Barry Lynn is something of a canary in the coalmine for competition policy in the United States. He is the founder of the Open Markets Institute, a Washington D.C. think tank, and the author of several books on the topic many of which have become invaluable resources for legislators, regulators, and policymakers across the aisle. His latest book, Liberty from All Masters, will be published on September 29th.
A journalist by trade, Lynn first became involved with competition policy in the 90s while investigating supply chains for a magazine he ran called Global Business. An earthquake in Taiwan in 1999 shutdown the bulk of the world’s semiconductor companies that at the time supplied critical computer companies like Dell, Compaq, and IBM.
He wondered, how had we allowed such an important part of the supply chain to become so concentrated? The answer was U.S. policy changes toward competition and antimonopoly law here at home and internationally. His investigation led to a vital piece, “Unmade in America,” which was published in Harper’s Magazine overseen by the editor at the time, Lewis H. Lapham.
This month, Lynn has dropped another bombshell investigative think-piece in Harper’s Magazine, “The Big Tech Extortion Racket.” This time, Lynn sets his sights on the quickly evolving industry of big tech, specifically companies like Facebook, Apple, Amazon, Netflix, and Google. It is a conversation that has grown louder in recent months as seen in Congressional hearings with the tech CEOs on market power concerns.
Lynn knows first hand this is an uphill battle. Prior to founding Open Markets independently, Lynn oversaw the antimonopoly program as a senior fellow at the New America Foundation. The foundation had received millions of dollars from Google CEO, Eric Schmidt, over the past decades, and in a move that shocked even the most established members of the press, Lynn and his entire team of seven was fired.
Undeterred, Lynn has continued to press for open markets and the enforcement of antimonopoly legislation. He argues in his books that these monopolies in many cases are harmful to innovation, undermine freedom and democracy, and destabilize entire industries and financial systems. We spoke with Lynn on his journey with the Open Markets Institute, how we should think about monopolies and big tech, the political will for coming legislation, and what we can do about it.
NOT YOUR TYPICAL BOARD GAME
Mark Benjamin: Thanks for speaking with me today. Your article in Harper’s was incredibly eye opening. What is the monopoly and why are they bad?
Barry Lynn: A monopoly is not necessarily a company where you have 100% of the market share. You can be an effective monopolist if you have 50% or even 30% of the market. That means that you have sufficient power to shape the market to serve your interests.
The key is that you are not subject to the market, but have power over the market. If you have 30% of the market and every other player has 2%, you can shape that market in a way that no one else can and really harm sellers and buyers
What makes monopolies bad?
Not all monopolies are bad. We have many monopolies in our lives that are largely beneficial. The power within some monopolies has been curbed in a way that makes them safe for our democracy and for our liberty. Back in the day, AT&T was a true monopoly. They had control over pretty much every telephone in the United States, every long distance line, and every local line. Theoretically, that gives you immense power over different people for pricing, but also to determine who you connect with – who gets to talk with whom.
“There’s really two things you can do with a monopoly. You can break it up. Or if you don’t want to break it up, for whatever reason, you neutralize it.”
But we regulated AT&T to ensure that power was entirely neutralized. It became a corporation that served people. Transportation and communication networks should be regarded as a form of monopoly. We shouldn’t be afraid of monopoly per se, but we want to make sure that anytime when you do decide that this monopoly is necessary or wise to have, you have special rules applied to that corporation to make sure it treats everyone it serves the same.
There’s really two things you can do with a monopoly. You can break it up. Or if you don’t want to break it up, for whatever reason, you neutralize it. Those are your basic rules.
MB: I want to talk about how they form. At least in the modern sense, it looks like what happens is you have a group of investors, whether it be a bank like SoftBank or a sovereign wealth fund, come together and say, this is a great idea. Usually, it’s in the tech space. Then they fund these companies to expand their technology and can run losses for years, or in Tesla’s case, a decade. This creates a wide moat and makes it anti-competitive as they gain substantial market share. Then they eventually monetize it with plenty of price control. Is that right?
BL: Yeah. You got it.
I’ll give you another example. This is an example of how you can do it in the real world and how it was done even before big tech. Mitt Romney used to be a principal at Bain Capital. One of the things that Bain did going all the way back to the early 80s was that all across America there were stationery and office supply stores. They were owned and run by families. In New York, they were all up and down Broadway. Usually, they’re run by one person or one family. This was true all across America.
