Policing the power of tech giants - Axios
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Policing the power of tech giants

Rebecca Zisser / Axios

The world's largest tech companies — Google, Facebook, Amazon, Microsoft and Apple — have become enormous concentrations of wealth and data, drawing the attention of economists and academics who warn they're growing too powerful. "Platform companies have captured the economy," said Jonathan Taplin, who argues in a new book and a recent NYT op-ed that the dominant platforms are so big that they're undermining competition.

Our thought bubble: Despite populist promises, cracking down on Silicon Valley is not one of President Trump's near-term priorities. Makan Delhrahim, Trump's top antitrust enforcer at the Justice Department, has pledged to to enforce antitrust violations with respect to online platforms just as he would with any other industry, but insiders expect him to be cautious. And Maureen Ohlhausen, acting FTC chair, said in a recent speech that the agency has no intention of meddling in the way tech companies use algorithms and data.

Sheer size:

  • Facebook, Amazon, Apple, Microsoft and Google parent company Alphabet are the top five contributors to the S&P's 500 gains this year and their climbs helped drive the stock market's recent rally
  • These mega-cap tech stocks have earned the acronym FAAMG from Goldman for their performance, adding $660 billion in market value this year.
  • The market cap of tech giants is already greater than the GDP of large U.S. cities: On that basis, Google is bigger than Chicago, Amazon is bigger than Washington DC.
  • "It could ultimately lead to populist calls for redistribution of the increasingly concentrated wealth of Silicon Valley as the gap between tech capital & human capital grows ever-wider," according to a recent Bank Of America Merrill Lynch note.

Economists tend to agree that concentration has increased across U.S. industries, including the internet platform industry. What they don't agree on, though, is whether it's time for antitrust authorities to step in and if there's even a legal mechanism to do so.

Who's the regulator? The FCC regulates the networks these companies use to reach consumers, but not the online platforms themselves. That duty falls to the FTC, but the agency doesn't have the same rule-making authority and therefore relies on after-the-fact enforcement actions when companies mislead consumers or violate their own rules, such as privacy policies. Antitrust laws, some lawyers argue, were designed to oversee physical industries like steel and oil— not the new breed of digital commerce companies that have created entirely new markets.

"High-tech has no regulator so there's a huge policy gap" said Gene Kimmelman, CEO of consumer interest group Public Knowledge and former DOJ official under the Obama administration, who expects greater antitrust scrutiny of tech company moves. "The pot is simmering and it's getting hotter. I think it's a question of whether they overreach in an environment where people are distrustful of their power."

The case for more scrutiny: Overreaching is what Microsoft did in the late-90's, when a judge ruled it had attempted to monopolize the web browser market and unlawfully tie its web browser to its operating system, a violation of the Sherman Antitrust Act.

But the government's lack of enforcement over the past decade could lead to much stronger regulation as populist policymakers start to take notice. Gary Reback, an attorney at Carr Ferrell who led the charge against Microsoft and now does antitrust work against Google, said, "If this behavior goes unchecked for another 10 years, you're going to see the [formation of] the Internet Commerce Commission" to reign the companies in.

The antitrust sanctions against Microsoft helped lead to the startups that later displaced it, some argue.

"People don't fully appreciate that the reason we have Google and Facebook today is because there was an antitrust enforcement action against Microsoft that slowed down the ability of Microsoft to monopolize the internet, the browsers, the data, search, and so on," said Luigi Zingales, finance professor at the University of Chicago Booth School of Business. "Today's monopolies are yesterday's startups. In a good system, this keeps changing."

European regulators have taken much stronger positions against the data practices of these tech giants. Barry Lynn, head of New America's Open Markets program, thinks the EU's higher level of scrutiny is has already caught the attention of some U.S. policymakers.

The case against: Not everyone is ready to take the tech companies to task. In the complicated internet platform and data markets, it's sometimes hard to tell what's anticompetitive and what's just efficient business.

In the case of internet platforms, markets overlap and are are tough to clearly define. While Google may have 88% market share of search advertising, Facebook more than 70% of social media on mobile and Amazon 70% of the ebook market, at some level all three are competing against one another for time and attention and are moving into each others' turf.

