Category: Monopoly

I Missed This

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Last week,

the House Juciciary Committee passed some rather expansive anti-monopoly billis, which is generally a good thing, as Matt Stoller notes:

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And now to the good, bad, and meaning of the break-up votes. Here’s Jerry Nadler, the Chair of the Judiciary Committee.

The Good

The Judiciary Committee wrote and passed six different bills, two of them being general purpose antitrust acts and four being big tech-specific ones. These bills are an outgrowth of the 16-month investigation into Apple, Google, Amazon, and Facebook, with an analysis of millions of documents and hundreds of witnesses.

I would note the fact that only two of them being general is a bad thing.

Monopolies and ologopolies in insurance, banking, media, finance, pharmaceuticals, groceries, etc. need to be reined in as well.

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So what do these bills do?

The first two are relatively simple. The first increases the amount of money that our antitrust enforcers can use to bring cases and regulate markets. (The FTC’s budget is $351 million, this would boost it to $418 million, while the Department of Justice Antitrust Division would go from $188 million to $252 million.) I wasn’t so keen on this one for a long time, because the Federal Trade Commission and the Antitrust Division are terrible and asking for more resources was an excuse for bad legal strategy. But with Lina Khan at the FTC, I’m more optimistic that she can restore the agency’s legitimacy. Or at least, now I know there’s someone there who recognizes the task at hand.

The second is a bill that is very procedural, but antitrust is a weedy area, and it matters. One of the techniques that monopolists use to avoid scrutiny is to move cases brought by state attorneys general to courts that are friendlier to big corporations. California, for instance, is well-known for tech-friendly judges – Google tried to move one key antitrust case on adtech to its home state. But big pharma does it too. In 2016, 40 state attorneys general filed suit in Connecticut against 18 pharmaceutical companies alleging price-fixing and market allocation of 15 generic drugs. The pharmaceutical companies, most of which were headquartered in the Philadelphia-area, successfully transferred the case to the Eastern District of Pennsylvania. It still hasn’t gone to trial. The second bill stops this nonsense, and lets state AGs keep the cases in the district they choose to bring suit. (Jurisdictional fights have always been a problem – in my book I profiled a 1937 suit over the monopolist Alcoa, in which the firm got the suit moved to its home town of Pittsburgh, and Congress in response nearly passed a law making it easier to remove judges.)

These two bills might not seem like a big deal. However, if these two bills were all that passed, they would still comprise the single most important strengthening of Federal antitrust law in a generation. For decades, antitrust was just not important, and the Judiciary Committee didn’t bother to focus on it. So to have these markups, and pass these bills, is in itself meaningful.

More money to enforcers and making it more difficult to judge shop (which should also apply to federal bankruptcy proceedings) are a good thing, but explicitly listing harms to competitors, and evaluating whether the behavior will lead to greater consolidation, a refutation of Robert Bork’s corrupt and hypocritical views on antitrust, are badly needed as well.

The other four bills solved for problems specific to Google, Apple, Amazon, and Facebook, problems ostensibly laid out in the big tech report by the subcommittee last year. Here are the four bills and what they did.

1) The ACCESS Act mandates that big tech firms have to make their systems open to competitors and business rivals, in the same way that AT&T customers can talk to T-Mobile customers, or users of different email systems can communicate with one another.

2) The merger bill makes it harder for big tech firms to buy rivals.

3) The nondiscrimination bill is intended to ban the ability to big tech firms to preference their own products, the way Google substitutes its own reviews for Yelp reviews, even if Yelp’s reviews are better.

4) The break-up bill is supposed to split apart big tech firms by prohibiting platforms from owning any line of business that uses that platform.

All four passed the committee, which is extraordinary and unexpected. And not only did they pass, but they passed with both Republicans and Democrats working on them.

These bills do not address a bigger question, which is that many agencies refuse to enforce the law, (Stoller gives the example of the FTC refusing to enforce the Robinson-Patman act, which led to an explosion of store mega-chains) and judges who have 50 years of precedent to defer to the word of the monopolists in court.

I think that the laws need to be completely rewritten to reject the past 50 years of jurisprudence, as well as placing the burden of proof on the accused monopolists.

It’s a good start though.

We Have a New Definition of Chutzpah

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Amazon is demanding that FTC chief Lina Khan recuse herself on any decisions about Amazon’s abuse of its monopoly power because she has extensively studied the subject. 

They claim that she has pre-judged the issue, but really they are saying that anyone less corrupt than Robert Bork is biased.

Amazon can go Cheney themselves:

Amazon filed a 25-page petition today with the Federal Trade Commission asking that Chairwoman Lina Khan recuse herself from antitrust investigations into the company.

Khan, a frequent critic of Amazon and other Big Tech firms, was appointed FTC chair less than two weeks ago. Though there has been plenty of speculation about her first moves, her short tenure to date means she hasn’t had much opportunity to file lawsuits or announce investigations. Amazon’s petition shows that its legal team hasn’t sat idle since her nomination as commissioner and subsequent appointment as chair.

“Although Amazon profoundly disagrees with Chair Khan’s conclusions about the company,” Amazon wrote in the petition, “it does not dispute her right to have spoken provocatively and at great length about it in her prior roles. But given her long track record of detailed pronouncements about Amazon and her repeated proclamations that Amazon has violated the antitrust laws, a reasonable observer would conclude that she no longer can consider the company’s antitrust defenses with an open mind.”

Khan made a name for herself four years ago when she published a paper in a law journal. Titled “Amazon’s Antitrust Paradox,” the paper made the case that current antitrust laws have fallen short as tech platforms have risen to dominance. She argued that prices are a poor yardstick with which to measure anticompetitive behavior and market power, especially among platform companies like Amazon. The peculiar economics of platforms means that companies are happy to forgo profits in the name of growth, which leads to predatory pricing, she said. And because the very nature of platforms allows companies to control access to various products and services, it creates incentives for companies to favor their own products over rivals.

Since graduating from law school, Khan worked for the Open Markets Institute, which advocates for stronger antitrust laws and enforcement, and for the House Judiciary Committee, where she worked with Rep. David Cicilline (D-R.I.) to open a congressional inquiry into tech companies’ behavior.

The term for Amazon’s filing here is bullsh%$.

If Ms. Khan had made this statement as a government official, or if she had economic ties to Amazon or its competitors they might have an argument.

Here though, we simply have two drastically different views of the competitive landscape, and her statements were in an academic context.

To quote the noted philosopher Bender Bending Rodriguez:

If any member of the staff of the FTC were to suggest that there were a legitimate case for her recusal, I would suggest that they be reassigned to the FTC office in Butte, Montana.

Today in Amazon Rat-F%$#ery

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A brief rundown of poor Amazon behavior, first despite triple digit temperatures in the Pacific Northwest, and the Kent, Washington warehouse continued operations in brutal heat with no air conditioning. 

Next, and more significantly, Amazon is demanding stock warrants to carry some merchants’ products in their store, which in addition to being something that Glass-Steagall USED to ban is a pretty big slam dunk example of anti-competitive behavior:

Suppliers that want to land Amazon.com Inc. as a client for their goods and services can find that its business comes with a catch: the right for Amazon to buy big stakes in their companies at potentially steep discounts to market value.

