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Amazon’s European Chokehold, breaking up Google
Notes from the growing anti-monopoly movement
Welcome to The Counterbalance, the newsletter of the Balanced Economy Project.
Overall, it's been a good few weeks for anti-monopoly. We’re delighted that our co-founder Michelle Meagher is back at work, after maternity leave. Also, the European Commission, whose anti-monopoly chops are very often over-rated, has issued a surprising statement of objections about Google monopolising online "adtech" (which matches advertisers with publishers). It makes a preliminary finding that "only the mandatory divestment by Google" of the relevant pieces would address its concerns. In other words, break up Google. (The U.S. Justice Department is ahead of the curve here: this latest EU move is the fruit of close and welcome transatlantic co-operation.)
The UK has also taken a courageous step in blocking the Microsoft-Activision merger.
More on these below; but more generally we’re hugely encouraged by the continued growth and confidence of the international anti-monopoly network that we're backing. This article lays out some of the latest things we've been up to, together.
Amazon is a monopolist with a remarkable chokehold over the 800,000 sellers active on its marketplaces, according to a landmark new report by our partners at SOMO, the Netherlands-based (but internationally-focused) Centre for Research on Multinational Corporations. The report signals clearly how a significant chunk of the huge fees extracted from sellers are the fruit of Amazon's raw economic power, rather than from its providing genuine services. For example: since 2017, its fees from independent sellers have tripled, even as its sales have grown more slowly; its fees from advertising have grown 17-fold. The Balanced Economy Project has worked closely with SOMO on the report: read it here.
The European Union seems to have decided who its next Chief Competition Economist will be: the U.S. antitrust expert Fiona Scott Morton. A group of us recently published a detailed submission to the EC pushing for a change of tack. [Update, July 2023: Prof. Scott Morton turned down the post, following a public furore about her appointment, and we’re told that our letter was influential in this democratic success.)
She has conflicts of interest, having consulted for big tech and other dominant firms, and she has said in the recent past that certain companies like Amazon "are not breaking the law," when clearly robust enforcement is needed. The Financial Times, reporting on our letter, quoted "a person close to Scott Morton" as saying her consulting work for Big Tech ended two years ago" - yet our submission itself notes work she did for Microsoft published just six months ago. We also questions the appointments process as odd, but more importantly noted that she is a leading defender of the outdated Consumer Welfare ideology, which has proved to be a monopolists' charter. European elections are due before too long; a new Commission will bring new dynamics and new opportunities to resist an agenda driven by believers of “big = efficient”, and instead enact tighter regulation on harmful monopoly power.
A rich, deep investigation by the European Trade Union Confederation (ETUC) into how labour movements can engage with EU competition policies, and what needs to be reformed. "This report will raise questions about the apparent un-willingness of EU competition authorities to address the asymmetry of power between capital and labour." In the battle between consumers and working people, consumer welfare hurts workers. This report, to which the Balanced Economy Project contributed, will be a key reference document for the longer term.
The UK's Competition and Markets Authority (CMA) last month blocked Microsoft's acquisition of the gaming and entertainment company Activision. It came under ferocious attack from the digital giants and a host of their allies. "The UK is closed for business," was the commonest attack line: a line that big banks, crypto firms and hedge funds routinely wheel out when they want to intimidate governments. Some raised spurious fears that popular games like Call of Duty could be banned in the UK. The arguments are bogus: it is monopolists who close down economies for business, not regulators trying to stop monopolisation. Nobody is banning anything.
Did the EU follow suit? Au contaire: it approved the merger a few days later, subject to some behavioural remedies, in a clear snub to the UK. The CMA's Sarah Cardell responded with a stern but justified rebuke: the concessions accepted by Brussels would “allow Microsoft to set the terms and conditions for this market for the next 10 years. They would replace a free, open and competitive market with one subject to ongoing regulation.” See our shared civil society statement on the UK's courageous and essential move; our article The UK's and Germany's new competition bills are major steps forwards; and Max von Thun's article The UK Finally Published its Competition Bill. Was it Worth the Wait?
We joined with Tommaso Valletti, a former Chief Competition Economist at the European Commission, to publish a new report about the latest effort to monopolise the UK mobile market: a tie-up between Vodafone and Hong Kong/Cayman-owned Three. It shows the pervasiveness of incoherent Chicago-School ideas, that Vodafone Chief Executive Margherita Della Valle felt she could get away with claiming that this merger, which is literally reducing competition by cutting the number of mobile network operators from four to three, would be “great for competition.” Our report looks at the international evidence on past mergers and finds a clear pattern, in country after country, study after study: companies say they 'need' mergers to keep the show on the road, they promise sumptuous benefits from a merger - then those benefits do not materialise: mobile prices go up, investment stagnates, and company executives and shareholders make off like bandits. They only need a merger, in the sense that children need ice cream. See our report, and our article in The Guardian.
This article that we co-authored with the UK think tank IPPR, and the Open Markets Institute, is also focused on the UK, and also has wider relevance. As it said: "Competition policy can be one of the government’s most powerful policy toolkits, because it directly regulates the structure and operations of our markets and economy. As such, it lies at the heart of reform for a fairer economy, any serious industrial policy, and can be “a master narrative for democracy”. Smart competition policy is a genuinely pro-business agenda that prioritises ordinary working people. It also highlights a recent speech by US national security adviser Jake Sullivan, with anti-monopoly at its core: a central idea is to eliminate international economic choke-points by creating a more diverse, balanced and resilient international economic system. See our joint article also here.
