The Corner Newsletter: November 18, 2022
Welcome to The Corner. In this issue, we explore the ramifications of Big Tech’s deep penetration into the auto industry, where its products have now become embedded in nearly all cars manufactured by major manufacturers.
Is the Auto Industry Big Tech’s Next Takeover Target?
Luke Goldstein
Last week, Senator Elizabeth Warren sent a letter to the Federal Trade Commission calling on the agency to investigate Google, Apple, and Amazon's expansion into the auto industry. Each of the Big Tech firms have inked deals with auto companies to become a one-stop shop for all in-vehicle operations systems and info-tainment — from maps navigation and voice assistants to cloud storage and computing.
Sen. Warren’s letter focuses closely on how data collection and exclusive dealing arrangements by the tech companies might violate antitrust laws. This is an important start. But when the agencies do begin to dig into this issue, they may want to take a far broader view of the threat. By relying on Google and Apple to provide operating systems for their vehicles, and then handing over all their data to the tech companies, the carmakers appear to be laying the groundwork for a Big Tech takeover of their businesses, and of the auto industry as a whole.
Industry analysts have estimated that almost all new cars sold on the market this year have Google’s Android Auto, Apple’s CarPlay, or Amazon’s Alexa installed — and many will carry all three.
Google has made the deepest inroads into the industry. At its current pace, Google's Android Automotive Operating System will be running in 70% of all cars by the 2028. Last year, Google struck a partnership with Ford to become the provider of all of its in-car services. Amazon has signed a similar partnership with GM’s Buick line. In most cases, automakers find themselves forced into bundling agreements to buy a full suite of products and services offered by the platforms.
These deals represent a major retreat by automakers in their efforts to control their own technological destinies. Over the last decade, major automakers tried to develop their own operating systems, sometimes through cooperative ventures with competitors. One consortium of automakers that attempted to develop its own OS included Toyota, Hyundai, VW, and Mercedes-Benz. One main reason they did so was the fear that they would face the same fate as the once-powerful mobile phone makers Motorola, Nokia, and Ericsson. For years, these corporations dominated all aspects of cell phone manufacturing. But once Google and Apple persuaded them to adopt iOS and Android, these titans swiftly fell.
A more recent cautionary tale comes from Uber. Google was an initial investor in Uber and held sizable control of the firm. But early on, Uber executives came to view reliance on Google's mapping and navigation services as a threat to full control over their own business. The corporation pushed a top Google executive off their board, and invested almost $500 million in developing its own maps and navigation technology before admitting failure. By the time Uber launched its initial public offering in 2019, the firm's filings revealed that it paid $58 million to Google for maps and $631 million for advertising and marketing over the previous three-year period. What's more, Google was also bankrolling Uber's main ride-hailing competitor, Lyft. In certain respects, Uber found itself to be little more than a subsidiary in the pocket of Google.
The Uber saga should give carmakers pause before lurching further into partnerships with Big Tech. Unless these manufacturers manage to extricate themselves from tech's control, they may end up stripped of their most valuable data and more or less directly controlled by Google, Apple, and Amazon. Antitrust enforcers should review the tech companies emerging creep into the auto market before it's too late.
Open Markets Leads Efforts to Block or Restructure Elon Musk’s Takeover of Twitter
OMI reporter Luke Goldstein on Thursday published an article in the Washington Monthly highlighting the dangerous impact of Elon Musk’s ownership of both the Starlink broadband satellite system and the communications platform Twitter. He wrote: “If federal regulators had done their job, we would never have gotten to the point where one fickle titan has so much unfettered power. Since 2018, for example, the Federal Communications Commission has routinely approved Musk’s requests to build a constellation of satellites with little oversight … If that oversight weren’t lax enough, Musk has benefited from enormous federal subsidies.”
Also, last Thursday Open Markets issued a statement calling on law enforcers to block and/or closely regulate Musk’s takeover of Twitter. Open Markets wrote: “One way law enforcers can move swiftly to block Musk’s takeover of Twitter is to focus on his existing ownership of Starlink. As its use in Ukraine demonstrates, Starlink has become one the most important communications platforms in the world.”
Lessons from the 2022 Midterms: In a Divided Nation, Antimonopoly is Key to Rebuilding True Democracy.
Earlier this week, the Open Markets team examined the key lessons of the midterm elections. Our conclusion? Now’s the time to double down on using antimonopoly law and policy to rebuild our democracy. As we wrote in our statement: “Democracy won this midterm election. Americans voted against far-right threats to their voting rights and abortion rights, delivering the best mid term results for a Democratic president since John Kennedy. But let’s be honest. Given the stakes, this was still way too close a call. The time has come for the people who truly believe in liberal democracy to tell a new story of America, one that will empower us to build a strong and lasting majority.” Read the full statement here.
Open Markets Institute Files Amicus Brief Supporting McDonald’s Workers
Last week, Open Markets Institute, together with partners Towards Justice and the National Legal Advocacy Network, filed an amicus brief in support of McDonald’s workers in a Seventh Circuit case called Deslandes v. McDonald’s. McDonald’s workers are seeking damages from the “no-poach” provisions that McDonald’s included in franchise agreements until 2018. These contracts prohibited McDonald’s franchisees from hiring workers who had recently worked at another McDonald’s branch. In practice, this meant an experienced McDonald’s manager could not move to another McDonald’s even when offered higher wages and better benefits. Our brief argues that McDonald’s and its franchisees established and enforced a collusive system to restrict their employees’ labor market freedom, illegally robbing them of bargaining power.
