Will Bill Barr Screw Up the Google Monopolization Case?

Like it or not, Trump's Attorney General is a key decision-maker on the Google antitrust case.

Hi,

Welcome to BIG, a newsletter about the politics of monopoly. If you’d like to sign up, you can do so here. Or just read on…

Today I’m going to write about Trump Attorney General Bill Barr, who is a key decision-maker on whether, and how, the U.S. brings an antitrust suit against Google. I’ll also do a paragraph on each of these nuggets:

• War at the FTC Over a Carl Icahn-Approved Casino Merger

• An Ad Boycott of Facebook

• Private Equity Rolling up the Space Industry

• Repair Shops Deplatformed by Google

• Blackstone and Brookfield Defaults and the Private Equity World

• UK Regulators Cave to Amazon on Deliveroo Acquisition

But first, I need your help. When the Federal government finally launches an antitrust case against Google, it will be important to have a community of people who know what it’s like to deal with this incredibly complex institution. So if you’ve had a problem with Google from a business standpoint, or if you’ve worked there, and would be willing to share your experience, let me know. My organization has set up a form here. We’ll keep your information private, unless you indicate you’d like us to share it.

Also, I’ve been meaning to note that this newsletter is a year old. Originally I started BIG because I wanted a place to talk about my book on monopolies, but this newsletter took on a life of its own. Today, there are about 30,000 subscribers, from policymakers all over the world to students and workers to ordinary business people to central bankers to short-sellers. We’ve been cited in The New York Times, The Guardian, The New Yorker, and The American Prospect as well as in legal research around big tech. We’ve sent comments to the FTC on non-compete contracts, helped warn about the threat to podcasting, explained WeWork’s counterfeit capitalism, and shown that monopolization creeps into every corner of life, including cheerleading. We’ve also helped demystify private equity, though there’s a lot more to do on that front. Every week I get emails from people all over the world inspired to see business law as a key center of politics.

And that’s really the goal. I’m proud of this work, and I’m proud that we’ve been able to advance the ideas critical to a more just society without being especially partisan. I’m not opposed to partisanship, but I do think that ideas need to carry power outside of the lines we draw today in our muddled politics. So thanks for reading.

And now…

The Drumbeat for an Antitrust Suit Grow Louder

Every day, new stories seem to come out about how the Department of Justice and state attorneys general are considering launching an antitrust suit against Google. Leah Nylen in Politico offered the latest:

The people cautioned that Attorney General William Barr, who did not attend the meeting, has yet to make a final decision on whether to sue, a judgment he could make in the coming weeks. The department would also need to decide what remedy it would seek, such as trying to break up the company or placing limits on its behavior. Whether the state attorneys general would also sign on to the DOJ complaint isn't yet determined.

Skepticism of big technology companies is one of the only bipartisan causes in Washington. Antitrust Subcommittee Chairman David Cicilline has threatened subpoenas to big tech CEOs, and the Chairman of the Judiciary Committee, Jerry Nadler, called for corporations to be broken up in February. "That kind of power cannot be allowed to exist in society,” said Nadler. “It tends to aggregate to itself. You cannot have a democracy and concentrated economic and political power." State attorneys general, largely Republicans, as well as the Trump Department of Justice, are seeking to bring a suit.

And there’s no mystery why this is. The sheer number of markets Google dominates - mobile operating systems, general search, online video, mapping, email, display advertising, and browsers - lets the corporation structure the internet itself. It is so big that almost by accident it makes enemies, stepping on and endless number of businesses without even noticing it was doing so.

So there’s a broader anger at this point against Google that goes beyond just political officials. Black creators on YouTube recently announced lawsuit against the corporation over racial discrimination, and conservatives have had enough of Google, calling for the corporation to be broken up because of its monopolization of ad revenue and demonetization of sites on which they rely. Corporate opponents of Google, everyone from Yelp to the newspaper industry to Oracle to small businesses who feel taxed and threatened, want a case. Microsoft’s Brad Smith, for instance, just argued for an antitrust case against Google for its Android app store.

