No images? Click here Welcome to The Corner. In this issue, we discuss the Student-Athlete compensation antitrust case at the Supreme Court, Apple's race to acquire AI companies, and comment on the Suez Canal ship incident. The Supreme Court Hears Arguments Concerning Student-Athlete Compensation Last Wednesday, the Supreme Court heard oral argument in NCAA v. Alston, a case in which a group of college basketball and football players challenged the NCAA's collusive rules against paying players. The justices generally expressed sympathy for the players' argument. Justices Samuel Alito and Brett Kavanaugh homed in on the huge sums of money generated by college basketball and football and the paltry compensation to players, sounding unpersuaded by the NCAA’s repeated invocation of “amateurism.” Justice Clarence Thomas asked why the NCAA collusively limits the pay of players, but not coaches. He wondered if there is any principled distinction between the two classes. Justice Neil Gorsuch added the NCAA has “monopsony control over the labor market." Justice Amy Coney Barrett, raising an issue presented in Open Markets' amicus brief in support of the players, asked the solicitor general whether the lower courts should have weighed the harms to the players from the NCAA's trade restraints against their supposed benefits to sports fans. Apple Races to Acquire AI Companies Despite Resurfaced Privacy Concerns
In 2019, Apple promised to do a better job of protecting its users from the intrusive surveillance of Siri, its voice assistant. The immediate spur was a report in The Guardian that detailed how Siri captured private moments and discussions outside of direct interactions — including those between doctors and patients, business deals, and sexual encounters. “We realize we haven’t been fully living up to our high ideals,” Apple said in response. “For that we apologize.” Since then, however, Apple appears to have continued to put profit over privacy in its race to keep up with Google and Amazon on artificial intelligence (AI) assistants. This is especially evident in Apple’s decision to continue an acquisition spree that has brought at least 25 AI companies under its control from 2016 to 2020. Critics say the corporation’s assurances to its users on the safety of their data privacy are, at best, misleading. On February 10, a U.S. district court in Northern California moved to dismiss a class-action lawsuit against Apple for violating federal and state privacy laws through its AI assistant’s surveillance. Despite the dismissal, U.S. District Judge Jeffrey S. White told the plaintiffs to file and serve an amended complaint. And last May, Thomas Le Bonniec, an Apple contractor turned whistleblower, penned a public statement to the European National Data Protection Authorities, questioning the lack of an investigation against the tech corporation’s invasion of its users’ information and data. “[Apple] announced that they would start to improve their users' privacy, thus tacitly acknowledging that they were using illegal recordings before,” Le Bonniec said. “Nothing has been done to verify if Apple actually stopped the programme. Some sources already confirmed to me that Apple has not.” Some analysts view Apple’s acquisition spree as a sign of weakness. They say that aside from aiming to improve Siri, the tech titan is also seeking to avoid losing further ground in its competition with Google Assistant and Amazon’s Alexa. GlobalData senior analyst Nicklas Nilsson says Apple is now playing catch-up. “Siri was first on the market, but it consistently ranks below the two in terms of ‘smartness,’ which is partly why Apple is far behind in smart speaker sales,” Nilsson said. Some economic experts say the acquisitions aren’t the problem. Kevin Bryan, a professor of strategic management at the University of Toronto, said the issue is ensuring the gap between technological leaders and other competitors doesn’t get too big. Apple’s acquisitions are not “the kind of thing that I think we generally want to ban,” Bryan told Open Markets. “[An] exception is where the acquirer has a lot of market power already and the acquisition essentially entrenches that market power.” Apple made some improvements to Siri’s privacy protections in response to the 2019 criticisms. This includes adding an ‘opt-in’ option to its Siri-grading process. Those who don’t opt in are still subjected to surveillance as Apple stores and reviews transcripts of interactions with Siri by default. According to Apple’s support page, random identifiers are assigned to the data from Siri interactions instead of being tied to a user’s Apple ID. Yet the corporation harvests information ranging from contact names and relationship types to device location and IP address. In its Siri and Dictation guidelines, Apple says it holds onto the transcripts and audio samples for six months before it removes the identifier from the data. Once the random identifier is stripped, Apple says the transcripts or audio recordings can be kept indefinitely for ongoing improvements to Siri. As TechCrunch reported last week, Siri handles 25 billion requests on a monthly basis with a reach over 36 countries. If 1% of the requests are chosen for inspection, for instance, then that means 250 million requests are stored and combed through. What the Suez Canal Incident Tells Us About Supply Chains