"Each of these companies provides different things. That differentiation of platforms — search engines, social networks, vending websites, etc. — may reduce the tendency of concentration and the ability to dominate an entire market," said Michele Polo, economics professor at Italy's Bocconi University.

Market share does not necessarily equate to market power, said Michael Beckerman, CEO of the Internet Association, which represents Amazon, Facebook, Google and Microsoft in Washington D.C. Speaking on a panel about competition last week, he pointed to low barriers of entry to compete in the internet sector, and the consumers' ability to quickly switch to a new service with a single click.

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Nikki Haley's "personal conversation" with Trump

President Donald Trump and U.S. Ambassador to the United Nations Nikki Haley at Trump's National Golf Club in Bedminster, N.J. (Pablo Martinez Monsivais / AP)

U.S. ambassador to the U.N. Nikki Haley told CNN today that she had a "personal conversation" with President Trump about how he handled the fallout from Charlottesville, per Politico.

"Well, I had a personal conversation with the president about Charlottesville, and I will leave it at that," Haley said on CNN. "But I will tell you that there is no hate in this country. I know the pain that hate can cause, and we need to isolate haters, and we need to make sure that they know there is no place for them."

On "Good Morning America," Haley brought up her conversation with Trump again, adding that her message was "taken very well." As for whether Trump believes he was in the wrong with his response? "The president clarified so that no one can question that he's opposed to bigotry and hate in this country," said Haley.

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Chelsea Clinton wants Barron Trump to have a "private" life

AP

Chelsea Clinton defended fellow first child, Barron Trump, on Twitter Monday after a Daily Caller reporter criticized the 11-year-old for his fashion choices.

The critique: "The youngest Trump doesn't have any responsibilities as the president's son, but the least he could do is dress the part when he steps out in public," entertainment reporter Ford Springer wrote in the Daily Caller.

Clinton's kickback: "It's high time the media & everyone leave Barron Trump alone & let him have the private childhood he deserves" she tweeted, linking to the story.

Why it matters: Clinton, who has otherwise been known to rail against Trump and his administration on social media, has come to Barron's defense on several occasions. Twice she's tweeted that Barron deserves the right and the privacy to be a kid.

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Former Uber exec will be H&R Block's next CEO

Photo courtesy of H&R

Jeff Jones, the former Target CMO who spent just six months at Uber as its president of ride-sharing, will be H&R Block's next CEO, starting in October, the company said today.

  • Despite the enthusiasm around Jones' hiring last year, his departure was less positive. He left amid a flurry of controversies bubbling at Uber, including allegations of sexual harassment and discrimination within the company, and shortly after it announced plans to hire a COO.
  • Jones on his departure: "It is now clear, however, that the beliefs and approach to leadership that have guided my career are inconsistent with what I saw and experienced at Uber, and I can no longer continue as president of the ride sharing business."

Jones is not the only Uber executive to leave the company in the last six months. Others include its head of finance, head of its AI labs, its head of product and growth, its PR chief, and several employees from its self-driving car teams — including Marakby's boss, former head of Google Maps Brian McClendon.

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Blue Apron faces shareholder lawsuits

Bree Fowler / AP

Blue Apron, the meal kits company that went public in June, has been hit with multiple shareholder lawsuits. They allege that the company misled investors about its business prior to going public, although only two suits have been formally filed, Axios is told. Now, these investors are angry and want their money back.

Tough crowd: Despite being a media darling while a private company, Blue Apron has had a tough time on the markets since going public — its stock price is now nearly half of what it was at the IPO. The company is also facing competition from Amazon, which recently debuted its own meal kits business, which investors claim Blue Apron knew and hid.

Amazon declined to comment on the lawsuits.

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Uber adds new options for driver flexibility

Eric Risberg / AP

Over the last few months, Uber has been on a campaign to repair its relationship with drivers via changes to its policies and service. This time, it's trying to make their driving more flexible thanks to new options in their mobile app, such as setting a trip arrival time if they need to be done by a certain time to pick up their kids from school, and notifications before long trips, for example.

