A Year of BIG

It's been a year since I took this newsletter paid. One thing I've learned is that this community matters. Plus, spies and monopolies, and consolidation in premium car audio systems.

Welcome to BIG, a newsletter on the politics of monopoly power. If you’re already signed up, great! If you’d like to sign up and receive issues over email, you can do so here.

Today I’m writing about this newsletter, since it’s been a year since I started accepting subscriptions. I am going to talk about how I write it, and what we’ve accomplished together. Plus:

• The weird monopoly of premium car audio systems.

• The National Security Agency and the Antitrust Division get into a bit of a scuffle over surveillance, monopoly power, and Booz Allen.

And now…

This is me, Revolution-splaining.

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Three years ago, I started writing BIG. While that’s not a long time, 2022 feels like a different world than 2019. When I first picked up the Substack pen, there was no such thing as Covid, Biden was just a candidate in the Democratic primary, and there hadn’t been a single government antitrust suit filed against a Big Tech firm. In fact, the Antitrust Division hadn’t filed a monopolization suit in 20 years. All of that has changed, to say the least.

My goal was to write about political economy, not the standard political sniping madness all over TV. That focus has paid off. The innumerable political scandals washed away, mostly irrelevant. But the big changes in our economy have not. When Covid was just a disease in far-off China, you and I saw it early, because we paid attention to China as an industrial center. When supply chains started breaking down, you and I saw it before almost everyone else, because market power thins out production. When crypto collapsed, we knew why. And when antitrust came to occupy the center of discourse, we were ready.

A year ago, I decided to ask you to pay for this newsletter, to invest in it. It was a nerve-wracking choice, because I had no idea whether what I did mattered or meant much. Your response was remarkable, and continues to be remarkable.

One result of the broad anti-monopoly movement of which BIG is a part is that in 2022, dominant firms across the economy are hiring antitrust counsel furiously, the antitrust agencies and big business are in a near-war, and populists are running key parts of competition policy. This conflict over the core of our economy isn’t a story you’d necessary see on CNN, but it is a key way this period in history will be remembered decades from now.

So today, on the one year anniversary of going paid, I wanted to take some time to explain why I write it, what this community means, and how we are actually changing the very guts of politics. First of all, if you’re a subscriber, either free or paid, thank you. Every time you forward this newsletter, bring up antitrust in conversation, or leave a comment or like, you act as an important ambassador for the anti-monopoly movement. And if you are one of the people willing to sign up for a paid subscription or who just-reupped after a year, I appreciate it and will explain why it matters. A lot of people can’t afford to become paid subscribers, but if you can, and you think this community is worth investing in, you can subscribe here.

With that in mind, here are some stats about BIG. Since last October, 3059 people signed up for paid subscriptions, which is a lot. More surprisingly, the number of people who receive the free version of BIG has gone from 47,791 to 69,359, and the growth rate has actually accelerated. (That’s a far cry from the collapse of many mainstream media outlets since Trump left office.)

I try to only send out one BIG issue a week, because each one is long and we all get too much email. As a result, every issue gets between 50-150k viewers. And the audience is broad and important. There are BIG readers in the antitrust agencies, across the Federal government and among state officials, among enforcers all over the world, politicians in the House and Senate, and within the antitrust bar itself. I get thousands of emails from everyday people, business people, elected leaders, students, workers, consumers, etc. Most are lovely, a variant of ‘I didn’t realize that monopoly was so fundamental.’ But more on that in a bit.

With the revenue you’ve provided, I’ve hired a copy-editor and guest-writers, rented a Discord server, and I do open threads on the weekends. I’ve started doing twice a month video segments on Breaking Points, and I have a section on Weird Monopolies. The goal is to build out arguments around monopoly, tech, learn, and persuade. Sometimes it’s uncomfortable. I’m on the left, but I write a lot about the conservative movement and their changing views on monopoly. Sometimes it’s powerful. We’ve watch-dogged antitrust cases, regulatory actions like an attempt to ban non-compete agreements for workers, and submitted thousands of comments to the Antitrust Division and Federal Trade Commission to rewrite merger guidelines.