Last week, the 400-meter-long container ship Ever Given was dislodged from the banks of the Suez Canal after blocking passage through one of the world’s most important trading routes for almost a week. Although the stoppage affected only 400 ships, the overall effects on world trade will likely last for months. They also provide yet another illustration of two fundamental flaws in the system of global supply chains: the concentration of risk due to monopolization in the production of vital materials and goods and increasing reliance on super-large container ships and lean production systems. Policymakers have long been aware of the importance of physical chokepoints for trade, such as the Suez Canal. In 2020, 19,000 ships went through the 205-meter-wide waterway, accounting for 13% of total world trade and 30% of the world’s container shipping. The passage is essential for timely and efficient transportation of goods from Asia to Europe, with North America sometimes being an end destination. But Willy Shih, an economist and professor of management at Harvard Business School, says the Ever Given event helps to illustrate how the size of container ships has also become a major factor. The average size of such ships has doubled over the past two decades, and today’s largest vessels carry 24,000 containers. This increase has been spurred by corporations wanting to lower their unit costs, in order to increase profits for shareholders, Shih says. It’s been a “race to the bottom,” he says. “Stockholders are allergic to inventory because it has high carrying costs.” The large size of ships like the Ever Given also means that any disruption will likely result in wider cascading effects throughout the steamship system. Ships like the Ever Given are too big to serve most U.S. East Coast ports, which means that after reaching Europe, U.S.-bound cargo must be transferred onto smaller ships. Any delay in the arrival of such a large ship can disrupt transport planning across the North Atlantic basin. Shih says the lesson is not to shift all production back from countries in East Asia, but rather to diversify production and reduce reliance on overly lean inventory management systems. “You get resiliency if you hold more inventory,” he says. The Open Markets team has pioneered much of the discussion about the economic and national security risks created by concentration of production, in detailing the role of monopolization in creating the risk, and in identifying ways to make international systems more resilient. See the Open Markets primer on supply chain risk here. 🔊 ANTI-MONOPOLY RISING:
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BARRY LYNN’S NEW BOOK
Liberty From All Masters The New American Autocracy vs. The Will of the People St. Martin’s Press has published Open Markets Executive Director Barry Lynn’s new book, Liberty from All Masters. Liberty is Lynn’s first book since 2010’s Cornered. In his new work, Lynn warns of the threat to liberty and democracy posed by Google, Amazon, and Facebook, because of their ability to manipulate the flows of information and business in America. Barry then details how Americans over the course of two centuries built a “System of Liberty,” and shows how we Americans can put this system to work again today. Lynn also offers a hopeful vision for how we can use anti-monopoly law to rebuild our society and our democracy from the ground up. Liberty from All Masters has already made waves for its empowering call to restore democracy by resurrecting forgotten tools and institutions. “Very few thinkers in recent years have done more to shift debate in Washington than Barry Lynn. In Liberty from All Masters, he proves himself as a lyrical theorist and a bold interpreter of history. This book is an elegant summoning of a forgotten tradition that can help the nation usher in a new freedom,” says Franklin Foer, author of World Without Mind and national correspondent for The Atlantic. You can order your copy of Lynn’s book here.
SALLY HUBBARD’S NEW BOOK
MONOPOLIES SUCK 7 Ways Big Corporations Rule Your Life and How to Take Back Control Simon & Schuster published Monopolies Suck by Sally Hubbard on Oct. 27. The book is the first by Hubbard, who is Open Markets’ director of enforcement strategy. Hubbard examines how modern monopolies rob Americans of a healthy food supply, the ability to care for the sick, and a habitable planet, because monopolies use business practices that deplete rather than generate. Monopolists also threaten fair elections, our free press, our privacy, and, ultimately, the American Dream, Hubbard shows. In Monopolies Suck, Hubbard reminds readers that antitrust enforcers already have the tools to dismantle corporate power and that decisive action must be taken before monopolies undermine our economy and democracy for generations to come. In Monopolies Suck, Sally provides an important new view of America’s monopoly crisis and of the political and economic harms of concentrated private power. Order your copy here. 🔎 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. |