Washington Post columnist Eduardo Porter, in his recent piece, “Corporations are not destroying America,” seems to be taking cues on economic policy from his colleague Catherine Rampell. To Porter’s credit, he, contra Rampell, seems to actually read the materials he’s writing about. Yet the entire piece is emblematic of columns favored by the Post: ones that casually brush aside progressive policy ideas by dispatching with a straw man and infantilizing anyone to their left rather than engaging head on. 

Porter takes issue with the “idea that American markets have become monopolized across the board, with dominant companies raising prices at will,” which he calls “ludicrous.” But that’s really not the point that progressives—or the Harris campaign, who Porter’s “memo” is addressed to—have been arguing. Could you find someone who thinks that every market in the country is overly concentrated with greedy fatcats leeching off the public? Absolutely. But it’s not the argument that progressives in the policy community and Harris have articulated. 

The actual argument is not that every industry is overly concentrated, but that a number of key industries are, which enables opportunistic price gouging to ripple through key sectors of the economy and cause acute harms because of how critical those industries are. These are industries like meatpacking, airlines, credit-card issuing and processing, railroads, Internet search, ocean shipping, and baby formula. Porter can cite all the studies he wants that say overall concentration levels are not soaring or concerningly high and still not get to the substance of the argument. That said, there are numerous methodological and theoretical questions about measuring market concentration. But that’s hardly necessary here; the examples above are so obviously oligopolistic that there’s really no need for formal measurement. 

Similarly, Porter simply misrepresents what opponents of corporate power claim big firms with pricing power are doing. He frames it as a matter of “dominant companies raising prices at will,” but the throughline in nearly all versions of progressives’ arguments is about companies leveraging particular disruptions, like inflation, as a smokescreen to exploit customers  by raising prices in excess of the increased costs they’re incurring. Harris’s grocery price-gouging restriction has been much maligned by Rampell and other neoliberal pundits who usually either paper over that it only applies in emergencies (and only in the food industry) or elide it with a slippery slope “but what is an emergency?” distraction, preferring to hyper obsess over fringe cases when most of the time it will be pretty clear if we’re in an emergency; Harris’s plan specifically is inspired by the real-world exploitation of large groceries, as found by the FTC and revealed in the Kroger-Albertsons merger trial, during the last disaster. 

Porter’s column also pointedly veers into an argument that narratives about “the monopolization of America often rests on evidence about corporate concentration at the national level. But the market relevant to consumers is, in many cases, local.” And that’s true to an extent, but Porter’s own example of hardware stores (directly following this) is a good demonstration of why this elides the harms to which progressives are trying to draw attention. Porter discusses “mom and pop” hardware stores vis-à-vis national chains Home Depot and Lowe’s (apparently he’s not a fan of ACE). But there are no mom-and-pop airlines or baby formula manufacturers or oil firms. 

As far as the corporate big tech “Godzillas,” as Porter terms them, apparently they aren’t “squashing competition to reduce wages, keeping new rivals from entering their markets, and sticking it to consumers.” (Let’s ignore for a moment the very serious allegations that Uber and Amazon have suppressed the wages of their drivers. Or the recent verdict by a jury in Epic v. Google that Google overcharged app developers for transacting on the Play Store. Or the recent finding of a judge in U.S. v. Google that Google monopolized the search industry and the associated market for text advertising.) Rather, Big Tech’s fearsome power has come, per Porter, “first and foremost from deploying new technology and offering better value to customers.” 

Presumably then, Facebook didn’t go buy out a bunch of other social media and networking websites and softwares. But it did. It bought ConnectU in June 2008, FriendFeed in August 2009, sharegrove in May 2010, Hot Potato in August 2010, Beluga in March 2011, Friend.ly in October 2011, and Instagram in April of 2012. Definitely not buying out competitors to sit on a huge pile of market share, just good old innovation! 

And Amazon definitely got to where it is by besting its rivals through good old market competition! Except when it bought dozens of other online retailers and web service companies. Oh and when it artificially skewed its marketplace to disadvantage third party retailers in favor of Amazon’s own products, many of which were reproductions of other companies’ products. 

Porter also seems to have overlooked the fact that Google acquired its way to power in the ad stack, gobbling up, among others, DoubleClick, Invite Media, and AdMeld.

The entire piece is vapid left-punching; Porter even actively agrees with the substance of the critiques against monopolists. For instance, this paragraph:

For sure, corporate consolidation has reduced competition in some markets. It was probably a bad idea to allow Whirlpool to take over Maytag in 2006, or to allow Miller to merge with Coors two years later. Hospital mergers deserve a much more skeptical view than they have received in the past. Let’s be careful about drug manufacturers buying out competitors for the purpose of killing a potential competing drug.

Yes, there is discourse about the American economy becoming more consolidated writ large, but the core of the debate is about intra-industry dynamics where market power creates unique opportunities for profit at the expense of consumers. Like when pharmaceutical companies buy out a firm working on a competing treatment. In sum, we have yet another piece to file away in the classic genre of “WaPo doesn’t have anything substantive to add, but feels the need to put down uppity leftists.” (It’s only gotten worse after new data revisions showed an even sharper uptick in corporate profits than earlier data had indicated.)

The last thought Porter offers is that “taking a wrecking ball to big business in the service of a rickety theory of harm will do everyday Americans no good.” What is the wrecking ball? Who is proposing to destroy major corporations? 

The entire case laid out in this “memo” is that Harris, at progressives’ behest, is calling for leveling all large corporations. But Porter would do well to remember that the story of Rampell’s he links to in order to outline the consequences of this “wrecking ball” literally lies about what Harris’s pricing gouging law narrowly targeted at suppliers in the food industry (as opposed to all large companies) would look like. There are no “price controls” in the proposal, contrary to Rampell’s suggestion; food suppliers could justify price hikes during the next crisis so long as they were cost-justified. Rampell says Harris’s plan is likely to be modeled after a bill from Senator Warren (D-MA) that would give the FTC power to punish firms for price gouging. 

As a justification for why such a law would be disastrous, Rampell says that “the legislation would ban companies from offering lower prices to a big customer such as Costco than to Joe’s Corner Store, which means quantity discounts are in trouble.” No, it doesn’t. There is absolutely no prohibition against quantity discounts. Rampell is, at best, warping this line stating that one standard that would give a firm “unfair leverage,” which would make it presumptively in violation of the statute, is when it “discriminates between otherwise equal trading partners in the same market by applying differential prices or conditions.”

If two firms are buying vastly different quantities of something, they are not “otherwise equal trading partners” of that supplier. What that line actually means is that if Joe’s Corner Store and Bob’s Corner Store both order identical shipments of widgets but Widgets Incorporated charges a much higher rate to Joe than Bob, then that is unfair pricing.

This is not the first time that Rampell has grossly misrepresented what Warren’s legislation says. Back in March, she said that it, and a similar bill from Senator Casey (D-PA), would be “[f]orbidding companies from changing the prices and sizes of everyday products without government say-so.” Neither bill said anything remotely like that. The fact of the matter is that Catherine Rampell is so committed to lashing out at the left that she either doesn’t bother to read the things she’s complaining about or is happy to just outright lie. Whatever the case may be, Porter should look elsewhere for insights about the economy.

Dylan Gyauch-Lewis is a Senior Researcher at the Revolving Door Project. She leads RDP’s Economic Media Project.

The FTC is seeking a preliminary injunction to prevent two of the country’s largest supermarket chains, Kroger and Albertsons, from merging. The case was heard in the U.S. District Court for the District of Oregon, where U.S. District Judge Adrienne Nelson, a former Oregon Supreme Court justice, will soon render a verdict.

The merger would make Kroger-Albertsons the second largest retail store after Walmart. The FTC alleges that, in hundreds of local grocery and labor markets, the merger increases Kroger’s market share to a degree sufficient to activate the structural presumption against the merger. Kroger, unsurprisingly, has advanced various standard arguments in favor of mergers: that it is necessary to compete with even larger retailers (in this case, Walmart), will result in lower prices for consumers, and that any anticompetitive harm would be offset by the divestiture plan built into the merger.

As an initial matter, it is unclear whether the central mission of the Sherman Act—to promote healthy competition—is compatible with Kroger’s argument that the merger is necessary to compete with Walmart. While it is undoubtedly true that Walmart is a corporate behemoth whose very existence is an existential threat to competition, it hardly follows that allowing a merger that creates a second behemoth is the best way to reign in the first. Indeed, it is hard to imagine that the drafters of the Sherman Act could even comprehend a corporation as large as Walmart in the first place—and even if they could, it is hard to imagine that they would accept a second, equally large corporation as a legitimate solution.

Kroger’s Defenses Are Unavailing

Putting this aside for a moment though, it is worth taking a closer look at some of the arguments Kroger-Albertsons have advanced to support the merger. First, Kroger has tried to portray Albertsons as a failing firm. Yet testimony has established that Albertsons is not a failing or flailing firm—and in fact, is far from it. Albertsons CEO Vivek Sankaran, testifying in front of Congress in 2022, stated that the firm is in “excellent financial condition” with “more than sufficient resources to continue” with their current plan. Albertsons has admitted that, if the merger does not go through, they have no plans to close any stores. In FY 2023 securities filings, Albertsons told investors that it was “pleased” with their reported $1.3 billion net income. Albertsons COO Susan Morris has also testified that the company is still on track to achieve its savings goals whether or not the merger goes through. What then explains Albertsons leadership’s eagerness to merge? The answer is hardly surprising—their executives have testified that their private equity backers stand to gain tens of millions of dollars in parachute payments should the merger be approved.

Second, Kroger argues that the merger would not produce anticompetitive effects due to the divestiture plan built into the acquisition. The plan is to sell hundreds of stores in overlapping grocery markets to C&S, a wholesale grocer, which, according to Kroger, would mitigate any anticompetitive harm. As the FTC has repeatedly pointed out throughout the trial, there are more than a few reasons to be suspicious of this argument.

The Court should be skeptical of this remedy, as every party in this transaction has a failing record of making divestiture work. For example, in Albertsons’ 2015 acquisition of Safeway, 146 stores were divested to Haggen. Haggen filed bankruptcy within months, and shortly thereafter, Albertsons reacquired 54 of the stores it had previously sold. This is not the only reason for skepticism. As was revealed at trial, Alona Florenz (C&S Senior VP of corporate development and financial planning), writing to a Bain consultant, stated “just be careful with FTC. We want to say we can run them.” It doesn’t take a genius to read the subtext—C&S wants to say that they can run the stores so that, after the merger is approved, they can turn around and gut them for profit.

This interpretation is further supported by the economic realities inherent in the divestiture plan. C&S is primarily a wholesale grocer, meaning that its primary mode of business is selling in bulk to grocers, not operating stores that sell groceries to consumers. It is extremely unlikely that C&S has the infrastructure or know-how to successfully operate hundreds of grocery stores across the country that are acquired simultaneously. Further, it was revealed during discovery that C&S officials themselves believe that they are buying Kroger’s worst stores. Not only have they been caught saying the quiet part out loud, the price that C&S would pay is itself revealing: the deal is priced close to the value of the real estate alone, suggesting that C&S could easily sell off the stores for close to what it paid.

You may be thinking: even if C&S doesn’t stand to lose much on the deal, what’s in it for them? Fortunately, one need not look far for an answer. When Price Chopper and Tops, (two grocery stores) merged, C&S acquired certain stores as part of the divestiture plan. As they have done here, C&S was happy to tell the FTC that they planned to use the newly acquired stores to robustly compete with the newly merged firm. But what actually happened? C&S operated some of the stores at a loss while using others as leverage to increase profits in its wholesale business—its primary money-maker. They sold many of the recently acquired stores to their wholesale customers, who, in return, extended their lucrative contracts with C&S.

As further evidence of C&S’s true intentions, the acquisition price of the divested stores is essentially equal to the value of the real estate alone. And in a previous merger, after telling the Court that they would use stores acquired in a divestiture plan to compete with the merged firm, they turned around and sold enough stores to ensure that their wholesale profits, their primary source of revenue, would eclipse the losses from the self-proclaimed dud firms they acquired and retained. What possible reason would Judge Nelson have to believe that this would go any differently? And to top it off, even if the divestiture plan went exactly as Kroger and C&S say it would, it would fail to cure the anticompetitive harm in hundreds of local markets across the country.

Beware of Dynamic Pricing

Beyond the inadequacy of the divestiture plan, the FTC has raised other concerns that may be even more serious—especially for consumers. In 2018, Kroger began rolling out “digital price tags,” which allow the company to change retail prices in real time. Several lawmakers have expressed concern that these digital price tags could be used to facilitate dynamic pricing, whereby the price charged depends on the identity of the consumer making the purchase. The digital price tags come equipped with cameras, which use the vast amounts of data to which Kroger has access to change the price of an item depending on who the camera sees looking at the shelf. If the merger were to go through, Kroger would acquire all Albertsons’ data about their consumers, which would greatly increase the efficiency with which Kroger can price discriminate.

Kroger, of course, has steadfastly denied that the new technology will be used to raise prices. These denials are a staple of merger cases—firms poised to merge have consistently argued that they won’t raise prices, and far too often, courts have been content to take them at their word. Here, should the merger go through, Kroger has promised to invest $1 billion to keep prices low. Government attorneys correctly pointed out that, not only are these promises completely unenforceable, but history has shown that they are utterly meaningless, as post-merger firms have consistently broken these promises without consequence. Corporations such as Kroger have a fiduciary duty to their shareholders, not to their customers. If they see opportunities to raise profits, this duty requires them to pursue it—consumers be damned. Beyond history, Kroger itself has proven to be untrustworthy—in the course of these proceedings, they were forced to admit that they had engaged in price gouging on consumer staples such as milk and eggs in the midst of the Covid-19 pandemic.

Worker Welfare Matters Too

Beyond hurting consumers, the merger also harms employees. Kroger and Albertsons currently employ around 710,000 people across about 5,000 stores nationwide. Currently, unions can bargain separately with Kroger and Albertsons, and thus have greater leverage to advocate for increased wages and other protections for their workers. Should the merger go through, unions will lose this critical leverage, and would again be subjected to the whims of Kroger’s leadership. Kroger’s attorney, the aptly named Matthew Wolf, told Judge Nelson that “[Kroger] will preserve the unions.” As with his promise that the merger would lead to lower prices, taking Mr. Wolf at his word would be no wiser than taking the word of an actual wolf who tells the farmer that he will diligently guard the hen house.