I think an anecdote will illustrate the impact we’ve had. A contact at one of the agencies recently told me that a lot of antitrust lawyers are fairly upset these days, because despite the rapid increase in fees that they get for their services, the culture of antitrust practice has changed in a way that makes many of them sad. The old model of merger enforcement involved a sort of clubby atmosphere, where lawyers repping merging firms would meet with government enforcers, and the lawyers on all sides would act like they were greeting old friends, and they were all trying to work out a deal, a divestment here, a consent decree there. Today, the feeling is much more distant; the meetings about a deal exist to see if the government will sue. It’s cold, unfriendly, business-like.

The antitrust defense lawyers have a sense of hurt feelings, a kind of ‘What did we do wrong? Why are you so angry with us?’ The answer is of course, nothing. It’s just that antitrust is a form of law enforcement, and the old culture in the antitrust agencies, one of deal-making to facilitate consolidation, is gone. And this newsletter is part of the reason, because everyone in the antitrust world knows that we are watching. I still find the reach of this newsletter hard to believe, but there we go.

On a personal level, having you invest in this work has calmed me down. It can be terrifying as a writer to send out work to lots of people. What if it is obviously wrong in some way? What if it is naively written? What if it is hurtful? What if it is embarrassing? Before I went paid, every time I would hit send, I felt a twinge of fear. That is how antitrust lawyers often used to win before the first shot is fired, by intimating their audience into remaining silent for fear of getting something wrong in a complex area of law. But once you started subscribing, it helped me understand that this is a community effort, that this work isn’t just mine, but yours as well.

And that’s because most of us have a shared experience in coming to understand market power, even if we don’t know it. I analogize this process to understanding plate tectonics. Before 1967, we didn’t really know the cause of earthquakes and volcanoes. But that year, scientists Dan McKenzie and Robert Parker published a paper describing the theory of plate tectonics, the idea that Earth’s crust is composed of big flexible plates that smash into one another, fostering lots of phenomena, including earthquakes, volcanoes, mountain ranges and continents.

As plate tectonics does to geology, monopoly power explains the underlying features of our politics in such a fundamental way that it is inconceivable to understand how things work without it. Earthquakes and continents do not make sense without a basic explanation of movements in earth’s crust, just as culture wars and social questions do not make sense without understanding that they flow through corporations and business law.

Once you see the basic architecture of politics, you can’t unsee it. Once you understand the market power of Disney, Google, or CVS, and how their strategies and choices are based on a set of ideas interpreted by legislators and judges, arguments about culture or health care or technology seem foolish without a grounding in market power.

And believe it or not, this process is something that happens to everyone. It happened to antitrust lawyers who saw the collapse of their body of law over the last three decades, it happened to people in the cheer world when they realized that Varsity Brands is organized to acquire power over them, and it happens to policymakers as they come to understand their role in protecting our markets and our liberties. It’s why a lot of the antitrust bar lawyers are still upset, they haven’t gone through the experience of seeing what we see, of recognizing that the dysfunction of our politics and society is a result of consolidated market power.

And it still happens, every day. And that’s why this newsletter matters. That’s why your interest matters. The emails and discussions are essential. But being an interactive audience is the most fundamental part of what it means to govern ourselves. When people in power know that there is an audience for what they are doing, they operate differently. The people that want to get more aggressive, get more aggressive; the people that want to stop them, get less aggressive. Just the fact that there is an audience, matters.

There are more granular ways we’re having an impact, of course. Over the next year, one of the big conflicts in antitrust is going to be over merger guidelines. This seems like a small technical thing, the rules by which firms get to combine. But in fact merger policy represents a good chunk of the money and power in the economy. Mergers are how firms consolidate. Right now, the Antitrust Division and Federal Trade Commission are rewriting these rules; in the open comment period, there were 5000 public submissions to the government. BIG readers alone provided roughly 40% of the total docket. This process isn’t over, and we are going to continue to pay attention to it.