There is also now ample intellectual firepower for a case; in the center-left legal academy, former Obama antitrust enforcers Fiona Scott Morton and David Dinielli laid out two cases, one against Google’s search monopoly and one against its ad tech business lines. Former ad executive and legal scholar Dina Srinivasan wrote a comprehensive analysis of Google’s stock market-like system that lets itself serve as a middleman in nearly all online advertising markets. Frank Pasquale, one of the earliest critics of Google, is outlining a Digital New Deal, which includes antitrust enforcement, transparency, and non-discrimination principles.

Foreign enforcers from Australia to France to Russia have investigated and brought suits, only one of which - in Russia of all places - broke Google’s monopoly. And there are more cases cases to come, though everyone is looking to America to genuinely take on this quintessentially American corporation.

The Decision-Makers

So one would think that now is the moment for a great case, one to truly open up the marketplace to new competition in such a vital area as the information arteries of our society. But then there’s the guy who is in charge of making the call for a case. That’s not Makan Delrahim, who is the Assistant Attorney General for Antitrust, as Delrahim had to recuse himself. It is Bill Barr, the Attorney General himself.

Barr is not the worst possible person to be in this position, because while he’s a conservative, he isn’t a dogmatic libertarian that abhors the use of public power to structure markets. In fact, Barr was the attorney general under George H.W. Bush, and helped send a thousand white collar savings and loan executives to jail. Barr was a high level official at both Verizon and Time Warner, and knows how both the media and telecom businesses work. He noted during his confirmation hearing that he was puzzled why Obama didn’t send anyone significant to jail for bank fraud. Because he’s willing to use power, Barr is feared in the Republican regulatory world.

There is, however, a problem with Barr. And that is, he doesn’t seem to really care about the law. For instance, last week, John Elias, a civil servant from the Antitrust Division at the Department of Justice, testified to Congress that political officials in the Trump administration misused antitrust law by opening investigations for illegitimate reasons. Elias noted that Barr ordered the division to harass the marijuana industry, purely because he doesn’t approve of the drug. As a result, baseless merger inquiries into marijuana accounted for 29% of total merger investigations in 2019. Antitrust scholars across the spectrum have condemned this behavior, as it throws doubt on the legitimacy of law enforcement and is also, well, embarrassing. (I’m less inclined to see former antitrust insiders as particularly honorable, but the criticism of Barr, if a bit overwrought, is valid.)

I once asked a well-connected contact, what motivates this guy? My friend responded, “Oh, Barr? He’s just a criminal.” Another person heavily involved told me that aside from whether Barr operates in good faith, there’s another problem. His people lose big cases, like AT&T-Time Warner, and their attempts to wield power often misfire. “Everything these guys touch turns to shit,” he said. I don’t say this as a criticism, because I want Barr to bring a big case, and to succeed at it. It’s just that Barr’s track record makes it a bit tough, though not impossible, for good faith advocates for an antitrust case to align themselves with the DOJ, and that’s a problem.

But Barr, while he’s in the most important position, isn’t the only decision-maker. State attorneys general are also investigating Google, and they have jurisdiction over Google as well. The states have banded together into a multi-state investigation, which is led by Republican Texas Attorney General Ken Paxton. Paxton is a right-wing ideologue with a track record of skepticism towards large concentrations of power, and whether he has the states bring their own suit, or signs on with Barr’s, is an important question.

