2023 was a good year for anti-monopoly
Those silver linings are growing fast
Last year was, despite all the gloom, a good one for the international anti-monopoly movement. Internationally, after decades of regulatory laxity on monopoly power, something new is in the air. We see spring-like green shoots of new thinking, among regulators, civil society, small businesses, workers and politicians.
The annual gathering of the wealthy and influential at the World Economic Forum in Davos next week kicks the year off with a moment to spotlight the excesses of concentrated wealth and power.
Anti-monopoly is a broad church, because there are many ways to push back against excessive concentrations of corporate power, and many organisations that do so, working in thematic areas like tax, trade, labour, privacy, or intellectual property. These can be indirect anti-monopoly tools, as they mostly pursue other goals primarily.
Less well populated, from a civil society perspective, is the arena where governments contest economic power and shape the structure of markets directly: competition policy, antitrust, merger control and so on.
Outside the United States there are very few general anti-monopoly organisations that work across different sectors and themes, and which also focus significantly on the tools that seek to tackle corporate power and market structures directly through antitrust, competition policy, merger control and so on. We'd cite the Canadian Anti-Monopoly Project (CAMP,) and the recently minted European offices of the Open Markets Institute - and ourselves.
So we're delighted, now, to welcome a new general anti-monopoly organisation into our networks: the Germany-based Rebalance Now, registered just before Christmas, spearheaded by our previous network co-ordinator, Ulrich Müller.
Nelly and Max also have a German-language podcast on monopoly power and lobby power, "Machtspielchen" (power games). It is available on all streaming platforms, such as here.
Many successes for and by the movement
We and our allies have had all sorts of successes in the past year. In Europe, for instance, we played a role in helping block the appointment of Fiona Scott Morton, a leading international proponent of the specious "consumer welfare" ideology, to the post of Chief Competition Economist in the European Union. We've been involved in creating serious fresh thinking around power and climate issues; around how finance drives monopoly; around how, why, when (and when not) we might want to break up dominant firms (watch this space for more, soon); or on how to use tax systems to address corporate power.
Canada, after lagging international peers in tackling concentrated corporate power, is now moving ahead fast with welcome competition policy reform. Our colleagues at CAMP can claim some influence here. Bill C-56 to reform the Competition Act and the proposed Bill C-59, to be debated in the new year, will remove the damaging "efficiencies defense" for otherwise harmful mergers (in other words, merging parties could claim speculative and often bogus economic 'efficiencies' to override concerns about mergers), expand the scope of protections against abuses of dominance provisions, and let private parties seek damages for anticompetitive conduct. Taken together the two bills represent the biggest improvements to the Competition Act since its 1986 introduction, and a move away from the efficiency-obsessed approach that has led to sporadic enforcement and continued corporate consolidation. See more at CAMP's summary explainer.
We and our allies have begun a series of other initiatives which will bear fruit in 2024 and beyond: watch this space.
A regulatory fightback gathered pace in 2023
A regulatory fightback, mostly directed against the tech giants, has also gathered steam. This is significantly the result of a decade-old and massively influential anti-monopoly movement in the United States, which has effectively flipped that country from a decades-long global fountain of dangerous economic ideas into an increasingly radical global anti-monopoly leader. Good ideas are starting to spread.
Let's start with the cases against what is arguably the most dangerous monopolist in world history.
In January the U.S. Justice Department and eight attorneys-general sued Google saying that it had been engaged in "a pervasive and systemic pattern of misconduct" in illegally monopolising the online advertising technology business - the machinery that sits between advertisers and publishers: the latter, including the investigative news media, are cornerstones of our embattled democracies. So while the New York Stock Exchange charges fees of 0.01 - 0.18 percent for electronic trades, and credit card companies charge 2 or 3 percent, Google sucks out more than 30 percent -- simply because it can. (As a forthcoming report of ours will soon show, Google has been enjoying 'markups' - the difference between costs and sales prices - of over 100 percent.) But that was just one salvo against the monopolist. In June, the European Commission did something similar, attacking Google's abuses of its online advertising monopoly, saying that "a behavioural remedy is likely to be ineffective" to deal with Google's massive conflicts of interest and that a "mandatory divestment" - or selective breakup - would do the trick. This is still a preliminary "Statement of Objections" so there's a way to go, but we like this EC picture of what it envisages.
Google has also just lost its first antitrust trial, in an epic fight with the gaming company Epic Games, after the latter had the termerity to ask players of the shoot-em-up game Fortnite to pay Epic directly rather than through Google's extractive payments system. (Your humble correspondent notes as an aside, from personal experience, that Fortnite is a scourge on our children). The judge in the case ruled that Google had destroyed relevant trial evidence. This case is doubly significant, for: as Matt Stoller put it: "these kinds of decisions have a bandwagon effect. The precedent is set, in every case going forward the firm will now be seen as presumed guilty."