  • In the last six months, it's become clear to the company that it needs to take a friendlier approach in many aspects of its business, including its relationship with drivers.
  • Driver turnover is a big problem for ride-hailing companies, and Uber has to compete for them with rival Lyft, which has cultivated a driver-friendly image.
  • Uber published a paper on time and income flexibility for drivers to support its new policies.
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Food waste takes up 21% of America's landfill volume. The founders of Misfit Juicery say that ugly fruits and veggies may be the solution.

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Study: knowing more doesn't change disbeliefs about science

Associated Press

If someone is already pre-disposed to disbelieve scientific conclusions around issues like human evolution, climate change, stem cell research or the Big Bang theory because of their religious or political views, learning more about the subject actually increases their disbelief, a new study finds.

Why it matters: The research flies in the face of commonly held views that more science literacy and greater education around controversial scientific issues will diffuse polarization but supports a growing body of evidence about how our identity forms our views.

  • For stem cell research, the Big Bang theory and evolution, religious identity overrode science literacy.
  • Political beliefs surrounding climate change led to polarization.
  • They found little evidence (yet) of political or religious polarization for nanotechnology and genetically modified food.

What they found: Carnegie Mellon social scientists looked at Americans' beliefs around six potentially controversial issues: stem cell research, the Big Bang theory, nanotechnology, GMOs, climate change and evolution. The found people's beliefs about topics associated with their religious and political views become increasingly polarized with more education (measured by markers like the number of years in school, highest degrees earned, aptitude on general science facts or the number of science classes taken). Baruch Fischhoff from CMU said:

"These are troubling correlations. We can only speculate about the underlying causes. One possibility is that people with more education are more likely to know what they are supposed to say, on these polarized issues, in order to express their identity. Another possibility is that they have more confidence in their ability to argue their case."

One bright spot for science literacy advocates: If someone is already pre-disposed to trust the peer-reviewed science process and scientists, they're likely to believe what they say and find in all of these areas.

Go deeper: Arizona State University's Daniel Sarewitz got to the heart of it in the Guardian yesterday.

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U.S. sanctions Chinese, Russian entities that help North Korea

Susan Walsh / AP

The U.S. Treasury has unveiled sanctions targeting Chinese and Russian entities doing business with North Korea, which is intended to add pressure to the North to soften its nuclear program. North Korea's number one trading partner is China, and most of the sanctions target Chinese companies, per The Washington Post.

Why it matters: This comes the same week as the U.S. and South Korea are conducting military exercises that China, Russia, and North Korea have all been opposed to, given that it looks like the U.S. is escalating its threat to the North — making an already tense week that much more precarious.

The sanctions target 10 entities and 6 individuals that help those who are already sanctioned who support North Korea's missile program or assist the country with its energy needs. It also targets people who help North Korea's export of workers, per CNBC.

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Takeaways from former nat sec officials on Afghanistan

Carolyn Kaster / AP

The Cipher Brief got reactions to President Trump's speech on Afghanistan from top former national security officials — including former acting CIA director John McLaughlin, former Army vice chief of staff Gen. Jack Keane, former CIA and NSA director Michael Hayden, and former acting CIA director Michael J. Morrell.

All are worth reading in full for their diversity of opinions, but here are three major takeaways across the interviews:

  • Trump sounded and acted presidential, which all four officials agreed was vital to delivering this speech effectively.
  • There was no outlined timetable for withdrawal — a departure from Obama-era policies that was seen as a positive and necessary step.
  • Trump's call to have India more involved in Afghanistan was the biggest news, but it could have a potentially destabilizing effect with the United States' relationship with Pakistan.
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Pence explains why Trump didn't announce troop numbers

AP

Vice President Mike Pence defended President Trump's speech on Afghanistan in a USA Today op-ed.

His overarching message: "Trump has determined that conditions — not arbitrary timetables — will guide our strategy. The previous administration alerted our enemies ahead of time by announcing troop numbers and timelines, something President Trump has wisely refused to do."

  • Trump's plan vs. Obama's: "We need only look at Iraq, and the rise of the Islamic State of Iraq and Syria following the last administration's withdrawal of U.S. forces, to see where this path leads."
  • Focus on Pakistan: "America will not write a blank check for countries that fail to root out the same forces who try every day to kill our people. Pakistan has much to gain from partnering with our effort in Afghanistan. It has much more to lose by supporting terrorists. The president has put them on notice."