The technology-and-retail giant has struck at least a dozen deals with publicly traded companies in which it gets rights, called warrants, to buy the vendors’ stock in the future at what could be below-market prices, according to corporate filings and interviews with people involved with the deals.

Amazon over the past decade also has done more than 75 such deals with privately held companies, according to a person familiar with the matter. In all, the tech titan’s stakes and potential stakes amount to billions of dollars across companies that provide everything from call-center services to natural gas, and in some cases position Amazon among the top shareholders in those businesses.

The unusual arrangements offer another window into how Amazon uses its market heft to increase its wealth and clout. The company has been under growing scrutiny from regulators and lawmakers over its competitive practices, including with companies it partners with.

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Amazon routinely leverages its size and power to force terms that benefit itself, including by getting partners in one business to sign on to its other services; learning about up-and-coming technology companies through its venture-capital fund; or creating top selling Amazon branded goods that compete with small sellers on its site. It has aggressively competed to wrest market share from rivals, which Amazon says results in better deals for shoppers.

In its supplier deals that include warrants, Amazon throws its weight around to exact lucrative terms, knowing many companies won’t refuse, according to former Amazon executives who worked on the deals.

An Amazon spokeswoman said the warrants it obtains in commercial agreements are typically tied to milestones that Amazon has to meet, such as large purchases from the supplier. The company declined to comment on specific deals, or say how many warrants it has exercised or the amount of money it has made from such agreements. The spokeswoman said it has warrant deals in fewer than 1% of the commercial agreements it enters into.

Grocery distributor SpartanNash Co. last year amended a contract with Amazon to deliver groceries to its Amazon Fresh arm. The Grand Rapids, Mich.-based company had been supplying Amazon with food since 2016, but this time Amazon added a condition: if it bought $8 billion worth of groceries over seven years, it could get warrants to purchase around 15% of SpartanNash’s stock at a price potentially lower than the market. Amazon also said it wanted to be notified of any takeover offers for SpartanNash and have a 10-day window to offer a counterbid.

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Amazon has been doing such deals with vendors for about a decade but has aggressively increased the practice in the past few years, said former Amazon executives and lawyers who worked on structuring the deals. In its latest quarterly report, the company valued its warrants at $2.8 billion, more than five times the level three years ago. Amazon doesn’t disclose the value of stakes it owns as a result of exercising its warrants.

A broader measure of its warrants and the stakes it holds in companies through warrants, direct investment or other ways increased 10 times to $8.4 billion in that period, according to Amazon’s quarterly filings.

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Like stock options, warrants let the holder buy a company’s shares at a set price during a set period. If the stock surpasses that strike price, the warrant holder can buy shares at a below-market price.

Corporate executives in a range of industries and lawyers said Amazon’s push to get warrants as part of vendor deals is highly unusual. Warrant deals have more commonly been used by investors who back companies in financial trouble, in deals deemed high risk.

Amazon is using its market dominance to steal from the share-holders, but that’s OK with the corrupt stooges that Robert Bork unleashed on antitrust law.

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In talks with Atlas Air Worldwide Holdings Inc., Amazon broached a 10-year leasing deal, with similar terms. This time Amazon demanded warrants that would amount to up to 20% of Atlas’s equity over five years—with an option for 10% more later—depending on how much business it gave Atlas. Amazon also wanted the right to elect a director to Atlas’s board, after meeting certain milestones.

People involved on both sides said that warrants were a condition of Amazon partnering with Atlas. “There was definitely a sense that if it wasn’t agreed to there wouldn’t be a deal,” said one of the people. Atlas executives didn’t want to pass up the revenue opportunity from Amazon and viewed giving up the warrants as the price of doing business with Amazon, said the person.

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Former Amazon executives said they avoided doing anything during supplier negotiations, such as putting its ultimatums in writing, that would give fodder to critics who have said Amazon abuses its power. One of the former executives said that most companies complied with its demands over warrants. Several former Amazon executives who worked on such deals said in interviews that they found them to be unfair and one-sided, saying the companies weren’t in a position to refuse and that most of the upside went to Amazon.

This is extortion and demanding kick-backs, and while it is likely legal, it really shouldn’t be.

This sort of behavior is baked into its DNA, as we can see by their dealing with the press as well, with intimidation and lies being the rule rather than the exception:

It was a slow news day at Gizmodo, the tech website where Dell Cameron worked. Without a story of his own to report he decided to aggregate—a journalism term for rewriting and crediting—a day-old Tampa ABC-affiliate’s TV piece on how Amazon’s Ring home surveillance security system was being marketed to dozens of Florida police departments.

A day later, an email from an Amazon spokesperson popped into Cameron’s inbox. The brief email claimed that the Tampa-based reporter, Adam Walser, was “correcting his story” and suggested that Cameron would need to do so as well. In her mail, the spokesperson challenged the accuracy of the station’s entire report. “It is inaccurate that AWS or Amazon is marketing Amazon Rekognition to law enforcement, either individually or in combination with Ring,” she wrote.

Cameron checked, and he didn’t see a correction on the Tampa story. Before making any change to his post, Cameron decided to reach out to Walser and double-check. “I read him the exact email that they sent me,” Cameron says. Walser was puzzled, according to Cameron. “He said ‘That’s just not true, we’re not issuing a correction. I don’t know what they’re talking about.’” Cameron wrote back to the Amazon spokesperson relaying what he’d been told, and mentioning that Gizmodo was planning their own potential follow-up story that was “likely to include that Amazon attempted to obtain a correction from Gizmodo by falsely claiming the ABC station was planning to issue one.”

The Amazon spokesperson doubled down, insisting that a correction had indeed happened. She accused Cameron of being “up in arms” and “threatening” by mentioning the possibility that Gizmodo would publish a piece about being misled by Amazon. “I do not appreciate being called… a liar,” she added in a follow-up email.

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“I do not believe for a second that this person is naive or didn’t understand what a correction is,” Cameron told me recently, almost two years after the interaction. “They got a job in the PR department at one of the most powerful companies in the world. I think they were trying to trick me into correcting a story and didn’t expect me to go back and contact the reporter.”

It’s not unusual for communications teams for corporations, non-profits, and the government all alike to be withholding in their interactions with the press and to try to spin things in the best possible light. It’s rarer that companies try to mislead and intimidate the press into falling into the lines that they want. But of the dozen journalists I spoke with for this story, most of whom declined to be identified out of concern for professional repercussions, all recalled times Amazon’s press team had engaged in manipulative and sometimes deceitful behavior. According to these writers and editors, and my own experience reporting on the company, Amazon’s comms team readily employs these rarer, bare-knuckle PR tactics. The ultimate result isn’t just that reporters have a harder time writing stories. Some may be deterred from writing on the company at all. And if those that do are deceived and unduly influenced, then by extension the public is as well.

Aside from Cameron, at least two reporters recalled moments when they felt Amazon’s press team had outright lied to them. Almost all of the journalists told me they found that Amazon press relations was either the most or among the most clawing and deceptive corporate communications team that they had dealt with in their work.

“Amazon is the only company I’ve dealt with that has directly lied to me,” said one tech writer, recalling instances when Amazon boasted of warehouse safety guidelines in ways that journalists who had spoken with rank-and-file employees had found not to be true.