In a related case, Google also just lost a lawsuit brought by 53 US states and territories that will help open up its Play Store on Android devices to alternative payment methods and to allow 'sideloading' of apps from other sources beyond Play Store. Google has also been facing a massive antitrust lawsuit again from the DoJ and 11 states over its monopolisation of general search. In the original complaint, they sought, among other things, "structural relief" which means a breakup.
Beyond Google
The relentless train of transatlantic regulatory activism continued, especially but not only in the United States. We have recently seen, just for instance:
A massive FTC lawsuit against Amazon alleging that the behemoth has so much power it can raises price not just on Amazon (via huge inflated fees) but economy-wide. Having cemented its monopoly, Amazon is now milking it, degrading quality in favour of profit, having become "too big to care." The European Commission has also opened an in-depth investigation into Amazon’s proposed acquisition of iRobot, after civil society groups raised the alarm.
Adobe abandoned its proposed $20 billion acquisition of Figma, an innovative product design company, after pushback from both EU and UK competition regulators. An experienced designer described to us how Adobe had also seemed to be becoming Too Big To Care: Adobe had been "slowly getting worse," they said: it was buggy and extremely slow to fix problems, while Figma was a breath of fresh air, allowing effective real-time online collaboration. "We assumed they would buy Figma, take out the bits they needed, and discard the rest."
A U.S. Court sided with the Federal Trade Commission, ordering the DNA sequencer Illumina to divest its recently acquired cancer-screening subsidiary, Grail: technically, a breakup. This is also significant because it is about a dominant firm buying a supplier: "vertical integration" - an area where blinkered regulators for decades found it hard to see how there can be a problem.
A new front has opened in the U.S. against the predatory practices of private equity, which we have written about in detail before. In this case, it's private equity roll-ups in the medical sector, which has as usual raised prices: a private equity firm is in the frame for the first time. Private equity folks responded with comments like "well this is terrifying" and "This will cause shockwaves." Good.
The UK's Competition and Markets Authority has invited comments on the new OpenAI-Microsoft tie-up, a monopolisation play that appears designed to evade antitrust scrutiny. This, after some scary shenanigans at OpenAI where board members urging safety were ejected. Let's push to ensure that this one gets reversed: this report from Open Markets Institute lays out the monopoly dangers of AI, and how to tackle them. (See also this report from Corporate Europe Observatory, laying out the scale of tech lobbying over the EU's own AI Act.)
We recently noted how Germany’s competition policy and enforcement has gained serious gumption, with an announcement in July of sweeping reforms to their Competition Act (GWB,) which State Secretary Sven Giegold described as "the most fundamental since the legendary minister for economy Ludwig Erhard" - that is, in six decades. They will be able to impose remedies without having to undergo bureaucratic and difficult processes to prove abuse of a dominant position; they can more easily order the “unbundling” (breakup) of problem companies; they can more easily remove “illegitimate super profits,” and it will become a lot easier to stop dangerous mergers.
The Wall Street Journal published its 80th attack on Lina Khan, former staffer at Open Markets (now Open Markets Institute, our close anti-monopoly friends and allies). She now chairs the re-invigorated and feisty U.S. Federal Trade Commission, and in the past year she has put considerable personal and agency effort into going out and listening to farmers, tech startups, small retailers, pizza restaurant owners, and others suffering under the boot of monopolists. The relentless and often personal attacks are undoubtedly tough for her -- but they are also a sign of her growing traction and influence. New merger guidelines will open the way to challenge vertical mergers and private equity roll-ups, and will encourage courts to take harms to workers into account.
Alongside those successes above, we see a growing list of successes by her, and her colleagues at the Department of Justice and elsewhere: see here, or here: merger approvals are down 40 percent. Among other successes are two healthcare giants under scrutiny abandoning plans to merge; an attack on another big health merger. There is a sustained and significant attack underway on ubiquitous "junk fees," (those annoying add-ons to the price of goods and services); on "non-compete" agreements that prevent some workers from moving to other employers. What is interesting about the anti-monopoly movement is the traction it has gained on different sides of an increasingly polarised political spectrum. As one analysis in Politico put it: "If it outlives Khan and her allies, it will have this strange alliance to thank: a faction of hard-right conservatives, far-left progressives, and the local pizza guy, all dragging the Washington bureaucrats along with them."
More generally we've seen evidence of joined-up thinking in the United States, following the White House's Executive Order in 2021 mandating antitrust ideas as an all-of-government mission. For example:
U.S. Trade Representative Katherine Tai outlined some radical new anti-monopoly thinking in terms of how breaking chokepoints can be one foundation for forging new links between trade policy and antitrust. "A shift in trade, as in antitrust, moves away from a narrow focus on benefits for consumers: our trade policy places workers at its centre." (Tai has also made stunning statements about patents, another form of monopoly power.)