What Bain Capital did, after a change in law that President Reagan put into place in the early 80s, is raise a big pot of money and give it to one company to roll up this whole business. They raised a bunch of money and gave it to the people that ran a small operation called Staples.
“This second stage monopolization has resulted in a pyramiding of power where rather than having 500 super large corporations and banks in the United States, increasingly you have five.”
The people who ran Staples then used that money to buy up or bankrupt hundreds and thousands of these independent stationary and office supply stores. At the end of the day, you end up with a corporation that’s run by Wall Street capitalists in place of 5,000 or 10,000 independent stores that were owned by people in the community.
It’s an economic revolution clearly. But it’s also a type of social revolution because suddenly it becomes essentially impossible for the independent entrepreneur to survive. That has effects on your community. It also affects all the people who want to start a business, who now find it much harder to do so.
That’s just one story about stationery stores and office supply stores, but this is true in every single corner of our political economy. Just about every part of our political economy has been radically concentrated over the last 35 years. Most sectors of the U.S. economy are now essentially owned by people on Wall Street.
The age of the internet corporation
MB: And so how are the Internet and monopolies colliding at this point?
BL: One way to understand what happened in America and the world is that we’ve actually seen a two stage process of monopolization. In stage one, the Reagan folks came in the early 80s and overturned the traditional way we do anti-monopoly law. That unleashed the consolidation that led to the era of Walmart, Citibank, Goldman Sachs, Staples, and Monsanto.
By 2005, around the time of the Iraq war, the American economy was dominated by these super giant corporations. These were real world corporations. For example, it takes a long time to monopolize retail the way Walmart has because if you have 5,000 stores, you have to physically control 5,000 pieces of property. That requires a vast amount of capital and it’s a lot of work. It took 25 years from the change in law for these corporations to capture control over just about every key sector of the political economy. That was stage one.
Then with the crash of 2008 we saw The Great Recession and the collapse of the financial system which to that point had supported the first stage of monopolization. That’s when you saw Google, Amazon, and the Internet corporations really start to take off.
“We look around at Trump and say, ‘Oh, he’s a fascist.’ But actually, the kind of fascism that we should really fear is when you have a pyramid of power in which the super large investor and the super large corporation executives are afraid to speak out about what Google is doing, what Facebook is doing, what Amazon is doing.”
What you’ve seen over the last 10 years is the second stage of monopolization in which Google, Amazon, Facebook, Uber, and others captured control over many of the super large corporations of the last generation. These technology companies have become the platforms through which other people do business. This second stage monopolization has resulted in a pyramiding of power where rather than having 500 super large corporations and banks in the United States, increasingly you have five.
MB: I read the other day that 17.5% of the S&P 500 is now in tech stocks like Apple, Microsoft, Alphabet (Google), Amazon, and Facebook.
BL: I think it’s north of 20% at this point. The level of monopolization that we see today, it’s not good for even the largest capitalists of the last generation. Just to be clear, all of our money at the Open Markets Institute comes from philanthropy. We serve the public. What we do is we try to take money from places like the Ford Foundation, Rockefeller Brothers, and other bona fide philanthropies and use this money to study the effects of monopolization and what can we do about it from the point of view of the public.
We have had many corporations, very large corporations, come and try to give us money. Walmart will come to us and say, can you help us deal with Amazon? We’ll have NewsCorp come and say, can you help us deal with Google and Facebook? Our response is always, we can’t take any money from you, but to the extent that our interests align, let’s walk the path together.
What you see today is someone like Rupert Murdoch has now become afraid that someone is more powerful than he is, and that someone is Google and Facebook. Walmart used to be the all-powerful, the top-tier competitor. But now they look around and they see that every day and every year they lose ground to Amazon.
That’s one of the things that people should keep in mind. The concentration has gotten so extreme that even some of the biggest people out there are now afraid of somebody else. That’s a very dangerous point for our political economy.
