Welcome to The Corner. In this issue, we examine the European Commission’s newly announced investigation into potentially anti-competitive practices by Apple.

To read previous editions of The Corner, click here.

Apple Investigations Offer EU a Chance to Get Competition Policy Right

The European Commission’s two n e w investigations into how Apple manages its app store and its Apple Pay feature open an important new front in the fight against anti-competitive behavior in online markets. Apple has long exploited its gatekeeper position over a vast swath of wireless services to promote its own products in the app store, to force third parties to use Apples’s in-app payment system, and to collect a 30% commission on certain types of sales within the app system. Furthermore, in the second investigation, the company has limited the ability of banks and other third parties to use Apple’s Near Field Communication (NFC) technology to offer their apps for mobile payment.

Unfortunately, the commission once again appears to be going into battle with a large U.S. tech corporation without tools sufficiently powerful to actually change that corporation’s behavior. In recent years, the commission has repeatedly chosen to fine large tech corporations for violating European law, while largely setting aside any threat to break them up or otherwise restructure their operations. EU Competition Commissioner Margrethe Vestager admitted this in a hearing in October 2019, s aying “Fines are not doing the trick. And fines are not enough because fines are a punishment for illegal behavior in the past.”

Despite noting the inadequacy of fines, Vestager is also on record rejecting structural breakups as a solution: “We don't have a problem that big where breaking up could be the solution,” she said at a conference in Lisbon in November 2019.

As a result, the commission has racked up an impressive list of actions against Google and other corporations in recent years, but many of these corporations have largely continued to engage in the anti-competitive practices similar to those that first attracted the attention of law enforcers.

For example, in 2017 the commission fined Google $2.73 billion for favoring its own services in search results for online shopping. Then in July 2018, the commission fined Google $5.1 billion for abusing its market dominance by forcing phone manufacturers to install Google products such as its browser, search engine, maps, and app store Google Play. In that case, the commission also ordered Google to stop forcing manufactures to install its products.

Two years later, however, those actions have done little or nothing to reduce Google’s overall power on the internet or to alter its behavior. Google still enjoys “enormous market power. For years, Google, in particular, has biased its results to serve its interests and leverage its power to entrench it further and hurt consumers in the process,” said Yelp Senior Vice President Luther Lowe at a hearing in March before the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights. Additionally, the fines did nothing to address Google’s monopolies over the markets for search and mobile operating systems (OS). Google has a roughly 86% global market share in search and a 77% market share of the search ad market. Google’s Android has a 74% share in the mobile OS market.

“Even multibillion-dollar fines don't cause tech giants enough pain to stop bad behavior. For Big Tech, fines are a rational cost of doing business,” wrote Open Markets Enforcement Director Sally Hubbard in an op-ed piece for CNN last year.

The time has clearly come for the commission – and other competition agencies around the world – to take a more aggressive approach to put a stop to these practices by the platform monopolists, including common carrier regulations, interoperability, and structural separation, .

Services, such as the app stores of platform monopolists such as Apple and Google, can be regulated under common carrier rules, which require carriers to offer the same prices and terms of service to all users. This would ensure nondiscrimination, neutrality, and fairness in the app store marketplace and other markets dependent on the Big Tech giants.
Platforms can be broken up vertically to reinforce nondiscrimination and create more competition. This would prohibit dominant corporations from producing goods and services while also controlling the marketplace where these goods and services compete with rivals.
Competition agencies can impose interoperability requirements, which would allow users to use their data across multiple platforms and give different platforms the ability to operate their services interchangeably.

Some policymakers and law enforcers are beginning to move in this direction. German lawmakers passed legislation that could allow other companies to use the iPhone's NFC technology to offer mobile payment options on their own apps. This is an example of common carrier legislation and something that governments – especially the government in Washington – should adopt.

🔊 ANTI-MONOPOLY RISING:

A California judge last week sentenced Christopher Lischewski, the former CEO of Bumble Bee Foods, one of the world’s largest producers of seafood products, to 40 months in jail for his role in a three-year conspiracy to fix the prices of canned tuna. (The Counter)
The United Kingdom and Australian competition authorities each opened investigations into Facebook's acquisition of Giphy earlier this month. The agencies will investigate whether the acquisition would entrench Facebook’s current market power and foreclose consumers’ access to rival messaging services. (Axio s)
The European Commission is planning to bring formal antitrust charges against Amazon in the coming weeks for its potentially anti-competitive treatment of third-party sellers in its marketplace and for collecting data about competitors’ products on its platform, according to inside sources. (The Wall Street Journal)
The California attorney general’s office has opened an investigation into Amazon’s business practices, according to inside sources. The investigation will focus on Amazon’s treatment of its third-party sellers and its promotion of its own products over those of rivals, a practice known as self-preferencing . (The Wall Street Journal)
German federal courts on Tuesday upheld an order by the country’s antitrust watchdog, the Bundeskartellamt, forcing Facebook to stop combining user data from its own and other third-party websites and applications. Facebook broke competition laws by combining data across different platforms, such as WhatsApp and Instagram, to enhance its market power and shut out rival platforms. (T he New York Times)

📝 WHAT WE'VE BEEN UP TO:

Daniel Hanley published a law review article in the Connecticut Public Interest Law Journal that examined the business operations and anti-competitive conduct of digital, multi-sided platforms and analyzed how the market dominance of Big Tech corporations adversely affects competition in the technology industry.
Sandeep Vanheesan was quoted in BBC News speaking about how technology acquisitions have accelerated during the COVID-19 pandemic and how there is urgency for more M&A. “All of them will be in the M&A game if they're not already. Start-ups are more likely to sell out during the pandemic when they might struggle to meet their obligations and the buyout looks especially attractive – the pandemic is speeding up the buyout date in some cases," says Vaheesan.
Open Markets’ support for a bill, proposed by Rep. Anna G. Eshoo (D-CA), that would prohibit micro-targeted political advertising was featured in NextTV.
Claire Kelloway’s article in the April edition of Washington Monthly, about food waste and supply chains, was mentioned in In These Times. The piece discusses how concentration among food corporations is the major reason that these companies destroy massive quantities of food each week.
Open Markets Institute’s pro-worker event, Building a Pro-Worker Anti-Monopoly Movement, was mentioned in The American Prospect, in an article about the Federal Reserve’s lackluster efforts to assist state and local governments during the fiscal crisis caused by the COVID-19 pandemic.
Open Markets Institute was mentioned in Vanity Fair as one of the advocacy groups targeted by Facebook’s newly hired public relations firm, which will work to discredit organizations that oppose Facebook’s practices.

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📈 VITAL STAT:

40 months

The duration of the prison sentence for the CEO of Bumble Bee Foods for fixing the price of canned tuna.

📚 WHAT WE'RE READING:

“Nascent Competitors” (University of Pennsylvania Law Review, C. Scott Hemphill & Tim Wu): The authors describe why companies that are rising challengers should be protected from acquisition or anti-competitive exclusion by dominant incumbents, even if it’s highly uncertain whether the nascent competitors would ultimately be successful.
“How Biden Can Prove He’s Serious About Busting Corporate Monopolies” (Washington Monthly, Andrea Beaty): Beaty argues that former Vice President Joe Biden, the presumptive Democratic presidential nominee, could show that a potential Biden administration were serious about tackling concentrated corporate power if it addressed the revolving door between government and private firms, and prohibited actions that consolidated private power, such as anti-competitive mergers and acquisitions.

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