“They’d often lie about things we had proof of,” said another reporter, citing times they had visual evidence contradicting the communications teams’ claims. “There will be videos of these big walkouts and they’ll say only a few workers participated.”

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“I do think that the broader effort is to disincentivize you from telling the truth. They want you to feel like it’s going to be a world of pain if you do your job,” one veteran tech reporter said. “Even if corrections aren’t needed, it’s still a headache and a waste of time for reporters and editors and lets them know that they’re probably scheduling another headache for themselves the next time that they decide to write about Amazon.”

Another reporter at a smaller outlet with less resources described a similar chilling effect after the company pressured him after a critical story. “It just eats up so much of time, going back and forth with our attorneys,” the reporter said, describing how the trouble had made him hesitant to cover Amazon again. “You think twice about it. Is it really worth it? Maybe you have a good story but it won’t change how they do business. It’s kind of a scary thing.”

Amazon tried a similar tactic this September on Reveal—a non-profit investigative news shop that often releases its stories in partnership with newspapers, broadcasters, and other outlets—after it published an award winning series from a team led by reporter Will Evans about the company’s efforts to mislead the public about warehouse injury rates. “Yesterday we published an investigation into Amazon’s massive misinformation campaign. Naturally, we’re now the *subject* of their misinformation campaign,” wrote Andy Donohue, Reveal’s deputy director of projects.

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But others noted Amazon is willing to go to bold lengths compared to other companies they’ve reported on. Amazon has a broader reputation for fostering a cutthroat corporate culture, which seems to be reflected in the company’s external communications. Ahead of April’s high profile unionization vote at the company’s Bessemer, Alabama facility, Amazon fallaciously tweeted claims that its hard-pressed drivers and warehouse pickers didn’t actually have to pee in bottles, and chided lawmakers like Bernie Sanders and Elizabeth Warren who had spoken out about the company’s labor conditions. Recode reported that the tweets were directly driven by Jeff Bezos, the company’s CEO and one of the world’s most wealthy men.

While that suggests the company’s aggressive PR efforts flow from the very top, there are other executives with a role in overseeing public relations and related portfolios. While the most high profile may be vice president of global corporate affairs Jay Carney, the former Time magazine reporter and Obama White House press secretary, two former Amazon communications staffers and another employee with knowledge of Amazon’s communications team told me that Drew Herdener, the vice president of communications, usually calls shots internally.

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Amazon’s tactics seem to be well known among reporters. Beyond the dozen with personal experience I spoke with for this story, many others who had not themselves faced an Amazon harangue were aware of the company’s aggressive approach. Indeed, hints of Amazon’s press strategies have leaked out over the years. In 2019, a Twitter glitch notified users when they were put on other users’ private lists. Caroline Haskins, a reporter at BuzzFeed who had broken a series of stories on Amazon Ring, noticed that Morgan Culbertson, an Amazon PR person, had added her to a list called “Haters.”

The goal is to have these tactics, “Well known among reporters.”  The technical term for this is, “Chilling Effect.”

Even reporters who have never written a story about Amazon are leery of writing one.

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It was not the first time I had been yelled at by a press flack—that’s not uncommon. Nor was it the first time I had been asked for a correction. But it was the first and only time a press flack tried to aggressively antagonize and intimidate me into stripping a quote out of a published story from an established expert.

That expert, Stacy Mitchell—the co-director of the Institute for Local Self-Reliance, a research group that advocates for small businesses—has seen the impacts of Amazon’s PR wrath firsthand. When I spoke with her for this story, Mitchell said that she’s had editors “tone-down and remove stuff to reduce the blowback from Amazon” or “at least brace themselves,” when preparing to publish op-eds she’s written.

See Effect, Chilling.

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“I’ve heard about Amazon’s bullying from many journalists,” Mitchell says. “I sometimes ask reporters about it, and sometimes they bring it up off-handedly.”

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Even accepting that less than ideal reality, Amazon seems to be doing something that goes beyond mere spin. Facebook, Google, or other tech giants’ softer pressure and prodding certainly don’t come with the best of intentions. But employing aggressive, intimidation tactics and playing word games that severely contort the truth clearly goes beyond the line, wherever it is.

I am not surprised.  The company was founded by a contemptible sociopath, and the company (Corporations are people, my friend) is a contemptible sociopath as well.

About F%$#ing Time

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Finally, the courts are starting to rule against the modern-day slavery ring that is the NCAA.

It’s a fairly limited ruling, (9-0) simply stating that their limits of scholarships that the NCAA places on athletes are a violation of antitrust law, but it’s a start:

The Supreme Court unanimously ruled on Monday that the N.C.A.A. could not bar relatively modest payments to student-athletes, a decision that underscored the growing challenges to a college sports system that generates huge sums for schools but provides little or no compensation to the players.

The decision concerned only payments and other benefits related to education. But its logic suggested that the court may be open to a head-on challenge to the ban by the National Collegiate Athletic Association on paying athletes for their participation in sports that bring billions of dollars in revenue to American colleges and universities.

In a concurring opinion, Justice Brett M. Kavanaugh seemed to invite such a challenge.

“Nowhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate,” Justice Kavanaugh wrote. “And under ordinary principles of antitrust law, it is not evident why college sports should be any different. The N.C.A.A. is not above the law.”

While this is good for athletes, it might be better for students in general, since the top schools openly collude on financial aid awards and tuition for students more generally, which should be targeted by antitrust authorities.

I think that this could be a precedent for this as well.

An Unalloyed Bit of Good News

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Lina Khan, who shot to fame when her article in the Yale Law Review, Amazon’s Antitrust Paradox, mainstreamed an new (actually old, pre-1970) and aggressive anti-trust policy.

Since then she has been a leading voice in the movement for forceful and expansive enforcement of anti-monopoly enforcement, and now, she has been confirmed as Chair of the FTC.

Hopefully, this presages a much more assertive approach to monopolies by the agency:

In a move that heralds a growing effort to check the power and influence of Big Tech, President Biden on Tuesday appointed Lina Khan, a top antagonist of the tech industry, to chair the Federal Trade Commission, the federal government’s primary antitrust watchdog.

Biden’s decision to put Khan in charge of the FTC’s agenda is the clearest sign yet that his administration will take a drastically different approach to regulating the tech giants than did President Barack Obama, whose administration took a largely hands-off approach toward Silicon Valley.

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Khan, 32, is known for her unconventional proposals to counter the tech giants’ power. While still in law school in 2017, she wrote a paper denouncing Amazon for what she said was anti-competitive behavior and suggesting U.S. anti-competition laws were poorly equipped to counter the world of e-commerce. (Amazon founder and CEO Jeff Bezos owns The Washington Post.)

Here proposal is not all unconventional. It was a pretty standard view of anti-trust before Robert Bork and Evil Minions™ perverted the field.

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During her confirmation hearing, she signaled she would take a tough line on regulating tech giants. She said that in the past few years, new evidence has come to light showing there were “missed opportunities” for enforcement actions against tech companies under the Obama administration. She also said new findings show the FTC must be “much more vigilant” when it comes to large acquisitions in digital markets.

Khan also said she was particularly concerned about the ways in which large companies use their dominance in one market to give them an upper hand in others, an issue under intense scrutiny by Congress.