We look around at Trump and say, ‘Oh, he’s a fascist.’ But actually, the kind of fascism that we should really fear is when you have a pyramid of power in which the super large investor and the super large corporation executives are afraid to speak out about what Google is doing, what Facebook is doing, what Amazon is doing. When Rupert Murdoch is afraid to speak out, that’s a really dangerous place to be, politically. That’s where we are now.
One of the questions I wanted to answer in the Harper’s piece is: what is the mechanism that Google, Facebook and Amazon use to capture control over and manipulate even some of the biggest of the big corporations in the world? The purpose was to show how bad it is, but also to show we actually have the tools we need to deal with this.
Capitol Hill, Apple, and Fortnite
MB: A few weeks ago the big tech executives came out in front of Congress and addressed the antitrust subcommittee about questions of market share. Where is the political will currently to do something about this problem?
BL: It’s one of the things that gives me real hope. It’s been pushing twenty years since I realized that monopolization was a huge problem in America. Ten years ago, when I published Cornered, most people looked at me and said, ‘You’re insane. This is cowboy capitalism here in America. We have no monopoly problem.’
Now we have awareness of it on both sides of the aisle. We have people who are ready to fight. The hearings that you mentioned, that’s the antitrust subcommittee in the House of Representatives. That’s run by a man named David Cicilline from Rhode Island.
Congressman Cicilline is a real hero. He has not just educated himself, but he and his staff have educated every member of that subcommittee. One of the things that we saw in that hearing was every single member of that subcommittee hammering on the CEOs. And they were largely in agreement, the Republicans and Democrats. They weren’t entirely in agreement, but they were largely in agreement about the nature of the problem and what to do about it.
It’s reasonable to fear that it’s just showboating, but having watched this for as long as I have, I know that they’re moving towards doing something about it. The information that they’ve published has already been used in this antitrust case that is being brought against Apple by Epic, the maker of the video game Fortnite.
“When it comes to search, Google has north of 90% of search traffic. Through the entire ad technology chain Google, at every point you look, has between 60 and 90% control of the capacity.”
That’s one of the things that has come out of the information that the subcommittee has brought forth. There’s going to be more information that’s brought out, but this hearing and this report that they’re putting out this year, this is just the first stage. Assuming that the Democrats retain the house, Congressman Cicilline will remain in that seat and begin next year with a brand new investigation in which he takes this further.
If the Biden administration does not take this seriously, Congressman Cicilline has the power as a chair of an important subcommittee to force them to do so. Then you have Senator Warren. A Senator with seniority and an understanding of an issue and a willingness to fight for what she thinks is right. A Senator like that is an awesome power.
Cory Booker and Amy Klobuchar have become very good on these issues. We have worked with both. If you’ve got a group of senators, including Republicans, and a strong committed subcommittee in the House, they can bring an awesome amount of power to bear on the administration and on the agencies, in ways that force them to actually enforce the law.
The thing about Congress is if the agencies don’t do it, if they fail, for whatever reason, Congress itself can do whatever it wants. Congress tomorrow could break up Google. That’s the nature of popular sovereignty in America.
This is also happening in Europe. It’s happening with the states’ Attorney Generals here in the United States. We have turned the corner on this. We still have a long way to go. But from my point of view, we’re in a good position. We need to fight, we need to fight every day. But I am very encouraged.
Power over the press
MB: Just to play devil’s advocate for a minute, the arguments that the tech executives put forth, for example, Facebook will say they have plenty of competitors such as China’s ByteDance with TikTok. Google will say, Facebook is a formidable competitor. Apple has tons of competitors…
BL: For online advertising, Google and Facebook together control probably about 70 to 75% of all online advertising and that percentage is growing. Certainly, when it comes to social media, Facebook’s dominance is growing to 70 to 75%. When it comes to search, Google has north of 90% of search traffic. Through the entire ad technology chain Google, at every point you look, has between 60 and 90% control of the capacity. By any reasonable definition, these are monopolies. In fact, what we see here are multiple monopolies tied together. That’s especially true for Google. Google is a whole array of monopolies that have been lashed together.
MB: I want to talk about Facebook for a minute because it’s almost like a social contract has formed between society and this platform. It carries so much weight of the free press today, which has always been a cornerstone of our democracy. What is your take on where these monopolies meet the free press?
