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Welcome to The Corner. In this issue, we discuss how Europe’s Digital Markets Act could make a global impact and the risks of Big Tech’s payment systems. We also take a look at Open Markets’ top accomplishments in 2021.

Europe’s Digital Markets Act Breaks New Ground in Regulating Big Tech Behavior

Karina Montoya

The Digital Markets Act — the latest European effort to regulate how Big Tech exercises power over communications and commerce — is nearing its final version after the EU Parliament greenlighted the bill in December 2021 [[link removed]]. The DMA defines, for the first time, acceptable business practices for corporations identified as “gatekeepers” of core Internet services such as web search, social media, cloud computing, video sharing, and advertising. In that sense, the law is poised to have global effects.

One key part of the bill has the potential to significantly curb the surveillance advertising [[link removed]] systems of the platforms, especially Google. Article 5 limits how gatekeepers can use data for purposes other than for what it was originally collected. If strongly enforced, this would largely prevent Google from combining user data from its search engine with data collected from YouTube, Maps, Gmail, Android, Chrome, and its other tech platforms to track and target individual users.

The DMA marks a major step forward from Europe’s General Data Protection Regulation [[link removed]], which became law in 2016. The GDPR was the first EU data regulation aimed at enhancing users’ control over the privacy of their data. But critics faulted the GDPR [[link removed]] for its lack of enforcement by member states and a flawed design of consent notices. The DMA gives new powers to the EU Commission to centralize enforcement and seeks to stop the practice of data cross-use without proper consent, which the GDPR did not cover.

For the DMA to become law, the EU Parliament needs to reach an agreement with the EU Council — composed of the member states — on the final text, then both legislative bodies must vote to pass the bill. The EU Commission mediates the negotiations, known as “trilogue,” which started this week [[link removed]]. No unanimity in the Council votes is needed. This year, France is leading the EU Council, and President Emmanuel Macron is looking to reach an agreement in the first half of 2022, Euractiv reports [[link removed]]. On Tuesday, Macron gave a speech slamming Big Tech foreign platforms [[link removed]] for their role in amplifying disinformation.

Antitrust and data privacy activists welcomed the strength of the DMA but said additional efforts are still needed, both in Europe and in the United States. “These are global companies, which require global intervention,” Tommaso Valletti, former chief economist of the EU Directorate General for Competition, told Open Markets.

Civil society groups such as the Irish Council for Civil Liberties warn that Article 5 makes it too easy for tech firms to avoid [[link removed]] the [[link removed]] limit [[link removed]] s on [[link removed]] cross-use of data [[link removed]]. Since the law only requires platforms to offer a single consent to users to combine and cross-use their data, this creates an ambiguity that can be exploited to avoid enforcement, according to Johnny Ryan, a senior fellow with the ICCL and a fellow and strategic adviser at Open Markets. ICCL also warned lawmakers about the vague wording in Article 5 that asks gatekeepers to “refrain” from cross-using data rather than to outright “ban” such behavior without proper consent. The ICCL said this wording leaves too much leeway for the platforms to continue this practice.

Valletti also warns that enforcement will be key. The DMA does create more enforcement tools, but their effectiveness remains to be seen. For example, the EU Commission will be able to directly dictate compliance measures without having to test gatekeepers’ remedies first (which is what currently happens). As an extra measure, a report from a panel of experts that assessed the DMA [[link removed]] recommends allowing independent auditors to have direct access to algorithms and use of data to evaluate their compliance.

Open Markets Details Dangers of Big Tech Payment Systems in Comments to CFPB

In October, the Consumer Financial Protection Bureau ordered [[link removed]] six Big Tech firms — Google, Apple, Facebook, Amazon, Square, and PayPal — to disclose information about their payment system practices. Open Markets praised [[link removed]] the action at the time, and in December we submitted detailed comments [[link removed]] about the dangers of Big Tech rushing to build entirely new payment systems designed to circumvent existing systems of regulation.

Our comment letter highlights concerns about the potential for Big Tech to use payments for self-preferencing and steering, extractive business practices, enhanced data for manipulative algorithms and the potential for financial surveillance. It also details the unique risks of crypto asset projects undertaken by Big Tech. You can read the full comment letter here [[link removed]]. The comment was mentioned in U.S. PIRG [[link removed]], ConnPIRG [[link removed]], and Communications Daily [[link removed]].

Open Markets’

Best of 2021​

2021 was a productive and influential year for Open Markets. Here’s a compilation [[link removed]] of some of our team’s top accomplishments.

