Tag Archives: Anti-Trust

Vote No Because We Say So…

Like many Americans these days, my husband and I stream our television watching. But we do watch the news on traditional broadcast television, and lately, we’ve been treated to one of those periodic political non-messages, urging us to call on our Congressperson to oppose a bill that “will make us less safe.”

No details, of course, about the bill–only the urgent need to oppose it. It’s a bad bill, and we know it’s bad because the people paying for the advertisement say so.

So what is really going on–other than another example of just how stupid the sponsors of the ad think we are? (Admission: I worry that they may be right about that…) Tom Wheeler of the Brookings Institution has the details.

“A multimillion-dollar campaign is pushing Dems to ditch antitrust reform,” The Washington Post headlined. Of the $36 million spent to date, The Wall Street Journal reports the Computer & Communications Industry Association (CCIA) has spent the most—over $24 million. The CCIA commercials reportedly focused on the swing states of Arizona, Georgia, Nevada, Wisconsin, and New Hampshire. CCIA represents companies such as Amazon, Apple, Meta/Facebook, and Alphabet/Google.

“Don’t Break What Works” is the theme of the CCIA advertisements. “Congress has plans that could stop progress in its tracks, breaking the products and services you love,” the commercial warns. The campaign targets S. 2992, the bipartisan American Innovation and Choice Act that would empower the government to challenge self-preferencing practices of the online platforms if they are determined to be anticompetitive.

Of course, you would never guess that the bill you are being told to oppose had anything to do with anti-trust; no, the voice-over tells us it’s about national security. The advertisement I heard–paid for by something called the Consumer Technology Association– insists that  the legislation is a “national security threat.” It references the Russian attack on Ukraine and “cyber warfare against the U.S.,” and then asks, “Why is Congress considering legislation that makes us less safe?” The commercial doesn’t make reference to a specific piece of legislation, but it concludes with a dark warning:  “Don’t break American technology when we need it most.”

The Brookings report details other, similar ads. Among them:

Another advertising campaign is being run by a heretofore unknown organization named American Edge Project. These commercials also fail to mention what legislation concerns them, how those concerns could be fixed, or how the horrors they warn of could actually happen.

“I don’t understand why some in Congress want to take away the technology we use every day,” the owner of a small plumbing business worries in an American Edge ad. Lamenting “this political campaign against American technology,” Larry Melton of Gilbert, Arizona, warns, “our leaders need to strengthen, not weaken, American technology.”

In another advertisement from the group, small business owner Renee Carlton of Corinth, Mississippi, warns that “some politicians are pushing new laws that will weaken American technology.” The result, she cautions, “will make small businesses dependent on China for the technology we use every day.” Ms. Carlton concludes, “I have a message for Congress. Don’t weaken American technology.”

What will this mysterious bill really do? According to ARStechnica,

The American Innovation and Choice Online Act, cosponsored by Sen. Amy Klobuchar (D-Minn.) and Sen. Chuck Grassley (R-Iowa), would limit Big Tech firms’ ability to “unfairly preference” their own products and services. For example, under the proposed bill, Amazon couldn’t boost search rankings of its private-label products, and Apple and Google couldn’t do the same for their apps in their app stores

These Big Tech platforms  can be immensely useful, but they also have a dark side.

By working both sides of a market, platform owners have unrivaled insights into both buyers and sellers, giving them an advantage when selling their own products and services. In some cases, that can harm consumers. In others, it can harm sellers. So far, antitrust law has struggled to address all the ways that dominant platforms skew markets.

As Klobuchar has pointed out, current law doesn’t address these problems, because existing antitrust measures were written before these platforms came on the scene. Anti-trust laws haven’t been meaningfully updated since the birth of the Internet.

The merits and concerns relevant to this legislation have been debated in Congress, and the bill is supported by the Justice Department. (DOJ’s analysis determined that the legislation would “supplement the existing antitrust laws in preventing the largest digital companies from abusing and exploiting their dominant positions to the detriment of competition and the competitive process.”)

There’s a reason those advertisements don’t tell us that what they oppose is an anti-trust measure that would hamper Big Tech’s ability to exploit dominant market positions. Most Americans wouldn’t see that as an attack on national security, because it isn’t.

 

 

It’s Complicated

The usual reason economists oppose monopolies is that when a business effectively dominates a particular market, it is able to raise prices. A monopoly has effectively eliminated the competition that keeps prices low. The higher prices harm consumers, and allow the company to rake in more profit than it would otherwise be able to generate.

One of the criticisms of the current administration (a criticism that tends to get lost among the mountain of others) is that enforcement of anti-trust laws has been somewhere between lax and non-existent.

Despite their almost-universal support for vigorous anti-trust enforcement, however, few economists identified a relationship between monopolies and the growth of  inequality. As a post from Inequality.org informs us, that may change.

Andrew Leigh is both a member of the Australian Parliament and an economist, and his recent research is making waves.

