Welcome to The Corner. In this issue, we argue that Congress should focus on the national security threats posed by Apple, Google, Facebook, and Microsoft, along with TikTok.

Best Way to Tackle TikTok Threat Is to Target Google, Facebook, and Twitter Too

Karina Montoya

The House Energy and Commerce Committee held a hearing last week featuring TikTok CEO Shou Zi Chew’s first congressional testimony. Rather than a deliberation, the committee kicked off the meeting with a verdict: TikTok, the Chinese social media app with at least 150 million U.S. monthly users, poses a grave threat of foreign influence and causes too many harms to kids online. Thus, it should be banned.

Given the wider geopolitical conflict between the U.S. and China, many Americans are sympathetic to the idea that a Chinese-owned app designed for the U.S. market is a national security risk. Indeed, it is possible that managers at ByteDance, TikTok’s parent company, may fall under the pressure of the Chinese government requesting access to TikTok’s data. The U.S. government cannot ignore the risk of allowing a foreign power to manipulate our public discourse and access our personal data.

But banning TikTok alone would not address the larger threat to U.S. national security posed by how America’s own Big Tech corporations run the core communication platforms on which our society and democracy depend. That’s why a smarter way to fight foreign interference and buttress the security of our nation and of individual Americans citizens is to broadly use antimonopoly enforcement and law to reinvigorate our domestic rules for business conduct.

If anything, a ban solely on the Chinese-owned app may actually make the situation worse, such as by feeding into Facebook’s narrative that TikTok is the “real” threat to America, whereas Facebook and other U.S. tech corporations, on the other hand, are helping to protect U.S. national security. As the Washington Post reported last year, Facebook paid lobbyists to use TikTok as a way to deflect public opinion away from its own privacy and antitrust problems.

By contrast, if we look at Google, Facebook, Apple, Twitter, and TikTok through the same lens, we see that they all pose a variety of roughly similar threats to U.S. security. And we will see that these threats - as a group - can be tackled largely with the same tools.

Consider that Google’s YouTube illegally profited from American kids’ personal data and only promised to change its practices when it was fined by the Federal Trade Commission (FTC). And that YouTube, Facebook, Twitter, and TikTok amplified false claims of U.S. election fraud. And that Elon Musk, since acquiring Twitter, has repeatedly used the platform to censor American journalists. And that Apple is highly subject to punishment by the Politburo in Beijing because of it’s dependence on manufacturing there. So too Twitter. As national security expert Max Boot wrote recently, “China is a major manufacturing and sales hub for Tesla, a company Musk leads.”

Furthermore, these U.S. corporations have repeatedly used their power in ways that have disrupted democracy in key American allies. Google’s monopoly over advertising tools — used to buy and sell ad space across the web — fuels disinformation in Europe, Latin America, and Africa, as this ProPublica report last year made clear. In India, YouTube and Twitter have blocked international content that the ruling party dislikes, and Twitter recently allowed the Indian government to block the accounts of its opponents as well.

The good news is that the same antitrust tools that can make Big Tech safer here at home can also help us address these other threats. For example, as Open Markets’ legal director Sandeep Vaheesan recently wrote, the Federal Trade Commission has the authority to ban the surveillance advertising model that these companies rely on, and “prevent corporations, big and small, from tracking our online and offline activities in an effort to ‘target’ advertising based on our non-public activities, speech, and thoughts.”

Currently, the FTC is exploring rules to potentially prohibit this type of mass surveillance as an unfair method of competition. A ruling in this direction would force companies to create new and less harmful ways to make their platforms appealing to the public.

Merger enforcement is another tool that law enforcers can use to limit the value of personal data in ways that reduce the incentive to build surveillance platforms. As Open Markets has previously reported, to prevent conflicts of interest and self-dealing practices that fortify monopolies, we can enforce structural separations between adjacent lines of businesses, such as prohibiting a single corporation from being simultaneously a publisher, an advertiser, a marketer, a data broker, and the owner of key communications infrastructures.

Under our current ways of structuring digital markets, even if TikTok were to spin off from ByteDance, it will continue to compete under the same terms that allowed bigger social media platforms to put profit first over Americans’ privacy and a stronger democracy.

Open Markets’ Phillip Longman Discusses Predatory Hospital Practices in New Documentary

Open Markets Institute policy director Phillip Longman appears prominently in a documentary film called American Hospitals: Healing a Broken System, which debuted in Washington D.C. this week. Longman explains how hospitals that were originally chartered as non-profit, charitable institutions have too often evolved into predatory monopolies that focus on high-margin treatments for the affluent while ignoring the larger needs of their communities. The film is based in part on a July 2020 investigation published in the Washington Monthly by Longman and former Open Markets colleague Udit Thakur.