Judge Nelson should grant the FTC’s preliminary injunction blocking the merger between Kroger and Albertsons. Albertsons is a healthy firm whose presence in the market is essential to competition, and their desire to merge is motivated by the fact that their executives stand to make tens of millions of dollars should it be consummated. The divestiture plan, even if it plays out exactly as Kroger says it would, is inadequate to mitigate the anticompetitive harm that would result from the merger. C&S, the acquirer, has openly stated that it is taking on Kroger’s worst firms, has a strong economic incentive to pawn off the newly acquired firms to secure greater profits in its primary revenue source as a wholesaler, and has a known track record of doing exactly that. The acquisition, which would include all of Albertsons’ consumer data, would allow Kroger to exponentially increase the sophistication and efficiency of their dynamic pricing regime. And, after admitting to price gouging amidst a global pandemic, Kroger offers nothing more than its legally unenforceable word that it won’t use the immense increase in market share to raise prices or harm workers. This merger will harm competition, consumers, and workers. The Court should reject it.

Corey Lipton is in his final year of the JD/MPP program at the University of Michigan.

Just a few weeks shy of its one-year anniversary of the Federal Trade Commission’s landmark monopolization case against Amazon, the government and the world’s largest e-commerce marketplace await a crucial decision: Whether Judge John Chun will dismiss the case before it ever reaches trial. 

Amazon’s motion to dismiss the lawsuit has been sitting in front of Judge Chun since December. Since then, both sides have swapped legal paperwork arguing whether the FTC’s case, accusing Amazon of using its stranglehold over online retail to rip off shoppers and third party sellers, is fit to survive until its October 2026 trial date. 

Now, two recent court decisions may have made the choice clearer for Judge Chun. Those decisions—one by a D.C. appeals court and another by Fourth Circuit Court of Appeals—appear to strengthen the FTC’s claims that its lawsuit accurately details Amazon’s dominance, and that its description of Amazon’s alleged monopoly abuses are more than enough to survive Amazon’s dismissal request. 

To wit: The FTC sued Amazon last September, accusing the company of using a whole suite of tactics to keep rival online marketplaces from attracting shoppers and third-party sellers to their platforms. The 172-page complaint details, among other things, how Amazon strong-arms small sellers into paying outlandish fees in order to succeed on its monopoly e-commerce platform—fees that then force those sellers to raise the price of their products. Amazon then imposes a “fair pricing policy” to punish sellers who seek to steer shoppers to a competing marketplace by charging a lower price for the same products on the rival store, the lawsuit claims. It’s a complex complaint, but it spells out what the FTC calls a “course of conduct” plot—a series of actions that, taken together, shuts out competition and unfairly protects Amazon’s monopoly. 

Amazon’s motion to dismiss attempts to cast Amazon as both a champion of consumers and just another retailer that has to compete with everyone from Walmart to the local brick-and-mortar shops down the street. Amazon says that, even if what the FTC says is true, the company’s actions are actually procompetitive; it’s not forcing small sellers to raise their prices across the web, it says, it’s just ensuring Amazon has the lowest price, which helps shoppers. 

Amazon’s arguments set up Judge Chun’s decision: Is Amazon an online retail monopolist whose actions suffocate rival online stores and hike up prices everywhere? Or does Amazon compete against everyone and anyone who sells stuff to people, and is doing all it can to keep prices on its marketplace low for shoppers? 

The two recent court rulings may help answer those questions. The first ruling, from the D.C. appeals court, overturned a lower court decision to dismiss the District’s monopoly lawsuit against Amazon that mirrors some of the key allegations in the FTC’s complaint. 

The D.C. appeals court’s decision is clarifying. The District’s definition of the industry Amazon operates in—namely, “the U.S. retail e-commerce market”—is plausibly the right one, rather than the much larger universe of all retail, brick-and-mortar included, that Amazon claimed to operate in, the court found. That tracks with how other federal courts have defined Amazon’s market, and, the D.C. appeals court says, the lawsuit “offers a plausible basis for its contention that Amazon possesses market power in online product submarkets and in the broader online marketplace.”

The appeals court also pushed aside Amazon’s claim that the abuses the District accused Amazon of— forcing Amazon sellers to raise their prices in order to afford its fees, then restricting sellers from offering lower prices elsewhere—were actually pro-consumer and intended to keep prices low. The appeals court said the District’s description of the real-world effects of Amazon’s fair pricing policy—raising prices for consumers across the web—were enough to overcome Amazon’s motion to dismiss the case. That case will now go back to the local D.C. trial court, and the FTC flagged the decision for Judge Chun. 

Meanwhile, the Fourth Circuit court of appeals took up a different issue: Whether “course-of-conduct” monopoly claims could survive a motion to dismiss, even if each individual action that makes up a course-of-conduct claim wouldn’t violate the law alone. 

In the FTC’s lawsuit, the agency says each Amazon action that makes up the alleged “course of conduct” is illegal independently. Still, it’s the course-of-conduct allegations that are the central theme of the government’s lawsuit. Amazon’s bad actions are, as the FTC says, “greater than the sum of its parts” in their anticompetitive effect. 

While course-of-conduct monopoly claims were already accepted under the law, the Fourth Circuit’s decision makes it abundantly clear that a monopolist’s conduct can break the law when viewed together and holistically, even if a monopolist’s individual actions aren’t obviously anticompetitive on their own. 

In that case, upstart energy company NTE sued incumbent utility monopoly Duke Energy, claiming that a series of actions Duke took to maintain its electricity contract with Fayetteville, North Carolina collectively stopped NTE from competing for the city’s business even though it could sell Fayetteville electricity for far cheaper than what Duke could offer. 

We’ll skip the details of that lawsuit here, other than to say NTE alleged, more or less, what the FTC is accusing Amazon of doing: Using an interrelated series of actions that, when viewed together, amounted to a monopolist using its power to ensure rivals can’t get a foothold in the market needed to compete—even when, in the Duke Energy case, the upstart rival is more efficient than the monopoly incumbent. 

A district court had dismissed the case, looking at each accusation against Duke alone and in a kind of legal silo, detached from every other allegation. When it did, it found that the individual allegations against Duke failed for the same reasons a lot of monopoly lawsuits fail: Because a mountain of pro-monopoly case law over the past decades means lots of fairly obviously bad behavior escapes prosecution. 

In its opinion, the Fourth Circuit Court said viewing each allegation individually was a mistake; not only are course-of-conduct monopoly claims allowed, they are often necessary to understand if and when a monopolist is abusing its power and foreclosing competition. This is far from new; the Supreme Court since at least 1913 showed that an antitrust conspiracy should not “be judged by dismembering it and viewing its separate parts, but only by looking at it as a whole.” The Court extended that legal framework to monopolization in the 1960s, and other circuit courts have upheld that standard as recently as the 2000s. 

But common law around monopoly claims has become far more restrictive over the past four decades or so, and at least one circuit court less than a decade ago fully ignored the Supreme Court’s demand that judges take a holistic view of anticompetitive conduct. So a reminder to Judge Chun is helpful, and that’s what the Fourth Circuit delivered. When a plaintiff alleges a complex, exclusionary monopoly scheme, looking at each piece of the anticompetitive puzzle individually and applying a specific test to each “would prove too rigid,” the court ruled.

The FTC flagged the Fourth Circuit’s decision to Judge Chun, and Amazon has lodged its rebuttal. Along with the D.C. appeals court decision, they’re just two more pieces of law for Judge Chun to ponder when considering whether the FTC’s lawsuit should survive. Technically, all the commission has to do is present a set of facts that, if proven true, could plausibly violate the antitrust laws. It’s a relatively low bar, but Judge Chun will ultimately decide the lawsuit’s fate. That decision could come as soon as the end of September. 

Ron Knox is a senior researcher and policy advocate at the Institute for Local Self-Reliance. His writing has appeared in The Atlantic, The Washington Post, Wired, The Nation and elsewhere. 

Professor Tim Wu, former White House advisor on antitrust, offered remedies following Judge Mehta’s decision in the U.S. Google Search case. He identified both Google’s revenue-sharing agreements that exclude competitors and its access to certain “choke points” as a basis for remedies. A divestment order of Chrome and the Android operating system was proposed, as well as an access remedy to Google’s browser, data and A.I. technologies.

It is hard to see how the transfer of a browser monopoly into others’ hands, however, would facilitate access and use of it. That could repeat the mistake of the AT&T 1984 divestiture order that transferred local access monopolies into separate ownership without creating any competitive constraint or pressure on those local business to innovate and compete. In a follow up article, Julia Angwin pointed out the fundamental problem being the Google search results pages, facing no competitive pressure, are now “a pulsing ad cluttered endless scroll,” which masks relevant results. Google’s ad-fuelled profit maximisation leads it to promote that which is remunerative over that which is more relevant.   

Also, there remains a major issue with any access order: Will it be able to withstand future technology changes used by Google to circumvent their aims? A crucial issue in writing an order to a monopoly tech company to provide access to XYZ or supply XYZ interface, and the day after the order being written a technical change (or simply version control) making the order technically outdated and pointless.

Any remedy first needs to stop the infringement, prevent its reoccurrence and restore competition. So, the core problem now is to restore competition to the Google search monopoly. This means finding a competing consumer-facing search product that is ad-funded so that “free at the point of use” search can provide competitive pressure on Google’s own free at the point of use product. A possible optionis canvassed below.

The two-sided nature of the search market means any effective solution needs to create consumer-facing competition with Google Search pages and business-facing competition for Google’s Search Text Advertising offering. A starting point for remedies is then prohibiting the mechanisms used by Google that restricted competition from rivals. This means prohibiting the revenue-sharing and default-setting deals with Apple and other technology and telecoms companies that have acted as a moat to protect Google’s Search “castle.” However, restoring effective competition going forward also means enabling the use of data inputs and alternative access points (such as the browser) so competing search ads face competitive price pressure.

The proposal below is inspired by the BT Openreach settlement (and prior BT Consent decree). BT proposed an access remedy, which applied to the local loop. Non-discriminatory access to BT’s local loop (Openreach) business was supplied to third parties on the same terms as it was supplied to downstream parts of BT. The obligation applied to the BT Group of companies and its internal divisions, and corporate structure was subject to non-discrimination both on supply and use. This improved upon the AT&T divestiture remedy, which was in operation in the United States at the time. Avoiding the risk of technology change also means taking account of an often-overlooked Consent Decree, which was agreed among BT/MCI/Concert and the DOJ in 1994. That decree broke new ground as it imposed a non-discriminatory “use” obligation on the recipient of services supplied by the monopoly supplier. A similar obligation on non-discriminatory use of inputs could apply to the use by Google of inputs and would apply overtime irrespective of the technical means of supply. 

Scale of Google’s data inputs and sunk investments costs

Google now has unrivalled scale in data acquired from billions of users millions of times per day when they interact with Google’s many products. That data is obtained from its ownership of Chrome, the dominant web browser, providing Google with unrivalled browser history data. It also uses other interoperable code (such as that stored in cookies) to check which websites browsers have visited and has an unparalleled understanding of consumers interests and purchasing behavior. Per Judge Mehta’s Memorandum Opinion in USA v Google (Search), data from billions of search histories provides it with “uniquely strong signals” of intent to purchase data that is combined with all data from all other interactions with all of Google’s many products (see trial exhibit of Google presentation: Google is magical). Its knowledge from all data inputs is combined to provide it with high quality information for advertising. The Memorandum Opinion recognizes that “more users mean more advertisers and more advertisers mean more revenues,” and “more users on a GSE means more queries, which in turn means more ad auctions and more ad revenue.” These positive feedback loops suggest increasing returns to scale and returns to the scope of a range of products offered over the same platform using artificial intelligence as part of its systems. It has built one of the most recognized and valuable brands in the world.

The costs facing any competitor seeking to make an entirely new search engine from scratch are now enormous. This is referenced in evidence as the “Herculean problem.” Reference is made to the many billions of dollars that would be needed by Apple to build a new search engine of its own.

Any restoration of competition will now have to overcome these very considerable advantages and sunk costs, while at the same time competing with Google as the established, and well-knownsupplier of the best search engine in the world. That point about the costs being “sunk” for Google but not new entrants will be returned to below.  

The Memorandum Opinion refers to the uniqueness of Google’s Search and the search access choke points many times. Access to these unique facilities must now be on the cards as a remedy.

Third party access to data inputs, match keys and access points to support effective competition in “free at the point of use search results businesses”

Google uses data inputs to identify the user’s “purchasing intent” that inform its ads machine. Data inputs are combined from multiple consumer interactions with others digital content and has enabled Google to charge high prices for its search text ads. Google’s Search engine consists of at least three key components: (1) an index of media owner content cataloged by a web crawler, (2) a “relevance engine” to match consumer input to this catalog, (3) ranking and monetization of the search engine results. At a technical level, the online display advertising system relies on match keys that enable the matching of demand for ad inventory to match a supplier of ad inventory. Third parties need access to these data inputs currently uniquely available to Google, to derive user’s purchasing intent. Competing rivals could then employ the input data and match keys to match inventory supporting display advertising and competing search page results businesses using Google’s relevance engine.Use of such inputs would help drive down prices for ads in competing search businesses. 

Access points for search businesses include the Chrome browser. Here, the idea that the browser could be quarantined, as suggested by Professor Wu, could be picked up. The browser would also need to be monitored so that it provides a neutral gateway to the web. It is a choke point that can be enhanced with additional functionality – a wallet in the browser substitutes for decentralized wallets that could otherwise be deployed by competing websites. As was the case with the 1956 AT&T consent decree, AT&T was prevented from competing in areas that were open to competition – so too Google could be prevented from adding functionality to its gateway that could be provided by others elsewhere on the web. The browser then loses its position as gateway controller and becomes a neutral window on the web. 

Google is owned by Alphabet so there is an opportunity to apply an obligation to Alphabet not to discriminate in the supply of its relevance engine as between Google and third parties rather than its Search system as a whole. That would enable competition between pages and page presentations offered by different businesses. It would overcome the enormous costs and “Herculean” task of creating a new search engine from scratch. New players might then be tempted to enter that business and resell Alphabet’s relevance engine results combined with its own ads or ads from third parties, which would increase price pressure on search ads.