BL: One area the Open Markets Institute focuses on is any time monopolies are taking control over industries where it’s going to affect our ability to communicate with each other and share information with each other. There are two areas we’ve really focused on over the years: the way Amazon’s power affects book authors and book sellers and book publishers. And how Google and Facebook, how their power affects the reporter, the news editor, and the news publisher.
We hosted an event two years ago, where we had the CEO of the New York Times and the CEO of News Corp. onstage together along with Senator Klobuchar and the head of antitrust enforcement, Makan Delrahim, talking about how Google and Facebook were destroying the news media industry. They are destroying it by stealing all the advertising. Whether we like advertising or not, the fact is that from the beginning of our country, newspapers and magazines have been supported by advertising. That’s one of the things that makes them free, because if you have many advertisers, then you’re not beholden to anyone, and you’re not beholden to the government.
It has actually worked pretty well for American society over the course of a couple of hundred years. Now Google and Facebook are stealing all the money. There are a couple of exceptions, like the New York Times and the Wall Street Journal, who are doing okay. But for every other newspaper or magazine it has become fantastically difficult to make a living.
Eight years ago, Buzzfeed was running around saying, we’re beating the pants off of News Corp. and now Buzzfeed has realized it’s extremely hard to sell advertising when Google and Facebook stand in between you and the advertiser and stand in between you and the reader.
You live on someone else’s plot of land, and you are going to pay rent to those people. There are no rules about how much rent they can charge. They can charge rent up to the point where you’re essentially bankrupt and that’s what’s happening to all of these different corporations that we rely on for the news that we depend on to have a democracy.
MB: My theory is that it has forced media outlets, especially news, to go into more extremist niches to capture loyalty. Why is the media so polarized? I think a big part of it is because of economics. They’ve had the advertising revenues stripped from them and so they’re forced to create more insular views so as to have a dedicated readership, whereas before they could have been more broad with the tone of their reporting.
BL: Oh, you’re absolutely right. That’s a huge part of what we see taking place right now. Even worse is that Facebook’s business model exacerbates the polarization. They make money by getting people angry. The writers who do a better job of getting people angry at other people, they’re the ones that are going to get more traffic. They’re the ones that get rewarded by Facebook, especially by their business model. It’s not just the market itself, it’s not just the way in which reporters and editors are responding to the market. It’s also actually the way in which Facebook and Google are structuring the market.
You can’t vote with your dollar. You can’t vote with your fork.
BL: We do a lot of work with authors, musicians, photographers, and filmmakers and their trade groups and associations that help to promote their interests. There are a few artists who are doing extremely well right now. But it’s become much harder for most creators to get to a point where they’re making enough money to live, just to pay their bills. It’s becoming harder to make the next documentary, to write the next book, to get the money together to make the kind of album that you want to make because of Netflix, Amazon, Spotify, you know, these monopolies.
This is the key thing that we have to understand. None of this is inevitable. All of this can be fixed. All of this we will fix. We’re in the process of fixing all this now. But in order for people like Elizabeth Warren and Congressman Cicilline and Keith Ellison, the state attorney general in Minnesota, to succeed, we have to support them. These people are smart enough and understand history well enough and understand law well enough that they know how to win.
Everyone who cares about art, everyone cares about journalism, everyone who cares about film, everyone cares about the local community, we have to get together and give these people the support that they need to push this through. We should understand that we will win, but the only way that we will win is to get out there and fight and give the support to the people who know what they’re doing.
MB: I think it’s probably too late to delete these services, right? So, how can the average person show support for these policy changes?
BL: The thing to remember is it’s not really through boycotts that we win. Michael Pollan once said, ‘vote with your fork.’ Milton Freidman years ago said, ‘vote with your dollar.’ If you don’t like what someone’s doing, move your dollar. But in the world of monopoly, you can’t vote with your dollar. You can’t vote with your fork because you’re stuck under the power of the monopolists. In large parts of this country there’s really only one place to shop for certain things. Boycott if you can. But if you can’t, don’t fret about it. But do make sure that you’re supporting the people who are fighting for democracy.
One way to learn about these folks is through our website, the Open Markets Institute. We are connected with a huge number of these fights. Encourage your Congressperson, encourage your local legislators to fight the monopolies and reward them for doing so. That’s how we win.