Rebalancing power, fighting inflation
And other stories from the fast-growing anti-monopoly movement
Welcome to the latest edition of The Counterbalance, the newsletter of the Balanced Economy Project. This edition has no single focus, but our selection of important articles.
Rebalancing Power - From monopolies to democratic economies.
This new website originates in a recent movement-building event in Berlin, in which we were quite heavily involved. Rebalancing Power is an initiative aimed at helping shape the foundations of a new anti-monopoly movement in Europe.
Click to see the presentations by Zephyr Teachout, Christian Reiner, Filippo Lancieri, Max Bank, Aidan Regan, Susanne Wixforth, Kim Kuenstner, and Barry Lynn. Follow-up initiatives have already begun. Join us!
A week in Berlin - the Gig economy Project
The Gig Economy Project's Ben Wray spent a week in Berlin talking to food and grocery delivery workers (and to the Balanced Economy Project.) "The movement in Berlin is, as far as we are aware, unique in Europe in the intensity of the organising that is happening and its entirely grassroots construction. Ben offers more personal reflections, here.
New German structural approaches to market concentration - Sven Giegold
The Green Party official, who is State Secretary at the German Federal Ministry for Economic Affairs and Climate Protection, outlines "a package of measures that structurally strengthens the state against large corporations and their power." (See the official announcement, in German, here, on incoming changes to the law to strengthen the Bundeskartellamt, or Cartel Office, to allow three things. First, enabling them to break up markets without having first to prove antitrust law violations or anticompetitive mergers, potentially lifting a key roadblock stopping breakups. Energy markets, where the ministry says “complete market power lies in the hands of a few”, may be first in line. Second, while there is already a legal instrument allowing antitrust authorities to deprive companies of benefits they have gained from anti-competitive behavior, the legal hurdles are so high that the instrument isn’t usable. These hurdles will be lowered. Third, market inquiries and investigations will be improved, apparently with some inspiration coming from the UK.
We see a networking opportunity now opening up, to impact policy, in particular starting to break a taboo in competition circles about breaking up dominant firms. (Our new network co-ordinator, Ulrich Müller, is German, which will help.)
Fighting for a more democratic economy - Canadian anti-monopoly project (CAMP)
CAMP is a new think tank addressing monopoly power in Canada. It helps individuals and organisations navigating and reforming Canadian competition law, and produces research and policy proposals. They are friends of ours. (They are also on Twitter.)
Agriculture & food in Eastern and Southern Africa: An agenda for regional competition enforcement - Grace Nsomba, Simon Roberts, Ntombi Tshabalala, Earnest Manjengwa.
The report finds major concerns with market outcomes with large excess margins being made between producing and consumer areas, much greater than justified by transport, trading or storage costs. Someone in the middle is making a killing. An important report, which emphasises the crucial role of regional and national competition enforcement in preventing middlemen from fleecing consumers and small producers alike.
What is the link between taxes on individual wealth and market power? George Dibb, IPPR.
The Balanced Economy Project held a closed event on June 1 with the Roosevelt Institute in the U.S. and the international Tax Justice Network, with invited experts in tax, economics and market power. The event sought answers to the question: how can tax systems be used to push back against excessive concentrations of economic power? We asked George Dibb to pose a provocative question to the meeting about whether wealth taxes could be one anti-monopoly tool. "I started out sceptical but here's where I ended up." With more to come from us on the topic of tax and monopoly power: watch this space.
Closing the Enforcement Gap - Res Publica
A report focusing on disastrous state of UK enforcement on Big Tech, as other countries (such as Germany) steadily harden their stance. Hopes for legislation to back an incoming Digital Markets Unit (DMU) were dashed in May: a top UK official said “Conservative governments don’t legislate their way to economic growth.” The new report, authored by Balanced Economy Senior Adviser Tim Cowen, notes that Big Tech delivers a broad spectrum of harms and the DMU should sit under a body with appropriately broad remit, such as the Attorney General's office. It also backs the use of injunctions to deliver justice rapidly, and for whistleblower protection given the fear that small businesses have of standing up to Big Tech.
What drives inflation? Adam Tooze
Whereas unit labour costs had accounted for 62% of U.S. inflationary pressure in 1979-2019, with corporate profits making up only 11%, the calculations have now flipped. Labour costs accounted for less than 8% of inflation in 2020-21. The main culprit now? Corporate profits, at 52%, with most of the rest accounted for by energy costs.
Something similar is happening in Europe. Here's an example from the highly concentrated German gas and diesel markets in Germany, after the government passed a 3-month tax reduction. "To no one's surprise, big oil only passed on a fraction." Or see this, on Uber boasting that it has increased its "take rate" from drivers, amid widespread hardship. On a macro level, the ECB's Isabel Schnabel notes that pricing power of firms across advanced economies “has fed into underlying price pressures . . . profits have recently been a key contributor to total domestic inflation."
So market power is a big part of the inflation story. In a related matter, Jan Eeckhout (p270) notes that the welfare cost of inflation has historically been estimated at around 1% of GDP - but the welfare cost of market power has been estimated at least 7%.
Antitrust, Big Tech, and Democracy: A Research Agenda - Viktoria Robertson
The paper explores whether competition law has a role to play when it comes to addressing this intersection of Big Tech, data, and democracy. (Of course it should! And it needs to go a long way further.)
