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The Sea Change Significance of Simons-FTC Privacy and Antitrust Hearings

Much bigger change is afoot at the FTC than many may appreciate. An awakened and reinvigorated Simons-FTC lies ahead as do eventual new FTC calls for 21st century privacy and data protection legislation. Don’t be fooled by the glacial pace of the 2017-18 FTC appointment/confirmation process for a near clean slate of FTC leadership.

We now have strong official directional evidence from FTC Chairman Simons that the next two-and-a-half years are going to be very different from the last five years, 2013-17.

Less than two months after being confirmed, new FTC Chairman has set in motion a once-in-a-generation, “all agency” project, to hold 10-15 public hearings on “Competition and Consumer Protection in the 21st Century,” to “consider whether broad-based changes in the economy, evolving business practices, new technologies, and international developments warrant adjustments to competition and consumer protection law, enforcement priorities, and policy.”

Some context is critical here.

It is highly-relevant and telling that FTC Chairman Simons explains that the example and rationale behind these 2018 FTC hearings were the Pitofsky FTC 1995 hearings on “Global Competition and Innovation” that occurred in FTC Chairman Pitofsky’s first year as FTC Chairman from 1995-2001.

Chairman Simons highly respects his former professor as does former FTC Chairman Muris whom Mr. Simons and many others at the FTC worked for. Like the Pitofsky hearings in 1995, these Simons hearings in 2018 are clearly intended to be serious, empirical-evidence gathering, and consequential.

The simple fact that they are scheduled to occur as an “all-agency project” with “significant resources” also signals that FTC Chairman Simons and his fellow commissioners are acutely aware that all is not right with the FTC and market situation that they inherited, and the FTC’s collective ability and authority to protect competition and consumers in the 21st century.

Like 2018, 1995 was a hinge-point for antitrust and consumer protection change.

 

Consider that 1995 was two years after the FTC investigated Microsoft for abuse of its PC operating system monopoly, then became deadlocked 2-2, and then closed the case. Ultimately the successor DOJ U.S. v. Microsoft prosecution went on to be the seminal antitrust case of the last three decades.

Don’t miss the ironic parallel with today. Note that the 2013 FTC closed its Google investigation, which then forced the EU to step up to address the obvious U.S. antitrust vacuum on Google, which has resulted in one EU monopoly abuse conviction and two more EU monopoly abuse charges pending.  

Also consider that 1995 was one year after the U.S. privatized the Internet backbone creating the modern Internet, and one year before passage of 1996 Telecommunications Act that ended the AT&T monopoly and promoted communications competition, and included Section 230 that made it U.S. policy that the Internet should be “unfettered by Federal and State regulation,” and U.S. law that Internet firms are immunized from civil liability.

It is no coincidence that the 1995 “Pitofsky hearings” and the 2018 “Simons hearings” perfectly bookend the Internet era.

Chairman Simons clearly stated the FTC needed to engage with the “changes in markets and business-to-business and business-to-consumer relationships,” i.e. how the Internet and Internet policy and law has changed competition and consumer protection.

If one studies the topics for which the Simons FTC is asking the public for comments, they tacitly focus very-heavily on the effect of the Internet on competition and consumer protection even though the word “Internet” is not mentioned in the FTC release, and the work “platform” is only used once.

Make no mistake these hearings apparently will be characterized largely by the Internet-era effects of Google, Amazon, Facebook, and other Internet platforms have on competition and consumer protection.

Simply this is a Big-Internet inquiry not a Big-Tech inquiry for those paying close attention.

The first and most telling evidence that a lot of change is coming is that FTC Chairman Simons apparently has already concluded that the FTC does not have privacy and data protection enforcement authority to be a credible deterrent.

Simons said: “Our remedial authority with respect to data security and also privacy is something that’s of serious concern to me.” “And I’m very nervous that we really do not have the remedial authority that we need in order to create a sufficient deterrent to deter the kind of conduct that we want to deter.”

New evidence bolstering FTC Chairman Simons privacy authority concerns is a letter today to the FTC from multiple U.S. consumer and privacy groups that ask for the FTC to investigate Google and Facebook’s unfair and deceptive practices that continue to manipulate consumers from selecting offered options that would  better protect their privacy.

Practically, the hearings will strongly reinforce Chairman Simons, “serious concern” and tentative conclusion that the FTC needs new privacy and data protection deterrent authority because the empirical evidence is overwhelming that Americans privacy and data is minimally protected today.

Consequently, it is very likely that the Simons FTC eventually will make a bipartisan request to Congress for passage of new privacy law to authorize and enable the FTC to protect consumer privacy in the 21st century, in ways that they cannot protect today, but need to be able to protect to fulfill the FTC’s longstanding consumer protection mission.

Another big apparent coming sea change is that the FTC in its inquiry topics is focusing on “monopsony power” and “collusive” conduct, because this indicates at least the FTC understands Internet markets are indeed very different from offline markets, warranting new thinking, and possibly new approaches and authorities.

It is not a coincidence that the FTC release and inquiry topics do not mention the word “monopoly” but do ask for “evidence and analysis of monopsony power.” [Note: a monopoly is a market with one dominant seller (supply); a monopsony is a market with one dominant buyer (demand).]

That’s highly relevant because how Internet markets differ dramatically from pre-Internet markets is that the nature of Internet technology, law and policy heavily-favor winner-take-all monopsony models, i.e. demand aggregation models per Ben Thompson’s outstanding empirical aggregation theory where the whole business game is which company can be the first to aggregate the most demand/users to create unbeatable network effects.

The leading 21st century monopsonists the FTC will hear about in the Simons-hearings are evidently Google, Amazon, and Facebook.   

Another potential sea change here is the FTC’s focus on “evaluation of collusive… conduct.”