Hopefully, this presages an extremely muscular by the Federal Trade Commission.

Interesting Tactic

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The state has sued Google, looking to have its search declared a public utility, which would make its favoring of its own products, including its ad markets unlawful.

This is an interesting way of doing things, but I have no idea how likely that it would successful:

Ohio Attorney General Dave Yost has filed a lawsuit asking a court to declare Google a public utility that should be regulated as such.

“Google uses its dominance of internet search to steer Ohioans to Google’s own products – that’s discriminatory and anti-competitive,” Yost said in a statement. “When you own the railroad or the electric company or the cellphone tower, you have to treat everyone the same and give everybody access.”

The lawsuit, filed in Delaware County Common Pleas Court, is believed to be the first of its kind, Yost’s office said.

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Google disadvantages businesses and consumers by ranking its own services above competitors, Yost argues in the complaint. For example, if someone searches for a flight, Google Flights is the first result that pops up after advertisements, not other search sites such as Expedia and Travelocity.

The lawsuit does not seek monetary damages.

Even if they win, there will be years of appeals, but I would really like the State of Ohio to prevail.

A Good Start

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New York State Senate has just passed a wide ranging antitrust law which appears to have some serious teeth.

It eschews Robert Bork’s corrupt and hypocritical sham that ignored the whole history, and recast antitrust as something that only applied when consumers were immediately charged more money.

The changes in the law:

  • It lowers the presumption of market dominance from 80%+ to 40%.
  • It allows private plaintiffs to file under the law.
  • It makes “Unilateral power to set wages or contractual provisions that restrict workers from moving from their current employer to a competitor,” evidence of market dominance.
  • Dominant firms would forbidden from, predatory pricing.

There is a good primer here. 

This has not passed the state assembly yet, and it is not clear if “Ratfaced Andy” would sign the bill into law.

You are getting a lot of bullsh%$ about how this will harm small business, but that’s a lie.

Business who would be subject to this would people like Google, Apple, Amazon, Facebook, and dominant hospitals in a regions, who all need to be taken down for the good of society:

The New York state Senate passed legislation Monday making it easier for plaintiffs to win antimonopoly lawsuits, in the latest state-led effort to rein in large technology companies in the absence of action by Congress.

The antitrust bill was opposed by business groups and backed by unions and other critics of corporate giants such as Amazon.com Inc. and Alphabet Inc.’s Google. To become law, it must also pass the state assembly and be signed by the governor.

Monday’s 43-20 party line vote represented an incremental victory for advocates of tougher antitrust laws, who will seek to use it as a springboard to tougher laws in other states and at the federal level.

“We have a problem in this country. We have a problem that there is tremendous market power in very, very few hands,” said New York state Sen. Michael Gianaris, a Democrat and the bill’s lead sponsor, at a virtual press conference Monday. “Small startups and medium-sized businesses don’t have the opportunity to grow and innovate.”

………

Mr. Gianaris said he would continue fighting for the New York bill if it doesn’t become law during the state legislature’s current session, which ends this week. No further legislative days are scheduled this year, although more could be added.

If the bill isn’t passed this year it would have to be reintroduced next year. New York Gov. Andrew Cuomo’s office had no immediate comment.

Congress is considering changes to federal antitrust law, but those efforts haven’t advanced significantly this year as lawmakers focus on other priorities. States including Maryland and Florida have enacted new statutes aimed at powerful tech companies.

The proposed New York law takes broader aim. It would make it unlawful for a company “with a dominant position in the conduct of any business…to abuse that dominant position.” A company would generally be presumed dominant if it had a greater than 40% market share.

That is a more plaintiff-friendly standard than current U.S. antitrust laws at the federal and state level. Generally under those laws, a company is considered a monopoly if it controls two-thirds of a market, and its conduct isn’t considered anticompetitive unless it can be shown to harm consumers.

It’s very late in the session, so there is a good chance that it won’t pass this year, but it should be back next year.

A Good Primer on Why We Need Aggressive Antitrust

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Here is how preventing a merger led to lower prices and better products:

Stopping mergers is good for business. Take a very simple consumer product – razors and razor blades for shaving, or disposable wet shave safety razors.

Short version:  A couple of competitors to the disposable razor duoopoly went from online to store shelves, and forced the incumbents to reign in their high prices, particularly when one of the attempts to buy out one of the companies was stopped by the FTC.

It’s a 5-10 minute read, and well worth it.

The Front Fell Off

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The Front Fell Off?

It now appears that the Ever Given, the massive container ship which had completely blocked the Suez Canal, has been freed and traffic has resumed through the waterway.

There is still a major backlog of ships in both directions, but after a week, we should expect a return to normal shipping conditions.

The bigger issue is how this event has demonstrated the fragility of international shipping.

What’s more, it has increasingly been juxtaposed with economic fragility driven by the increasingly oligopolistic nature of shipping, which means that if one shipper fails, the entire system can seize up.

The classic Clarke and Dawe sketch, “The Front Fell Off,” (shown) is a perfect metaphor for this:

In this newsletter, I do a lot of explaining about complicated problems caused by big dumb corporate institutions. I don’t have to do that this time, because the story of the mess in the Suez is so simple. “After years of bitcoin and reddit short selling and credit default swaps and a million other things I don’t understand,” one random person put in a tweet that went viral, “it’s so refreshing to hear that global commerce is in peril because a big boat got stuck in a canal.”

That’s basically the story right there, it’s a big boat and it got stuck in a canal. The ship blocking the Suez, called the Ever Given, weights 220,000 tons, and is as long as the Empire State Building is high. Despite the hilarious nature of the problem, the disruption to world trade is large and serious, costing tens of billions of dollars. And if the ship can’t be dislodged soon, some consumers will once again experience shortages of basic staples like toilet paper.

That said, the reason this disruption to global commerce seems so dumb is because it is. It starts with the ship size itself. Over the last few decades, ships have gotten really really big, four times the size of what they were 25 years ago, what the FT calls “too big to sail.’ The argument behind making such massive boats was efficiency, since you can carry more at a lower cost. The downside of such mega-ships should have been obvious. Ships like this, which are in effect floating islands, are really hard to steer in tight spaces like ports and canals, and if they get stuck, they are difficult to unstick. In other words, the super smart wizard financiers who run global trade made ships that don’t fit in the canals they need to fit into.

The rise of mega-ships is paralleled by the consolidation of the shipping industry itself. In 2000, the ten biggest shipping companies had a 12% market share, by 2019 that share had increased to 82%. This understates the consolidation, because there are alliances among these shippers. The stuck ship is being run by the Taiwanese shipping conglomerate Evergreen, which bought Italian shipping firm Italia Marittima in 1998 and London-based Hatsu in 2002, and is itself part of the OCEAN alliance, which has more than a third of global shipping.

Making ships massive, and combining such massive ships into massive shipping monopolies, is a bad way to run global commerce. We’ve already seen significant problems from big shipping lines helping to transmit financial shocks into trade shocks, such as when Korean shipper Hanjin went under and stranded $14 billion of cargo on the ocean while in bankruptcy. It’s also much harder for small producers and retailers to get shipping space, because large shippers want to deal with large clients. And fewer ports can handle these mega-ships, so such ships induce geographical inequality. Increasingly, we’re not moving ships between cities, we’re moving cities to where the small number of giant shipping lines find it efficient to ship.

