The Political Fallout of Amazon's HQ2 Temper Tantrum

Big issue 6-26-2019

Hi,

Welcome to Big, a newsletter about the politics of monopoly. If you’d like to sign up, you can do so here. Or just read on…

Over the last few days, I’ve been doing a series on why anti-monopoly politics is back (here’s part one and part two). I’ll pick up the series again next week, because something happened last night worth mentioning. In Queens, a 31-year old Latina candidate named Tiffany Cabán won a closely watched district attorney race against the Democratic establishment candidate Melissa Katz. What does this have to do with antitrust and monopoly?

Plenty. But first…

Google Screws Up in the Senate: Yesterday, a Google executive named was asked in a hearing on big tech and user manipulation whether the company uses persuasive techniques on users. Maggie Stanphill, Google’s director of user experience, said, “No, we do not use persuasive technology at Google.” No one followed up with the obvious question. “Then why do advertisers buy from you?” But that’s probably because Senators couldn’t believe she said that. Google probably figured no one would attend yet another hearing on big tech and manipulation, but the company was wrong. It was crowded and widely attended.

Stanphill was terrible, unable and unwilling to answer basic questions like whether YouTube incorporates data from search or Gmail, or whether Google is responsible for its search engine results. The company should have sent a higher up. Senators are getting sick of being insulted and patronized. Ex-Googler Tristan Harris, who has created an entire language and argument around the use of manipulative techniques, testified effectively, and he’s becoming a political star, increasingly trusted by both sides as an honest broker.

Criminal Price-Fixing Against Big Chicken: The Trump DOJ is considering criminal charges against chicken producers. The Sherman Act is a criminal statute, which a lot of people don’t really know. But monopolization is a crime. Read Chris Leonard’s The Meat Racket for more on how concentrated this industry really is.

A Merger Challenge in Books: The Trump DOJ is also challenging a merger between the two largest physical printing companies, who print long-form magazines and books. The companies, Quad/Graphics and LSC, are going to fight, making the case that they face massive competition, such as that Google’s advertising business. No, that doesn’t make sense.

Europeans Attack the “Antitrust Takes too Long” Excuse: The EU Competition Authority did something important today, imposing what are known as “interim measures” against a company, in this case chip maker Broadcom, for the first time since 2001. This means that Broadcom has to stop engaging in potentially anti-competitive behavior while the investigation is going on. The idea here is that rather than a case taking seven years before anything changes, with all competitors dying in the meantime, the EU will make sure the market is healthy and investigate at the same time. It’s a big, big deal, procedurally.

The enforcers opened an investigation against Broadcom for restrictive supplier practices in chip sets for modems, set-top boxes, TVs, and routers. They are investigating exclusive purchase obligations, illegal rebates, bundling, IP-abuse, and degrading interoperability. These are standard antitrust violations, and a lot of the tech industry engages in them, so the investigation itself will be useful. More importantly, the ‘antitrust takes too long’ excuse is gone.


The Amazon HQ2 Fallout That Wasn’t

Now back to the main story. This race was the first election since Amazon HQ2 pulled out of New York City - and in particular, Queens. The deal had zero impact on the election, which is a significant political win for the anti-tax break forces.

While there was a noisy opposition to Amazon’s tax breaks, the deal was actually popular in the city, with 56% of New Yorkers approving and 26% disapproving. This is how monopoly politics often plays out, because the targets of anti-monopoly laws are often fairly popular companies engaged in anti-competitive or destructive behavior. Google and Amazon, despite their predatory actions, have some of the best brands in the world.

Still, Amazon’s demand for subsidies provoked anger, as well as opposition from a coalition of nonprofits, businesses, and politicians led by state Senator Mike Gianaris, Assemblyman Ron T. Kim, and Congresswoman Alexandria Ocasio-Cortez. The opposition wasn’t isolated to lefty groups and politicians, but was rooted in serious concerns over political economy and development. For instance…

Entrepreneur and quipmaster Scott Galloway blasted the deal repeatedly, calling it a “con meant to induce ridiculous terms that they then took to the cites all along that they knew they were going to be in.”

None of this took away from the popularity and seeming political salience of the deal. The company had support from Mayor Bill De Blasio and Governor Andrew Cuomo, whose power and influence extends into most crevices of power in New York. The criticism caused Jeff Bezos to pull out in a huff. And after he did, recriminations started, with tremendous fear of retribution from Cuomo, as well as voters themselves. Even opponents of the deal were of two minds. For example, the New York Times editorialized against the deal when it was announced, and then after Amazon’s temper tantrum, editorialized against the deal’s opponents.

In other words, there seemed to be consensus we need to radically change our approach to powerful corporate actors, as long as everything stays the same.

Over the past few months, Tiffany Caban challenged the Amazon-supporting Queens machine, and did so with a movement of politicians who were pretty much identical to those who opposed the Amazon HQ2 tax breaks, including Gianaris, AOC, and Ron T. Kim. The issues seemed different, focusing on criminal justice reform, ending the war on drugs and decriminalizing sex work, and poverty. But Caban, like new DA in Philadelphia Larry Krasner, also pointed the eyes of criminal prosecution upward, pledging to establish “Corporate Crime, Consumer Protection, Wage Theft and Antitrust Units” of the Queens DA office, attacking big pharma and its “blood money” (with the implication that she’s talking about opioids). And she mentioned Amazon’s “discriminatory, monopolistic policies." Caban had support from other anti-monopolists like Elizabeth Warren and Bernie Sanders, who endorsed her, versus more traditional Democratic power brokers like Congressman Greg Meeks.

The race was many things, including a generational turnover and a fight against an entrenched political machine. But it was also - and this isn’t the main story but it is a part of the story - the triumph of an anti-monopoly coalition. It’s the same dynamic as AOC defeating Joe Crowley last year; Crowley was a large recipient of money not just from big tech companies, but from Sheryl Sandberg personally.

And despite the seeming popularity of the Amazon tax breaks, in the actual election they didn’t matter to voters. To use a cliche, support for subsidies for Amazon was a mile wide and skin deep. It turns out that, at least in certain contexts, politicians can attack powerful corporations even if those corporations have good brands. Going after such corporations can help solidify their support base while not actually alienating voters who like those brands.

Anti-monopoly policy isn’t just about factional ideological fights within the Democratic Party, because there are anti-monopolists across the spectrum and all over the world. But this dispute is worth highlighting, because it reflects that seeking to stop monopolistic abuses of corporate power is just part of how the emerging post-Obama Democratic Party thinks about politics.

Thanks for reading. And if you liked it, you can sign up here for more issues of Big, a newsletter on how to restore fair commerce, innovation and democracy.

cheers,

Matt Stoller