A BIG Video Exposing Amazon Prime

I'm doing a new video series with Breaking Points on monopoly power. Amazon Prime is first on deck.

This email is a bit shorter than normal.

First, I’d like to share with you a video we taped with the populist political show Breaking Points on the real business model behind Amazon Prime. The video is getting tons of play, and it’s based on a piece I wrote last May based on an antitrust suit by D.C. Attorney General Karl Racine. And it’s part of a series, we’re going to tape these videos once or twice a month with Breaking Points. The goal of this series is to explain to a different audience how our economy works.

So please, watch, enjoy, and share.

Audio?

Second, I’m thinking of providing an audio versions of BIG. Is that something you’d like? If so, email me with your thoughts, or just a Yes or No. (To respond, just hit reply on this email.)

It’s All Happening

Third, here’s a slice of what’s going on in the anti-monopoly world. There’s too much anti-monopoly news to keep up with, but this is what I think matters.

Judges Are Getting Irritated with Big Tech. Google, Facebook, Amazon, and Apple have become enormously entitled. People at those firms do not believe that anything will happen to them no matter what they do, and have come to regard laws and court orders as merely suggestions. As court cases proceed, this attitude is wearing thin on perhaps the only people in America who feel more entitled than big tech CEOs: Federal judges.

And in this case, the judges are right. Google and Facebook have been playing games with discovery, which is the process whereby firms have to give internal documents to people suing them. Trying to mess with your opponents during the discovery process is common in litigation, but openly flouting the entire process is not.

And now, judges are getting mad, because big tech lawyers are refusing to offer even cursory legitimacy to the court, with Google willfully misinterpreting court orders on what to produce to plaintiffs in an antitrust suit. In response, Judge Kevin Castel of the Southern District of New York basically threatened Google with contempt of court for refusing to produce documents to plaintiffs. Meanwhile, a ninth circuit Judge has demanded that Facebook stop playing games on what documents it will produce, including the personal papers of Mark Zuckerberg and Sheryl Sandberg. "If the executive has other plans on Thursday afternoon,” Judge Chhabria wrote, “they are ordered to postpone them."

It’s not a good idea to anger judges who are about to rule on important motions. But then, big tech CEOs and Wall Street have been on such a winning streak they won’t believe anything bad can happen to them, until it does.

SoftBank’s $66bn sale of chip group Arm to Nvidia collapses, Financial Times. One can call this Lina Khan’s first big victory at the Federal Trade Commission. In December, the FTC challenged the merger of Nvidia and its supplier of chip designs, Arm. Yesterday the deal fell apart. What’s important about this shift is that the deal was a ‘vertical’ merger, in which the acquirer wasn’t buying a direct rival but a supplier. Enforcers haven’t typically opposed such mergers, to the point where in 2017, AT&T said it was ‘inexplicable’ the government would try to block its vertical merger with Time Warner, and went to court and won. The environment has changed so significantly that firms are not only losing, but are walking away from vertical deals before even going to court.

Arm is now going to have to make it on its own, and that’s worrisome because our financial system encourages the pillaging of such firms. But that’s a different policy problem.

Senate committee advances bill targeting Google and Apple’s app store profitability, CNBC. The Senate Judiciary Committee passed a bill to open up the control of app stores. The vote was 20-2, so that’s overwhelmingly bipartisan. The next stop is the floor of the Senate. It’s become increasingly common for big tech to lose procedural votes on legislation, which is significant.

Combating Big Tech’s Totalitarianism: A Road Map, Heritage Foundation. One of the constant themes in BIG is the realignment on the Republican side of the aisle. And yesterday, the Heritage Foundation, which is ground zero for the GOP establishment, just came out with a remarkable report endorsing stronger antitrust laws against big tech firms. There’s a lot I don’t agree with here, as you might expect, but in terms of context, it’s simply astonishing that right-wing voters have come to recognize that corporate power is a threat to liberty. The Republican corporate establishment is losing control of conservatives, and they are worried. People on both sides of the aisle distrust each other, but, well, the app store bill did pass 20-2.

Frontier and Spirit Airlines announce plans to merge, New York Times. This is Pete Buttigieg’s first big test on monopoly questions. While the Department of Justice Antitrust Division has jurisdiction, they will work with the Department of Transportation on this merger. The typical framework for such deals is whether these firms overlap and compete on specific routes, like if they both fly from Detroit to Boston. But that’s a narrow lens, and leaves out a whole host of possible harms. So we’ll see if this one gets challenged.

Schakowsky Introduces Legislation to Empower Franchise Owners, There are a million franchise owners in America, of outlets like McDonald’s, Subway, 7-11, Dunkin Donuts, and so forth. Franchising has its own set of laws governing the relationship between the corporate headquarter and the franchise owner, and they are very tilted against the little guy. Increasingly there’s pushback.

Acting Chairman Martin J. Gruenberg Announces FDIC Priorities for 2022. The Federal Deposit Insurance Corporation regulates our banks, and provides deposit insurance so we are protected in case a bank goes under. Last year, the Chair, Republican Jelena McWilliams, refused to revisit bank merger guidelines, even though the Board itself had a majority to do so. She ended up resigning, and now the new Chair is reviewing how the agency handles bank mergers. Score one for CFPB Director Rohit Chopra, who sits on the board of the FDIC.

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Thanks for reading.

And please send me tips on weird monopolies, stories I’ve missed, or comments by clicking on the title of this newsletter. And if you liked this issue of BIG, you can sign up here for more issues, a newsletter on how to restore fair commerce, innovation and democracy. And consider becoming a paying subscriber to support this work, or if you are a paying subscriber, giving a gift subscription to a friend, colleague, or family member.

cheers,

Matt