🔊 ANTI-MONOPOLY RISING: Earlier this week, U.S. District Judge James Boasberg rejected Facebook’s motion to dismiss illegal monopolization claims by the Federal Trade Commission. The action followed the agency’s decision to amend its original 2020 case against the corporation after Judge Boasberg said it lacked sufficient information. The amended complaint features a more detailed account of Facebook’s monopoly power and anti-competitive behavior. The court also dismissed Facebook’s request to invalidate the complaint because FTC Chair Lina Khan has not recused herself from the case. ( CNBC [[link removed]])

Last month, the FTC opened an investigation into Facebook’s $400 million acquisition of virtual reality fitness app Supernatural. The probe comes over concerns that Facebook may be cornering the VR startup market. Facebook is believed to have a majority market share of much of the VR industry. ( The [[link removed]] Verge [[link removed]])

On Dec. 28, hospital bed-maker Linet filed an antitrust lawsuit against rival Hillrom alleging monopolization of the hospital bed market. In the lawsuit, Hillrom was accused of anti-competitive practices such as exclusive and coercive agreements with health systems. According to Linet, the market for hospital beds will experience limited innovation and supply if Hillrom, which has a 70 percent market share in intensive, standard, and birthing beds at U.S. hospitals, is allowed to continue its “illegal” practices. ( Chicago [[link removed]] Tribune [[link removed]])

Four former minor league baseball teams filed an antitrust lawsuit Dec. 20 against Major League Baseball for violating the Sherman Act. The four clubs allege that MLB engaged in anti-competitive behavior by improperly influencing the success of club affiliates when it ended its affiliation with 40 minor league clubs last year. The lawsuit also argues that the MLB’s antitrust exemption has allowed it to violate antitrust laws and cited the Supreme Court’s skepticism about the exemption in the landmark NCAA v. Alston case last year. ( The [[link removed]] [[link removed]] Washington Post [[link removed]])

Last week, Germany’s Federal Cartel Office (the Bundeskartellamt) decided that Google met the special threshold for abuse control updated last year in the German Act Against Restraints of Competition. The office found that Google has “paramount significance across markets” such as search, advertising, data, and other gatekeeping roles. The significant designation will allow the office to immediately take antitrust action against identified anti-competitive behavior. ( TechCrunch [[link removed]])

📝 WHAT WE'VE BEEN UP TO:

Open Markets joined with 21 other organizations including Public Citizen [[link removed]] to send President Joe Biden a letter [[link removed]] urging him to remove Federal Deposit Insurance Corporation Chair Jelena McWilliams if she continued to violate the agency’s statutes and bylaws that provide for majority rule. Open Markets’ later statement on Twitter [[link removed]] supporting her subsequent resignation was quoted in Truthout [[link removed]], AlterNet [[link removed]], Common Dreams [[link removed]], and NewsBreak [[link removed]]. “The Open Markets Institute also welcomed her resignation, highlighting that it comes after she tried and failed ‘to subvert a democratic vote of the FDIC board to review bank merger policy.’”

Daniel Hanley published an article in Democracy Journal [[link removed]] about ending corporate Amerca’s coercive contracts. “Our existing contractual legal regime allows corporations to further exploit their power over workers and consumers. But public policy can, and should, change that.”

Open Markets welcomed [[link removed]] the extension of the federal student loan pause. The statement was rerun by Common Dreams [[link removed]]. “The extension of the student loan moratorium is especially welcome at a time when fewer and fewer student loan servicers are responsible for overseeing millions of loan repayments, further concentrating the Too Big To Fail problem in student loan servicing.”

Alexis Goldstein attested to Sarah Bloom Raskin’s proven track record of consumer protection in support of her nomination for chair of supervision at the Federal Reserve in Yahoo! News [[link removed]] and Bloomberg [[link removed]]. Bloom Raskin “criticized the Fed’s bending of the rules shortly thereafter, pointing out that they loosened the rules following political pressure to help deeply indebted fossil fuel firms who were in financial trouble well before the pandemic.”

Sen. Elizabeth Warren (D-Mass.) cited Barry Lynn’s testimony [[link removed]] at her Senate Subcomittee on Fiscal Responsibility and Economic Growth’s hearing, “ Promoting [[link removed]] Competition in the Technology Sector [[link removed]],” in a letter [[link removed](1).pdf] to the Department of Commerce urging action against semiconductor shortages by combating industry consolidation. “At my hearing earlier this week, Barry Lynn, Executive Director of the Open Markets Institute, summarized costs of semiconductor industry consolidation.”

Open Markets released a statement [[link removed]] applauding President Biden’s new executive action plan targeting “price gouging” and other monopolistic conduct by the meat industry. The statement was cited in Nation of Change [[link removed]] and The Counter [[link removed]]. “It’s long overdue that our leaders support America’s small- and medium-sized, independent ranchers, farmers, and farmworkers in their effort to take back control over our food economy from predatory monopolists,” the statement read.

The [[link removed]] New Republic [[link removed]]’s The Soapbox analysis of corporate concentration and inflation highlighted articles by Garphil Julien and Phillip Longman about supply chains in shipping and transportation.

“Garphil Julien of the Open Markets Institute, another antitrust nonprofit, argued [[link removed]] last month that the shipping industry deserves a look, too. Profits on container shipping, Julien reported, are on track to be 15 times higher than in 2019.”

​“But economic concentration doesn’t usually raise prices month after month; rather, prices stabilize at a too-high level. That’s the story, for example of rail freight, as described last year in an excellent Washington Monthly [[link removed]] piece [[link removed]] by Open Markets’ policy director, Philip [sic] Longman.”

Alexis Goldstein’s testimony [[link removed]] at the U.S. Senate Banking Committee’s December hearing on stablecoins was mentioned in Forbes [[link removed]], Lexology [[link removed]], Crowdfund Insider [[link removed]], and Bollyinside [[link removed]]. According to CoinTelegraph [[link removed]]: “The barrage intensified with the testimony of Alexis Goldstein, director of financial policy at Open Markets Institute. The liberal think tank, according [[link removed]] to some observers, has become influential by spurring the Democratic party’s drive to rein in tech goliaths such as Meta and Google.”

The Financial Times [[link removed]] quoted Barry Lynn on the closure of the Internet Association. “’Microsoft has realised that it doesn’t want to be associated with Google, Facebook and Amazon,” Lynn told the FT.

Barry Lynn explained President Biden’s executive order on competition and monopoly in a piece in The New Republic [[link removed]] about how the president can help transform Americans’ lives in 2022. “’It was a reenvisioning of how we use the state,” Lynn told TNR.

Johnny Ryan reiterated in Tech Crunch [[link removed]] his previous prediction that IAB Europe’s “Transparency and Consent Framework” was doomed to fail at supporting digital privacy in response to new research indicating he was right. “’There is no control. No technical measure to actually control what happens to the data,’ Ryan told TechCrunch. ‘This means the TCF can never fulfil its purported objectives of providing control and transparency.’”

Garphil Julien’s July 2021 article [[link removed]] about how the assassination of Haitian President Jovenel Moïse highlights the nation’s monopoly-dominated economy was rerun in a Haitian news outlet, Haiti Beat [[link removed]].

Open Markets’ historical work to advocate for stronger action from the FTC against Facebook’s privacy abuses was cited in The Register [[link removed]]. “The Open Markets Institute, a progressive think tank, went so far as to denounce the FTC's 2019 [$5 billion] privacy violation settlement with Facebook – now living under the assumed name Meta – as ineffective [[link removed]] and woefully insufficient [[link removed]].”

Nikki Usher’s book News for the Rich, White, and Blue was included in The Center for Public Integrity [[link removed]]’s list of books tackling inequality in 2021: “University of Illinois professor Nikki Usher challenges American journalism’s popular understanding of itself as a force helping the disadvantaged and powerless in News for the Rich, White and Blue [[link removed]].” The book was also mentioned by Poynter [[link removed]].

Open Markets’ concentration data was cited in Civil Eats [[link removed]], Medium [[link removed]], Longview News-Journal [[link removed]], and Victoria Advocate. [[link removed]] The report was also cited in Successful Farming [[link removed]]: “Meatpacker revenues, aided by beef imports, are on the rise while American cattle prices have dropped. Currently, four companies control 85% of the cattle market, according to the Open Markets Institute.”

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

DONATE [[link removed]] 📈 VITAL STAT: 100+

The number of Sonos patents violated by Google, according to the speaker manufacturer. Sonos proposed a licensing deal to Google, but the two companies failed to reach an agreement. A trade court ruled last week that Google infringed on five audio technology patents held by Sonos and is barred from importing products into the U.S. that infringe on those patents. ( The New York Times [[link removed]])

📚 WHAT WE'RE READING: “ Police Foundations [[link removed]] : [[link removed]] A Corporate Sponsored Threat to Democracy and Black Lives [[link removed]]” (Color of Change): This report details the hidden and often intimate relationships corporations have with police departments throughout the nation. Often, private corporations create police foundations to funnel corporate money into police departments. As the report details, such practices inflate police budgets, lead to the militarization of police departments, and, without a change in policy, expand the presence of policing and surveillance of Black, brown, and Indigenous neighborhoods.

NIKKI USHER'S

NEW BOOK

News for the Rich, White, and Blue: How Place and Power Distort American Journalism

Nikki Usher, a senior fellow at Open Markets Institute’s Center for Journalism & Liberty [[link removed]], has released her third book, News for the Rich, White, and Blue: How Place and Power Distort American Journalism [[link removed]]. In her latest work, Usher offers a frank examination of the inequalities driving not just America’s journalism crisis but also certain portions of the movement to save it.

“We need to radically rethink the core functions of journalism, leverage expertise, and consider how to take the best of what the newspaper ethos of journalism can offer to places that have lost geographically specific news, “ says Usher, an associate professor at the University of Illinois-Champaign. “The news that powers democracy can be more inclusive.”

Usher is also the author of Making News at The New York Times (2014) and Interactive Journalism: Hackers, Data, and Code (2016).

News for the Rich, White, and Blue, published by Columbia University Press, is available as a hardback, paperback and e-book. You can order your copy here [[link removed]].

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Written and edited by: Barry C. Lynn, LaRonda Peterson, Jackie Filson, Daniel A. Hanley, Alexis Goldstein, Karina Montoya, Garphil Julien, and Ezmeralda Makhamreh.

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