656-1282

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