Rising corporate power prompts congressional scrutiny
The power of corporations is on the rise, and it is raising concerns in Congress. Competition is declining in the U.S. and other advanced countries, according to an April 2019 report by the International Monetary Fund. The extensive IMF report analyzed data from “nearly 1 million companies” from numerous market economies, including the U.S., “since the early 2000s.”
Summarizing the report, the IMF blog “How to Keep Corporate Power in Check” notes that “rising corporate market power has had a fairly limited negative economic impact so far. But, if left unchecked, it could take a bigger toll on growth and people’s incomes in the future. Policymakers need different policies to keep market competition strong.”
Congress seems to be responding to the IMF’s call to action, as politicians from both sides of the aisle have called for either breaking up Big Tech firms such as Facebook or restricting how they operate. Last week, for example, Democratic Senators Mark Warner (Va.) and Richard Blumenthal (Conn.), along with Republican Sen. Josh Hawley (Mo.), introduced the Access Act, which would require Big Tech social media platforms such as Facebook to incorporate portability, interoperability and “delegatability.”
Users/consumers would benefit as they could move (portability) their postings and other stuff, such as pictures, from Facebook or other social media platforms to competitors’ platforms. Users would also benefit by having more control over the privacy of their stuff (delegatability). Potential competitors of Facebook would also benefit. According to Sen. Warner, interoperability would “break down the anti-competitive barriers that companies put up to limit their competitors from interacting with their platforms.”
Another example of non-partisan politics gone wild against Big Tech was Texas Republican Sen. Ted Cruz’s March 2019 retweet of Massachusetts Democratic Sen. Elizabeth Warren’s tweet about social media and free speech. Cruz said, “first time I’ve ever retweeted @ewarren But she’s right — Big Tech has way too much power to silence Free Speech. They shouldn’t be censoring Warren, or anybody else. A serious threat to our democracy.”
Facebook under fire
The rise in corporate market power extends beyond Big Tech companies. Other industries where corporate market power has been on the rise include airlines, pharmaceutics and retail trade (Amazon and the big-box retailers). Facebook has been under the most fire lately, though.
Just last week, Mark Zuckerberg, co-founder and CEO of Facebook, was called to testify before the House Financial Services Committee. The questions posed to him ranged from the serious to the simple-minded. Several serious concerns were addressed including: (1) election meddling by foreign countries, (2) the payment system (Libra) being developed by a consortium including Facebook and the possible location of Libra in Switzerland, (3) the monitoring of content posted on Facebook, (4) cyber security, (5) whether the U.S. has lost its lead in technology, and (6) the pay and benefits of Facebook’s employees, among other concerns.
Of course, a bit of grandstanding was done by a few of the committee members. Congresswoman Katie Porter, for example, simple-mindedly asked Zuckerberg if he would be “willing to spend an hour a day, for the next year” working as a content monitor for Facebook. Zuckerberg responded, “I’m not sure it would best serve our community for me to spend that much time” (as a content monitor). In addition, Porter asked Zuckerberg to respond to her question with either “yes” or “no.” Porter’s concerns for the pay and benefits of Facebook’s employees is admirable, but asking the CEO of a $500 billion corporation that employs about 40,000 workers to spend an hour a day on a low-level job is a frivolous way to address a serious issue.
Besides politicians, Chris Hughes, co-founder of Facebook, who no longer works for Facebook, has called for the breakup of Facebook. In a lengthy opinion piece in the New York Times, Hughes called out Facebook for its “sloppy privacy practices that dropped tens of millions of users’ data into a political consulting firm’s lap; the slow response to Russian agents, violent rhetoric and fake news; and the unbounded drive to capture ever more of our time and attention.”
Hughes provides a short history of Facebook and makes a compelling case for how consumers as well as potential competitors would benefit from a breakup of Facebook. Consumers would be the biggest winners if they had more choices such as “one network that offered higher privacy standards, (or) another that cost a fee to join but had little advertising [or] another that would allow users to customize and tweak their feeds as they saw fit.” Hughes contends Facebook has stifled potential competitors as “despite an extended economic expansion, increasing interest in high-tech startups, an explosion of venture capital and growing public distaste for Facebook, no major social networking company has been founded since the fall of 2011.”
Antitrust through the ages
Efforts to curb unbridled corporate power date back to 1890, when Congress passed the Sherman Antitrust Act. The August 2019 CNBC video “The evolution of US antitrust law” notes, “US antitrust law dates back to 1890, but it’s been largely out of the spotlight for 20 years. Now, with antitrust concerns swirling around Big Tech companies and major telecommunications mergers, it’s back.”
Likewise, the December 2017 Harvard Business Review article
The Rise, Fall, and Rebirth of the U.S. Antitrust Movement,” by Maurice Stucke and Ariel Ezrachi, notes how U.S. antitrust policy and enforcement has “waxed and waned” ever since 1900. Their article cites four phases of the on-again, off-again nature of antitrust law enforcement.
According to their article:
¯ 1900 to 1920 — After initial administrative neglect and judicial hostility, this era ushered in the promise of antitrust with the breakup of Standard Oil and the enactment of the Clayton and Federal Trade Commission Acts to prevent the formation of trusts and monopolies.
¯ 1920s to 1930s — Antitrust activity was rare since (presidential) administrations generally preferred industry-government cooperation (and, during the early New Deal, economic planning and industry codes of fair competition) over robust antitrust enforcement.
¯ 1940s to late 1970s — Antitrust was seen as the key to preserving economic and political freedom. At the time, competition was seen largely as an antidote to fascism, and antitrust (was seen) as the enabler of that competition.
¯ Late 1970s to mid 2010s — Beginning with the Reagan administration, antitrust actions contracted as political, social and moral values were sacrificed to the belief that free markets were all that were needed to prevent abuses of concentrated corporate power.
Stucke and Ezachi call for a “rebirth” of antitrust actions. They noted, “by the 1960s, there were many antitrust prosecutions (by both Democratic and Republican administrations), but without any antitrust movement. Fifty years later, the U.S. has neither an antitrust movement nor much enforcement. That needs to change.”
To protect consumers and foster economic growth and innovation, Congress, the president, and government agencies need to carefully pursue measured regulatory and antitrust actions. The challenge is to keep hold of the reins on government while reining in the power of big corporations. Scary thoughts. Happy Halloween!