Boom! Antitrust Bill Passed

The Merger Filing Fee Modernization Act just moved through the U.S. House of Representatives, supported by a weird bipartisan coalition. This is very, very good news.

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Today I’m writing about how the U.S. House of Representatives just passed a bill to strengthen antitrust enforcement, over the objections of Google, Amazon, Republican leaders, and key Silicon Valley Democrats.

Voting is for nerds.

Overcoming the “No We Can’t” Problem

I’ve been focused on the problem of monopoly since Too Big to Fail banks crashed the economy during the financial crisis in 2008, so I have a pretty good sense of when there are political inflection points. And I will say with reasonable confidence that this week, the opponents of monopoly power took a big step forward. Against fierce opposition from dominant firms, the U.S. House of Representatives voted for the Merger Filing Fee Modernization Act, which is first time I can remember that we’ve won a floor vote to explicitly roll back monopoly power.

Having a majority in the House oppose corporate dominance is critical for a number of reasons, but the most important one is that it helps solve what is the biggest hurdle in the anti-monopoly movement. That hurdle is not convincing people that monopolies are a problem. As The American Prospect reported, pollster Stan Greenberg just came out with polling and focus groups on the matter. Everyone, from Trump voters in rural Texas to black Democratic diehard supporters to college educated urbanites, hates concentrated corporate power.

These sentiments are consistent with public and private polling and market research I’ve seen over the years. The problem is not convincing voters that monopolies are a problem. They already believe that. The problem is convincing them that doing something about these problems is possible. This fatalism also shows up in conversations with policymakers, businesspeople, and workers. There are any number of comments you’d recognize making this point. Congress is corrupt. Big tech is too powerful. Washington is broken. Big money runs everything. The government works for big business. Essentially, the case for concentrated corporate power is that, well, they are simply too entrenched to overcome.

Well yesterday, the anti-monopoly political movement showed that it is possible to use our political system to fight concentrated power. In a shocking action, the House passed a provision to strengthen antitrust laws by a vote of 242-184. Google, Amazon, Apple, the U.S. Chamber of Commerce, and various big tech funded trade associations opposed this bill, and Republican leaders like Jim Jordan and Silicon Valley Democrats Zoe Lofgren fought it bitterly. But they lost. And this is very weird to write, because Google never loses in legislative votes. Ever. But they did yesterday.

So what does this vote mean? What actually passed? And what impact will this victory have?

The Substance

I’ve gone over what this bill does in a few past issues, but I’ll rehash that here. The legislation has three main parts.

First, it forces firms who want to engage in mergers to disclose subsidies from the Chinese government. That’s a basic national security protection, and it looks like a serious provision that will reveal a lot of unexpected and interesting conflicts in corporate America.

Second, it raises filing fees for big mergers, and makes it easier to direct the extra revenue to the Antitrust Division and the Federal Trade Commission. Congress still has to move money to the FTC with another vote, but for budgetary reasons, it is now easier to do that. The agencies are right now in a significant cultural transformation away from a friendly posture with corporate America, and towards a posture of law enforcement. Having more money will help with this change.

And finally, the bill makes it easier for state antitrust enforcers to bring cases by letting them have those cases heard in local courts. Right now, when a state enforcer sues a monopolist, he or she risks having the court system remove that case to a distant judge and then combine it with a bunch of other similar cases. This sounds like a boring procedural change, and it is, but it’s also the kind of jurisdictional wrinkle that affects a lot of antitrust litigation in important ways. In fact, this whole legislative kerfuffle was kicked off by the Texas Attorney General having his critical suit moved to a New York court and slowed dramatically by combining it with a host of other similar suits.

What the bill does NOT do is change the substance of antitrust law itself. It doesn’t attack bad court precedent, and it doesn’t impose new legal obligations on dominant tech firms or anyone else. It’s mostly a set of procedural and bureaucratic changes. But procedure and bureaucracy can matter. One of the more important changes in antitrust history occurred in 1902 when Teddy Roosevelt got Congress to appropriate money for antitrust lawyers, which later became the Antitrust Division. Over the next ten years, Roosevelt, then Taft, broke apart significant numbers of large firms then making up much of corporate America. A bill like this impacts antitrust enforcement in a similar direction.

So that’s the substance. What about the politics?