Currently, 80 percent of the SERP is composed of advertising of one sort or another. Enabling competition in the provision of search results could avoid the morass of current search pages and encourage both quality and price competition. This could benefit both consumers and advertisers.Alternative search businesses could be expected to innovate in the way that they provide and present ads; higher proportions of the results pages could be composed of relevant results and fewer ads.  If competing businesses had access to Alphabet’s relevance engine and data inputs they could use them for their own advertising, introducing price pressure on Google’s search text ads. New entrants could be expected to finance their businesses quickly given that they would be reselling a proven search product.

Availability of distribution deals with Google’s revenue sharing partners

The current agreements with Apple, OEMs and telecoms carriers operate as exclusive agreements. They contain contractual restrictions in the form of default settings and revenue sharing payments,which incentivize the parties to promote Google Search Ads. The scale of the payments operates as a disincentive and prevents the parties from offering products competing with Google in search. 

Removal of only the contractual default setting is likely to be insufficient to end the anticompetitive effect of the agreements and would go no way to restoring competition. The sharing of revenue from Google’s Search advertising must end if competition between new search advertising players is to be established.

Ending the current distribution deals on a revenue-sharing basis creates a problem of what is an acceptable replacement deal. If Google products are to compete on their merits no restriction at all should be imposed on distributors from providing competing alternatives. However, Google’s distributors will still need to be paid for distribution and the volumes and scale of payments is so large that current recipients are still likely to only sell Google products, even if the restrictive provisions are removed. They are unlikely to take the risk of backing a competitor search product if some form of competition in search is not restored. If access to Alphabet’s relevance engine is mandated as described above that would also help to restore competition at the distributor level. 

A proposed access remedy needs to underpin the restoration of competition 

A remedy order applicable to Alphabet could provide access to an independent and quarantined browser (access point) and search relevance engine. That would not restore competition alone. Overcoming the considerable barrier to entry of a new entrant seeking to build its own relevance engine and attracting new users while competing with Google is very hard. It is currently prohibitive,even for Apple.

When considering the issue further, it is important to appreciate that: 

• The relevance engine and index are currently both organizationally and technically separate from the ads and ad network organization. 

• Search is currently optimized by people working in a search business. There are separate groups of people that work on products and separate organizations for advertising. 

• Alphabet’s products (news, maps, images, shopping, etc.) are interweaved between relevant search results when the page is presented to end users. An effective remedy could build on these existing organizational and business boundaries. 

If third party competitors could access the relevance engine and its index on non-discriminatory terms, they may be able to create effective competition between new “Search Engine Results” businesses. Those businesses would access the substantial sunk investments already made in optimizing search relevant to users’ needs and overcome the substantial “Google” brand value. As noted above, that investment is sunk for Google but represents a considerable barrier to entry for others. Since much of that value has been obtained illegally, there would be a case for stripping Alphabet of that value. Perhaps a better solution here would be to enable the use of the brand to support entry. New competitors would be known to be using Google’s world-renowned relevance engine. The established reputation for quality would help entry. As this is central to restoring competition compensation for use is then a non-issue.

Moreover, Google currently offers access to its relevance engine to companies (like Duck Duck Go) that would resell them, so cannot easily suggest that the above proposal is unworkable.

How the proposal addresses technology changes over time

The law has been broken through the denial of access to data inputs and choke points, and thusdeprived rivals of scale. No other players have sufficient scale to replicate Google’s position. Access to the same data that is used in Google Ads would be a starting point for competitors to create competing search ads from. The solution is access to the IDs and the data inputs that Alphabet uses to fund its search business. Obligations can be crafted to access data feeds for non-discriminatory use of whatever Google uses.

To be clear, there are two critical data feeds that will be needed for competitors to function: (1) Access to the Google relevance engine. This would enable competitors to offer a highly relevant search product. Results would be from a proven and established, world renowned and high-quality source; and (2) Access to the data inputs and advertising IDs and match key data, which are used in Google search ads to identify purchasing intent that can be matched with available advertising inventory.

As a matter of U.S. law and practicality, a non-discrimination obligation on usage can be contained in an order addressed to Google as the user of a search engine or data source owned by Alphabet. As a usage–based non-discrimination obligation applicable to the user of assets owned by the head company, Alphabet, it is materially different from a requirement to supply. There is less of a risk of it offending the case law that defers to businesses deciding whether and with whom they contract – it is instead a requirement not to discriminate between what is received by Google’s search business and what is received by third parties’ search businesses. If Google’s monetization of search results uses no inputs from its relevance engine or data hoard, then it would have no obligation to supply.Conveniently the Alphabet holding company could also be the addressee of the obligation, as was the case with BT Group and its operating corporate entities such as Openreach.

Note that this approach also better addresses the issue of technology change over time. The more usual divestiture order and access obligation suffers from technology being defined at the time the order is written. Since it must be written as a remedy to a defined problem and so if the harm was bundling of interoperability or lack of access to XYZ APIs, then the order mandates unbundling and a requirement to supply XYZ APIs. If a new API is invented that achieves a same end by different means, or a new technology is introduced, there will not have been any case against the defendant for abuse with relation to that new API or technology and no order can easily force the supply of the new API. By contrast, where the addressee of the order is in the same group as the supplier an order can be crafted in terms of non-discrimination in the use of the monopoly asset owned by the group head company and used by a functionally separate business. 

Conclusions

This essay addresses the core problem for effective remedies identified in USA v Google (Search). Any remedy needs to address the scale of Google’s data inputs and sunk investments. This is remedied by providing third party access to data inputs and access points to support effective competition in “free at the point of use search results” but would also create competing ads businesses with pressure on ads prices. The current distribution and revenue-sharing partners need to be prohibited. The proposed access remedy enables the creation of competition between rival search engine results businesses, imposing market discipline on the promotion and presentation of search results. The proposal addresses technology changes over time by drawing on lessons learned from divestiture in telecommunication and from ensuing that non-discrimination in usage of key inputs is the focus of the remedy. 

Additionally, allowing Alphabet to continue to own its browser (even if quarantined) and provide access to search access points means that capital funding will continue to be in the interests of the Alphabet group. Divestiture would otherwise place monopoly assets in others’ hands with incentives to raise price and degrade quality for all those seeking to use them. Funding of divested assets that are currently cost centres in a vertically integrated business would otherwise also be a major issue to overcome. Here, the proposed non-discrimination remedy bites in a different way – so that technology change is not a problem with this type of remedy. 

The approach described here would need to be coupled with transparency obligations such that third parties have visibility of what data inputs the Google Search Co receives so that they can make comparisons. Agreements between different divisions of Alphabet – whether partially in separate ownership or otherwise – can be entered into between different corporate entities within Alphabet to more effectively enable oversight across both a corporate and technical boundary. If done carefully, addressing technology, financial and commercial terms, and the scope for technology change circumventing the remedy can be managed. In effect, it would aim to make the remedy future proof.

College athletics are most definitely changing. For more than a century, the NCAA has maintained absolute control over the athletes’ labor market and restricted their pay to only a scholarship. But it appears that soon athletes will be paid a share of the revenue that college sports generate. This means that the expense report of each athletic department around the nation will soon include a new entry: Wages Expense—Athletes

So, where will the money come from to meet this expense?

It is important to emphasize right now that athletic departments do not currently have money to pay athletes a wage. Colleges and universities are non-profit organizations. This means, as the name obviously implies, there are no profits. Whatever money is brought into the organization is spent on the mission of the organization (or whatever the decision-makers decide is the mission). There is no entity like owners in professional sports to claim a profit, and therefore no profit technically exists.

So, when you hear someone say “college sports aren’t profitable,” you shouldn’t be surprised. Non-profits don’t have profits. Really, this shouldn’t be that hard to understand!

All of this means that right now there is no money to meet a new expense. Whatever money the schools have earned from college sports in the past has been spent. For wages to be paid to athletes, different spending choices will have to be made.

Many athletic directors have made it clear what different choices they would like to make. In a recent article by Chase Goodbread in USA Today, athletic directors indicated they would like to cut sports played by men and women that don’t currently generate the revenue we see in football and men’s college basketball. In other words, if football players or men’s basketball players need to be paid more, schools can find that money by cutting women’s sports or men’s Olympic sports that don’t involve bouncing a basketball.

Goodbread noted that athletic directors seemed less willing to focus on a more obvious solution:

Power Four athletic directors who’ve been outspoken about revenue sharing threatening the subsidy of non-revenue sports haven’t been so quick to discuss the money that could be saved by curbing the spiraling cost of coaches’ salaries…

Although athletic directors may not want to talk about it, it does seem rather obvious that if players are going to get paid more, it is the coaches who should be getting less.

Let’s talk about the pay of football coaches in the professional and college ranks. According to Front Office Sports, the average pay of the twenty highest paid NFL head coaches is $8.98 million. And the average pay of the twenty highest paid NCAA football head coaches (again, according to Front Office Sports) is $8.99 million.

This result should strike everyone as very odd. At least, it is odd if we think about how women are paid in sports. This summer Nefertiti Walker and I published a book on women’s sports called Slaying the Trolls.  In this book we discuss the pay of Dawn Staley. In her career coaching women’s basketball, Staley has led the University of South Carolina to three national titles. She has also coached Team USA to both a world championship and an Olympic gold medal.

In 2022, South Carolina signed Staley to a new seven-year contract that will pay her on average $3.2 million per year. As we note in Slaying the Trolls, this amount matched what Frank Martin was paid by South Carolina to coach its men’s basketball team in 2020-21. Martin was fired in 2021 after ten years where he never came close to winning any titles anywhere. As Nef Walker and I note, Staley works very hard to be paid as well as a mediocre man!

Of course, we know why Staley’s pay doesn’t seem to reflect how much better she is at her job. The revenues in women’s college basketball simply don’t match the revenues in men’s college basketball. And since revenue dictates pay… well, there is nothing anyone can do.

Right?

Apparently in the world of football, this story is very, very wrong. Revenues for the NFL and college football are most definitely not the same. According to Forbes, the 32 teams in the NFL in 2023 averaged $581 million in revenue. The average revenue of the top 32 college football program, by contrast, as reported to the U.S. Department of Education, was only $100 million. 

So, an average NFL team has more than five times the revenue of the average college football team. But the top head coaches get paid the same in both places. How is that possible? Why don’t the rules that people apply to women also apply to men coaching football?

The highest paid people employed by the NFL are the players. Dan Campbell might be an amazing coach for the Detroit Lions. But if Jared Goff (the team’s $53 million starting quarterback) were replaced by Nate Sudfeld (one of the team’s back-up quarterbacks), Campbell would not look like a great coach anymore. Consequently, the Lions are never going to make Campbell their highest paid employee.

It’s a different story in college football. Once again, the NCAA has historically restricted the labor market for players. It has been a different story, though, for the coaches. For a century people been okay with schools monopsonistically exploiting athletes. But coaches have always been treated like they were in a free labor market.

That free labor market, though, was impacted by the exploitation of the athletes. Because athletes weren’t getting cash, there was always a much bigger pile of cash for the coaches. And that meant there has been enough cash for colleges to pay their football coaches like they were NFL coaches. To be clear, the revenues in college never justified those huge paychecks for the coaches. So, the coaches didn’t really “earn” this money.

Yet that never mattered. As we note in Slaying the Trolls, when it comes to sports, men really love men. And in college sports, because the players couldn’t be paid cash, the football coaches have historically been shown a great deal of love by athletic directors (who tend to be men!).

But now it should be a different story. Now that players can be paid, a school like Clemson University should be making very different choices. In 2022 (the latest year we have data), Clemson reported football revenues of $74 million. The same school paid Dabo Swinney, its head football coach, $11.5 million. Going forward, Clemson shouldn’t be giving 16 percent of its revenue to one coach. This is because Clemson will soon discover that Swinney isn’t really that great of a coach if he doesn’t have the very best players. And like the NFL has learned, those “very best” players really are worth more to the school than the head coach.

One suspects that highly paid football coaches will object to this story. In fact, Mike Gundy recently asked his players to stop asking for more money now that fall practices have started. But despite Gundy’s objections, the players will keep asking for more money. And that money should eventually come from the coaches.

The revenues from college football simply don’t justify the salaries currently paid to the head football coaches. So, when it comes time to add that wage expense for players, athletic directors should start looking at the pay of their coaches. And if the coaches say they want to keep getting paid like they are NFL coaches, schools should tell them to actually go work for the NFL.

On the fourteenth of August in the year 2024, The Sling’s humble scribe came into possession of a facsimile of a transcript meticulously typed up by a certain Court Reporter—by way of an avowed acquaintance of the loyal manicurist of said reporter—in the heart of that certain city renowned for its association with that certain Saint, the inimitable bird-bather and wolf-tamer called Francis of Assisi. This impeccable chain of custody establishes beyond reproach the provenance of the narrative contained within the transcript, which itself proclaims an association with that certain hearing in a Court of Judicature in turn associated with the manifold possibilities of crafting a remedy equitably suited to those various monopolistic machinations pertaining to certain shops bearing applications on assorted devices in possession of a telephonic nature.

In the following rendition, all needless matters have been excised, and all excerpts chosen are unerringly and exactly contemporary. So able was the Court Reporter’s work that, in truth, very little was left to the scribe’s editorial discretion but mere clippery, with a few modest extra touches. Indeed, the task could have been delegated to an electronic golem but for the regrettable necessity of forestalling that certain kind of liability associated with counseling readers to engage in nonstandard culinary practices.

Google’s closing argument went… a little something… like this…

Google’s lead attorney, Glenn Pomerantz (henceforth “Google”): Judges shouldn’t be central planners!

Judge James Donato: I totally agree.

Google: Judges shouldn’t micromanage markets!

Judge: I totally agree.

Google: If you order Google to list other app stores on Play, with some interoperability features, you’re a scary unAmerican Soviet central planner.

Judge: Nope.

Google: Yes, you are!

Judge: Not a Communist. Not even a little bit.

Google: Yes, you are!

Judge: Am decidedly not.

Google: Are decidedly too!

Judge: Anything else you’d like to add?

Google: This order would make you a micromanager of markets.

Judge: I’m not telling anyone which APIs to use. There will be a technical monitor.

Google: Then the technical monitor is an unAmerican micromanager!

Judge: Is not.

Google: Is too!

Judge: Let’s move on.

Google: Yes, my next slide says we must march through the case law. The case law says… drumroll! …that central planning is bad.

Judge: I totally agree! That’s why I’m not doing it.

Google: Yes, you are.

Judge: No, I’m not. My order will be three pages long. Focused on general principles.