That is a necessary topic inquiry because it is evident that before the FTC closed all five of its Google antitrust probes in 2013, Google was in fierce direct core business competition with Microsoft, Yahoo, Facebook, Apple, and Amazon, and today there is relative competitive peace between them, favoring winner-take-all core business outcomes and much less competition for these markets. (See here, here, here, and here for the case and evidence.)

The most evident “collusive” question for the FTC is whether the abrupt cessation of competition in 2014 for the mobile social advertising market from Google+ to Facebook, and competition in 2014 for the mobile search advertising market from Microsoft-Yahoo-Facebook search offering was a result of collusive conduct or not.  

The answer to this Google-Facebook “collusive” question is central to understanding the anticompetitive problems that are rife in the digital advertising market today.   

In sum, more change is afoot at the FTC than many appreciate.

 

It is evident directionally that the Simons-FTC over at least the next two-and-a-half years is going to be very different from the last five years, 2013-17, and tougher enforcers concerning Internet platforms if the evidence warrants it.

That’s because the Simons-FTC is committing big publicly to bringing serious, evidence based, antitrust, privacy, and consumer protection scrutiny to Internet platforms that evidently was not occurring 2013-2017.

American consumers need, deserve, and will welcome a newly-invigorated FTC cop on the Internet platform beat, and an FTC that is interested in new FTC privacy authority to better protect American consumer privacy in the 21st century. 

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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy specializing in how the Internet affects competition, markets, the economy, and policy, for Fortune 500 companies, some of which are Internet platform competitors. He is also Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. Cleland has testified seven times before the Senate and House Antitrust Subcommittees on antitrust matters. Overall, eight different congressional subcommittees have sought his expert testimony a total of sixteen times. When he served as an investment analyst, Institutional Investor twice ranked him the #1 independent analyst in communications. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.”

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Precursor LLC Research Series on Asymmetric Accountability Harms:

Part 1:   The Internet Association Proves Extreme U.S. Internet Market Concentration [6-15-17]

Part 2:   Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms [6-22-17]

Part 3:   Why Aren’t Google Amazon & Facebook’s Winner-Take-All Networks Neutral? [7-11-17]

Part 4:   How the Google-Facebook Ad Cartel Harms Advertisers, Publishers & Consumers [7-20-17]

Part 5:   Why Amazon and Google Are Two Peas from the Same Monopolist Pod [7-25-17]

Part 6:   Google-Facebook Ad Cartel’s Collusion Crushing Competition Comprehensively [8-1-17]

Part 7:   How the Internet Cartel Won the Internet and The Internet Competition Myth [8-9-17]

Part 8:   Debunking Edge Competition Myth Predicate in FCC Title II Broadband Order [8-21-17]

Part 9:   The Power of Facebook, Google & Amazon Is an Issue for Left & Right; BuzzFeed Op-Ed[9-7-17]

Part 10: Google Amazon & Facebook’s Section 230 Immunity Destructive Double Standard [9-18-17]

Part 11: Online-Offline Asymmetric Regulation Is Winner-Take-All Government Policy [9-22-17] 

Part 12: CDA Section 230’s Asymmetric Accountability Produces Predictable Problems [10-3-17]

Part 13: Asymmetric Absurdity in Communications Law & Regulation [10-12-17]  

Part 14: Google’s Government Influence Nixed Competition for Winner-Take All Results[10-25-17]

Part 15: Google Amazon & Facebook are Standard Monopoly Distribution Networks [11-10-17]

Part 16: Net Neutrality’s Masters of Misdirection[11-28-17]

Part 17: America’s Antitrust Enforcement Credibility Crisis – White Paper [12-12-17]

Part 18: The U.S. Internet Isn’t a Free Market or Competitive It’s Industrial Policy [1-4-18]

Part 19: Remedy for the Government-Sanctioned Monopolies: Google Facebook & Amazon [1-17-18]

Part 20: America Needs a Consumer-First Internet Policy, Not Tech-First[1-24-18]

Part 21: How U.S. Internet Policy Sabotages America’s National Security [2-9-18]

Part 22: Google’s Chrome Ad Blocker Shows Why the Ungoverned Shouldn’t Govern Others [2-21-18]

Part 23: The Beginning of the End of America’s Bad “No Rules” Internet Policy [3-2-18]

Part 24: Unregulated Google Facebook Amazon Want Their Competitors Utility Regulated [3-7-18]

Part 25: US Internet Policy’s Anticompetitive Asymmetric Accountability - DOJ Filing [3-13-18]

Part 26: Congress Learns Sect 230 Is Linchpin of Internet Platform Unaccountability [3-22-18]

Part 27: Facebook Fiasco Is Exactly What US Internet Law Incents Protects & Produces [3-26-18]

Part 28: How Did Americans Lose Their Right to Privacy? [4-14-18]

Part 29: The Huge Hidden Public Costs (>$1.5T) of U.S. Internet Industrial Policy [4-15-18]

Part 30: Rejecting the Google School of No-Antitrust Fake Consumer WelfareStandard [4-20-18]

Part 31: Why New FTC Will Be a Responsibility Reckoning for Google Facebook Amazon [4-27-18]

Part 32: “How Did Google Get So Big?” Lax Bush & Obama FTC Antitrust Enforcement [5-23-18]

Part 33: Evident Internet Market Failure to Protect Consumer Welfare -- White Paper [5-31-18]

Part 34: What Happened Since FTC Secretly Shut 2012 Google-Android Antitrust Probe? [6-8-18]

Part 35: Buying WhatsApp Tipped Facebook to Monopoly; Why Didn’t FTC Probe Purchase? [6-19-18]

Q&A One Pager Debunking Net Neutrality Myths