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The Politics: Culture Warring and Monopolies

“Congressman Jim Jordan’s staffer, Tyler Grimm, claimed Lina Khan admitted to “recruiting” from Marxist groups during a recent oversight hearing.” - Washington Post

The debates over the Merger Filing Fee Modernization Act were deeply bitter, and split both political parties, though more the Republicans than the Democrats. This bill was part of a series of changes to antitrust laws considered by Congress this session, as well as a five year long set of investigations into big tech and market power, and so it has to be seen in that context.

Perhaps the most important change voted on this session has been Congressional confirmation of Jonathan Kanter at the Antitrust Division, as well as Lina Khan and Alvaro Bedoya at the Federal Trade Commission (which gives that body an anti-monopoly majority for the first time in a generation). There was vicious lobbying against them, but big tech lost those fights. However, the reputation of these enforcers has become an important part of the political debate, especially on the right.

Over the last two years, Congressional committees, though not either full chamber, have passed a whole host of legislation to change antitrust law. Committees have marked up bills to raise agency funding, to make it easier for state enforcers to bring cases, to break up big tech firms or block mergers, to stop self-preferencing by dominant platforms, to regulate app stores, and to redress bargaining imbalances between newspapers and platforms. Another bill to rein in the abuses of pharmacy benefit managers, which run the pharmaceutical supply chain, also moved through the Senate Commerce Committee. In addition, while it didn’t pass a committee, a bill to structurally separate online advertising platforms, authored by conservative Senator Mike Lee, will likely be considered next year.

Little has made it into law so far, however, because a coalition led by Republican leader Jim Jordan and Silicon Valley Democrat Zoe Lofgren has been able to block getting most of this legislation heard on the floor of either chamber. For months, Senate Majority leader Chuck Schumer used the excuse that the votes aren’t there to refuse to hold a vote on any of this big tech legislation. There was a chicken and egg problem here, because Schumer was saying he wouldn’t hold a vote in the Senate until supporters could prove there’s a majority, but you can’t prove a majority until there’s a vote. Nancy Pelosi on the House side, however, was willing to hold a vote. And when this bill was slated for the calendar, the debate kicked off in a big way.

And this brings us to the arguments around this bill. There was significant support on the progressive side for stronger antitrust laws, with unions like the Teamsters and SEIU, as well as a host of nonprofits, pressing forward. This is natural, considering that it was Senator Elizabeth Warren who in 2016 really brought anti-monopoly arguments explicitly into politics with the first modern major political address on corporate consolidation. But key parts of the right also supported the legislation; conservatives Mike Lee, Tom Cotton, Matt Gaetz, Josh Hawley, and Ken Buck also weighed in for it, as did the powerhouse D.C. think tank the Heritage Foundation. Skepticism of big tech has pervaded a significant part of the conservative world.

These political dynamics ended up reflecting the final vote tally. Ultimately, 39 Republican House members voted for it, vs 168 who voted against it. On the Democratic side, 203 voted for it, vs 16 who voted against it. Since a majority of the House requires 218 votes, that means that the Democrats, while carrying the bulk of the votes, needed a splinter faction of Republicans to come with them. And that happened.

Still, if there’s so much right-wing anger at big tech, what explains that 75% of the GOP caucus voted the way Google and Amazon sought? The answer has to do with the structure of Republican politics. Jordan never says he wants to help Google, but he asks the question, ‘do you want to empower Lina Khan with more authority?’ And thus, the question of antitrust changes becomes wrapped up in the personal reputation of someone most Republicans in D.C. don’t know.

And that’s when lobbyists swing into action. The beating heart of the GOP is the lobbying world of K Street. K Street is a thoroughfare in D.C. where lots of law and lobbying firms set up shop, as well as trade associations. It’s the nexus of corporate America and political America, and also where GOP Congressional staff go to make some money, and Republicans connect with the business of America. And the lobbying world is as much a social milieu as a substantive place of policy debates and money. (There are Democrats on K Street, but the lobbying and business trade association world tends to lean towards the Republican Party.)

Since Khan was confirmed, the Wall Street Journal oped page, parts of K Street, and big tech firms have been focused on painting a picture of Khan as a dangerous regulator, a radical focused on using the FTC to control the economy. The lead organizer of this campaign is Congressman Jim Jordan, who is the Chair of the House Judiciary Committee and a well-respected conservative, but much of the lobbying world has chipped in, as have figures like economist Larry Summers. But it’s also coming from within the antitrust establishment itself.