So far, no Democrat has really jumped on board in terms of leading along with Paxton. Many were hoping Colorado Attorney General Phil Weiser would do so, since he’s an antitrust attorney who worked on the Microsoft case. But he hasn’t. Karl Racine of D.C. is a Democrat and he might co-lead (he’s also my favorite domestic enforcer), but D.C. is not a state so it wouldn’t look as powerful. There are other possibilities, but this is a hard case and it requires resources most AGs don’t have. In addition, progressives, while they often do express frustration about corporate power, tend to care more about labor rights, health care, and education. Hard-core anti-monopoly stuff just doesn’t seem to penetrate, at least not yet. I hope a Democrat steps up, and Barr should focus very heavily on making sure one does, because that would solve outstanding credibility issues.

Barr and the states can bring separate cases, but Barr is likely to pressure the states to jump on board the Federal one. There are a few key risks with a Google case run by someone like Barr. Barr wants headlines, and the calendar before the election gets shorter every day. One obvious risk is whether he chooses to waste political capital on conservative viewpoint discrimination, which is not an antitrust violation but would bring him accolades in some part of the right-wing press press. Such a case would induce a backlash and a defense of Google from the Democratic side of the aisle as well as the law and economics world, since it would be missing the point of antitrust, and would be so obviously calculated to benefit a particular ideological side. Throughout the 2017-2018, Congressional Republicans held endless hearings on anti-conservative bias, and Google lobbyists and libertarians just loved it. It is the weakest and most bad faith approach to the problem.

There’s also the risk of Barr moving too fast in order to give himself a feather in his cap before the election. Antitrust cases take time to develop. You have to interview witnesses at dozens of companies that compete with or were undermined by Google, go over thousands of pages of contracts, find ex-employees of Google, flip higher-ups, etc. If you rush it and lose, it sets back the case and the entire enterprise of antitrust. That said, the states don’t have to go along with Barr, they can simply hold off and force a coherent thorough investigation. And if Trump loses the election, Barr is going to have to hand over this case to the next administration, and the next administration will likely be able to amend the complaint.

A different risk is if Barr chooses to settle with Google over inconsequential practices, like the corporation’s tying of Android to search, rather than bring a case. He might also bring a weak or narrow complaint, like only covering adtech, instead of focusing on search. One opponent of Google has been pointing out that looking at Google without looking at search is like looking at Standard Oil without looking at oil. Yeah there are business lines there, even big ones, but the main stuff will go untouched. In fact, there is a reasonable case to be made that since every business, every non-profit, and every publisher needs to be online, the Google bottleneck is weakening the economy in general.

There are a lot of analogies with Google to the Microsoft case, because Microsoft is the last big antitrust suit, and Microsoft was in modern digital technology. But I don’t think that analogy is quite right. Microsoft was relatively speaking a simple company, it had an operating system monopoly and a monopoly with Office. Its power came from contractual relationships with IBM and original equipment manufacturers of personal computers, which made it the only on-ramp to the PC. The remedy for Microsoft was to break it up into two companies, an OS and an applications subsidiary (though the remedy was overturned on appeal).

Google by contrast has eight products with more than a billion users, and it is the result of hundreds of acquisitions over twenty years. Google runs a set of complex businesses with market power in lots of different areas. It looks a lot more like Standard Oil, and Standard Oil in 1911 was broken up into 34 different companies, including oil refining, distribution, pipeline, manufacturing, and transportation companies. One of the consequences of that break-up was that Standard of Oil of Indiana finally became free to experiment with a method to refine a byproduct of oil, a byproduct called gasoline.

In fact, Google is so dominant and has been dominant for so long that we sometimes forget what its component parts really are. Google.com is a consumer-facing site, but it relies on a web index, and there’s no reason these two entities have to be in the same corporation. This is true for the Map consumer-facing site and the map index data. Chrome, Android, Google Play, YouTube, and Google Drive are all very large businesses in and of themselves, and there’s simply no reason they couldn’t be split up further. Google Analytics is a monster, so is Gmail. The whole adtech ‘stack,’ which is basically a stock market for buying and selling ads, is another Goliath that can be pulled apart.