📝 WHAT WE'VE BEEN UP TO:

Open Markets Institute’s legal director Sandeep Vaheesan and chief economist Brian Callaci co-authored an article for the Cornell Law Review that examines how the Chicago School revolution in antitrust paved the way for today’s rampant use of franchising, gig work, and other types of fissured work arrangements across the U.S. economy. “Employing its broad unfair methods of competition power, the Federal Trade Commission should prohibit or limit the use of a range of vertical restraints,” the authors write.
Open Markets’ reporter Karina Montoya published a piece in El Tiempo Latino explaining how unregulated data brokers enable criminals to target vulnerable communities. “Thanks to a combination of invasive tracking technologies and a lack of comprehensive data privacy rights, communities of color in the U.S. suffer the most from the exploitation of their data collected on social media, websites, and just about any app they use.”
OMI policy director Phil Longman’s reflections on railroad monopolies, including how concentration in that industry has led to worse service and recent derailments such as the one in East Palestine, Ohio, were featured in a recent video from progressive media organization More Perfect Union.
Speaking on The Verge’s Decoder podcast, OMI legal director Sandeep Vaheesan traced Ticketmaster’s Taylor Swift concert ticket fiasco to the Chicago School revolution in antitrust. “They said, ‘Actually, mergers are generally good. Mergers are how businesses get larger, attain economies of scale, and potentially even lower prices for consumers,’” Vaheesan said. “And so, they greatly scaled back merger enforcement and adopted a set of guidelines that were extremely tolerant of mergers and acquisitions.”
Vaheesan was quoted in an article in Forbes exploring the historical relationship between antitrust law and labor markets. Noting that unions have not stepped up as an adequate countervailing force to large corporations, Vaheesan says, “But right now, we seem to have the worst of both: Very large firms that wield awesome power and dominate their small firm satellites.” The piece also cites an article on fissured work arrangements published in Slate last year that was co-authored by Vaheesan and Open Markets’ chief economist Brian Callaci.
Conservative think tank American Enterprise Institute cited an article published by Open Markets Institute executive director Barry Lynn in Democracy Journal last year as evidence for its claim that the Neo-Brandeisian movement aims to use antitrust policy to limit what consumers and businesses can do. AEI writes: “Lynn says the NB mission is a story of good versus evil, with NBs opposing large successful businesses committing ‘moral crimes . . . looting and breaking the foundations of a good economy and a good society.” The AEI piece was reprinted in the Washington Examiner.
Politico reported OMI’s hiring Brussels-based director of Europe and trans-Atlantic partnership, Max von Thun. Politico also noted that there are 562 think tanks and academic institutions registered in the EU transparency register as of mid-March this year.
The European Conservative quoted from a joint letter Open Markets Institute an partners sent to the European Commission earlier this month urging fairness in the forthcoming distribution of clean energy subsidies as evidence to make its point that the European Commission is undermining competition between EU member states. The article quoted the letter’s call for “strict safeguards … to ensure that the [subsidy agreement] does not worsen market concentration both within and across EU member states.”

🔊 ANTI-MONOPOLY RISING:

Amazon’s attempt to dismiss an antitrust class action by consumers was rejected by a Seattle-based U.S. district judge, which could lead to the giant being on the hook for damages as high as $172 billion. Filed in 2020 by residents of 18 states, the lawsuit challenges Amazon’s policy that retailers cannot offer lower prices for goods sold elsewhere if they also want to sell their product on Amazon’s marketplace. (Reuters)
Chinese e-commerce giant Alibaba is splitting the company into six different business groups in a bid to avoid antitrust scrutiny from the Chinese government. Each unit would have its own chief executive and board of directors, with only the Chinese e-commerce unit remaining as a wholly owned Alibaba entity. (New York Times)
Germany’s antitrust regulator this week kickstarted an investigation into Microsoft’s market power, potentially leading to product bans if the software giant’s business practices are deemed uncompetitive. The Bundeskartellamt said it would decide whether Microsoft should be designated a company “of paramount significance for competition across markets.” (Reuters)
The Department of Justice’s lawsuit aiming to dismantle Google’s ad-tech business is moving speedily through the courts and could come to trial as soon as a year from now. The federal judge overseeing the trial has set a deadline for all pretrial work to be finished by January 2024, rejecting Google’s proposal to extend the timeline by six months. (Bloomberg Law)

We appreciate your readership. Please consider making a contribution to support the continued publication of this newsletter.

DONATE

📈 VITAL STAT:

70%

The share of the marketplace controlled by the country’s three largest pharmacy benefit managers, who negotiate manufacturer rebates on behalf of health insurance companies and determine reimbursements to pharmacies. The Ohio attorney general’s office has filed an antitrust suit against one of the three, Express Scripts. (ABC)

📚 WHAT WE'RE READING:

“How Data Happened: A History from the Age of Reason to the Age of Algorithms.” (W.W. Norton, Chris Wiggins and Matthew Jones). What is data and how does it arrange the algorithmically mediated world we live in? In this new book, the authors trace the evolution of data from the 18th century to the development of Google search, and show how data can be used in ways that we, the people, intentionally choose.

🔎 TIPS? COMMENTS? SUGGESTIONS?

We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue.

SUBSCRIBE TO OUR NEWSLETTER

DONATE