Fundamentally, what we are doing together with BIG, is to repair a basic broken link in our democracy, to reconnect our social problems and the policy levers that can address them. This starts with thinking about what journalism is for. There’s a lot of bullshit in the media. I often hear ‘why isn’t the media paying attention to this or that?!?’ as if the point is attention. But most of the time attention doesn’t matter, stuff doesn’t change. And that’s because most are missing the point of the press in a free society. It’s not to validate problems, but to link their cause to an actual policy lever. Sad and awesome stories are everywhere, that’s just life under any form of government. In a democracy, however, we must connect our experiences as citizens to the choices of those in our governing institutions.

This is how we empower ourselves and link our efforts to real political change. And your support empowers me to do that. When I know that people are behind me, that they’ve invested in this work, I have the confidence to be more aggressive, to tell more truth. I often say that if you want lies, there’s a whole media ecosystem that will give them to you for free. The truth costs a bit of money, but in the long run is worth a lot more. And that’s what your support and investment in BIG has helped to foster, at a very basic level. The truth.

So thanks and may BIG have many more years to come. And once again, for those who haven’t already, if you’d like to sign up for a paid subscription, you can do so here.

If you’ve gotten this far and you are so inclined, drop me an email about what you enjoy, what you’ve learned, how BIG has affected your thinking, or any other feedback you think I should have going into the coming year.

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Weird Monopoly: Premium Car Audio Systems

Via Thomas Hundal at the Autopian:

If you like music and spend a lot of time in your car, you’ve probably considered popping for a pre audio system. However, with brands like Bang & Olufsen, JBL, Revel, Mark Levinson, Harman Kardon, Infinity, and Lexicon all on deck at various manufacturers, it can be a bit hard discerning what makes certain factory sound systems special. I’ll let you in on a little secret; all of the brands I just mentioned are owned by Samsung subsidiary Harman International.

Hundal does a nice job running down the litany of acquisitions here by Harman, as well as the resulting declines in quality, price hikes, and generally homogenization of the space. There seems to be some competition, with independent brands such as Bowers & Wilkins and Burmester, and new players McIntosh, Dolby, and Sonos.

But while there do seem to be choices on first glance, the market structure means a lot of people can’t get access to them. Most consumers buy a car, and then the car manufacturer will give them options for these audio systems. So the way to get into the market is to have a deal with an automobile manufacturer. It seems like Harman, with all its different brands, has been able to exclude a lot of possible rivals at that level.

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Spies and Monopolies

The shooting war in the antitrust world continues. A few days ago, the Antitrust Division lost yet another hearing in district court. It’s not a full trial, but enforcers lost on an attempt to stop contractors for the National Security Agency from gaining a monopoly in a certain area of procurement. Here’s the story.

A federal judge in Maryland on Tuesday ruled against the Justice Department's effort to block Booz Allen Hamilton's planned $440 million acquisition of fellow government technology services company EverWatch on antitrust grounds.

Justice had sought a preliminary motion to stop the transaction from proceeding, but Judge Catherine Blake declined to do so in a ruling that will remain under seal until Oct. 18. That date is when the U.S. District Court for Maryland intends to release a redacted version of its memorandum to all parties involved, according to a court filing.

The case in part centers around the recompete for a signals intelligence contract with the National Security Agency that Booz Allen has held for two decades.

I’m going through the post-hearing briefs, and what seems to have happened is that National Security Agency employees would not testify against the merger, instead remaining neutral.

The case against the merger is simple. The NSA is a government agency, and it needs a contractor to do something called signals intelligence modeling and simulation, which is a way of improving surveillance capacity, aka spying. For 20 years, Booz Allen was a monopolist in this area, because it had the requisite top secret SCI clearance and a deep understanding of how the NSA operates. This time, however, a new firm called EverWatch, which had been assembled to be able to get this contract, sought to compete in the bid.