The Law and Politics of Global Competition - Christopher Townley, Mattia Guidi, and Mariana Tavares
Looking at the International Competition Network, a body set up in 2001 whose declared aims are to "to build consensus and convergence towards sound competition policy principles across the global antitrust community." But what does ‘sound competition policy’ entail? As our co-founder Michelle Meager will argue in a forthcoming paper, a "Washington Competition Consensus" has prioritised a pro-monopoly paradigm to most countries. This new papers shows how the ICN agenda tends to promote the interests of large multinationals headquartered in rich countries.
The Power of Big Finance - Positive Money
‘Big Finance’ — banks, investment firms, insurance companies and other large financial firms — form the most powerful interest group in the UK, and have leveraged that power to design a system that puts their commercial priorities above the public interest. We recently signed a landmark economists' letter on this subject: we will continue to pay close attention to Big Finance, and have a page on our new website. Another worry: UK insurance deregulation in "Solvency-2" reforms, a sleight of hand billed as helping green finance but in reality removing protections for ordinary people. The UK Financial Inclusion Centre has a good podcast on this.
CMA plans market investigation into mobile browsers and cloud gaming - Competition law blog
Market investigations are an unusual tool that are unique to the UK. They involve an 18-month (or longer) investigation into an industry, at the end of which the CMA has major powers to reshape the industry even without any abuses being proven. This follows the release of a new CMA market study into mobile systems.
Personal data and competition - Privacy International
A mapping exercise showing the attitudes and perspectives of competition regulators and civil society across the world, in the field of personal data and competition. (See also Mapping the Platform Economy, Frederich Ebert Stiftung.)
Giant Tech Firms Plan to Read Your Mind and Control Your Emotions. Can They Be Stopped? - Lynn Parramore
They know our personalities. They record whether we are impulsive or prone to anxiety. They understand how we respond to sad stories and violent images. And they use this power, which comes from the relentless mining of our personal data all day, every day, to manipulate and addict us. An interview with law professor Maurice Stucke, with pointers on what to do about the mounting problems.
Mundt disputes self-executing nature of DMA - Global Competition Review
The head of Germany’s antitrust authority has said he “very much” doubts that the EU’s Digital Markets Act will actually be self-enforcing, while noting that large technology companies are already trying to “circumvent” its provisions.
Manager pay in the digital age: Size matters, and so does monopoly - Renjie Bao, Jan De Loecker, Jan Eeckhout
Top managers are hired disproportionately by firms with market power in their sectors, and they get rewarded for it because better managers help increase the rents from market power. This rather striking graph illustrates the relationship.
Ukraine will win war and build back through competition, authority head says
Russia is bombing Ukraine’s infrastructure to reduce competition, but the latter will defeat the invasion and define “new economic realities” through competition policy, the head of the country’s Antimonopoly Committee has said. We say: moving away from the consumer welfare / corporate efficiency paradigm, and watching for the emergence of excess economic power will be essential, if they are to rebuild a resilient economy in the end. But: first things first.
Crypto-monopoly - Financial Times
Sam Bankman-Fried, owner of a massive crypto exchange, says the question of whether crypto will empower people is "still in the balance. It depends on whether the sector falls victim to monopolies." He believes network effects and regulatory barriers have made it difficult to disrupt banks and social media platforms, creating an “entrenched elite”. Meanwhile, Twitter founder Jack Dorsey calls Web3, the blockchain-based internet which encompasses crypto, “ultimately a centralized entity.” See also Brett Scott's new book Cloudmoney, which carries further warnings of crypto-monopolisation. We will bring more on this, in due course.
Amazon seeking to settle EU antitrust investigations, sources say - Reuters
The European Commission last year charged Amazon with abusing its massive market dominance. Theoretically, Amazon could be fined 10% of global turnover, or nearly $40 billion. Now, Amazon is trying to mollify regulators with tactical concessions. We urge the Commission to take the hardest, most aggressive line with this abusive, exploitative and manipulative monopolist.
From the United States:
Crackdown on buyout deals coming, warns top US antitrust enforcer - Financial Times
The top antitrust enforcer in the US, Jonathan Kanter, says that the Department of Justice will take a tougher stance on private equity firms rolling up large parts of the American economy. “Many of the mergers we’re confronting are as a result of [private equity] roll ups,” he said.
Is Elon Musk too big to regulate? - Financial Times
Some legal experts remain surprised that the Securities and Exchange Commission — which is reportedly investigating some Twitter-related disclosures by Musk — has yet to charge him. “Has he become so important to such an important company that the SEC is afraid to do something?” the ex-official asked. Also see: Open Markets Details How US Government Can Block Musk Takeover of Twitter. If he does buy it, it would give one man control over one of the most important speech patforms, and create conflicts with his ownership of Starlink, another key communications business.
Torpedoes in the water - Matt Stoller
Writing about the revolutionary changes coming to antitrust that have been put in motion, but whose impact isn’t yet clear. “Right now, we’re in that lag time, the period after the launch of a torpedo, but before it has struck.” The foundational initiative at both agencies [Federal Trade Commission and Department of Justice Antitrust Division, both now headed by leaders of the new U.S. anti-monopoly movement] is the joint effort to revise merger guidelines.
Please send us relevant reports and notes, if you want us to consider including them in future editions.