When you really step back, Google is squatting on a range of potential industries, stifling their potential. Maps is a great service, but imagine if anyone could license mapping data to build their own product. The same is true with search. If there were actually competition, so you could license Google’s index for a search engine, we’d see an explosion of innovation. Right now buying or selling ads is impossible without going through Google, but if that weren’t the case, we’d likely seeing new ad models emerging and a new publishing ecosystem. Android could get a lot better if it weren’t tied to search.

In other words, there’s a world inside Google waiting to be unlocked. That’s why this suit is important, and that’s why Barr, and state AGs, shouldn’t rush it.

(Also, this is one more reminder that if you have had problematic business dealings with Google, you can tell my organization about it here.)

War at the FTC: Eldorado Resorts and Caesars Entertainment: The bitter war at the Federal Trade Commission between Democratic commissioner Rohit Chopra and the three Republicans continues. This time, it’s over the FTC allowing the merger of two casino giants Eldorado Resorts and Caesars, which is basically just a favor to takeover artist Carl Icahn, who owns a chunk of Caesars. Here’s Chopra’s dissent.

Facebook Ad Boycott: Facebook’s stock took an 8% hit on Friday after major advertisers said they would pull ad spend on social media until Mark Zuckerberg gets a handle on hate speech. That’s a $55 billion loss in market capitalization, though Facebook is still worth more than it was prior to the pandemic. Ad boycotts can be useful, but they have to be followed by policy action. The problem is the legal framework that allows Facebook to consolidate power in social media advertising in the first place.

Private Equity Rolling up Space Force: I don’t know much about space technology, but private equity firm AE Industrial Partners is changing the industry. As Space News’s Jeff Foust notes, “Made In Space, a pioneer of in-space manufacturing and assembly technologies, is being acquired by Redwire, a new venture that is rolling up a number of smaller space companies.” These markets are so concentrated and difficult to penetrate that small innovative companies get bought up by either private equity firms or by established contractors like Northrup.

Repair Shops Deplatformed by Google Google has established a policy of just not allowing repair shops to advertise because they found some shops that were scam artists. Repair shops are upset. I don’t think there’s bad faith here from Google, but the search giant’s behavior is illustration that the corporation is just too big. They can’t figure out how to validate repair shops, so rather than collecting the money and facilitate the service, they just shut it all down because even a large amount of ad money to someone other than Google is a rounding error to a corporation with $150+ billion of annual revenue.

Brookfield and Blackstone Defaults: A Minsky Moment for Private Equity? Blackstone is defaulting on real estate loans for a hotel chain it owns. Brookfield, which is a far more shadowy operation that owns a bunch of malls, may be having a more serious cash crunch. According to the FT, Brookfield is “chasing small retailers to pay thousands of dollars in rent on outlets that were forced to close during the coronavirus pandemic, even as the Canadian investment group skips payments on its mortgages and asks lenders for forbearance.” I’m watching Brookfield.

UK Caves to Amazon: The British Competition and Markets Authority had initially opposed Amazon’s investment in food delivery service Deliveroo. But the CMA flipped, apparently scared by the pandemic. Meanwhile, Amazon bought self-driving technology company Zoox for $1.2 billion, after the company had been valued $3.4 billion a few years ago. It’s good to be a monopolist during a pandemic.

Thanks for reading. Send me tips, stories I’ve missed, or comment by clicking on the title of this newsletter. And if you liked this essay, you can sign up here for more issues of BIG, a newsletter on how to restore fair commerce, innovation and democracy. If you really liked it, read my book, Goliath: The 100-Year War Between Monopoly Power and Democracy.

cheers,

Matt Stoller

P.S. Here’s an excellent point from reader Adam.

Sorry for the impertinence but have you noticed that at the end of Frozen I, Elsa gives Kristoff some sort of monopoly over ice delivery, when she has the magical ability to make unlimited amounts of the stuff??? My toddler is making me watch the film yet again and I cannot believe how wacked out the governance of Arendelle is.