Dumb big ships owned by monopolies are the result of dumb big ideas, the physical manifestation of what Thomas Friedman was pushing in the 1990s and 2000s with books such as The Lexus and the Olive Tree and The World is Flat, the idea that “taking fat out of the system at every joint” was leading towards a more prosperous, peaceful and competitive world. Friedman’s was a finance-friendly perspective, a belief that making us all interdependent with a very thin margin of error would force global cooperation.

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What is new isn’t the vulnerability of the Suez Canal as a chokepoint, it’s that we’ve intentionally created lots of other artificial chokepoints. And since our production systems have little fat, these systems are tightly coupled, meaning a shortage in one area cascades throughout the global economy, costing us time, money, and lives.

It’s a dumb way to organize a global supply chain system, just as it was dumb to build ships that are too big to fit into canals. And that’s why the “big boat stuck in canal” is such a great illustration of the problem, it shows our policymakers and corporate leaders couldn’t even think through what would happen if Really Big Thing Got Stuck In Important Canal.

………

The answer to addressing the problem of thinned out supply chains is to recognize that hyper-efficient globalization inherently carries the downside of unpredictable shortages, geopolitical tension, and supply disruptions. And then redesign our global trading order to make it less efficient and more resilient. There are three basic changes we’ll need.

Matt Stoller calls for a rigorous enforcement of anti-monopoly measures, a reimpositition of border friction like tariffs, and a restructuring of business so that they are less indebted and less vulnerable.

Unfortunately, this will not happen, because this system was created to benefit financial institutions and to drive wages down through labor arbitrage, so his reforms are actually a repudiation of the entire system.

I support his ideas, but I don’t think that they are politically realistic at this time.

 

First Court Ordered Antitrust Breakup in Decades

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And it was the result of private litigation, not any action of the agencies that are actually supposed to protect us from monopolists.

The case involved “Door Skins” which are the inside and outside surfaces of residential doors, which over the years, through buyouts and mergers, has become a completely uncompetitive market.

After buying its biggest competitor, Jeld Wen, which also makes complete doors, cut off door manufactures from its supplies of door skins, and court has ruled that it must sell off one of its factories:

Federal antitrust enforcers have long succeeded at unwinding consummated mergers. By contrast, private antitrust plaintiffs have not successfully forced companies to break up a completed acquisition. Until now.

On February 18, 2021, the U.S. Court of Appeals for the Fourth Circuit issued a historic decision in Steves and Sons, Inc. v. JELD-WEN, Inc., affirming a district court’s remedy of divestiture after a jury found a violation of Section 7 of the Clayton Act in the door manufacturing industry. To the Fourth Circuit’s knowledge (and the consensus of the antitrust bar), the Steves and Sons case is the first time a private plaintiff has secured a federal court order compelling a defendant to divest assets acquired through a past merger.

Absent further appellate relief, the Fourth Circuit’s opinion will require that the defendant unwind a 2012 acquisition of a doorskin manufacturing plant through an auction process supervised by a court-appointed special master. The decision has put parties to corporate merger and acquisition activity firmly on notice that private antitrust litigation may lead to unscrambling the eggs of a merger years after consummation, even when federal and state antitrust enforcers do not move to block the transaction as anticompetitive.

 This is likely going to end up at the Supreme Court, given the literally unprecedented nature of the ruling.

In 2012, JELD-WEN, Inc., one of the world’s largest door and window manufacturers, acquired Craftmaster International (CMI), a competing manufacturer. Before the combination, JELD-WEN and CMI each manufactured both interior molded doors and doorskins, which are veneers that are glued to the front and back of a frame to make a molded door. CMI produced doorskins at its plants in Towanda, Pennsylvania. Before the merger was consummated, it was investigated, but not challenged, by the Antitrust Division of the Department of Justice (DOJ). After the transaction closed, only two doorskin manufacturers remained in the U.S. market (JELD-WEN and Masonite). A JELD-WEN investor later noted that this duopoly “over time will improve our pricing power.”

Based on a long-term supply contract, JELD-WEN sold doorskins to Steves and Sons (Steves), an independent door manufacturer owned and operated by the same family for 150 years. In 2014, Masonite announced it would stop selling doorskins to independent door manufacturers like Steves. Shortly thereafter, JELD-WEN exercised its right to terminate the supply contract with Steves, effective in September 2021. As JELD-WEN’s prices increased and quality issues arose, Steves asked the DOJ to reexamine JELD-WEN’s merger with CMI. In 2016, the DOJ closed its investigation. Unable to secure any enforcement action, Steves filed a complaint in the U.S. District Court for the Eastern District of Virginia, alleging, among other things, that the JELD-WEN/CMI acquisition violated Section 7 of the Clayton Act. Steves asked for equitable relief to unravel the CMI acquisition and to divest JELD-WEN’s doorskin plant in Towanda.

………

On appeal, the Fourth Circuit vacated much of the antitrust damages award, but rejected JELD-WEN’s numerous arguments related to antitrust injury, “antitrust impact,” evidentiary rulings, and the propriety of divestiture as a remedy, and held that the district court did not abuse its discretion by ordering divestiture of the Towanda plant. The appeals court noted that private lawsuits under the Clayton Act “seeking divestiture are rare and, to our knowledge, no court had ever ordered divestiture in a private suit before this case,” but that divestitures in private Clayton Act actions are based on well-established U.S. Supreme Court precedent. Ultimately, the court concluded that the Steves case “is a poster child for divestiture” given that the 2012 CMI merger had created a duopoly and the remaining suppliers “used their market power to threaten [the] survival” of independent door manufacturers like Steves.

Lots of footnotes at the link, but the this is, to quote President Biden, “A big f%$#ing deal,” at least as long as the ruling stands.

It has the potential for tying up mergers and acquisitions for months through private litigation by competitors, particularly if some well heeled groups arrange for pro bono, or at least subsidized legal action.

This is why I expect the Supreme Court to rule on this, and I’m not optimistic about the outcome there.

H/t Matt Stoller’s Big.

A Good Start

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The White House has announced that anti-monopoly and net neutrality activist Tim Wu will be appointed to its National Economic Council.

I hope that this means that the Biden administration will take concrete steps to reign in the monopoly power of big tech and the telecommunications incumbents, but I fear that this is just window dressing:

Longtime tech critic Tim Wu is joining the Biden administration as an adviser on technology and competition, a signal that the White House is likely to push for policies that rein in Big Tech.

Wu will be serving on the National Economic Council as special assistant to the president for technology and competition policy, the White House said this morning. Wu confirmed the news in a tweet.

Wu is best known in tech circles as the man who coined the term “net neutrality” in the early 2000s. He has held several positions at the federal level before, including advisory roles with both the Federal Trade Commission and the National Economic Council. He has also been a full professor at Columbia University law school since 2006, where he teaches First Amendment and antitrust law.

His 2010 book The Master Switch argued that the open Internet as we knew it was barreling toward a closed-off, walled-garden future. In 2018 he published another book, The Curse of Bigness, in which he argued that US regulators’ failure to enforce antitrust laws had led to “a new gilded age” and all its attendant problems. 

The rubber hits the road in two places, DoJ enforcement and Congressional legislation.

Hopefully, we will see some action there.

And He Would Have Gotten Away with It Too, If It Weren’t for That Meddling Journalist

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David Sirota has been all over the conflicts of interest and corruption at the heart of the proposed merger between the health insurers Anthem and Cigna:

Late last week, there was some notable news in the arcane world of insurance regulation: Connecticut’s state comptroller, Kevin Lembo, called on Insurance Department Commissioner Katharine Wade to recuse herself from a review of the proposed merger of the nation’s second- and fourth-largest insurers, Anthem and Cigna, in which the state has a lead role. “The revelations and repeated reports about your financial, personal and professional ties to Cigna,” Lembo wrote to Wade, “will make it challenging for the Connecticut public to view the review process of the Anthem-Cigna merger as fair and transparent.”

Lembo’s letter marked the latest turn in a controversy that, while building for more than a year, has come to a head over the past month—driven in substantial part by the ongoing reporting of David Sirota, the Denver-based senior investigations editor for the International Business Times. On June 1, Sirota published a lengthy piece weaving together previously-known and new concerns over conflicts of interest surrounding the merger review: Wade, appointed to her role in 2015 by Connecticut Gov. Dannel Malloy, is a former longtime Cigna lobbyist, her husband is a top Cigna lawyer, her father-in-law works for a law firm that lobbies for Cigna, and her mother worked for Cigna as recently as 2013. Wade’s brother, Sirota reported, also “previously worked as a counsel” for Cigna. Further, after reviewing more than a decade’s worth of campaign finance data, Sirota showed that Anthem, Cigna, and Cigna’s lobbying firm gave more than $2 million to groups linked to Gov. Malloy, with much of that money coming since 2015.

Since then, Sirota has produced more than a dozen follow-ups on the topic—tracking, for example, grassroots groups and state legislators calling on Malloy to remove Wade from the merger review—as what he initially envisioned as a “good little blog item” turned into an investigative series.

 Unfortunately, IBT is suffering financial difficulties, so go to their Political Capital page, and clock on their ads.

Seriously though, this coverage is kicking some major ass.

College Costs: It Ain’t Climbing Walls

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In response to a particularly egregious post by an overpaid (aren’t they all?) sales weasel about marketing to the “4 Ps”*, Paul Campos of LGM notes the remuneration of the 15 highest paid staff at the school, and the size of the school (less than 200 faculty), and draws obvious conclusions.

First, let me say, read the comments on his post.  They are a wealth of information as well.

Second, as is my wont, let me run the numbers:

The top 15 luminaries at this institution earn a total of $3,928,000.00, with the 15th most highly paid getting $145,000.00 a year.

There are 200 teaching staff, none of whom make $145,000.00 a year, or their names would be on the tax records used at LGM.

Assuming that they each average $100,000.00 a year, this means $20,000,000.00 spent on teaching staff, which means that 14% of the teaching budget is spent on such notables as the , “Vice President of Campus Environment ,” “Associate Assistant Vice President/Dean”, “Vice President of Institutional Advancement, ” and “Associate Vice President and Chief of Staff”.

According to the comments, almost all the teacher are adjuncts, so that number is probably less than $60K, it’s primarily a liberal arts institution, which would mean that of these people have get the ⅓ of what is spent on instructors.

When you further consider that it is likely that each of these bits of administrative deadwood have 5 flunkies working directly for them on average (and my guess would be that there are at least 10 working for both the marketing and alumni development chiefs) , and that each of them earn $30K a year, and this goes up to more than 50% of the teacher budget.

Note from the comments also, “It is telling that she refers to customers rather than students.”

A major problem with higher education, and higher education costs, is the explosion of overpaid and under-worked administrators.

Another one is that, particularly at the top schools, there is monopolistic collusion as to prices and aid awards, allowing prices to skyrocket.

Instead, we have people talking about climbing walls for students, and those palatial some new dorms.†

College is a microcosm of society, where an unproductive and parasitic managerial class suck the marrow out of business, the economy, society, and the “customer”.

*Product – What product or products should we offer? Price – How should our products be priced? Place – Where should we offer our products for sale? Promotion – What’s the compelling story we tell about our product and where do we tell the story to get people to buy our product?
†In fact, the high end student amenities are predicted by monopoly theory. Once monopolists stop competing on price, they jack up prices and compete on bling.

WTF, Ohio?

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Worst mascot ever!

Only in Ohio could an initiative to legalize recreational marijuana be opposed by legalization activists because it’s purpose designed to benefit 10 politically connected entities seeking monopoly rents:

As a member of the International Cannabinoid Research Society, a collector of antique marijuana apothecary jars, the founder of an industrial hemp business and “a pot smoker consistently for 47 years,” Don Wirtshafter, an Ohio lawyer, has fought for decades to make marijuana legal, calling it “my life’s work.”

But when Ohio voters go to the polls Tuesday to consider a constitutional amendment to allow marijuana for both medical and personal use, Mr. Wirtshafter will vote against it.

Issue 3, as the proposed amendment is known, is bankrolled by wealthy investors spending nearly $25 million to put it on the ballot and sell it to voters. If it passes, they will have exclusive rights to growing commercial marijuana in Ohio. The proposal has a strange bedfellows coalition of opponents: law enforcement officers worried about crime, doctors worried about children’s health, state lawmakers and others who warn that it would enshrine a monopoly in the Ohio Constitution.

The result has been one of the nation’s oddest legalization campaigns. It pits a new generation of corporate investors against grass-roots advocates like Mr. Wirtshafter, who deplores “opportunists seeking monopolistic gains” and laments that America would have been much better off “if they would have just let the hippies have their weed.”

A recent poll by the University of Akron shows voters evenly split, but if the proposal passes, Ohio will be the first state to approve marijuana for personal use without first legalizing medical marijuana. That would put Ohio, a swing state, at the forefront of the national movement to overhaul marijuana laws — just in time for the 2016 presidential campaign. Gov. John R. Kasich of Ohio, a Republican candidate for president, opposes Issue 3.

………

To complicate matters, the Ohio General Assembly has put a competing initiative, Issue 2, on the ballot; known as the antimonopoly amendment, it would block Issue 3 by prohibiting the granting of special rights through the State Constitution. There is certain to be a protracted legal battle if both measures pass.

There is also the matter that the granting of monopolies in the production of Marijuana might be unconstitutional.

We see state monopolies, and state granted monopolies and oligopolies, in alcohol because section 2 of the 21st amendment has been interpreted by the courts of giving states near absolute control over the alcohol trade within their borders.

This does not apply to weed.

The story is twisted:

The story of how Issue 3 got onto the ballot begins here in Columbus, the capital, with Ian James, a political consultant whose company, the Strategy Network, specializes in gathering signatures for ballot initiatives. In 2009, his firm helped legalize casino gambling in Ohio through a measure that amended the State Constitution and specified where casinos could be located.

………

Mr. James said he had “taken that premise and applied it to marijuana.” In early 2014, he said, he began meeting with lawyers and a potential investor, James Gould, a Cincinnati sports agent, to talk about a “tightly regulated system” to make marijuana available in Ohio. An organization called the Ohio Rights Group, then represented by Mr. Wirtshafter, was already gathering signatures for an initiative to make medical marijuana legal.