Working with a team of Australian, Canadian, and American analysts, he’s been studying how much the prices corporate monopolies charge impact inequality.

The conventional wisdom has a simple answer: not much. Yes, the reasoning goes, prices do go up when a few large corporations start to dominate an economic sector. But those same higher prices translate into higher returns for corporate shareholders.

Thanks to 401(k)s and the like, the argument continues, the ranks of these corporate shareholders include millions of average families. So we end up with a wash. As consumers, families pay more in prices. As shareholders, they pocket higher dividends.

But this nonchalance about the impact of monopolies, Andrew Leigh and his colleagues counter, obscures “the relative distribution of consumption and corporate equity ownership.” Average families do hold some shares of stock, but not many. In the United States, for instance, the most affluent 20 percent of households own 13 times more stock than the bottom 60 percent.

In other words, when prices rise, low- and middle-class families pay and wealthy families profit. According to Leigh and his fellow researchers, this redistribution from the less affluent to the wealthy via corporate concentration has shifted 3 percent of national income out of the pockets of poor and middle-class families and into the wallets of the affluent.

The research also shows that corporations grow large because there are incentives to growth to which their executives respond.

Indeed, firm size determines how much executives make more than any other factor, as research has shown repeatedly over the years. Executives don’t have to “perform”— make their enterprises more efficient and effective — to make bigger bucks. They just to need to make their enterprises bigger.

Executives, in short, have a powerful incentive to grow their companies, and that powerful incentive, as the latest research from Andrew Leigh and his colleagues shows, isn’t just making these executives richer. It’s leaving our societies much more unequal.

An obvious lesson from this research is that we need much more robust anti-trust enforcement. Another remedy, just now being tried, is a requirement that corporations publish the  pay ratio between their CEOs and their workers. (Portland, Oregon imposes an “inequality tax” on companies reporting too wide a disparity.)

Evidently, size does matter–at least, in corporate America.

What We Don’t Know Is Hurting Us

There’s an old saying to the effect that it isn’t what we don’t know that hurts us, it’s what we know that isn’t so.

Misinformation, in other words, is more damaging than ignorance.

I agree–with a crucial caveat. The adage is only true when we are aware of our ignorance–when we recognize what information or skill we lack. As research continues to demonstrate, however, there’s a high correlation between ignorance of a particular subject-matter and ignorance of our own ignorance. (It’s called the Dunning-Kruger effect.)

That’s why lawmakers’ allergy to data and preference for evidence-free policy pronouncements are so maddening.

A while back, I read a column making the point that data is inevitably political. The government collects data in order to inform policy decisions, because in order to address issues, it is essential to understand the facts involved, to have a handle on what we academic types like to call “reality.”

The column that I read (and no longer remember where, or I’d link to it) considered the consequences of the Reagan Administration’s decision to stop collecting data on corporate market share. Without that information, policymakers have no idea how large the largest corporations have become. They lack evidence on the degree to which companies like Amazon, Walmart, et al can dominate a segment of the economy and effectively set the rules for that segment. It’s likely that this lack of data is a significant factor accounting for diminished anti-trust enforcement.

The problem goes well beyond economic data. For a considerable length of time, the United States has been mired in one of the nation’s periodic and damaging anti-intellectual periods, characterized by scorn for expertise and empirical evidence.  (Another troubling manifestation of that scorn is the reported evisceration of Congressional staff–the panels of employees with specialized knowledge that advise Congressional committees and individual Representatives on complicated and technical issues.)

Instead of evidence-based policy, we get faith-based lawmaking. Ideology trumps reality. (And yes, I meant that double entendre…)

Last year’s tax “reform” is a perfect example. It was patterned after Sam Brownback’s experiment in Kansas–an experiment that spectacularly crashed and burned. As NPR reported

In 2012, the Republican governor pushed reforms through the state Legislature that dramatically cut income taxes across the board. Brownback boasted the plan would deliver a “shot of adrenaline” to the Kansas economy.

But the opposite happened.

Revenues shrank, and the economy grew more slowly than in neighboring states and the country as a whole. Kansas’ bond rating plummeted, and the state cut funding to education and infrastructure.

You might think that Kansas’ experience would inform a similar effort at the federal level, that it would at least be taken into account even if it wasn’t considered dispositive, but clearly that didn’t happen.

It’s that same dismissive attitude about “facts” and “evidence” and “data”–not to mention science–that is the largest single impediment to serious efforts to slow the rate of climate change.

Some lawmakers who deny climate change ground their beliefs in religious literalism (making them ‘literally” faith-based), but most do so on the basis of the same free-market ideology that led them to dismiss results in Kansas, and oppose even the most reasonable regulations. (There’s a highly convenient aspect to that ideology, since it keeps campaign contributions flowing…but it would be a mistake to think everyone who subscribes to it does so only as a quid pro quo.)

If the country doesn’t emerge from this “Don’t bother me with the facts” era, we’re in for a world of hurt.

And speaking of literalism, the whole world will hurt.