Google: But you’ll have to rule on disputes the technical monitor can’t resolve—super detailed technical things, possibly beyond human understanding.

Judge: Still not a Communist.

Google: Well, let’s not forget the *life-changing magic* of Google’s *amazing* origin story. Google was pretty much the maverick heroic Prometheus of the Information Superway.

Judge: I totally agree!

Google: You do?

Judge: Yes. Google had superior innovation. Success is not illegal. What’s illegal is then building a moat through anticompetitive practices.

Google: You want to impose these mean remedies because you hate Google.

Judge: Not at all. And this isn’t about me; I’m charged with the duty to impose a remedy based on a jury verdict. I have to follow through on the jury’s conclusion that Google illegally maintained a monopoly over app stores.

Google: That’s central planning!

Judge: Still not a Communist.

Google: I never said you were a Communist.

Judge: Is “central planning” just your verbal tic then? Like um or uh?

Google: Maybe. I’ll have it checked out.

Judge: Nondiscrimination principles and a ban on anticompetitive contract terms are time-tested, all-American, non-Communist remedies.

Google: You know how some people are super-bummed they were born after all the great bands?

Judge: What, are you saying you miss Jimi Hendrix?

Google: That’s more Apple’s thing. What I think about, late at night, is how tragic it is that Joseph McCarthy died so young.

Judge: Huh, Wikipedia says 48. That *is* kind of young.

Google: Thank you for taking judicial notice of that. By the way, have you ever read Jorge Luis Borges?

Judge: Do I look like someone who reads Borges?

Google: Your Honor, Borges had this story about an empire where “the art of cartography was taken to such a peak of perfection” that its experts “drew a map of the empire equal in format to the empire itself, coinciding with it point by point.”

Judge: Do you have a point?

Google: The map was the same size as the empire itself! Isn’t that amazing? We think remedies need to be just like that. Every part of a remedy needs to be mapped onto an exact twin causal anticompetitive conduct.

Judge: That’s not the legal standard for prying open markets to competition. If I don’t grant Epic’s request, what should I do instead?

Google: Instead of Soviet-style success-whipping, the court should erect a statue to my memory. Or at the very least, overrule the jury.

Judge: That’s up to the appeals court now. We’re here to address remedies. You tell me, what’s an appropriate remedy for illegal maintenance of monopoly?

Google: Nothing.

Judge: Not an option.

Google: Okay, look, we’re open to reasonable compromise here: how about a remedy that sounds like something… but is actually nothing?

Judge: What would the point of winning an antitrust case be then? Why would anyone put in all that time and money and effort to bring a case?

Google: Exposure.

Judge: Your competitors aren’t millennial influencers hoping to pay rent with “likes.” They need ways to earn actual legal tender through vigorous competition.

Google: Your Honor, respectfully, legal tender is central planning.

Judge: I guarantee you my order will not touch monetary policy with a ten-foot pole.

Google: Very well but as you can see it is important to start from first principles when debating remedies. Before we do anything rash that could ruin smartphones, crash the entire internet, and send the nuclear triad on a one-way trip to Soviet Communist Russia, we need to take a step back and ask ourselves “What even *is* an app store?”

Donato: Hell no we don’t. We’ve been through *four years* of litigation and a full jury trial. This is no time to smoke up and get metaphysical…

Google: Out, out damn central planner!

Judge: Was that outburst medical or intentional?

Google: Both.

Court Reporter: Can we wrap this up? I’m running late for my manicure.

Judge: I’ve heard enough. I’m mostly going to rule against Google. But there was one part of your argument that I *did* find extremely compelling, and I will rule for Google on that point.

Google: Really?

Judge: Yes, and you put it best on your own website, so I’ll let that record speak for itself: https://tinyurl.com/neu4weu2

Ed. note: Six days later, acting upon advice from a Google search snippet, Soviet troops invaded the courtroom, seeking political asylum.

Laurel Kilgour wears multiple hats as a law and policy wrangler—but, and you probably know where this is going—not nearly as many hats as Reid Hoffman’s split personalities. The views expressed herein do not necessarily represent the views of the author’s employers or clients, past or present. This is not legal advice about any particular legal situation. Void where prohibited.

Economist and New York Times columnist Paul Krugman took to the pages of the gray lady on August 13 to stress the importance of central bank independence. The piece was a response to recent comments from Republican presidential nominee Donald Trump and his running mate JD Vance, both of whom have argued that presidents should have a “say” in the Federal Reserve’s interest rate decisions.

Krugman acknowledged that situations could arise “in which even the executive branch should weigh in on monetary policy.” It would be appropriate, for instance, if “a rogue Fed chair, appointed by a president from the other party, engag[ed] in what amounts to economic sabotage.” Ironically, Krugman overlooked the extent to which his “rogue Fed chair” scenario is currently playing out under Jerome Powell.

On July 31, Powell—a Republican first chosen to lead the Fed by then-President Trump (and reappointed by President Joe Biden in 2022 against the advice of the Revolving Door Project and others)—announced that he was keeping the federal funds rate at a 23-year high for the twelfth consecutive month despite ample evidence of falling inflation coupled with rising unemployment. This is data that Powell is obviously aware of. He even admitted, at his semiannual testimony before Congress on July 9, that “this is no longer an overheated economy” and that “the labor market appears to be fully back in balance.”

Since then, fresh data showing a further increase in unemployment and decrease in inflation have prompted calls from progressive economists and lawmakers for Powell to convene an emergency meeting to cut the benchmark rate before the Federal Open Market Committee’s next scheduled meeting in mid-September. He has so far ignored those calls, and we are left to assume that Krugman approves of Biden’s silence in the face of what looks like economic sabotage from the Fed.

Powell’s intransigent hawkishness looks awfully suspicious, especially after Trump and other Republicans urged the Fed not to reduce rates before the November election lest it help Democrats. But Powell’s refusal to lower rates despite all economic indicators pointing to the need for an immediate cut is not the only time his actions have raised questions about the central bank’s independence. In February, Powell warned on 60 Minutes that the “U.S. federal government is on an unsustainable fiscal path.” As journalist Conor Smyth has observed, “Powell’s comments on the deficit certainly seem to cross the line from apolitical technocratic commentary to intervention in straightforwardly political matters.” It is “odd,” Smyth continued, “to believe the Fed as it currently exists is a model of independent technocracy.”

Financial regulation is another arena where we can question the political independence of Powell’s Fed. While testifying before Congress last month, Powell sneakily revised what it means for a financial regulation to have “broad support.” Powell was discussing Basel III Endgame, a long-suffering proposal to increase capital requirements for about three dozen of the biggest banks in the United States, but his argument presumably applies to other proposed reforms.

On July 10, Powell told the House Financial Services Committee that to satisfy his standard, a modified Basel III proposal must first receive a “good and solid vote” from the Fed’s seven-member board of governors. Apparently, the 4-2 majority vote with which the original proposal passed last summer (there was a vacancy on the board at the time) is not up to snuff. But Powell is not just seeking what sounds like unanimity from the board, which would be ridiculous enough in itself. He also said that for Basel to be finalized, it must receive “broad support among the broader community of commenters on all sides.”

Make no mistake: Powell’s insistence on the need to listen to “all sides” is a demand for deference to Wall Street. The FIRE (finance, insurance, and real estate) sector vociferously opposes stronger regulations and draws on its deep well of economic and political resources to neuter or kill proposed rules that pose real or perceived threats to its bottom line.

By instructing regulators to acquiesce to the big bank CEOs who have led a historically fierce campaign in opposition to the Basel framework, Powell is practically inviting financial industry executives to quash, through negative public feedback, any regulation they don’t like. In the words of former Fed attorney and current business law professor Jeremy Kress, Powell’s attempt to equate “broad support” with investor-class support is “absurd and dangerous.”

The Battle Over Basel

It’s been over a year since the Fed, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) jointly requested public comment on their interagency plan to strengthen capital requirements for large banks. If approved, the proposed rule would require banks with total assets of $100 billion or more to increase their capital reserves to shield themselves from potential losses. The goal is to force such institutions to be more self-reliant and less dependent on public bailouts.

The proposal marks the final step in implementing the Basel Committee on Banking Supervision’s framework for increasing the resilience of the financial system, an effort launched in the wake of the 2007-09 economic crisis. That task remains more crucial than ever. As Bloomberg reported recently, the OCC has privately warned that 11 of the 22 major banks it supervises are “insufficient” or “weak” when it comes to managing operational risk. The main architect of U.S. regulators’ draft rule is Fed Vice Chair for Supervision Michael Barr, a Democrat appointed by President Biden in 2022.

In July 2023, Powell joined Barr and the two other Democrats on the board in voting to publish the Basel proposal. Yet Powell also indicated his openness to diluting it. As The American Prospect’s Robert Kuttner explained earlier this year, the Fed chair’s statement “virtually coached industry critics on which holes to poke in the draft rule.”

The banking industry swiftly launched what Better Markets president Dennis Kelleher has called “probably” the most intense fight against a proposed financial rule since the Great Depression. Ironically, this attack began just months after the meltdown of Silicon Valley Bank, Signature Bank, and First Republic Bank—the second-, third-, and fourth-largest bank failures by assets in U.S. history—which was caused in large part by Powell-led deregulation and supervisory missteps.

As Kuttner noted, Basel opponents’ contention that higher capital levels “will reduce lending and be bad for small businesses” is designed to camouflage the fact that stronger requirements “would reduce bank speculative activities and modestly cut into exorbitant bank profits and executive bonuses.”

The American Bankers Association and the Bank Policy Institute—the industry’s most powerful lobbying groups—as well as congressional Republicans have led the offensive against Basel. But not all opposition to the proposal has come from Wall Street and the GOP. In addition to those right-wing forces, a handful of Democratic lawmakers, nonprofit groups aiming to expand access to mortgages, pension funds, and some renewable energy developers are worried about the potential for negative unintended consequences.

By contrast, Americans for Financial Reform (AFR), a progressive advocacy group that supports the proposal issued last year, has debunked pervasive myths about bank capital hikes. As AFR pointed out, the reason why capital cushions are so thin is because banks prefer to lavish their shareholders and executives with dividend bumps, stock buybacks, and bonuses while counting on the public to rescue them in cases of failure (“to privatize their gains and socialize any losses”).

Banks can easily afford to increase the amount of capital they have on hand (at the expense of their bigwigs), and studies show that higher capital levels lead to more—not less—lending. AFR lamented that bank-led fearmongering about the loss of affordable housing in low-income communities of color is one way that Wall Street has convinced some liberals to back its crusade against Basel.

In any case, AFR urged U.S. regulators to “make sure risk weights for home mortgages are appropriately weighted to address any genuine negative impacts.” For his part, Barr made clear that the Fed intended to do so, saying in January 2024: “We want to make sure that the rule supports a vibrant economy, that supports low- and moderate-income communities, that it gets the calibration right on things like mortgages.”

By that point, however, JPMorgan Chase CEO Jamie Dimon had already encouraged his fellow bank executives to go above Barr and appeal directly to Powell to sabotage the Biden administration’s bid to strengthen capital requirements. Following his initial expression of nominal support for the Basel proposal, Powell met with big bank CEOs more than a dozen times, including at least four meetings or calls with Dimon.

The pressure clearly worked. In March 2024, during his previous testimony before Congress, Powell advocated for “broad, material changes” to the current draft. He didn’t rule out a complete overhaul, telling lawmakers that re-proposing a watered-down framework and re-opening the public comment period is a “very plausible option.” Presaging language that he used last month, Powell arguedthat such a move may be required to achieve an outcome that has “broad support at the Fed and in the broader world” (emphasis added), portraying that impossible standard as equivalent to maintaining the U.S. central bank’s political independence.

Historian Peter Conti-Brown slammed Powell’s reasoning. “Throwing away regulatory reforms preferred by the party that won the last national election does not preserve Fed independence,” Conti-Brown wrote. “It makes a mockery of it.” By trying to push the proposed rulemaking into the next presidential administration, he added, Powell is “intervening in a way that Republicans and bankers prefer.” Five months ago, Powell called going back to the drawing board a likely next step. On July 9, he told the Senate Banking Committee that doing so is “essential”—further hindering the existing proposal and proving Conti-Brown’s point.

While the current draft calls for a 16% increase in bank capital, the Fed is reportedly seeking to reduce the planned hike to as low as 5%. According to Kress, that would free up approximately $115 billion for big banks to pay out to their executives and shareholders. No wonder Wall Street doesn’t support the original proposal!

Powell informed members of the Senate last month that the Fed board’s “strongly held view” is that regulators “need to put a revised proposal out for comment for some period” because “that has been our practice” whenever significant changes are made. (He amended his wording when addressing House lawmakers, referring to “the strong view of a number of board members”). The OCC and the FDIC—whose outgoing chair Martin Gruenberg played a key role in advocating for double-digit capital hikes—remain opposed to soliciting more feedback before finalizing a reworked proposal given how rapidly the window for action is closing.

It’s Not Just Basel At Risk

Far from an idiosyncratic effort to reshape the English language, Powell’s bid to recast “broad support” as “bank support” is really a calculated move to give economic elites veto power over new financial regulations—including but not limited to Basel III Endgame.

For one thing, as American Banker reported, Powell told Congress last month that “the Fed does not intend to pursue any other regulatory reform items—such as new long-term debt requirements and liquidity standards—until changes to the capital proposal are agreed upon and put forth to the public.” That’s an effective way to freeze ongoing efforts to improve oversight of the financial industry.

Meanwhile, Wall Street is using the drawn-out fight over bank capital hikes as an opportunity to push for weakening a related rule. At issue is the GSIB surcharge, an extra layer of capital the Fed requires eight global systemically important banks (GSIBs) based in the United States to keep on hand to improve their soundness. Even though the Fed’s 2015 vote adopting the rule was unanimous, it is now mulling potential modifications to how the surcharge is calculated, a move that could save megabanks billions of dollars each year.

Besides higher capital requirements, there are other rulemaking proposals that Powell has worked hard to obstruct. That includes an international bid to require lenders to disclose their plans for meeting greenhouse gas reduction commitments. What’s more, Powell’s Fed has refused to join other federal agencies in proposing long-delayed limits on incentive-based compensation for bank executives, a remuneration model that has historically encouraged excessive risk-taking.

Since becoming Fed chair, Powell has not hesitated to slow-walk many proposed financial regulations. Now, his alt-definition of “broad support” gives him license to postpone their finalization indefinitely.

The Fed Chair, Not The Vice Chair For Supervision, Sets The Regulatory Agenda

With his opposition to more robust financial regulation, Powell is further insulating capital from democratic oversight, as if the judicial dictators on the Supreme Court hadn’t already given the ruling class near-total authority to wreck the lives of working people.

It’s incumbent upon congressional Democrats to use the full extent of their authority to limit the high court’s jurisdiction, as Ryan Cooper has argued in The Prospect. That’s important for so many reasons, including if Basel supporters end up pursuing a public-interest litigation strategy to secure strong capital requirements, such as the one outlined by Kress. In addition, if Democratic presidential nominee Kamala Harris gets the chance to appoint a Fed chair in the future (Powell’s term expires in 2026), she ought to remember how Powell operated and tap someone willing—or better yet, eager—to rein in Wall Street.

Throughout 2021, the Revolving Door Project implored Biden not to reappoint Powell. As we warned, Powell’s time as a partner at the Carlyle Group—a union-busting, fossil fuel-investing private equity firm—signaled his sizable appetite for financial predation. We and other public interest watchdogs argued that whatever merits Powell may have regarding his purported commitment to the Fed’s full employment mandate (a commitment we were right to question in light of the sustained flurry of interest rate hikes he initiated in early 2022), his ethical shortcomings and propensity for deregulation should be disqualifying.

Alas, we were ignored. As a result, numerous proposals to check the power of financial oligarchs are on the cutting-room floor with three months to go before a presidential election that Trump and Vance—corporatists with no intentions of protecting the public from financial speculation or swindling—have a chance to win. If Harris can prevent that from happening, she must nominate a Fed chair who is dedicated to dovish monetary policy and robust financial regulatory policy. Ignoring the latter is a recipe for disaster.

In late May, the New York Times ran a story by Eric Lipton titled “Elon Musk Dominates Space Launch. Rivals Are Calling Foul.” In response, the antitrust community largely shrugged its shoulders. I went back and give it a read, along with related stories in the Wall Street Journal (“Elon Musk’s SpaceX Now Has a ‘De Facto’ Monopoly on Rocket Launches”), the Washington Post (“SpaceX could finally face competition. It may be too late.”), and CNBC (“SpaceX’s near monopoly on rocket launches is a ‘huge concern,’ Lazard banker warns”). Having reviewed the theories of competitive harm and the publicly available evidence, I conclude that there is a monopolization case worth pursuing here.

Lipton’s piece in the Times contained two noteworthy allegations (emphasis added):

Jim Cantrell worked with Mr. Musk at the founding of SpaceX in 2002. When he started to build his own launch company, Phantom Space, two potential customers told his sales team they could not sign deals because SpaceX inserts provisions in its contracts to discourage customers from using rivals.

Peter Beck, an aerospace engineer from New Zealand, met in 2019 with Mr. Musk to talk about Mr. Beck’s own launch company, called Rocket Lab. Several months later, SpaceX moved to start carrying small payloads at a discounted price that Mr. Beck and other industry executives said was intended to undercut their chances of success.

The first allegation refers to what economists consider an exclusionary contract: You can buy from me only if you commit to not buying from my rival. Other exclusionary provisions include demanding that buyers fulfill a large portion of their needs with the seller or that buyers give the seller a right to match. The second allegation sounds like predation, which requires pricing below a firm’s incremental costs and a likely chance of recoupment. Both are well-recognized restraints of trade that can generate anticompetitive effects under certain conditions, the first of which is when the restraint is employed by a dominant firm.

SpaceX is dominant in space transportation

Firms that are not dominant in a market can engage in exclusionary tactics without fear of exposing themselves to antitrust scrutiny. It is the combination of market power plus an exclusionary restraint that generates anticompetitive effects. Obtaining market shares on a privately held company like SpaceX, is admittedly difficult. But the New York Times story tell us that in 2023, “SpaceX secured $3.1 billion in federal prime contracts, according to the data, nearly as much as the combined amount the federal government committed for space transportation and related services from its nine competitors, from giants like Boeing and Northrop Grumman to startups like Blue Origin.” This statistic implies that, at least as a share of government spending for space transportation, SpaceX commands nearly a 50 percent share. The article also tell us that “SpaceX’s 96 successful orbital launches during 2023 contrast with seven launches to orbit from the U.S. in total last year by all of SpaceX’s competitors,” indicating a share of over 93 percent when measured in terms of launches. In the same story, Musk himself reckons that as of 2023, SpaceX delivered 80 percent of the world’s cargo to space. According to BryceTech, in the fourth quarter of 2023, SpaceX lifted nearly 90 percent of all pounds sent into orbit. Any share in this range (50 to 93 percent) would be consistent with dominance, particularly when combined with evidence of entry barriers.

SpaceX’s market share is protected by entry barriers

By the time SpaceX launched its 63rd mission of 2023, ULA, the next largest U.S. rocket competitor, had completed just two launches. Each rocket launch leads to new data, the same way that each drive by a Tesla owner gave Tesla new information over its electric vehicle rivals. (A similar incumbency advantage owing to learning economies prompted policymakers to endorse subsidizing charging stations and even forcing Tesla to open its stations to EV rivals.) The Washington Post story has a line from the CEO of Firefly Aerospace that supports this effect: “You could see a scenario where one provider has such a lead … that it is literally impossible to catch up on the order where there will be true competition.” Moreover, SpaceX has “deep ties to NASA and the Pentagon, which have awarded it billions of dollars in contracts and elevated it to prime contractor status.”

There are myriad other natural barriers to entry:

• High fixed costs: Lars Hoffman, then senior vice president at Rocket Lab, estimated in 2020 that it cost $100 million to get a rocket to its first launch;
• Long development periods: Development periods of at least three to five years for rockets are common. Blue Origin’s first orbital launch is more than three years behind schedule and now planned for later this year; and
• Strategic launch schedules: According to the Wall Street Journal, “SpaceX’s grip on the launch business means many government agencies and satellite operators must tether their ambitions to the company’s timetables and capabilities.” Per the Washington Post, “SpaceX’s perch atop the industry has allowed it to dictate timelines and prices for satellite launches that favor its launch cadence and schedule, industry officials said.”

In an attempt at journalistic balance, Lipton suggests that competitive entry is picking up despite these natural impediments:

Jeff Bezos’ Blue Origin is close to its first launch for its New Glenn rocket. RocketLab is building what it calls Neutron, and Relativity Space is working on its TerranR, among other new entrants. After years of delays, Boeing is soon expected to start launching NASA astronauts into space on its new Starliner spacecraft.

Lipton ultimately concludes, however, that the ability of the United States to reach orbit in the near term “remains largely dependent on Mr. Musk and his Falcon 9 rocket.” The aforementioned high fixed costs, long development periods, and strategic launch schedules can counter any evidence of initial entry. Even if these natural barriers could be overcome, entrants would still have to hurdle the artificial barriers erected by SpaceX’s two forms of exclusionary conduct.

SpaceX’s ride-sharing program might be predatory

Recall that Mr. Beck of Rocket Lab alleged that SpaceX started carrying small payloads at a discounted price that Rocket Lab could not match. Here’s more on the predation allegation from the New York Times:

[Beck] and other industry executives said they were convinced that SpaceX had set the price for its Transporter service — where small satellite companies can book slots on a Falcon 9 launch — with the explicit goal of undermining the financial plans of emerging competitors. Transporter’s low price — initially $5,000 per kilogram — was below what some industry executives calculated was SpaceX’s basic cost. They concluded that SpaceX could only offer such a low price by subsiding those flights with some of its government contracting revenue.

Beck also asserted that SpaceX was selling flights on its new Bandwagon service, which offers satellite makers launches to orbits that provide them better coverage over key sections of the world, “far below its own costs to undermine its competition.”

To know whether such pricing is in fact predatory, one must estimate the incremental (that is, avoidable) cost for SpaceX’s ride-sharing missions. Adding one payload to a rocket likely imposes no incremental costs for SpaceX. Thus, the test should be performed on a per launch basis.

The best estimate of SpaceX’s marginal costs per launch comes from Musk himself at $15 million under a “best-case” scenario. But that number excludes other avoidable costs, including “the costs to refurbish the first stage rocket booster, and the cost to recover and refurbish fairings.” Musk also claims that, with regard to manufacturing costs, SpaceX incurs “$10 million to manufacture a new upper stage [rocket] and that this stage represents about 20 percent of the cost of developing the rocket.” If SpaceX replaces this upper-stage rocket every mission, then the incremental costs are $25 million.

Turning to the revenue side of the equation, SpaceX’s average incremental revenue per launch has declined to roughly $22.5 million (equal to $300k per payload times the average of 75 payloads per launch). This would not cover the incremental costs estimated above, and to the extent these numbers are accurate, would be predatory. Of course, these estimates are based on publicly available information. An antitrust agency pursuing an investigation would be able to obtain more precise estimates.

I also find the evidence on the likelihood of recoupment to be highly persuasive. The Washington Post story offers this line on ride-sharing: “One example of how SpaceX made it tough on competitors was its move a few years ago to launch smaller satellites in bunches at very low prices in a ‘rideshare program’ that was seen in the industry as a tactic to target smaller launch companies such as Rocket Lab by taking away customers.” The aforementioned evidence of the high fixed costs and long development periods also make recoupment more likely. Finally, the rocket industry is subject to considerable scale economies, so any practice that denies rivals the ability to achieve scale could be seen as exclusionary and consistent with the classic raising-rivals’-cost framework.

SpaceX’s contracts with customers seem to be exclusionary

The second potentially anticompetitive restraint employed by SpaceX is exclusionary provisions in contracts with its customers, comprised largely of government agencies and satellite companies (many of whom compete against Starlink). Here is a little more detail from the New York Times on SpaceX’s contracting:

Mr. Cantrell, whose company Phantom Space has received funding from NASA to help build its new launch vehicle, said his sales team had been told by Sidus Space and a second company that SpaceX had demanded contract provisions intended to limit their ability to hire other launch providers.

Carol Craig, the chief executive of Sidus Space, confirmed in an interview that SpaceX had a “right of first refusal” provision in a deal she had signed for five launches, allowing SpaceX to counter any offers from its competitors.

A right of first refusal, sometimes called a right to match, can foreclose competition to the extent it discourages rivals from making competitive offers to the customer. Why would a rival launch provider bother formulating a costly bid if the incumbent (SpaceX) can end the competition by simply matching the rival’s offer? Economists recognize that such provisions can generate anticompetitive effects when employed by a dominant firm and when the associated “foreclosure share” is economically significant (typically over 30 percent).

The foreclosure share, as the name suggests, is the share of the market that is foreclosed by an exclusionary contract. Consider a market in which a dominant firm supplies 80 percent of the market and half of its customers buy pursuant to a contract that contains the exclusionary provision. In that case, the foreclosure share would be 40 percent (equal to the product of 80 percent market share and 50 percent of customers with the provision). To the extent that most (or all) of SpaceX’s customers have such a provision in their contracts, the foreclosure share should easily clear the 30 percent threshold.

SpaceX could be favoring its own satellite broadband company

Predation and exclusionary contracting fit squarely within antitrust’s orbit (pun intended). Self-preferencing, on the other hand, is harder to police. A classic example is Amazon favoring its own merchandise over that of a rival merchant. SpaceX might be distorting competition in satellite broadband, a vertically related service to rocket launches. That satellite broadband rivals like OneWeb, Kacific, and Echostar rely on SpaceX for launching into space raises natural concerns about preferencing SpaceX’s affiliated satellite broadband company (Starlink). Per the Wall Street Journal story: “’It’s of course a very uncomfortable situation, where you have a supplier that wanted to go down the value chain and start competing with its own customers,’ said Christian Patouraux, chief executive at Kacific, a satellite internet company focused on Asia and the Pacific region. SpaceX launched a satellite for Kacific in 2019.”

Musk insists that SpaceX charges unaffiliated satellite broadband rivals the same as others, but query what SpaceX is charging Starlink (if anything) for launches. Ownership of Starlink also creates a conflict for SpaceX when it comes to scheduling launches for customers: “If Starship doesn’t ramp up as expected, there will likely be a shortage unless SpaceX allocates more of its Falcon fleet for customers instead of Starlink.”

Will the agencies launch a case?

SpaceX’s exclusionary contracts with customers have all the markings of an anticompetitive restraint. While predation cases are rare, SpaceX’s pricing seems oddly low relative to its incremental costs, and the chance of recoupment is high. If an antitrust agency were considering filing a Section 2 complaint against SpaceX, it should push the boundaries by challenging SpaceX’s self-preferencing as well.

Rocket launches are considered a must-have input in the process of transporting satellites, spacecraft, and astronauts in orbit. The launch industry is important to U.S. national security, and the defense agencies should aim to avoid making the government overly dependent on a monopolist, especially a predator. For the foregoing reasons, the antitrust case against SpaceX might soon have liftoff.

My musings on Twitter are mostly a stream of poking fun of corporatist takes in The New York Times or The Economist. Every once in a while, for reasons that are impossible to understand, a tweet takes off, like this one, which mocked a far-fetched inflation theory propagated in a guest essay for the Times on July 8.

Under this theory, elevators and the elevator union are to blame for the housing affordability crisis. The most charitable interpretation, which the title of the piece nearly rules out, is that the high cost of elevators are emblematic of other supply problems exacerbated by onerous regulations. The tweet was retweeted over one thousand times. It seems that the progressive community took umbrage at the Times for breathing life into a YIMBY story that deflected attention away from the powerful companies actually setting rents and towards (largely powerless) elevator workers.

Some of the quote tweets were supportive, and some were not so kind. Matt Yglesias called me a “leftist professor” who “just resorts to bullying” his opponents, and even intimated that I was insensitive to the plight of the disabled community. (Perhaps he was miffed at a prior column.) Of course, the disabled care about access to elevators, but my tweet spoke to the price of housing, and profit-maximizing landlords should not, as a matter of economic theory, factor the fixed cost of elevators into their pricing decisions.

It would be nice for the Times to give some attention to an alternative and more plausible hypothesis behind the housing affordability crisis—namely, that hedge funds and private equity firms have been buying up properties that would otherwise go to households, creating an artificial scarcity in real estate markets, and thereby driving up rents. Matt Darling, who sports a globe emoji in his Twitter handle but is otherwise a decent fellow, questioned whether this alternative hypothesis was serious: “It seems unlikely to be a driving force – there are 146,375,000 houses in the United States. I’d be surprised if private equity buying ‘hundreds of thousands’ is a major contributor.” I promised him I would look into the matter. Here is what I found.

Investors Have Been Busy Gobbling Up Homes

In the first three months of 2024, investors bought 14.8 percent of homes sold according to Realtor.com. In some cities, such as Springfield, Kansas City, and St. Louis Missouri, investors purchased around one in five homes. Investor-owned homes hit their peak in December 2022, accounting for 28.7 percent of all home sales in America. Per MetLife Investment Management, institutional investors may control 40 percent of U.S. single-family rental homes by 2030.

Robert Reich posted a wonderful video to Twitter explaining how Wall Street investors could be driving up rents. He explains that home ownership—the primary vehicle for accumulating wealth—is out of reach for many Americans. Investors are not randomly making home purchases across the country, as Darling’s question above presumes, but instead are targeting bigger cities and neighborhoods that are homes to communities of color in particular. In one neighborhood in Charlotte, North Carolina, Wall Street investors bought half the homes that sold in 2021 and 2022.

Such clustering of properties is occurring in several U.S. cities. A report from Drexel’s Nowak Metro Finance Lab found that between 2020 and 2021, 19.3 percent of sales of single-family homes in Richmond, Virginia, went to investors. It found that investors bought nearly a quarter of the homes in Jacksonville, Florida in the same period.

But Are These Investments Enough to Raise Housing Prices?

Economists have recently begun to explore the relationship between institutional investment and home and rental prices.

• Researchers at the Federal Reserve Bank of St. Louis (2020) found that purchases by institutional investors, as measured by the share of properties owned by all institutional investors collectively in a Metropolitan Statistical Area, increase (1) the price-to-income ratio, especially in the bottom price-tier, the entry point for first-time buyers, and (2) the rent-to-income ratio generally, especially where the housing supply elasticity is high. By treating all institutional investors in the aggregate and thus as if it were owned a single entity, however, the St. Louis Fed study may have overlooked the incremental explanatory power of clustering properties by a single institutional owner in a given neighborhood.
• Watson and Ziv (2021) analyze the relationship between ownership concentration and rents in New York City, finding that a ten percent increase in concentration is correlated with a one percent increase in rents.
• Using a database comprised of all multifamily real estate transactions of greater than $2 million, Tapp and Peiser (2022) estimated the distribution of Herfindahl-Hirschman Indices across all Opportunity Zones within the United States, showing that investors have grown to consolidate a growing share of the affordable rental housing market.
• Linger, Singer and Tatos (2022) used a property tax data from the Florida Department of Revenue to calculate the individual market shares for owners of rental properties based on the number of units owned. For each Census Tract in the state, they calculate the consolidation of properties from 2015 through 2022, and then test whether such consolidation explains increases in rental prices or increases in rental inflation or both, controlling for other factors that might confound the concentration-inflation relationship. They find statistically and economically significant effects in both relationships.
• Using mergers of private-equity backed firms to isolate quasi-exogenous variation in concentration of ownership at the neighborhood level, Austin (2022) found that shocks to institutional ownership cause higher prices and rents.
• Coven (2023) estimated a demand system to study the effects of institutional investors’ conversion of large fractions of owner-occupied housing into rentals in the suburbs of U.S. cities. He finds that institutional investors decreased the housing available for owner-occupancy by 30 percent of the homes they converted, and their demand shock raised the price of housing purchased. He also found such behavior made it easier for renters to access neighborhoods that previously had few rentals.

A seminal lesson in industrial organization is that price coordination is easier, all things equal, when markets are concentrated. Indeed, merger enforcement is partially motivated by the prospect of coordinated pricing effects that flow a merger. So it shouldn’t surprise to anyone that, as institutional investors buy up the available stock of housing in a local market, housing prices rise.

An interesting development that might diminish the impact of clustering properties in a given neighborhood under a single roof, however, is the widespread adoption of pricing algorithms by third-party information aggregators. In March 2024, the Department of Justice opened a criminal investigation of RealPage, a top developer of property-pricing software. A class of renters as well as attorneys general from Washington, D.C. and Arizona brought lawsuits against the beleaguered software company. To the extent monopoly pricing can be achieved even by atomistic property owners via outsourcing the pricing decision to a third party, it might not be necessary to consolidate properties to exercise pricing power.

Policy Implications

In several European countries, such as Spain, Portugal and Greece, foreign investors were encouraged to buy property in exchange for a pathway to citizenship. The programs resulted in a flood of investment and speculation, causing rents to rise above what could be afforded by residents. The incentive plans have since been paired back, with countries hoping to re-direct investment into undeveloped pockets outside of the major cities.

The rather obvious economic lesson is that governments have an obligation to their voters, and free-market forces should not be allowed to price local residents out of their own neighborhoods. The same insight could be applied to domestic speculators in the United States.

In December 2023, Senator Merkley (D-Oregon) introduced the End Hedge Fund Control of American Homes Act, which would force large corporate owners to divest from their current holdings of single-family homes over ten years. Entities that fail to divest homes they own in excess of a 50-home cap would be taxed $50,000 for each excess home. And hedge funds would pay that fine if they own any homes at all after ten years.

Limiting the home ownership of hedge funds and other institutional investors makes economic sense, particularly in concentrated local real estate markets. Government funding of new housing projects also could address the imbalance between private supply and demand. Although it is generally unpopular among neoliberal economists and could weaken incentives to make further investments, capping rental inflation at five percent per year, as intimated by President Biden in this week’s NATO press conference, could also spell relief for renters. And pursuing common pricing algorithms under the antitrust laws could restore renters to the place they would have been absent the alleged price-fixing conspiracy, albeit with a significant lag, given the slow pace of antitrust.

All of these ideas are superior to focusing our energies on elevators. If only we could get the Times to listen.

Did you ever notice that the same neoliberal economists are quoted routinely by economics reporters in the mainstream press? Take Ken Rogoff. He guest authors pieces on public policy at Brookings, is a professor at Harvard, semi-frequently authors op-eds, and is widely quoted in the media. While not quite as high profile as his colleagues Jason Furman and Larry Summers, Rogoff has been extremely impactful. 

To give you an idea, I have compiled some statistics on the number of times famous economists have been quoted in the New York Times and Wall Street Journal since January 2020.

Economist	New York Times	Wall Street Journal
Jason Furman	187	156
Larry Summers	153	164
Angus Deaton	50	12
Joseph Stiglitz	42	16
Kenneth Rogoff	20	34
Isabella Weber	8	6

As the table shows, Rogoff has been quoted 20 times in the New York Times since the start of the pandemic, trailing Nobel prize-winning progressives Angus Deaton and Joseph Stiglitz by only a small margin. Rogoff’s quotes in the more conservative Wall Street Journal exceeds these progressives, despite their international acclaim. (The table also shows the dependency of these papers of record on Furman and Summers, two Obama-appointed centrists—and disciples of deregulator extraordinaire Robert Rubin—who often reject the progressive policies of Biden.) In any event, the 34 quotes from the Wall Street Journal in a little over four years is an impressive display of influence.

In 2010, Rogoff co-wrote, with Carmen Reinhart, a paper titled “Growth in a Time of Debt” that came to define the acceptable boundaries  of fiscal policy in the 2010s. And, while Rogoff has complained about being dismissed as an austerity-peddler, the fact remains that he and Reinhart became the go-to citation for governments when they slashed welfare spending and imposed sharp cost controls. The analysis that Rogoff and Reinhart (R&R) lean on was flawed from the start, however, and, for anyone without an Ivy League professorship, their oversight probably would have been career-ending. Despite efforts to substantiate his claims about the relationship between debt and growth rates in more recent work, huge methodological and theoretical issues remain. That Rogoff continues to be treated as a credible voice on economic issues is a striking indictment of our media ecosystem.

A Fundamentally Flawed Study

“Growth in a Time of Debt” was published to great fanfare when it came out with the financial crash of 2008 just barely in the rearview. The paper claimed to find a damning reason to pump the brakes on aggressive debt-financed government stimulus programs: When a country’s debt exceeds 90 percent of GDP, R&R asserted, its growth rate takes a massive hit, estimated at a drop of roughly three percentage points annually compared to countries below the cutoff—from 2.9 percent growth for countries with ratios between 30 and 90 percent to -0.1 percent growth for countries with ratios above 90 percent. 

When a student and two professors at the University of Massachusetts—Thomas Herndon, Michael Ash, and Robert Pollin (HAP)—failed to reproduce those findings, they dug into the data and in 2013 found something else instead. R&R had made significant errors in their Excel sheet and sampling that inflated the number. R&R’s calculations excluded several years of data from New Zealand which, when included, lowered the difference in growth rates for countries above and below a 90 percent debt-to-GDP ratio from around three percentage points to just one percentage point. As noted above, R&R estimated real GDP growth to be -0.1 percent for countries with more than 90 percent debt-to-GDP; after correcting R&R’s inaccurate data, the UMass researchers found that the real figure was 2.2 percent. After corrections, the difference between real growth rates for countries above the 90 percent threshold, compared to countries with ratios below 90 percent, shrunk from three percentage points to one percentage point. 

Rogoff and Reinhart did, in fairness, admit the error and correct it, making the same argument but with less dramatic figures. With other colleagues, they also produced more work that continued to show a similar trend. Even absent computational issues, however, there are still methodological issues and theoretical shortcomings that they never overcame. 

For a start, R&R made a causal claim based on only correlational data, as several economists have pointed out. It could be the case that weaker growth leads to more government debt, rather than the reverse. Additionally, that R&R largely treated debt levels as a binary—either equal to or above 90 percent of GDP or below 90 percent of GDP—rather than a continuous variable could play a role. If they were to use debt levels as a continuous variable, they could model a relationship that reveals how each additional point of the debt-to-GDP ratio correlates to growth rates. Their method, however, merely sorted countries into two buckets: those with a “debt overhang” (their term, seemingly coined here, for when debt/GDP is greater than 90 percent) and those without. Then they more or less just took the averages (the averages were country-weighted in the original R&R). 

R&R’s arbitrary 90 percent threshold is also worth discussing. For a start, the way that this threshold is determined is somewhat ambiguous, but it seems pertinent that when R&R published their most influential paper in 2010, that was a level that seemed to be fast approaching for many wealthy countries. Yet when HAP corrected the computational errors, the entire difference in growth rates was determined by the extreme outliers—that is, countries with debt-to-GDP ratios below 30 percent or above 120 percent. The UMass paper showed that, without those extreme outliers, there was no longer any strong correlation between debt and economic growth. 

Another issue with the use of debt-to-GDP is that it does not account for government assets. Governments can raise revenue at any point by selling off ships, planes, tanks, land, buildings, and more or by selling intellectual property rights or exclusive leasing or permitting to companies. That there isn’t a serious effort to do so after countries hit that 90 percent threshold (or even go well past it) seems to indicate that in practice, the impacts of a debt overhang are preferable to taking extreme measures to stay below the red line. 

Now R&R have insisted that they were never pushing austerity—and in fairness, they did include the caveat that fiscal stimulus should have been rolled back slowly. They never seemed to mind, however, that they were made famous by politicians like former Speaker of the House Paul Ryan and former British Chancellor George Osborne, who constantly cited R&R as a reason to impose austerity as rapidly as they could. In the wake of the controversy created by HAP’s 2013 debunking of “Growth in a Time of Debt,” journalist John Cassidy pointed out how R&R’s protestations in response to the austerity-pusher critiques completely clashed with the way R&R had marketed the paper when it was first published. Indeed, R&R were among 20 economists who publicly backed Osborne’s austerity policy in an open letter to The Sunday Times in February of 2010. 

The revelation of terrible data management and the defensive response from R&R was enough for Cassidy to question whether listening to any economists at all was worthwhile. You would think, at the very least, economic reporters would discount R&R’s opinions on fiscal matters, but they haven’t even done that. For a mistake that would have likely derailed anyone with a less impressive pedigree, R&R have bounced back, still producing research, still pushing a (somewhat) toned down version of their argument from “Growth in the Time of Debt,” and still opining on economic policy in the media. Rogoff, in particular, is still quoted aggressively (as shown in the table above) and is using the new era of high interest rates to try and resurrect his old pet theory. 

Old Wine in New Bottles

To be clear, unsustainably high levels of debt can be extremely problematic. But remember, that is not what R&R were saying. They were arguing that countries that experienced a debt overhang suffered long-term (economically significant) negative effects to their growth rates. Trying to use present circumstances to say, “See, we were right all along and all those people who decried our calls for fiscal responsibility were fools,” which is essentially what Rogoff has argued in a couple of op-eds this year, relies on a mischaracterization of both what R&R actually said and what their critics argued. In particular, Rogoff points to Adam Tooze using the word “austerity” over 100 times in his book Crashed. It is true that not all fiscal responsibility is austerity, and that not all austerity is fiscally responsible. But when Rogoff says things like Biden and Trump would both “blow up the debt,” he’s clearly hinting that mere “responsibility” is not all that he’s after. 

After President Biden’s 2024 State of the Union address, Rogoff told Bloomberg that “Biden’s speech suggested blowing up the debt.” This is simply false, as Biden called for his policy proposals to be funded by higher taxes on the wealthy. Plus, this story ran after the president released his budget proposal, which includes cutting the deficit by $3 trillion annually. Maybe, Rogoff was interviewed before that, but anyone serious about advising policy as a neutral expert would have offered an updated statement. Would the debt continue to grow under Biden’s plan? Yes. Would it “blow up”? No.

And while Rogoff also asserts that Trump would likely blow up the budget, he includes the caveat that “we really have no idea what Donald Trump will do.” Anyone who creates this level of false equivalency between Biden and Trump on responsible budgeting is either oblivious or a total hack. Rogoff is known for Republican leanings; he advised John McCain in 2008 and reportedly “warmed up” to Trump after he took office. 

Add it all up and we have a conservative economist who helped create a global push for austerity trying to resurrect that narrative, implying that Biden is no better than Trump on budget issues. 

Rogoff’s legacy is one of creating cover for conservative governments to prematurely abandon fiscal stimulus, leaving millions of people out of work. What rocketed “Growth in a Time of Debt” to its high status among economists was how clear and dramatic it found the risk of high debt to be. That was proven to be bunk. But it was deeply rooted in the ethos of the austerity movement, so much so that the hawks at the Committee for a Responsible Federal Budget felt the need to defend their own position in the wake of the R&R controversy. Why is Rogoff still in reporters’ rolodexes?

Are the curtains closing on TikTok? The sudden arrival on stage of the TikTok Divest-or-Ban law would seem to indicate so. TikTok’s rivalrous understudies—especially Facebook and Google—wait impatiently in the wings, salivating over the prospect of capturing the company, its users, or, most tantalizing, its advertisers’ dollars.[1] But peek behind the curtain and you might see a highly stylized, kabuki theatre performance orchestrated by none other than Dark Brandon, President Biden’s no-nonsense alter-ego.[2] 

To avoid getting swept off our feet with all the razzle-dazzle, let’s the run the “before they were stars” reel.

• 2017: TikTok was born when Chinese-based ByteDance bought US-based Musical.ly
• 2019: TikTok entered into a consent order with Trump’s Federal Trade Commission in connection with certain pre-2017 children’s privacy issues. In this settlement, TikTok agreed to be subject to a permanent injunction from a federal court, as well as future FTC oversight.[3]
• 2020: Trump’s Committee on Foreign Investment in the United States (CFIUS) recommended a ban, and Trump did that via an executive order. Multiple federal courts banned the bans on a variety of legal grounds, explicitly pointing to the lack of evidence.
• 2021: Biden revoked Trump’s executive order targeting TikTok and replaced it with a new order directing the Commerce Department to review apps with ties to foreign adversaries like China. Biden’s order emphasized a “rigorous, evidence-based analysis” to evaluate potential risks posed by apps like TikTok.
• 2022:  TikTok launched Project Texas, the plan to cordon off TikTok’s functions involving access to US user data and content moderation decisions, isolating these from potential Chinese government interference, with extensive oversight and control by the American company Oracle, CFIUS, and additional independent auditors.

And that’s where things stood until the 2022 midterm elections, when Republicans won a slim majority in the House. That led to the 2023 creation of the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party, a name definitely not ad-libbed by its chairman, Michael Gallagher (R-WI).[4] He is not a fan of Project Texas, the TikTok plan to resolve concerns about potential Chinese exploitation of Americans via the app (described above). Gallagher had seen this show many times before and knew the lines by heart—at the right moment, grab the spotlight and ban TikTok. Behind the scenes, he drafted a law that would accomplish just that. Or so he thought.

With great fanfare, on March 5, 2024, Gallagher introduced the “Protecting Americans from Foreign Adversary Controlled Applications Act,” braying that “TikTok’s time in the United States is over.”[5]  The bill has a showstopping feature. He put the headliners—TikTok and ByteDance—in big, bright lights.[6]  By explicitly naming them in the law, Gallagher avoided presidential hijinks—the law is self-effectuating, without any need to rely on Biden (given his apparent Project Texas acquiescence). Instead, the law imposes financial penalties on third-party gatekeepers (like Apple and Google app stores) to ensure they drop the platform like an aging starlet when the divest-or-ban deadline arrives. Gallagher’s visionary directorial choice seemed even more inspired when Trump, in a wild plot twist, vocally supported TikTok after the bill was unveiled. Trump’s stated explanation was that such a ban would benefit Facebook. Regardless of rationale, the law closes all loopholes for a president to slow or stop a TikTok ban post-enactment. Under the law, neither President Biden nor a possible President Trump have any mechanism or maneuver to settle or slow that ban. At least, that was the script.

To cut to the climactic moment, Gallagher’s bill was quickly passed by the House, went on ice in the Senate, was reincarnated in must-pass appropriation bill, and signed by the president. And, as expected, promptly challenged in court. But understanding the details of that legislative journey shows why this law will be rejected by the court—without much need to substantively consider the merits of the privacy or national security allegations. This is how Dark Brandon arrived on stage, operating in the shadows instead of the limelight, no doubt delightfully watching Gallagher hoist himself on his own petard with his overly clever and rushed legislating.[7]

Under a suspension of House rules choreographed by Speaker Johnson (R-LA), a procedural gambit usually reserved for uncontroversial bills, the House voted in favor of Gallagher’s bill on March 13, 2024, just eight days after its introduction.[8] During the intervening days, only one House hearing occurred: the House committee responsible for advancing the bill met on March 7—but in secret and under an unusual expedited rule that is rarely invoked. While secret sessions are usually transcribed, and could be made public, there is no mechanism to release them solely to a court considering a constitutional challenge to the law.[9] Two days before the full House vote, the committee introduced into the record a short document that is mostly comprised of citations to unverified news reports.[10] One day prior to the full vote, House members met in an “informal, confidential briefing” with national security officials—these briefings are never transcribed or recorded—and House members had contradictory reactions to the import of the shared information.[11]

After the bill passed the House, it went to the Senate, where astute observers expected it to languish before Senator Cantwell, in charge of the assigned Senatorial casting couch (Commerce Committee). Reading the same cue cards, Johnson and Gallagher plotted next steps. After five weeks, they had their blue script.[12] On April 18, a little over five weeks after the bill arrived in the Senate, Gallagher and Johnson cast it aside. The new “it girl” was the must-pass appropriations bill just received from the Senate, for $95 billion in aid to Ukraine and Israel, a matter near and dear to Democrats, as they well-knew. Gallagher tweaked the bill’s divestment timeline and Johnson attached Gallagher’s revised bill to the appropriations bill; in exchange, Biden and Cantwell made public statements that they would sign the appropriations bill with the TikTok ban.[13]  The full House voted on April 20, with final passage on April 24. Per the statute, TikTok had 165 days to file a legal challenge (October) and 270 days to divest (January).[14]

Continuing the breakneck pace, TikTok filed an earlier-than-expected legal challenge on May 7, asserting violations of First Amendment, Bill of Attainder, and Fifth Amendment.[15] But, like going to the opera, you don’t need to understand the words to understand this play. All you need to know is that TikTok challenged the constitutionality of the law, and the only way the government can overcome those challenges is with sufficient evidence of national security danger.

Ah but there’s the rub. What is the evidence of national security danger? Let’s welcome to the stage with a big round of applause….. Dark Brandon! Following Gallagher-Johnson’s first misstep in explicitly naming TikTok in the law (thus squarely implicating constitutional rights),[16] the duo made a second misstep—a rushed enactment, leaving the record devoid of meaningful evidence with which to justify the law. On that empty stage, Dark Brandon alone decides what evidence (if any) to present.

Deference to Biden’s assessment of TikTok’s danger can hardly be what Gallagher envisioned. After all, avoiding that reliance was the driving impetus for the bill. Take an intermission to consider big-picture what evidence Dark Brandon is likely to submit in the absence of any meaningful House record. One presumes that the Biden administration does not possess robust evidence of national security danger, or this administration would have earlier pursued a ban. Even if such evidence exists, how likely is it that Dark Brandon will present it to the court; wouldn’t that only demonstrate that he failed to protect the public himself via CFIUS?[17]   

This evidentiary misstep is joined with a third error, a flawed set design that Dark Brandon will use as a trap door to make the law disappear. The law has a weird framing for TikTok’s constitutional challenge, requiring the company to file its case in the DC Court of Appeals rather than the standard off-Broadway opening at a federal district court. Perhaps Gallagher perceived district judges as more likely to rule in TikTok’s favor; perhaps he was trying to deprive TikTok of forum selection.[18] Regardless, the statute’s jurisdictional mandate means no procedure exists for conducting discovery or presenting evidence.[19] Instead, the parties (and court) will play it by ear. They plan to submit evidence by attaching exhibits to their briefs, an indication the evidence will be minimal.[20] Moreover, Dark Brandon has indicated that he might not submit anything particularly sensitive, making no plans to litigate pursuant to the Classified Information Procedures Act.[21] He has indicated he might submit evidence under seal and on an ex parte basis—which means no one, not TikTok, not Gallagher, will ever know what that evidence is or whether it was weak.[22] 

And finally, Gallagher’s not-ready-for-prime-time bill has yet-another flaw that Dark Brandon no doubt recognized would increase the likelihood of judicial invalidation. In his histrionic pursuit of TikTok, Gallagher insisted on an extremely short lead-up to the ban. He picked a date out of thin air, with no rhyme or reason. The date arrives so soon, even with the trivially enlarged time in the amended bill, that it is practically impossible for the company to divest. The court will perceive the “divest or ban” law as a pure ban, a staging that favors TikTok. In addition, a fast-approaching date translates into expedited briefing and decision-making.[23] In rushed proceedings, judges favor the status quo. That is particularly true here, where the relevant burdens of proof likely favor TikTok.

One final foreshadowing: Gallagher’s attempt to upstage the president with an eccentric judicial route failed to take into account who gets to call “cut” to end scene. Assuming TikTok prevails in the appellate court, the president alone decides whether to seek review by the Supreme Court.[24]  It is unlikely that either Biden or Trump pursues an appeal to the Supreme Court, given that neither of them desires a TikTok ban on these terms. They will leave the law on the cutting room floor.[25]  Facebook and Google will plot other ways to undermine TikTok’s success.

With deft maneuvering, Dark Brandon used Gallagher-Johnson’s lust for a TikTok ban against them. Without jeopardizing his own China hawk bona fides, he traded nothing (a TikTok ban that will die in court) for something (Ukraine/Israel aid), all the while maintaining strategic flexibility on numerous China topics and the ability to protect Americans from actual harm when and if it arises (via the CFIUS hammer).[26] A standing ovation for Dark Brandon!

Megan Gray is the founder of GrayMatters Law & Policy, a boutique firm focused on Information, Internet, Innovation, and Intangibles. Megan has worked as corporate counsel, litigator, and lobbyist for startups, established companies, non-profit organizations, individuals, and trade associations. 

[1] “How Google, Meta and Snap’s battle with TikTok in short-form video is playing out,” https://digiday.com/marketing/how-google-meta-and-snaps-battle-with-tiktok-in-short-form-video-is-playing-out/. See also https://www.economist.com/business/2024/03/13/will-tiktok-still-exist-in-america (“If Americans redirect the roughly 3 trillion minutes of attention they lavished on TikTok last year to other apps already on their phones, Meta and Alphabet, the dominant duo in online advertising, will be the winners.”).

[2] Dark Brandon is a satirical anti-hero of President Biden that emerged as an internet meme in 2022. It portrays Biden as a powerful, no-nonsense leader who is not to be trifled with. On cue, President Biden joined TikTok on Feb. 12, 2024 with a Dark Brandon meme. On June 3, 2024, Trump also joined TikTok, further underscoring the lack of genuine security concerns with the platform.

[3] As the name indicates, this court order on TikTok’s privacy practices is permanent — it never expires. Interestingly, the Democrat commissioners explained in a concurring statement that they wanted to include TikTok’s officers in the consent order but the Republican commissioners would not agree.

[4] Conveniently for the theme of this essay, his wife is a Broadway actress.

[5] https://selectcommitteeontheccp.house.gov/media/press-releases/gallagher-bipartisan-coalition-introduce-legislation-protect-americans-0

[6] Division H, Section 2(g)(3)(A)(i) and (ii). The headings underscore the statute’s oddity, with the law dependent on the Definitions section to expressly categorize TikTok and ByteDance as “foreign adversary controlled application,” while excluding everything else, leaving that large universe for presidential evaluation similar to standard CFIUS review. Bafflingly, Gallagher did not include a “findings” section in the statute whereby Congress would assert its factual determinations and purposes that justify the law. See https://lawreview.uchicago.edu/print-archive/enacted-legislative-findings-and-purposes. Including Findings is commonplace and Gallagher gave no explanation for their absence. Courts often look to these Findings when assessing the constitutionality of a law, particularly when the connection to Congress’ power is not self-evident.

[7] People outside the DC bubble might wonder why Biden signed the bill if he was not in favor of it. Suffice to say that Biden wouldn’t win the election year Oscar by letting Gallagher-Johnson goad him into defending TikTok. While Biden certainly recognizes the severe harm that an enemy-controlled social network could inflict, he won’t win votes by explaining the constitutional limitations in preventing speculative harm via an information platform. Of note, some tea-leaf readers believe Biden signed the bill after rejecting TikTok’s idea to give the government the conductor’s wand to run the show (or end it, if desired). But rejecting a preposterous idea does not equate to a decision to shut down the platform. Vetting officers and evaluating terrabytes of content — in essence, running TikTok — would require staff and expertise well-outside the government’s ambit, and, more importantly, be cultural and political quicksand. https://www.washingtonpost.com/technology/2024/05/29/tiktok-cfius-proposal-rejected/; https://www.washingtonpost.com/technology/2023/03/07/tiktok-ban-senate-proposal/.

[8] https://www.congress.gov/bill/118th-congress/house-bill/7521/all-actions

[9] It’s unclear if anything significant occurred during the secret session apart from the vote roll call. https://crsreports.congress.gov/product/pdf/R/R42106. See House Rule 11, section 2(g)(1), https://budgetcounsel.com/laws-and-rules/%C2%A7361-house-rule-xi-procedures-of-committees-and-unfinished-business/

[10] The report is 18 pages, but stripping away everything except the purported evidence leaves less than a single page. https://www.congress.gov/congressional-report/118th-congress/house-report/417/1. It’s unclear what role, if any, this “legislative history” will play in the court case. Legislative history refers to the documents produced by Congress during the process of enacting a law. These documents can be used to help determine congressional intent or clarify ambiguous statutory language, but the intent and language in the TikTok ban are clear. The evidence in support of the ban, however, is not. Because the evidence is not part of the legislative history, the court may decline to consider it at all, or give it less weight because it was not directly considered by the legislators voting on the final bill.

[11] https://himes.house.gov/2024/3/himes-statement-on-protecting-americans-from-foreign-adversary-controlled-applications-act

[12] Standard operating procedure for screenwriting is to assign different colored paper to each new revised version of the script. The typical color sequence for script revisions is white (original script), blue revision, pink revisions, etc. https://en.wikipedia.org/wiki/Shooting_script

[13] Notably, Biden issued a press release on the day he signed the bill into law — but he did not mention TikTok at all, only about Ukraine/Israel. https://www.whitehouse.gov/briefing-room/presidential-actions/2024/04/24/bill-signed-h-r-815/; https://www.morningstar.com/news/marketwatch/20240418277/bill-that-could-lead-to-tiktok-ban-gets-potential-new-path-to-becoming-law-soon; https://www.congress.gov/bill/118th-congress/house-bill/815/all-actions

[14] Prior to the divest/ban date, the statute requires TikTok to build a special portability conduit to deliver user data to individual users.

[15] The First Amendment is of course about free speech. The Fifth Amendment is about due process. Under the Fifth Amendment, TikTok also alleged improper taking of private property without compensation. Fewer people are familiar with the constitutional prohibition on bills of attainder. Attainder is a legislative act that declares someone guilty of a crime and punishes them without a trial, imposing punishment on them, such as seizing property. Bills of attainder violate the constitutional principles of separation of powers by allowing the legislature to exercise judicial powers, and due process by punishing without trial (Constitution Article I, Section 9).

[16] Constitutional law nerds will appreciate that, by this devise, TikTok’s challenge is both “as applied” and “facial,” given the peculiar nature of the law, which namechecks TikTok for banning. This provides TikTok with an easier legal standard for review of its constitutional claims.

[17] In the future, if the government obtains sufficient evidence on the national security danger, the government will still have the ability to seek a ban via CFIUS, albeit perhaps on a different component of that authority than what Trump used.

[18] Another possibility is that Gallagher (a non-lawyer) opted for the appellate court as his “second choice” after learning that he couldn’t require TikTok to go straight to the Supreme Court. Congress cannot expand the Court’s original jurisdiction beyond what is stated in the Constitution.  https://en.wikipedia.org/wiki/Original_jurisdiction_of_the_Supreme_Court_of_the_United_States

[19] As the parties noted in a court filing, the law’s designation of the appellate court as the court of original jurisdiction means that neither the Federal Rules of Civil Procedure nor the Rules of Appellate Procedure apply, and there is no underlying judicial or administrative record of evidence. Because they have creative license, the parties could ask for the appointment of a special master to oversee discovery, but neither did so. See https://storage.courtlistener.com/recap/gov.uscourts.cadc.40861/gov.uscourts.cadc.40861.1208624137.0.pdf

[20] The DC Court of Appeals doesn’t have a rule for page limits on exhibits attached to briefs, and no one knows what rules apply here in any event. That said, standard practice in other courts is less than 40 pages. https://www.cadc.uscourts.gov/internet/home.nsf/Content/VL%20-%20RPP%20-%20Circuit%20Rules/%24FILE/RulesFRAP20240401.pdf

[21] Expert Backgrounder: Secret Evidence in Public Trials Protecting defendants and national security under the Classified Information Procedures Act (CIPA), https://www.justsecurity.org/86812/secret-evidence-in-public-trials-protecting-defendants-and-national-security-under-the-classified-information-procedures-act/. Indeed, the government seems to contemplate nothing more than a plain-vanilla protective order for confidential business information to protect business interests. See Joint Motion for Stipulated Protective Order, https://www.courtlistener.com/docket/68506893/01208630251/tiktok-inc-v-merrick-garland/

[22] If the government submits secret evidence, TikTok will presumably double down on its due process violation claim.

[23] Briefing is scheduled to be complete by August 15, with oral argument on September 16.

[24] The wacky pathway that Gallagher imposed for legal challenges to the law raises the prospect that the Supreme Court could be deprived of jurisdiction to hear an appeal even if sought by a party. https://www.reuters.com/legal/transactional/column-no-judge-shopping-tiktok-2024-05-08/  Related, depending on when the appellate court issues its decision, Dark Brandon could also deprive the next president of the ability to seek Supreme Court review. For the Supreme Court to hear a case, a party must file a petition for writ of certiorari within 90 days of entry of the appellate court decision. The 90th day prior to January 20, 2025 (when Trump might be sworn in) is October 22, 2024.

[25] Gallagher’s swan song ends on a bitter note, with no encore — he has resigned from Congress.

[26] Tellingly, the Chinese government seems unperturbed by the new law, even sending new pandas to the DC zoo as part of a positive diplomatic upswing. https://en.wikipedia.org/wiki/Panda_diplomacy and https://www.axios.com/local/washington-dc/2024/05/29/giant-pandas-return-dc-national-zoo.

The Justice Department’s pending antitrust case against Google, in which the search giant is accused of illegally monopolizing the market for online search and related advertising, revealed the nature and extent of a revenue sharing agreement (“RSA”) between Google and Apple. Pursuant to the RSA, Apple gets 36 percent of advertising revenue from Google searches by Apple users—a figure that reached $20 billion in 2022. The RSA has not been investigated in the EU. This essay briefly recaps the EU law on remedies and explains why choice screens, the EU’s preferred approach, are the wrong remedy focused on the wrong problem. Restoring effective competition in search and related advertising requires (1) the dissolution of the RSA, (2) the fostering of suppressed publishers and independent advertisers, and (3) the use of an access remedy for competing search-engine-results providers.

EU Law on Remedies

EU law requires remedies to “bring infringements and their effects to an end.” In Commercial Solvents, the Commission power was held to “include an order to do certain acts or provide certain advantages which have been wrongfully withheld.”

The Commission team that dealt with the Microsoft case noted that a risk with righting a prohibition of the infringement was that “[i]n many cases, especially in network industries, the infringer could continue to reap the benefits of a past violation to the detriment of consumers. This is what remedies are intended to avoid.” An effective remedy puts the competitive position back as it was before the harm occurred, which requires three elements. First, the abusive conduct must be prohibited. Second, the harmful consequences must be eliminated. For example, in Lithuanian Railways, the railway tracks that had been taken away were required to be restored, restoring the pre-conduct competitive position. Third, the remedy must prevent repetition of the same conduct or conduct having an “equivalent effect.” The two main remedies are divestiture and prohibition orders.

The RSA Is Both a Horizontal and a Vertical Arrangement

In the 2017 Google Search (Shopping) case, Google was found to have abused its dominant position in search. In the DOJ’s pending search case, Google is also accused of monopolizing the market for search. In addition to revealing the contours of the RSA, the case revealed a broader coordination between Google and Apple. For example, discovery revealed there are monthly CEO-to-CEO meetings where the “vision is that we work as if we are one company.” Thus, the RSA serves as much more than a “default” setting—it is effectively an agreement not to compete.

Under the RSA, Apple gets a substantial cut of the revenue from searches by Apple users. Apple is paid to promote Google Search, with the payment funded by income generated from the sale of ads to Apple’s wealthy user base. That user base has higher disposable income than Android users, which makes it highly attractive to those advertising and selling products. Ads to Apple users are thought to generate 50 percent of ad spend but account for only 20 percent of all mobile users.

Compared to Apple’s other revenue sources, the scale of the payments made to Apple under the RSA is significant. It generates $20 billion in almost pure profit for Apple, which accounts for 15 to 20 percent of Apple’s net income. A payment this large and under this circumstance creates several incentives for Apple to cement Google’s dominance in search:

• Apple is incentivized to promote Google Search. This encompasses a form of product placement through which Apple is paid to promote and display Google’s search bar prominently on its products as the default. As promotion and display is itself a form of abuse, the treatment provides a discriminatory advantage to Google.
• Apple is incentivized to promote Google’s sales of search ads. To increase its own income, Apple has an incentive to ensure that Google Search ads are more successful than rival online ads in attracting advertisers. Because advertisers’ main concern is their return on their advertising spend, Google’s Search ads need to generate a higher return on advertising investment than rival online publishers. 
• Apple is incentivized to introduce ad blockers. This is one of a series of interlocking steps in a staircase of abuses that block any player (other than Google) from using data derived from Apple users. Blocking the use of Apple user data by others increases the value of Google’s Search ads and Apple’s income from Apple’s high-end customers.
• Apple is incentivized to block third-party cookies and the advertising ID. This change was made in its Intelligent Tracking Prevention browser update in 2017 and in its App Tracking Transparency pop-up prompt update in 2020. Each step further limits the data available to competitors and drives ad revenue to Google search ads.
• Apple has a disincentive to build a competing search engine or allow other browsers on its devices to link to competing search engines or the Open Web. This is because the Open Web acts as a channel for advertising in competition with Google.
• Apple has a disincentive to invest in its browser engine (WebKit). This would allow users of the Open Web to see the latest videos and interesting formats for ads on websites. Apple sets the baseline for the web and underinvests in Safari to that end, preventing rival browsers such as Mozilla from installing its full Firefox Browser on Apple devices.

The RSA also gives Google an incentive to support Apple’s dominance in top end or “performance smartphones,” and to limit Android smartphone features, functions and prices in competition with Apple. In its Android Decision, the EU Commission found significant price differences between Google Android and iOS devices, while Google Search is the single largest source of traffic from iPhone users for over a decade.

Indeed, the Department of Justice pleadings in USA v. Apple show how Apple has sought to monopolize the market for performance smartphones via legal restrictions on app stores and by limiting technical interoperability between Apple’s system and others. The complaint lists Apple’s restrictions on messaging apps, smartwatches, and payments systems. However, it overlooks the restrictions on app stores from using Apple users’ data and how it sets the baseline for interoperating with the Open Web. 

It is often thought that Apple is a devices business. On the contrary, the size of its RSA with Google means Apple’s business, in part, depends on income from advertising by Google using Apple’s user data. In reality, Apple is a data-harvesting business, and it has delegated the execution to Google’s ads system. Meanwhile, its own ads business is projected to rise to $13.7 billion by 2027. As such, the RSA deserves very close scrutiny in USA v. Apple, as it is an agreement between two companies operating in the same industry.

The Failures of Choice Screens

The EU Google (Search) abuse consisted in Google’s “positioning and display” of its own products over those of rivals on the results pages. Google’s underlying system is one that is optimized for promoting results by relevance to user query using a system based on Page Rank. It follows that promoting owned products over more relevant rivals requires work and effort. The Google Search Decision describes this abuse as being carried out by applying a relevance algorithm to determine ranking on the search engine results pages (“SERPs”). However, the algorithm did not apply to Google’s own products. As the figure below shows, Google’s SERP has over time filled up with own products and ads.

To remedy the abuse, the Decision compelled Google to adopt a “Choice Screen.” Yet this isn’t an obvious remedy to the impact on competitors that have been suppressed, out of sight and mind, for many years. The choice screen has a history in EU Commission decisions.

In 2009, the EU Commission identified the abuse Microsoft’s tying of its web browser to its Windows software. Other browsers were not shown to end users as alternatives. The basic lack of visibility of alternatives was the problem facing the end user and a choice screen was superficially attractive as a remedy, but it was not tested for efficacy. As Megan Grey observed in Tech Policy Press, “First, the Microsoft choice screen probably was irrelevant, given that no one noticed it was defunct for 14 months due to a software bug (Feb. 2011 through July 2012).” The Microsoft case is thus a very questionable precedent.  

In its Google Android case, the European Commission found Google acted anticompetitively by tying Google Search and Google Chrome to other services and devices and required a choice screen presenting different options for browsers. It too has been shown to be ineffective. A CMA Report (2020) also identified failures in design choices and recognized that display and brand recognition are key factors to test for choice screen effectiveness.

Giving consumers a choice ought to be one of the most effective ways to remedy a reduction of choice. But a choice screen doesn’t provide choice of presentation and display of products in SERPs.  Presentations are dependent on user interactions with pages. And Google’s knowledge of your search history, as well as your interactions with its products and pages, means it presents its pages in an attractive format. Google eventually changed the Choice Screen to reflect users top five choices by Member State. However, none of these factors related to the suppression of brands or competition, nor did it rectify the presentation and display’s effects on loss of variety and diversity in supply. Meanwhile, Google’s brand was enhanced from billions of user’s interactions with its products.

Moreover, choice screens have not prevented rival publishers, providers and content creators from being excluded from users’ view by a combination of Apple’s and Google’s actions. This has gone on for decades. Alternative channels for advertising by rival publishers are being squeezed out.

A Better Way Forward

As explained above, Apple helps Google target Apple users with ads and products in return for 36 percent of the ad revenue generated. Prohibiting that RSA would remove the parties’ incentives to reinforce each other’s market positions. Absent its share of Google search ads revenue, Apple may find reasons to build its own search engine or enhance its browser by investing in it in a way that would enable people to shop using the Open Web’s ad funded rivals. Apple may even advertise in competition with Google.  

Next, courts should impose (and monitor) a mandatory access regime. Applied here, Google could be required to operate within its monopoly lane and run its relevance engine under public interest duties in “quarantine” on non-discriminatory terms. This proposal has been advanced by former White House advisor Tim Wu:

I guess the phrase I might use is quarantine, is you want to quarantine businesses, I guess, from others. And it’s less of a traditional antitrust kind of remedy, although it, obviously, in the ‘56 consent decree, which was out of an antitrust suit against AT&T, it can be a remedy. And the basic idea of it is, it’s explicitly distributional in its ideas. It wants more players in the ecosystem, in the economy. It’s almost like an ecosystem promoting a device, which is you say, okay, you know, you are the unquestioned master of this particular area of commerce. Maybe we’re talking about Amazon and it’s online shopping and other forms of e-commerce, or Google and search.

If the remedy to search abuse were to provide access to the underlying relevance engine, rivals could present and display products in any order they liked. New SERP businesses could then show relevant results at the top of pages and help consumers find useful information.

Businesses, such as Apple, could get access to Google’s relevance engine and simply provide the most relevant results, unpolluted by Google products. They could alternatively promote their own products and advertise other people’s products differently. End-users would be able to make informed choices based on different SERPs.

In many cases, the restoration of competition in advertising requires increased familiarity with the suppressed brand. Where competing publishers’ brands have been excluded, they must be promoted. Their lack of visibility can be rectified by boosting those harmed into rankings for equivalent periods of time to the duration of their suppression. This is like the remedies used for other forms of publication tort. In successful defamation claims, the offending publisher must publish the full judgment with the same presentation as the offending article and displayed as prominently as the offending article. But the harm here is not to individuals; instead, the harm redounds to alternative publishers and online advertising systems carrying competing ads. 

In sum, the proper remedy is one that rectifies the brand damage from suppression and lack of visibility. Remedies need to address this issue and enable publishers to compete with Google as advertising outlets. Identifying a remedy that rectifies the suppression of relevance leads to the conclusion that competition between search-results-page businesses is needed. Competition can only be remedied if access is provided to the Google relevance engine. This is the only way to allow sufficient competitive pressure to reduce ad prices and provide consumer benefits going forward.

The authors are Chair Antitrust practice, Associate, and Paralegal, respectively, of Preiskel & Co LLP. They represent the Movement for an Open Web versus Google and Apple in EU/US and UK cases currently being brought by their respective authorities. They also represent Connexity in its claim against Google for damages and abuse of dominance in Search (Shopping).