FTC

Let’s see what a winner-take-all, market failure looks like as it is happening before our eyes.

The Goobook digital ad cartel is continuing its outsized, abnormally-fast, revenue growth on top of the largest digital ad revenue bases by far. Consequently, their few remaining platform digital advertising competitors are weakening significantly per 1Q17 earnings reporting and other information.

This is how the relevant market players did in 1Q17.

Google (which is 90% digital advertising) grew revenues at a 22% annual rate, or an absolute revenue increase of +$17b to total $95b for the last year.

Facebook (which is basically all advertising) grew revenues at a 49% annual rate, or an absolute revenue increase of +$10b to total $30b for the last year.

What did the Senate confirmation hearing for President Trump’s nominee to head up the DOJ Antitrust Division, Makan Delrahim, tell us that’s relevant to the biggest pending global antitrust issue -- Google?

A lot.

Google is no longer politically protected from antitrust investigation in the U.S.

Let’s learn why.

It has gone from likely to clear that Makan Delrahim, will be the antitrust lead in handling the most consequential U.S and international antitrust matters, like Google, in the Trump Administration.

The hearing affirmed Mr. Delrahim is very well-known, highly-respected, and enjoys bipartisan support on the Senate Judiciary Committee. He received bipartisan letters of endorsement from 12 previous DOJ Antitrust Chiefs and all the Commissioners he served with on the Antitrust Modernization Commission.

In addition, as Deputy White House Counsel for nominations, who also shepherded Supreme Court Nominee, Judge Neil Gorsuch, through the Senate confirmation process, he obviously enjoys the strongest trust, respect, and support from President Trump and Attorney General Sessions.

Tellingly, it is mid-May and we don’t have a nominee for FTC Chairperson.

There are potentially big implications for Google, complainants, and antitrust authorities around the world, from Google’s antitrust settlement with Russia’s Federal Antimonopoly Service (FAS)

FAS previously ruled officially, and was upheld by the Russian Supreme Court, that Google-Android illegally abused its dominance in forcing handset manufacturers to strongly preference Google search and other apps, as a contractual requirement to license Google’s official Android operating system.

In this settlement, Google agrees to a variety of significant Android/Chrome behavior changes that, if they work in practice as represented, will enable other search engines, like Yandex, and app developers to have significantly more competitive opportunities in Russia. The arbitration agreement is for six years and nine months and comes with a fine of ~$7.8m -- the equivalent of 46 minutes of Google’s annual revenues.

What Google gets in return, is big brand protection in that it can claim: a) the settlement was voluntary; b) there is now no more Russian official finding/legal precedent that Google is dominant or a monopoly, or has done anything wrong (even though it officially did before this superseding settlement); and c) a Google-Android antitrust settlement template that Google can shop to other countries, (that is friendly to Google in that Google knows this settlement won’t be as effective elsewhere, because other countries sans China and South Korea, do not have a material competitive mobile search offering to Google like Russia’s Yandex.)

The evidence is compelling that the DOJ will replace the FTC as the lead Sherman Act antitrust enforcer on the biggest Google antitrust matters during the Trump Administration.

A huge action forcing event for the Trump DOJ Antitrust Division is coming, most likely this June/July, when EU antitrust authorities most likely will conclude the first of three antitrust cases against Alphabet-Google, and officially rule Google is a 90+% search monopoly that has anticompetitively abused its monopoly position in search, and impose a traditional monopoly nondiscrimination principle remedy that Google treat its shopping comparison competitors as it treats itself.

While conventional wisdom assumes the FTC will continue as the Google antitrust lead, that is very unlikely to continue, because of two Google antitrust gamechangers, the replacement of President Obama with President Trump, and the EU’s coming official antitrust conclusion that Google is in fact a monopoly that acts anticompetitively in over 30% of the world.

Since so much flows from the baseline assumption of which U.S. entity will be the Google antitrust lead, the DOJ or FTC, it warrants closest examination.

Summary of six reasons DOJ will take the Google antitrust lead from FTC

(1) Institutionally, DOJ is the United States’ antitrust lawyer and the official liaison with other countries.

At best the notions of net neutrality and consumer privacy are somewhat in tension.

At worst, they are in opposition, and harm consumer privacy as happened when the Wheeler-FCC subordinated the goal of what’s best for consumer privacy to the conflicting and overriding goal of what was best for imposing maximal, Title II net neutrality.

Net neutrality and consumer privacy are in tension because they are very different concepts, priorities, and approaches for the handling of information online.

However, the original tension between the FCC’s first concept of net neutrality and consumer privacy was very limited because the Martin-FCC’s 2005 Internet Policy Statement on net neutrality was an extension of the Powell-FCC’s “Internet Freedoms” concept of net neutrality, and both approaches were consumer-first, i.e. very clearly centered around what consumers could expect from the Internet.

What thrust them into the more opposing concepts that they are today?

It was when net neutrality flipped from being primarily a consumer-centric principle to an edge-provider centric principle defined by Google, Amazon, Facebook and Netflix; and from the enforcement of a general broadband nondiscrimination principle, to the preemptive imposition of “the strongest possible,” specific, utility rate regulation framework – i.e. Title II of the 1934 Communications Act -- on a competitive industry that had done nothing wrong to warrant it.

Conclusions:

Most of what we have learned in the five months since the election indicates that the Trump Administration is not going to be Google’s antitrust advocate and protector like the Obama Administration effectively was from 2013-2016, in de facto shutting down any real U.S. antitrust scrutiny of Google, and in turn implicitly discouraging antitrust enforcement of Google in the EU and around the world.  

This antitrust enforcement sea change has three big picture implications: for the EU, for the U.S., and for markets.

Please see PBS NewsHour’s five minute segment here with Gigi Sohn and I discussing Congress’ rescission of the FCC’s unimplemented broadband privacy order that the Wheeler-FCC majority passed last October by a 3-2 vote.

Please see my latest The Hill op-ed: “Congress was right to save consumers from privacy rules imposed under net neutrality.”

Consumer privacy has been the biggest loser from net neutrality proponents’ politicization of privacy.

President Trump’s impressive nominee to head the DOJ Antitrust Division, Makan Delrahim, enters the global antitrust stage when one company, America’s Alphabet-Google, has been under near constant antitrust investigation around the world for a decade and faces multiple pending antitrust enforcement actions.

What is the global and U.S. antitrust community to glean from this nomination?

Mr. Delrahim’s background speaks volumes, especially if one believes the adage, people are policy.

Overall, Makan Delrahim is a widely-respected, veteran antitrust official, attorney, expert, and professor, with high-level antitrust experience that check all the right boxes, organizationally, functionally, and professionally.

Mr. Delrahim’s antitrust-specific experience is outstanding.

By far the biggest competition problem facing U.S. antitrust and regulatory authorities is the Goobook Ad Cartel, the unaccountable dominant chokepoint for monetizing most online news, content, products and services.

The evidence is compelling that Google and Facebook have colluded to divide up and corner the online advertising market, and consequently, have deterred competition, devalued property and work, dehumanized privacy, and depressed economic growth and employment.

This unprecedented market power and winner-take-all outcome in such a vital sector of the economy is a direct result of purposeful U.S. non-enforcement of antitrust laws for online platforms, and the lavishment of most every public policy advantage upon them that one could imagine. 

Let’s first examine Google and Facebook’s massive monopolies, then their collusion, and then who is harmed and how.

Google & Facebook’s Massive Monopolies