U.S. national security adviser Jake Sullivan outlined monopoly as a threat to security - and outlined how confrontation can be reduced by tackling and dispersing dangerous economic chokepoints;
U.S. President Joe Biden has staked a claim to be the most pro-union president in world history; a profoundly anti-monopoly stance.
Using competition policy to tackle 'piracy'
The European Commission showed new spirit and new ways of thinking when it blocked a proposed acquisition by Booking.com, which has an estimated 60 percent share in the €100 billion market for online travel agencies (OTAs) - a company that the budget airline Ryanair recently called "OTA pirates" for leveraging its power to extract excessive fees from hotels and airlines. The Booking move, following submissions from, among other things, almost 15,000 hotels, will have wide significance, because it is the first time the Commission has deployed an "ecosystem theory of harm" that will enable it in future to move beyond narrow and blinkered approaches to tackling monopolists, to a recognition that monopoly power is a multi-faceted thing where, for example, Booking can leverage dominance in hotels to increase its dominance in flights, and vice versa. This is only the 11th merger that the Commmission has blocked in the past decade - while it has approved nearly 3,500 over the same period. We trust that Booking marks the start of a sea-change of thinking, to depart from this shocking record - and we will be able to provide more shocking data on this in the next couple of weeks.
In all these cases there are many hurdles still to overcome: court appeals, a major presidential election, and more. But this is at last a proper fightback by our embattled democracies.
In the meantime, here's a fun and illuminating quote, on mergers and ecosystems.
With a giant publishing merger, "it is like the vulture and the lion merging on the Serengeti - the ecological impacts are really what matters, and are very hard to predict." (Think Google/Doubleclick, or Facebook/WhatsApp/Instagram, how they got waved through -- and spawned out-of-control monsters. )
Using tax systems to tackle monopolists
As of a few days ago, large multinational companies will be subject to a "global minimum tax" for the first time, under an international system set up by the OECD, a club of rich countries, which is designed to bypass tax havens by ensuring that if corporate profits go untaxed in one country, other countries will be able to apply a top-up tax to make up the difference. The US and China haven't introduced the implementing legislation at this stage, but with the EU, UK, Norway, Australia, South Korea, Japan and Canada among those signing and implementing, it's a good start. The system is far from infallible - after all, what cross-border international tax system isn't full of loopholes? The OECD estimates it will raise up to $220bn in extra annual revenue, which is a big deal - and while there is a big question of how those revenues will be distributed among countries, the fact of transferring many tens of billions of dollars each year from monopolists to the public will bring widespread benefits. We have already published some detailed work with the Roosevelt Institute and Tax Justice Network on how to use tax systems to take on the monopolists; we plan more this year, including a look at the growing international traction for Digital Services Taxes (DSTs,) which are simple and powerful ways for even under-resourced low-income countries to get some revenue out of the giants. Bring them on.
Separately, we've been delighted to see the EU’s Advocate-General reporting that the EU general court had committed a series of legal and methodological errors in a ruling in 2020, which argued that the EU had failed to prove to “the requisite legal standard” that Apple had received €13 billion in illegal state aid from Ireland via a “sweetheart” tax deal that gave it an unfair advantage over other companies. Weirdly, the fact that Ireland could be in for billions in tax windfalls is being billed as a "setback" for that country - but hey, that's the peculiar anti-people logic of tax havens for you. This is a vindication for the EU team leading that case, even if it hasn't yet led to any action.
Fresh air in South Africa
A note on developments in South Africa, and a new article looking at its Competition Act, formulated to counteract the devastating and racist legacy of apartheid. The principal goal of competition law in South Africa is "to promote and maintain competition" - but alongside six other more interesting goals. Two are standard: consumer prices and economic 'efficiency' - but four are concerned with equity, or the public interest: to promote employment; to expand opportunities to participate in world markets; to ensure equitable opportunities for small and medium-sized businesses (SMEs); and to promote greater spread of ownership, especially for 'historically disadvantaged' people. An Amendment Act signed in 2019 extends this, aiming among other things to protect SMEs against price discrimination by dominant firms, and against the abuse of 'monopsony' buyer power, and to assess mergers on public interest grounds.
Having said all this, South Africa suffers some of the world's most extreme racialised concentration, so the power of malign vested interests is immense: the gap between ambition and outcomes remains very large.
Dominance at Davos
Finally, we and some of our partners will publish new data on the world's biggest companies and their billionaire owners (generally monopolists) in time for the meetings of world leaders and corporate bigwigs that starts next week in Davos, Switzerland. Your humble correspondent has created a new LinkedIn page where we will be highlighting a lot of material, and we have already published our first two Davos-focused pieces there: one on energy monopolists, and another on the luxury and retail sector.
Watch this, and that, space, especially on January 17th.
I like the vivid lion/vulture ecosystem metaphor.
And congrats to Uli for officially launching Rebalance Now!