The Republican members of the Federal Trade Commission, Christine Wilson and Noah Phillips, are important parts of this campaign. Wilson and Phillips are libertarians, and even under Trump voted against bringing a Trump-supported antitrust case against Facebook. Khan resurrected this case, but again, Wilson and Phillips opposed it. With a series of 3-2 votes on the commission, including on multiple areas where Khan sought to address big tech power and the Republicans did not, Wilson and Phillips have made the case that Khan is making the agency ‘partisan’ and lawless.

The odd dynamic here is that Khan is actually doing what the GOP broadly wants, which is to oppose big tech power, while Wilson and Phillips are doing the opposite. But the details are unimportant, because the opposition here is ideological and social. Wilson is a K Street disciple of Tim Muris, who helped restructure the FTC in the 1980s to a monopoly-friendly posture that Khan is trying to undo.

Wilson is carrying forward the torch of the Chicago School by engaging in vicious ad hominem attacks. In April, for instance, she gave a speech titled “Marxism and Critical Legal Studies Walk into the FTC: Deconstructing the Worldview of the Neo-Brandeisians,” in which she laid into Khan and anti-monopolists as critical race theory woke lunatics. Though in public service now, Wilson, who formerly ran regulatory policy for Delta airlines and before that worked at the private equity focused law firm Kirkland and Ellis, has her social and professional world anchored in D.C.-based right-leaning lobbyists and big law firms.

The combination of corporate lobbyists, the antitrust bar, Wilson and Phillips, and Jim Jordan mean that it’s now routine now to hear Republican members of Congress musing suspiciously about the FTC, though they never actually have any substantive complaints. Last week, for instance, Senator Marsha Blackburn in an oversight hearing in the Senate spent her time grilling Khan on whether she is a Marxist obsessed with critical race theory, and whether she wants to shape the economy in “her own image.”

Khan had to explain she spoke to an anodyne law student group called the Law and Political Economy Project that puts on events for people interested in antitrust. The goal, she said, is to recruit law students to come to the FTC, (which I’ll note is something that a lot of corporations and agencies do). After she gave this answer, Jordan’s key staffer, Tyler Grimm, started telling Republicans that Khan is recruiting Marxists to staff the FTC. The irony here is Blackburn is quite hostile to Google, but she is first posing the question of whether she trusts Lina Khan before she is asking what kind of policy changes she’d like.

Baseless insinuations are a regular part of this campaign. For instance, when Elon Musk wanted to buy Twitter, Jordan immediately and falsely accused Khan of trying to block the acquisition.

Rep. Jim Jordan @Jim_Jordan

Is Lina Khan and Joe Biden’s FTC working with far-left organizations to block @elonmusk’s purchase of Twitter? We need answers.

The essential argument is Khan, and to a lesser extent Kanter, are ‘out of control,’ and are trying to use antitrust laws to impose a “woke” social vision on America. The key reason for turning Khan toxic is to block any expansion of antitrust or regulatory power. And it has worked. Over and over, we see that when Republicans think about taking on corporate power, they can’t get themselves to accept the need for an administrative state to make that happen.

Earlier this year, for instance, Republicans put together a bill to try and address dominant pharmacy benefits managers, but didn’t want to let the FTC have any additional authority or resources. Sure it’s important to rein in, say, Google, but if the enforcer who would have to do that is a lunatic Marxist, no thank you. In fact, better to cut the budget of antitrust enforcers, so goes this logic, than to risk them doing something nutty. That may have some logical appeal, but it’s logical appeal that works to turn monopoly skeptical conservatives into accidental protecters of Google’s market power.

And thus, “Lina Khan is bad” became the main argument against the antitrust bill, and all antitrust legislation.

Rep. Jim Jordan @Jim_Jordan

Do you think we should give the Biden DOJ and FTC more money? Do you trust they won’t use the money to target conservatives? Do you think Joe Biden, Merrick Garland, and Lina Khan have your best interests at heart? No, No, No.

Basically, Google, Amazon, and corporate lobbyists were using culture wars to disguise corporate power.

Of course, it wasn’t just the right engaging in these kinds of distractions. Democratic Rep. Zoe Lofgren used the same set of arguments, alleging that this legislation would help ‘insurrectionist’ Republican attorneys general like Ken Paxton of Texas. In one amusing part of the debate on the floor of the House, Lofgren said that Congress should oppose antitrust actions, because antitrust action against big tech would lead to a situation where Google/Facebook couldn’t censor conservatives. Jordan then immediately stood up to say, no no, Lofgren is wrong, it’s important to oppose antitrust actions because antitrust action against big tech would lead to a situation where Google/Facebook would censor conservatives more.