A joint letter to the European Commission, on the critical role third parties (such as consumers, civil society, and Small and Medium Enterprises, or SMEs,) play in enforcing the Europe’s Digital Markets Act (DMA). The DMA formally moved into its implementation phase last month, but little remains known about how third parties can intervene in this process. The joint letter, signed by 15 organizations including the Balanced Economy Project, calls on the Commission to provide urgent clarity on their role in order to avoid a closed-door dialogue between the EU and Big Tech. See also Max von Thun's write-up in Euractiv.
We wrote last year about Michelle’s co-published paper (with Simon Holmes) on competition policy and climate / sustainability: this was recently published in the European Competition Law Review. This is one of the most active areas of competition law. There is tension between a need to use the competition toolkit to tackle climate change, and fears that companies will exploit new openings to monopolise further. In between, lies a struggle for both climate justice and economic justice, and there is a lot to play for. The full published paper is here.
Our network members are continuing to work on the Amazon's takeover of iRobot (which makes the robotic vacuum cleaner Roomba). Foxglove coordinated a letter to the UK's Competition and Markets Authority (CMA) welcoming its investigation and asking it consider all potential competitive harms arising from the Proposed Transaction. We are anticipating decisions soon from the CMA and European Commission, with sources reporting the CMA will be tougher than the EC. This piece from Insider reports Amazon internal documents highlighting its ambitions to combine home robotic hoovers with LLM (large language model) technology: "To put it simply: Our robot has a strong body. What we need next is a brain". This could put a different light on the investigations and decisions. See also Privacy International's Submissions to the UK and EU competition authorities on the Amazon/iRobot merger, and the UK’s disappointing decision to clear the merger after a narrowly focused investigation that avoided many deeper concerns over Amazon’s power.
Moving beyond "exclusionary" abuses of dominance, to see exploitation
A recent edition of The Counterbalance noted how European Competition authorities tend to divide market abuses into 'exploitative' ones (which do what it says on the tin) and "exclusionary" ones - where the question is whether or not competition’s working properly. We noted that the European Competition authorites and the 'competition bubble' seems to find it very hard to pay attention to the exploitative variety, which is the pervasive kind that most people would understand.
On 24th April, anti-monopoly network members made a joint submission in response to the EC’s Call for Evidence on ‘New guidelines on exclusionary abuses dominance’ under Article 102 of the Treaty on the Functioning of the European Union (TFEU), which is intended to prohibit abusive conduct by companies with a dominant market position. Our submission covers exploitative abuses, the consumer welfare standard, the EC’s over-reliance on narrow economic metrics, over-emphasis on “effects-based” analysis (acting after the fact), and monitoring excessive profitability as a potential marker for abuses. It also starts to think about addressing dominance, rather than merely “abuse of dominance”. Disappointingly, Linsey McCallum, Deputy Director-General for Antitrust in the Directorate-General for Competition, said in response to a question on exploitative abuses (in a recent discussion hosted by the EC) that we won't have guidance on exploitative because there is insufficient case law. This of course is a self-fulfilling prophecy if the Commission prioritises exclusionary over exploitative cases.
GDPR's crisis point
Irish Council for Civil Liberties (ICCL) produced a hard-hitting report; 5 years: GDPR’s crisis point,including shocking stats about the failure of GDPR enforcement. See Cory Doctorow’s report write up, highlighting the pitfalls of European privacy and data protection under the care of Ireland, a pre-eminent tax haven dedicated to attracting questionable activity through laxity in policy and enforcement. The report reveals that, as Doctorow put it, the Irish regulator "isn't merely tolerant of privacy crimes, they're gamekeepers turned poachers, active collaborators in privacy abuse . . . the European Data Protection Board – which oversees Ireland's DPC – overturns the Irish regulator's judgments 75% of the time. It's actually worse than that, it appears." (Also see the older Data Havens: how to tackle the digital race to the bottom.)
Moderators Unite! Breaking the Big Tech omerta - Foxglove.
One thing you run into time and time again in the fight for justice for tech workers is Big Tech omertá. Such as non-disclosure agreements used to terrify workers into silence, stopping them from speaking out about how they are exploited – or even talking to their closest loved ones about what they’re going through. So, as Foxglove noted, it felt surreal to watch a large group of social media content moderators from Facebook and TikTok, at the first-ever summit for content moderators in Berlin, not just breaking this code of silence but doing so with obvious joy. People were sick and tired of being told to suffer in silence - and it clearly felt good.
“It was the energetic crop of young American regulators who were the rock stars of the event” [which we and some of our allies attended.] See also The Total Eclipse of Margrethe Vestager - Politico. We have been saying this for some time. The EU’s "Statement of Objections" suggesting a Google breakup, noted above, was a bright spot in this otherwise bleak European backdrop: now expect an outpouring of activity from lobbyists and sponsored think tanks on the Google case:
Postscript: Inflation Watch, again
And, from a new paper by the Federal Reserve Bank of San Fransico: "Overall, labor-cost growth is responsible for only about 0.1 percentage point of recent core PCE [personal consumption expenditures] inflation."