Before the bidding process, Booz Allen decided to simply buy EverWatch to take it out of the contest for procurement dollars. The Antitrust Division noted this transaction is known as a merger-to-monopoly, and is unlawful. They found a number of internal conversations, particularly among low level employees who would be doing the work, indicating that the bidding would be much less intense as a result of the merger.

Booz Allen argued in response that the merger is fine for a few reasons. The most important reason is simply that the NSA itself wasn’t concerned. A lot of the briefs are redacted, but the gist is that one NSA witness, “a 40-year agency veteran” known as “Dr. S,” alleged the Antitrust Division’s case was mere ‘rhetoric.’ This neutral to pro-monopoly testimony from the procurement arm of a government agency is similar, though not quite as bad, to how the Department of Agriculture a few months ago supported a sugar merger to monopoly, fighting against the Antitrust Division. It is often hard to find government employees willing to risk angering a powerful industry, and much easier to find officials eager to help them. The NSA is no different than the Agriculture Department in this sense.

The other main argument Booz Allen made is that the firm would never take advantage of the government, because doing so would, and once again I’m not kidding, threaten the firm’s reputation. As they put it in their post-hearing brief, their employees support “the NSA’s mission and understand the work they perform supporting that mission is ‘a privilege.’” As with UnitedHealth Group, the notion Booz Allen is reliant on its reputation for its business is a bad joke. Here’s just one headline, but I could list many more.

So is this case over? Not exactly. The Antitrust Division brought two different claims, a Sherman Act claim against the merger agreement and a Clayton Act claim against the merger itself. And it also sought to have a speedy resolution so the bidding process could happen in a competitive manner. The judge didn’t say the merger was lawful, but merely ruled against the request for a preliminary injunction. She denied the government in its bid to stop the merger agreement, but allowed for a full trial on the merger itself. The Antitrust Division can still move forward, and we’ll know more next week when the full decision is unsealed.

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What I’m Reading

Kroger and Albertsons in Deal Talks to Create Supermarket Powerhouse, Wall Street Journal. This is one deal that shouldn’t get out of the board room, but Wall Street is getting arrogant because agencies have had a series of court losses.

The FTC is having an open meeting on October 20. Members of the public are free to speak for 2 minutes. You can sign up to do so here. Items on the agenda include junk fees, fake reviews and endorsements, and funeral home regulations, but you can speak about whatever you want.

Why is 'made in America' PPE shutting down?, Advisory Board

Justice Department digs into ‘competition concerns’ in New England fishing industry, New Bedford Light

“Get Big Fast.” How Amazon Accelerated the Commodification of Literature, LitHub

‘Car Talk’ host: Independent auto shops deserve the right to repair your car, Washington Post

FTC Probes Market Power of One of Country’s Biggest Anesthesia Providers, Wall Street Journal

Cannabis Legalization Must Address Monopoly Dangers, Law360. I wrote this piece with Shaleen Title on how to prevent dominant firms from controlling the marijuana industry.

BIG reader Andres Acevedo released a video on private equity.

BIG reader Paul Macko wrote up a fascinating story on how a billionaire controls the busiest international border crossing in North America, which carries a third of the trade between Canada and the United States. That’s some old-timey monopolization. This one has a happy ending, a new public bridge is slated to open in 2024.

Here’s a neat piece on how some ski areas are able to keep prices low, despite the monopolization and price gouging going on in much of the industry.

Why Boxing Stars Make So Much Money (and Why UFC Stars Don't), TJ Loves Fights. This is a great video explaining why top boxers can make $100M+ for their work, while top mixed martial arts fighters make a million dollars or so.

The FDA stands by as the vaping industry flouts its orders, STAT. Apparently FDA orders are suggestions.

Payments Billionaire Found to Have Knowingly Deceived Customers, Bloomberg. This story about a billionaire behind the sleazy gas card company FleetCor is interesting and important. Basically this firm stole from truckers using “falsely advertised rebates, concealed transactions fees and a host of other unfair practices,” according to an Atlanta judge that just ruled against FleetCor. The FTC is asking for an order that would bar the company from any such practices.

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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 Stoller