American Economic Liberties Project @econliberties

With their backs against the wall, Big Tech-allies @RepZoeLofgren & @Jim_Jordan are pushing bad faith arguments about the antitrust package. Lofgren claims H.R. 3843 bans content moderation. Jordan claims it will let Big Tech “censor content.” Don’t believe either of them.

It wasn’t just the culture war. In a fascinating illustration of the bureaucratic reservoirs of corporate power, the Administrative Office of the United States Courts came out against the legislation, arguing that it will burden the court system with too many suits. Judge Roslynn R. Mauskopf, who runs that office, wrote Congress that it would foster a “problem” of too much antitrust enforcement. Senators Klobuchar and Mike Lee responded by calling the letter from the courts “inappropriate,” as it “closely mirror[s] the arguments made by Google in its response to the antitrust complaints of Texas and other states.” It was sketchy, in other words, for U.S. courts to take the position of a “party in active litigation before the federal courts” in a policy debate.

As we move through the different institutions of the United States, it’s fascinating to see how deeply the corporatist mindset has penetrated. I didn’t even know there was an Administrative Office of the United States Courts, let alone that it would be a place from which Google could furtively mount a defense of its market power.

And yet, even with all of this administrative and financial power behind them, Jordan and Lofgren failed to cobble together a majority to defeat the bill. The pull of big tech arguments among Democrats was not nearly as strong as it was among Republicans, because Democrats didn’t wrap up their thinking in the question of whether Lina Khan is an untrustworthy Marxist. Just 16 Democrats defected from the bill, most from California, but 80% of the House Democratic caucus voted for it. During the floor debate, Democratic members seemed to distrust large firms. Rep. Sheila Jackson Lee, for instance, went off on airline mergers and higher prices.

Matt Stoller @matthewstoller

Sheila Jackson Lee is attacking consolidation, saying mergers of airlines have cut flights to lots of smaller regions.👍

Ultimately, with most though not all Democrats supportive, and enough Republicans holding fast against Jordan’s rumor-mongering, the bill passed. And given the support of key Republican Senators like Cotton and Lee for this legislation, Jordan angered many in his own party and showed outright that he is operating in bad faith. The conservative outlet Newsmax, in an article titled “Jim Jordan Sides With Big Tech Over Conservative Opposition, Jordan Responds,” essentially had a back and forth with Jordan’s communications staff on precisely this point.

So What Does This All Mean?

Choosing to fight this relatively uncontroversial piece of legislation was a strategic misstep by big tech, an example of hubris.

After the vote, I heard from one of my more well-connected contacts in D.C. “I thought the pushback was pathetic and sorta embarrassing for big tech,” this person told me. “They stick their neck out just for it to be chopped off publicly. Not a good strategy!” Just before the vote, tech lobbyists were anonymously bragging to D.C. trade publications that in defeating this relatively uncontroversial bill, they could show that they were totally unbeatable. Here’s what one of them said in The Hill.

"The package of proposals passed Thursday are “low hanging fruit,” and pose a chance for those against the bills to try and squash all momentum for antitrust legislation targeting tech companies, a Republican lobbyist told The Hill.

“They see this a greater proxy for the larger bills,” the GOP lobbyist said, referring to the American Choice and Innovation Online Act and the Platform Competition and Opportunity Act, which have both advanced out of the House and Senate Judiciary committees.

“If they’re able to kill this bill, it kind of destroys all momentum for anything larger between now and the lame duck,” they added."

What they hadn’t counted on is that this same dynamic works in reverse. Instead of letting the relatively uncontroversial stuff move through Congress, big tech decided to fight. And then they lost, thus proving to everyone in D.C. in a very high-profile way, that there is a working majority in Congress for strengthening antitrust law.

Basically, losing is not a good look for Google, Amazon, and Apple, because if it happens once, it can happen again. That’s often how politics works, it’s based on precedent. That means after the election, in the session before the new Congress takes office, there’s a chance to pass more pieces of legislation into law. Will that happen? Not clear. And even this bill has only cleared the House, and needs to find a vehicle to move through the Senate to get signed into law. But passing more antitrust legislation just became a lot more likely, as it’s clear the public, speaking through their elected leaders, have had enough. In the next five years, I would bet on antitrust doctrine getting significantly revamped.

So this was a good week for the anti-monopoly movement. A very good week indeed.

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Thanks for reading!

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cheers,

Matt Stoller