But Mr. James had a more ambitious plan.

With help from Mr. Gould, he found 10 investment groups willing to put up a minimum of $2 million each to finance a campaign to pass an amendment that would legalize marijuana for medical use and personal use in small amounts; set up a commission to regulate it; and designate 10 parcels of land — each owned or optioned by funders of the initiative — where marijuana could be legally grown and cultivated for commercial use.

………

The backers call themselves ResponsibleOhio. Among the investors: the former professional basketball player Oscar Robertson, the fashion designer Nanette Lepore, Mr. Gould and two great-great-grand-nephews of President William Howard Taft. Each investment group has committed as much as $40 million to build facilities if Issue 3 passes.

………

But perhaps the group’s most contentious marketing effort has been Buddie, an anthropomorphic marijuana bud who looks a bit like a spear of asparagus wearing green cowboy boots and a blue cape, and who has been turning up on college campuses around the state. Critics liken him to Joe Camel, the cartoon character accused of marketing Camel cigarettes to children.

To say that I have mixed emotions about this is an understatement.

My win-win scenario is for Issue 3 to pass, and for the federal courts to strip the monopoly provisions from the statute, but my second best alternative is for the corporate ratf%$#s to lose.

I have no clue as to how I would vote on this if I lived there.

Good News Everyone!!!

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Good news everyone!


I invented a device that makes you read this in your head using my voice!

It appears that the DoJ’s antitrust division will oppose the Comcast-Time Warner Merger:

Staff attorneys at the U.S. Justice Department’s antitrust division are nearing a recommendation to block Comcast Corp.’s bid to buy Time Warner Cable Inc., according to people familiar with the matter.

Attorneys who are investigating Comcast’s $45.2 billion proposal to create a nationwide cable giant are leaning against the merger out of concern that consumers would be harmed and could submit their review as soon as next week, said the people. The division’s senior officials will then decide whether to file a federal lawsuit seeking to block the tie-up.

Even better, it appears that this opposition could have the effect of preventing other mergers in the industry:

………

A rejection would be a blow to Comcast, which would have to give up on valuable cable and broadband assets in major U.S. cities including New York and Los Angeles. The $45.2 billion merger proposal is also a way for Philadelphia-based Comcast to fend off competition from phone companies, satellite providers and Web services like Netflix Inc. that have taken hundreds of thousands of its TV subscribers in recent years.

Another company has a lot at stake: Charter Communications Inc., the No. 4 in the industry. Charter, which counts billionaire John Malone as its largest investor, has agreed to take control of 3.9 million Comcast cable-TV customers to ease approval for the Comcast-Time Warner Cable merger. If that fails, Charter won’t get those customers. Another Charter deal, the recent agreement to purchase of Bright House Networks, would also be in jeopardy.

The most amazing thing about this is that the push-back seems to come primarily from consumers, driven largely by both Comcast and TW Cable, and the belief that if they are allowed to merge, the suckitude will get only worse.

Remarkably, this is the second time that adverse regulation against cable companies has resulted in a consumer backlash.

The Cable Television Consumer Protection and Competition Act of 1992 was vociferously opposed by the cable companies, and they plastered their programming with advertising against it.

Once alerted, cable users bombarded Congress with calls and letters supporting the bill, because they figured that if their cable company was against the 1992 Cable Act, they were for it.

Supreme Court Rules that Industry Dominated Regulatory Panels Can Be Sued for Antitrust Violations

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In North Carolina, the State Board of Dental Examiners is pretty much run by and for dentists.

When non-dentists started offering cheaper tooth whitening services, the board shut them down.

The Supreme Court has allowed state governments to engage in anti-competitive actions for over 70 years, and the question here was whether a something like the North Carolina State Board of Dental Examiners, where the inmates were running the asylum, deserved deserved immunity from antitrust enforcement.

The Supreme Court, and the answer was no:

State licensing boards composed of market participants do not enjoy automatic immunity from antitrust laws, the Supreme Court ruled on Wednesday. The decision in North Carolina Board of Dental Examiners v. Federal Trade Commission affirms the Fourth Circuit and deals a setback to an increasingly common form of regulation.

 State action antitrust immunity

 Since 1943, certain forms of state action have been immune from the antitrust laws. Accordingly, state legislatures may pass laws with anticompetitive effects. Several important Supreme Court cases since then have addressed the doctrine of state action immunity and helped to define its contours, particularly as it applies to actions outside state legislatures.

 Antitrust immunity generally covers non-state actors only if the state both (1) clearly articulates the anticompetitive policy, and (2) actively supervises the policy. This case deals with the second requirement. If a professional licensing board is a state agency, must another state actor supervise the agency in order for the agency to be immune from the antitrust laws?

 The dental board

In North Carolina, the legislature delegated regulation of dentists to a dental board. By state law, practicing dentists must fill a majority of the seats on the dental board.

This type of “self-regulation” is common among state licensing boards. But it has the natural tendency to become anticompetitive. Members of a guild frequently want to keep insiders in, keep outsiders out, and prop up the profession. A broad range of modern professions fall under professional licensing boards, including not just doctors, lawyers, and dentists, but also interior designers, real estate agents, floral designers, and hair braiders.

 In this case, the dental board tried to exclude non-dentists from the market for teeth-whitening services after dentists complained about the low prices non-dentists charged for teeth whitening. It sent threatening letters to non-dentists who offered teeth-whitening services and even encouraged mall operators to kick out kiosks used for teeth whitening.

The dental board’s actions were not supervised by any state officials from North Carolina other than the members of the dental board itself. On these facts, the FTC took action against the dental board. The FTC and the Fourth Circuit both rejected the dental board’s attempt to invoke the defense of state action immunity.

 No immunity for the dental board controlled by dentists

In a six-to-three opinion written by Justice Anthony Kennedy, today the Supreme Court affirmed the Fourth Circuit, holding that the dental board is not immune from the antitrust laws.

The Court’s opinion explains that even though the dental board is an agency of the state, its actions must still be supervised by the state in order to enjoy antitrust immunity. The “formal designation given by the States” does not itself create immunity. Here, the board is controlled by market participants in the same occupation that the board regulates. “When a State empowers a group of active market participants to decide who can participate in its market, and on what terms, the need for supervision is manifest.”

Where this might be most significant is in boards for doctors and state bars.

I am reminded of the case of Closings, Inc. in Massachusetts, which attempted to offer low cost closings for house sales in the commonwealth.

The state bar banned them, even though they employed lawyers to do the work, nominally because they were a corporation, rather than a partnership, and the state courts agreed.

What is was really about was that they were offering services for less than half what the law firms were charging, and as a result, they had achieved a 40% market share, and the lawyers did not want to lose what was easy money for what was a routine operation that should never have required a law degree.

These days, with a plethora of services that offer assistance for routine legal services online, I hope that we see a number of complaints filed against state bars.

Seriously? Chattanooga has the Best Internet in the Nation?

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Actually, yes.

You see,  Chattanooga has a municiplally owned fiber optic network:

For thousands of years, Native Americans used the river banks here to cross a gap in the Appalachian Mountains, and trains sped through during the Civil War to connect the eastern and western parts of the Confederacy. In the 21st century, it is the Internet that passes through Chattanooga, and at lightning speed.