In related news, the FTC joined the DOJ in backing McDonald’s laborers in an amicus brief filed last week in Deslandes v. McDonald’s. Arguing that antitrust laws protect competition for workers, the brief asks the appeals court to rule that a lower court applied the wrong test in a decision that dismissed workers’ allegations.
📝 WHAT WE'VE BEEN UP TO:
The Buffalo News printed an op-ed by Brian Callaci calling on New York senator Chuck Schumer to bring the American Innovation and Choice Online Act aimed at regulating Big Tech to the Senate floor before Congress adjourns by the end of the year.
Tribune-Review published an op-ed by OMI chief economist Brian Callaci decrying the University of Pittsburgh’s monopsony power as an employer of 92,000 workers, or 75% of all hospital workers in the city. Callaci writes, “With UPMC hiring so many different types of specialized workers, it has an outsized impact on multiple job markets. This unchecked power drives down wages, benefits and job quality for every person in the region who works for a paycheck.”
The Sling published OMI legal director Sandeep Vaheesan’s article on the false dichotomy between horizontal and vertical restraints within the statutory history of antitrust law and how this ill-conceived dichotomy continues to play out in the courts today.
Brian Callaci contributed an article to The Sling on the irresponsible consumer welfare standard, long used in antitrust law, and its relationship to labor markets in the wake of a judge’s decision to block the Penguin-Random House/Simon & Schuster merger.
The Washington Post quoted OMI executive director Barry Lynn on a judge’s decision to block the merger between Simon & Schuster and Penguin Random House after decades of lax antitrust enforcement in the U.S. Applauding the “huge reversal,” Lynn said of the victory, “It is a foundation on which we can build cases.”
OMI policy director Phillip Longman was quoted by TIME on the Biden administration’s reinvigoration of antitrust enforcement. “This underscores why we need effective antitrust policy,” he says, “to ensure that monopolies do not grow to such a scale that they dominate our government in its every corner.”
In a Q&A in the Harvard Business Review, OMI board member Rana Foroohar cited Barry Lynn’s book End of the Line as a vital source to consult when discussing supply chains. The article puts forth Lynn’s notion of redundancy and resiliency within supply chains. Foroohar said of the book, "He calls it the rule of four, which states that you should never have fewer than four suppliers for crucial goods. You simply don’t want, say, 98% of stabilizers for vitamin C coming from China or 92% of high-end semiconductor chips coming from Taiwan, which — other than Ukraine — is probably the most geopolitically contentious country in the world.”
The Southern Illinoisan quoted OMI food systems program manager Claire Kelloway on the potential impact of the Kroger-Albertson merger on food pricing. “Kroger will have more buying power to try and get lower prices from its suppliers,” she said. “But they don’t have to pass that on to consumers.”
LawStreet reported on the lawsuit brought against Oracle by Open Markets senior fellow Johnny Ryan, which alleges that the Oracle Advertising product collects personal data from unsuspecting Internet users.
OMI reporter Luke Goldstein spoke on the Attitude with Arnie Arnesen podcast to discuss Elon Musk’s use of Starlink to expand his dominion over U.S and international communications and the conflicts of interest posed by Musk’s ownership of Twitter.
🔊 ANTI-MONOPOLY RISING:
Last week, the Federal Trade Commission announced a clean break with 40 years of lax antitrust enforcement that began under the Reagan administration and was justified by academics and advocates adhering to the Chicago School. In a powerful statement, the FTC said it would use its power to police unfair methods of competition, identifying an array of practices that the FTC Act historically prohibited, including exclusive dealing, patent fraud, and tying. Open Markets Institute released a statement applauding FTC’s policy declaration. Read it here. (FTC)
The European Union Antitrust Commission last week began investigating the merger between Microsoft and Activision Blizzard over concerns that it may impede competition in the video game industry. “The point is to ensure that the gaming ecosystem remains vibrant to the benefit of users in a sector that is evolving at a fast pace,” wrote Margrethe Vestager, executive vice president in charge of competition policy. (The Washington Post)
The Department of Transportation took "historic enforcement actions" against six airlines, forcing them to pay back $600 million in fines to hundreds of thousands of people who are owed flight cancellation refunds. Airlines are required by the DOT to provide a refund to customers if their flights are canceled for any reason, even if the ticket was bought as nonrefundable. (USA Today)
The antitrust battle between Epic Games and Apple kicked off this week in an appeal that will determine Apple’s future in the app market and its ability to set its own rules around payments and commissions. (TechCrunch)
📈 VITAL STAT:
$392 Million
The amount Google agreed to in a record privacy settlement with a 40-state coalition of attorneys general for misleading users into thinking they had turned off location tracking although the company continued to collect that information. (New York Times)
📚 WHAT WE'RE READING:
“Like, Comment, Subscribe” (Penguin Random House, Mark Bergen). The book narrates how YouTube laid the foundations for today's attention economy, helping to extend the power of its parent company Google across the Internet, entrenching the company into everyone’s daily lives.
You can find the full job listings here.
🔎 TIPS? COMMENTS? SUGGESTIONS?
We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue.