The European Union Just Showed Democrats How To Take On Monopolies

U.S. Democrats have been soft on Big Tech.

WASHINGTON ― European antitrust officials slapped Google with a record $2.7 billion fine on Tuesday for manipulating search results to favor its own services.

The ruling, which came after a seven-year investigation, exposes what critics described as the failure of U.S. regulators to rein in monopolies at home, forcing their victims to seek recourse in the European Union.

“The U.S. does not do antitrust regulation,” Matt Stoller, an antitrust expert at the nonpartisan New America Foundation’s Open Markets program, told HuffPost. “That’s the key difference. [Europeans] actually do antitrust.”

But what is most surprising about America’s kid-gloves approach to antitrust policy is that it is not limited to Republicans, who are often open about their philosophical objections to regulating monopolistic behavior. In recent decades, influential Democrats have proved just as, if not more, willing to let companies with concentrated financial power off the hook, experts told HuffPost.

“It would be hard to be worse than the [Obama] administration on this,” Stoller said. “The failure of leadership was incredibly profound. That said, it could always get worse, but I don’t think we know enough.”

A monopoly is a company that controls such a large share of an industry that it has the power to dictate prices or engage in other behavior that limits competition. Sometimes companies without sole monopoly power conspire to control prices, forming what are known as cartels.

For many Americans, the word “monopoly” conjures images of robber baron-owned railroad and steel conglomerates from the turn of the 20th century. The trust-busting policies of former President Theodore Roosevelt put an end to them, a certain popular wisdom goes, giving us the thriving, competitive economy we have today.

In reality, as Stoller laid out in a lengthy essay in The Atlantic in October, cutting monopoly business and financial power down to size was the product of constant battles with big money interests that picked up significantly during the New Deal of the 1930s.

Responding to the banking abuses that led to the Great Depression, populist Democrats, often from rural parts of the country, battled the monopolies of their era in order to protect their constituent farmers and local businesses. Antitrust legislation allowed for companies that grew too large or abused their size to be fined or broken up, and Congress, together with the executive branch’s Federal Trade Commission, often put those laws to work.

The Google logo adorns the entrance of Google's Germany headquarters in Hamburg.
The Google logo adorns the entrance of Google's Germany headquarters in Hamburg.
Morris MacMatzen / Reuters

For several decades, their policing paid off: There were no major financial crises, small towns thrived and the typical worker’s pay climbed steadily.

But by the mid-1970s, a new generation of Democrats concluded that the tight regulation of the New Deal era was outdated, or at least in need of less vigilant enforcement, according to Stoller.

Monopolies swelled once again, leading to the present day, when concentrated wealth and anticompetitive behavior are just as often the province of socially liberal tech giants as that of Wall Street or traditional industry.

Google and Facebook, for example, together now rake in some 85 percent of all internet advertising dollars.

It’s that kind of power that companies can use to prevent new players from entering the market and cripple those that manage to rear their heads. In one infamous case, Google drove the small website to the brink of extinction in 2016 by offering the site’s data in its search results without consent, effectively depriving the upstart company of most of its traffic, the lifeblood of its business.

The divergent U.S. and European approaches to Google’s behavior in recent years exemplify the transatlantic divide on antitrust policy and the key role Democrats have played in lax enforcement in the U.S.

The Obama administration opted not to sue the tech giant, against the advice of its own antitrust division, according to The Wall Street Journal. In 2012, FTC officials reckoned that Google abused and relied on anticompetitive strategies in ways that unfairly disadvantaged both internet users and rival businesses, according to an unredacted report accidentally sent to the Journal in 2015. The agency report recommended bringing a lawsuit against Google in what would easily have been the biggest antitrust case since the Justice Department sued Microsoft in the 1990s for abusing its dominance in the hardware market to sell its software.

The FTC disputed the Journal’s report, claiming the “Commission’s decision on the search allegations was in accord with the recommendations of the FTC’s Bureau of Competition, Bureau of Economics, and Office of General Counsel.

“Some of the FTC’s staff attorneys on the search investigation raised concerns about several other Google practices. In response, the Commission obtained commitments from Google regarding certain of those practices. Over the last two years, Google has abided by those commitments.”

Indeed, in 2013, FTC commissioners voted unanimously to end the investigation after Google agreed to make some minor tweaks, giving advertisers more control over data from ad campaigns and websites the choice to opt out of search results. Then-Chairman Jon Leibowitz said the voluntary changes provided “more relief for American consumers faster than any other option.”

Leibowitz, who now represents corporate clients, including cable giant Comcast, on antitrust matters, declined to comment on the record for this article. A spokesman for former President Barack Obama did not immediately respond to a request for comment.

But as part of the agreement with the U.S. government, Google made no commitments to stop promoting its own e-commerce, food reviews and other services over competitors or to halt deals with websites that publish its search results to ice out rival search engines. So companies such as Yelp, Expedia and News Corp. turned to regulators at the European Commission, an EU governing body, to take action.

“In Europe, they’re more aggressive about dominance,” Robert Lande, a law professor at the University of Baltimore, told HuffPost. “In the U.S., there’s a really strong presumption that you got your dominance by efficiency, by something that’s good for consumers, and you maintain it by efficiency. Only once in a blue moon do we step over the line and say you got your dominance through something anticompetitive.”

Part of the problem may be that U.S. laws set a higher bar for what constitutes unfair market dominance, according to Harry First, a law professor at New York University.

“It would be hard to be worse than the [Obama] administration on this. The failure of leadership was incredibly profound.”

- Matt Stoller, antitrust expert at the New America Foundation

“In the U.S., you have to show that Google used its position in one market to get a monopoly in the other market, so they’d have to acquire a monopoly or be getting close to getting a monopoly,” First told HuffPost. “In Europe, you don’t have to show that. You just have to show that you are gaining some sort of advantage in that other market.”

Critics accuse the EU of a bias against U.S. companies and point to the dominance of U.S. giants across Europe as evidence that the continent’s regulatory regimes stifle its tech sectors. Last August, EU antitrust officials ordered Apple to pay Ireland up to $14.5 billion in taxes. In May, the commission fined Facebook about $122 million for providing regulators with misleading statements during the social networking behemoth’s $19 billion acquisition of the messaging service WhatsApp.

Those critics include several Democratic House members, particularly from districts where large tech companies reside. In November 2014, six House Democrats joined six Republican colleagues in a letter to top EU parliamentarians arguing against a resolution supportive of breaking up part of Google into separate companies. Ten of the 12 members of Congress received donations from Google.

In the run-up to the EU’s recent decision against Google, lobbyists were soliciting signatures from members of Congress for a letter condemning the EU’s antitrust policies that alleged anti-American discrimination. The letter, published by Politico on Tuesday without signatures, inveighed against the EU’s “aggressive and heavy-handed antitrust enforcement action against American companies.”

HuffPost asked the five remaining House Democrats who had signed the 2014 letter ― California Reps. Anna Eshoo, Zoe Lofgren, Eric Swalwell, Tony Cardenas and Colorado Rep. Jared Polis ― if they had signed the more recent missive making the rounds and whether they had a reaction to the final ruling. We posed the same question to Rep. Ro Khanna (D-Calif.), who unseated Mike Honda, the sixth Democrat on the 2014 letter.

Of those who responded, the offices of Eshoo and Lofgren said they were not familiar with the letter obtained by Politico, and a staff member for Khanna said simply that he had not signed it.

Lofgren, whose third-largest campaign contributor last election cycle was Google’s parent company, Alphabet, chose to comment on the ruling.

“Rather than offering consumers a truly competitive marketplace with European companies rivaling their American counterparts, the European Commission is attempting to regulate innovation and competition into existence,” Lofgren said in a statement. “This is unfair to European consumers, and unfair to the U.S. companies participating in European markets.”

But evidence suggests the EU deals equally harshly with its own companies. Margrethe Vestager, the EU’s top antitrust official, has hit major European firms with similar penalties for anticompetitive behavior, including a fine of more than $3 billion on major European truck makers in July.

Niamh Dunne, an assistant professor of competition law at the London School of Economics, said European regulators don’t apply the same kid-gloves approach to intervening in markets as their U.S. counterparts.

“It’s received wisdom in the U.S. you don’t want to intervene in the digital economy partly because it’s too new and partly because it’s too innovative, so you don’t want to replace beneficial market competition with inefficient government regulation,” Dunne told HuffPost. “As the digital economy becomes more established … maybe there needs to be recognition that, in these markets, competition problems can and might arise.”

For progressives eager to use the grassroot momentum unleashed by Sen. Bernie Sanders’ insurgent bid for the Democratic nomination last year to push the party leftward, antitrust policy could be a flag to rally around. Despite being out of power in Washington, the party could turn to state attorneys general. Tom Miller, the Democratic top cop in Iowa currently serving his ninth consecutive term, successfully led the antitrust battle against Microsoft in the late 1990s.

European Competition Commissioner Margrethe Vestager has hit also major European firms with penalties for anticompetitive behavior.
European Competition Commissioner Margrethe Vestager has hit also major European firms with penalties for anticompetitive behavior.
Francois Lenoir / Reuters

But the Democratic attorneys general best positioned to take on monopolies have shrunk from the fight, Stoller said. New York’s Eric Schneiderman vowed to become the new sheriff of Wall Street after winning election in 2010 amid the Great Recession, but he has failed to prosecute any significant antitrust case since taking office in 2010, Stoller said.

“He’s done nothing, literally nothing,” he said. “It is totally pathetic.”

Schneiderman’s office pointed out that the attorney general has brought several cases against corporations, including health insurers, pharmaceutical companies and tech companies, over mergers, price-fixing and other anti-competitive practices.

For example, his office said, the attorney general joined with the Justice Department and several other states to block the merger of Anthem and Cigna earlier this year. His office also sued in 2014 to block a pharmaceutical company from switching patients to a new Alzheimer’s drug formula to prevent competition from a new generic version, despite federal regulators declining to step in.

“The Attorney General has been a national leader in tackling some of the toughest antitrust challenges, with a focus on cases that have the biggest impact on New Yorkers,” the New York attorney general’s office spokeswoman Amy Spitalnick said in a statement. “We have ― and will continue to ― do what it takes to ensure New York’s residents and businesses can benefit from truly competitive markets ― no matter what happens on the federal level.”

Stoller was unimpressed with examples from the A.G.’s office of its antitrust wins, noting that many are cases in which New York has merely collaborated with other states or the federal government.

Stoller also said that former California Attorney General Kamala Harris, now a Democratic U.S. senator and frequent topic of 2020 presidential speculation, ignored the breeding ground for modern monopolies in her state’s Silicon Valley.

“She certainly didn’t do anything when she was there,” Stoller said.

A spokeswoman for Harris did not immediately respond to a request for comment.

Meanwhile, antitrust policy has slowly crept its way back into the liberal discourse, thanks to the scholarship of figures like Barry Lynn, a former business journalist who directs the program at the New America Foundation think tank, where Stoller hangs his hat.

In the Senate, Wall Street nemesis Elizabeth Warren (D-Mass.) has taken up the antitrust banner ― or “stick,” as she dubbed it in a May speech to Democratic donors and activists at the Four Seasons hotel in the Georgetown neighborhood of Washington, D.C.

“It is time to do what Teddy Roosevelt did: Pick up the antitrust stick again. The stick has collected some dust, but the laws are still on the books,” she said.

Sen. Richard Blumenthal (D-Conn.) responded to the EU’s fine by calling on the FTC to investigate Google. Sen. Amy Klobuchar (D-Minn.) said she would be keeping a closer eye on “dominant internet platforms” in her capacity as ranking member of the Senate Subcommittee on Antitrust, Competition and Consumer Rights.

Other congressional antitrust advocates include Khanna, whose district is squarely in Silicon Valley. He was the only member of Congress to publicly express concerns about the implications of Amazon’s acquisition of Whole Foods earlier this month.

“Technology companies are starting to take center stage,” Yong Chao, an antitrust expert and associate economics professor at the University of Louisville, told HuffPost. “In the future, we should see more and more digital giants being investigated under antitrust laws.”

And energy behind the antitrust movement has come from an unexpected source: President Donald Trump. On the campaign trail, Trump promised to block AT&T’s proposed acquisition of CNN-owner Time Warner, claiming “it’s too much concentration of power in the hands of too few.”

As with so many of Trump’s populist campaign vows, he is unlikely to follow through. Makan Delrahim, his pick to head the Department of Justice’s antitrust division, has indicated he would greenlight the mega-merger.

Still, there is nothing like a successful presidential run to show politicians from both parties which ideas resonate with broad swaths of the public. And based on Trump’s performance, antitrust policy sells.

“Trump paid more attention to antitrust than any major presidential candidate since William Jennings Bryan in 1896 to 1900,” law professor Lande said of the three-time Democratic presidential nominee from Nebraska. “Trump made it an issue, many times he rallied his base and found popular support for what I might call an old-fashioned populist antitrust position.”

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