“Gig City,” as Chattanooga is sometimes called, has what city officials and analysts say was the first and fastest — and now one of the least expensive — high-speed Internet services in the United States. For less than $70 a month, consumers enjoy an ultrahigh-speed fiber-optic connection that transfers data at one gigabit per second. That is 50 times the average speed for homes in the rest of the country, and just as rapid as service in Hong Kong, which has the fastest Internet in the world.

………

Since the fiber-optic network switched on four years ago, the signs of growth in Chattanooga are unmistakable. ………

………

EPB, the city-owned utility formerly named Electric Power Board of Chattanooga, said that only about 3,640 residences, or 7.5 percent of its Internet-service subscribers, are signed up for the Gigabit service offered over the fiber-optic network. Roughly 55 businesses also subscribe. The rest of EPB’s customers subscribe to a (relatively) slower service offered on the network of 100 megabits per second, which is still faster than many other places in the country.

Gee.  The private sector, largely unregulated, cable and phone companies deliver what is among the slowest and most expensive internet service in the developed world, and publicly owned providers outperform them.

Maybe it’s because the for-profit companies see preserving, and leveraging, their near monopoly status as more ……… well ……… profitable than improving the quality and price service.

Hoocoodanode?

It Sucks to be Tom Wheeler

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It turns out that the Telco Lobbyist turned FCC Chairman is experiencing a lot of push-back regarding his proposal to gut net neutrality, not individuals, but also from internet giants like Google and other Democratic FCC commissioners:

FCC Chairman Tom Wheeler’s proposal to let ISPs charge Web services for an Internet fast lane drew condemnation from many net neutrality advocates, and now two members of the commission have expressed doubts about the plan as well.

Jessica Rosenworcel and Mignon Clyburn, the two Democratic members of the commission other than Wheeler, spoke about the chairman’s proposal yesterday. In a speech at a gathering of state library agencies, Rosenworcel called for delaying a vote on the proposal:

Network neutrality is the principle that consumers can go where they want and do what they want on the Internet, without interference from their broadband provider. The American Library Association and the library community have long been champions of network neutrality and an open Internet. Libraries, of course, know that an open Internet is important for free speech, access to information, and economic growth. I also support an open Internet. So I have real concerns about FCC Chairman Wheeler’s proposal on network neutrality—which is before the agency right now.

To his credit, he has acknowledged that all options are on the table. This includes discussion about what a “commercially reasonable” Internet fast lane looks like. While I do not know now where this conversation will head on a substantive basis, I can tell you right now I have real concerns about process.

His proposal has unleashed a torrent of public response. Tens of thousands of e-mails, hundreds of calls, commentary all across the Internet. We need to respect that input and we need time for that input. So while I recognize the urgency to move ahead and develop rules with dispatch, I think the greater urgency comes in giving the American public opportunity to speak right now, before we head down this road.

For this reason, I think we should delay our consideration of his rules by a least a month. I believe that rushing headlong into a rulemaking next week fails to respect the public response to his proposal.

The FCC is scheduled to vote on a notice of proposed rulemaking (NPRM) on May 15. This would open a new public comment process, but Rosenworcel explained that it would also end the so-called “Sunshine Period,” another good opportunity for debate.

………

Also yesterday, dozens of tech companies including Amazon, Dropbox, Facebook, Google, Microsoft, Netflix, reddit, Tumblr, Twitter, and Yahoo sent a letter to the FCC (PDF) asking the commission to halt any plan allowing payments from Web services to ISPs in exchange for speeding up traffic.

“Instead of permitting individualized bargaining and discrimination, the Commission’s rules should protect users and Internet companies on both fixed and mobile platforms against blocking, discrimination, and paid prioritization, and should make the market for Internet services more transparent,” the letter said. “The rules should provide certainty to all market participants and keep the costs of regulation low.”

It’s still on the agenda for May 15, but I think that it likely that it will be delayed.

There is a groundswell of opposition to this, and if they delay this, I don’t think that it will go forward, much in the way that the SOPA/PIPA protests first delayed, then shut down those bills. (For that year anyway)

I do think that this will come back though.

I will say that Wheeler may be the point man, but the only way that this happened is with approval from the White House.

The Cossacks work for the Czar.

Why We Need Unions, Aggressive Anti-Trust Enforcement, and Former CEOs Behind Bars

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Because without all of these, those in power conspire to impoverish and humiliate the rest of us:

Back in January, I wrote about “The Techtopus” — an illegal agreement between seven tech giants, including Apple, Google, and Intel, to suppress wages for tens of thousands of tech employees. The agreement prompted a Department of Justice investigation, resulting in a settlement in which the companies agreed to curb their restricting hiring deals. The same companies were then hit with a civil suit by employees affected by the agreements.

This week, as the final summary judgement for the resulting class action suit looms, and several of the companies mentioned (Intuit, Pixar and Lucasfilm) scramble to settle out of court, Pando has obtained court documents (embedded below) which show shocking evidence of a much larger conspiracy, reaching far beyond Silicon Valley.

Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees.

According to multiple sources familiar with the case, several of these newly named companies were also subpoenaed by the DOJ for their investigation. A spokesperson for Ask.com confirmed that in 2009-10 the company was investigated by the DOJ, and agreed to cooperate fully with that investigation. Other companies confirmed off the record that they too had been subpoenaed around the same time.

Although the Department ultimately decided to focus its attention on just Adobe, Apple, Google, Intel, Intuit, Lucasfilm and Pixar, the emails and memos clearly name dozens more companies which, at least as far as Google and Apple executives were concerned, formed part of their wage-fixing cartel.

Heads, I win, tails, you lose, klepto-capitalism at its finest.

The fact that the victims of this organized wage-theft conspiracy are well paid does not make it better, neither does the fact that many of the people involved are techno-libertarians, which does not make it just that they are a victim of their own laissez-faire philosophy.

The DoJ has secured a settlement, slap on the wrist fines, and no one will go to jail.

At the most, there will be a court judgement, and penalties, but the executives in question won’t pay that, they are indemnified by their corporations, so it’s shareholders, pension funds and the like, end up paying for this.

This is contemptible.

On the Other Hand, This Decision is a Good One

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The Supreme Court upheld the right of the FTC to sue to prevent brand name drug manufacturers to bribe generic drug manufactures to keep them out of the market:

This case is an antitrust challenge to an increasingly common practice in the pharmaceutical industry. Brand-name companies faced with generic competition pay the would-be competitor an amount of money to stay out of the market. The payment comes in the form of settling a dispute over the validity or infringement of the brand-name company’s patent. Because generic entry reduces drug prices, these “pay for delay” or “reverse payment” agreements are alleged to reduce competition and increase drug costs. The Federal Trade Commission sued drug companies over one such deal. The court of appeals rejected that claim, explaining that the brand name’s patent includes the right to exclude competitors.

Today, by a vote of five to three, the Supreme Court reversed and held that the claim can go forward. Justice Breyer wrote the Court’s opinion, joined by Justices Kennedy, Ginsburg, Sotomayor, and Kagan. Chief Justice Roberts dissented, joined by Justices Scalia and Thomas. Justice Alito was recused from the case.

While they did not rule that the payments were presumptively illegal, it does make such payments far more unlikely, since the right of review has been affirmed.