Documents released by British Parliament show Facebook’s attempts to stifle competition; the Consumer Financial Protection Bureau no longer protects consumers; provider consolidation is driving up US health care costs; and how big really is America’s digital divide?       Britain’s House of Commons Digital, Media, Culture and Sport Committee, a parliamentary committee looking into Facebook’s role in the spread of fake news and disinformation on social media, made good on its threat to release a trove of internal Facebook emails and documents. The documents, which were seized by British Parliament last month, were part of the lawsuit app developer […]

Documents released by British Parliament show Facebook’s attempts to stifle competition; the Consumer Financial Protection Bureau no longer protects consumers; provider consolidation is driving up US health care costs; and how big really is America’s digital divide?

 

 

 

  • Britain’s House of Commons Digital, Media, Culture and Sport Committee, a parliamentary committee looking into Facebook’s role in the spread of fake news and disinformation on social media, made good on its threat to release a trove of internal Facebook emails and documents. The documents, which were seized by British Parliament last month, were part of the lawsuit app developer Six4Three filed against Facebook and reveal a great deal about Facebook’s inner workings between 2012 to 2015. British MP Damian Collins, who chairs the committee, explained his decision to exploit rarely-used parliamentary powers and release the documents by saying that the documents “raise important questions about how Facebook treats users’ data, their policies for working with app developers, and how they exercise their dominant position in the social media market. We don’t feel we have had straight answers from Facebook on these important issues, which is why we are releasing the documents.”

 

  • Overall, reports the Wall Street Journal, the documents show Mark Zuckerberg “was deeply involved in business decisions at Facebook as it grew into a global platform with more than 2 billion users.” Among other things, the documents show Facebook used its vast amounts of user data to favor certain companies and stifle competitors. Facebook, write Bloomberg’s Nate Lanxon and Sarah Frier, “wielded user data like a bargaining chip, providing access when that sharing might encourage people to spend more time on the social network—and imposing strict limits on partners in cases where it saw a potential competitive threat.” The documents also show that Zuckerberg himself oversaw “a small list of strategic competitors.” One email showed Zuckerberg personally approved a decision to cut Vine’s access to a feature that would allow users of Twitter’s ill-fated video app to connect with their Facebook friends. Facebook said that it was simply following the policy that was in place at the time and announced it would end the “out of date policy” on Tuesday—a day before the documents were released. 

 

  • Other documents and emails showed that Facebook “whitelisted” certain partners like Airbnb and Netflix, giving them “special access” to user data; that Facebook knew collecting call records from Android users without their consent would be “pretty high-risk” but decided to do so anyway; and that the company used Onavo, the Israeli analytics company it acquired in 2013, to collect data on potential competitors.

 

  • The documents, writes TechCrunch’s Natasha Lomas, “raise competition and consent questions.” In the New York Times, Kevin Roose writes that “the image the company promoted for years—as an idealistic enterprise more dedicated to ‘bringing the world closer together’ than increasing its own bottom line—was a carefully cultivated smoke screen.” In Bloomberg, Shira Ovide writes that not only did the documents provide a rare glimpse into Facebook’s inner workings, they also showed Zuckerberg as “a ruthless businessman and savvy corporate strategist,” a Charles Foster Kane-like figure that is very different from the public image he had sought to cultivate over the years. In Wired, Nitasha Tiku writes that Facebook’s “dirty tricks” are nothing new: “When their growth or profit is challenged, Facebook and its big brothers borrow tactics from the threatened behemoths in industries like tobacco and oil, deceiving lawmakers, funding their own experts, and working to forestall regulation.”

 

  • In BuzzFeed, Charlie Warzel and Ryan Mac write that “internal tensions at Facebook are boiling over.” Facebook, according to the report, is now divided into three camps: “those loyal to Zuckerberg and chief operating officer Sheryl Sandberg; those who see the current scandals as proof of a larger corporate meltdown; and a group who see the entire narrative—including the portrayal of the company’s hiring of communications consulting firm Definers Public Affairs—as examples of biased media attacks.”

 

  • In other Facebook news, Mother JonesMonika Bauerlein and Clara Jeffery published a highly-recommended piece about the impact that Facebook’s recent changes are having on journalism—and on Mother Jones itself. “Today, you are far less likely to see posts from Mother Jones or any other publisher than you were two years ago, even when you’ve specifically followed that page,” they write. “The decline in Facebook audience over the past 18 months translates into a loss of at least $600,000 just from advertising (not counting donations or subscriptions that won’t happen when people don’t see our stories). That’s a big part of the reason why we need to raise $400,000 this month.”

 

 

  • From CNBC: “Nine in 10 workers in Silicon Valley make less now than they did in 1997 after adjusting for inflation, according to a new report from the University of California in Santa Cruz.”

 

  • President Trump met with a group of tech executives at the White House this week, among them Google CEO Sundar Pichai, Microsoft CEO Satya Nadella, IBM CEO Gini Rometty, Oracle co-CEO Safra Catz and Qualcomm CEO Steven Mollenkopf. According to AP, the topic of discussion was “securing US dominance in artificial intelligence, quantum computing, advanced manufacturing and faster wireless technology known as 5G.”

 

  • France and Germany have abandoned plans to impose a 3 percent “digital tax” on tech giants’ revenues, reports the Financial Times, after the proposal was opposed by Ireland and some Nordic countries.

 

  • Uber drivers in New York are getting minimum-wage protection for the first time.

 

  • Tim Berners-Lee, inventor of the World Wide Web, has a plan to save it.

 

“You Guys Are Way Over Your Head,” Gary Cohn Tells Newly-Elected Representatives

 

  • “American capitalism isn’t working right now,” writes the New York TimesDavid Leonhardt in his coverage of Senator Elizabeth Warren’s Accountable Capitalism Act, which would require corporate boards to take into account the interests of other stakeholders and not just shareholders. “Warren wants an economy in which companies again invest in their workers and communities. Yet she doesn’t believe it can happen organically, as it did in the 1940s, because financial markets will punish well-meaning executives who stop trying to maximize short-term profits,” he writes.

 

  • From Yahoo! Finance: “A few double negatives buried in legislative text may have inadvertently freed nearly all US banks” from the Volcker Rule.

 

  • From the Washington Post: months before he was picked by President Trump to replace Jeff Sessions as attorney general, William P. Barr served on the board of Time Warner and clashed with the Justice Department he is now expected to oversee regarding the federal government’s attempts to block the AT&T-Time Warner merger.

 

  • “You guys are way over your head, you don’t know how the game is played,” former Trump economic adviser Gary Cohn reportedly told newly-elected members of Congress during a closed-door meeting hosted by Harvard University’s Institute of Politics. Cohn, the former president of Goldman Sachs, met with freshman representatives elected in 2018 as part of an orientation event hosted by Harvard, which included a number of CEOs and corporate lobbyists.The event, “a traditionally uncontroversial affair that has hosted more than 700 members of Congress since 1972” according to the Washington Post’s Jeff Stein, was immediately criticized by progressives like Rep.-elect Alexandria Ocasio-Cortez (D-NY) and Rep.-elect Rashida Tlaib (D-MI). “Right now Freshman members of Congress are at a ‘Bipartisan’ orientation w/ briefings on issues. Invited panelists offer insights to inform new Congressmembers‘ views as they prepare to legislate,” tweeted Ocasio-Cortez. “# of Corporate CEOs we’ve listened to here: 4 # of Labor leaders: 0. Lobbyists are here. Goldman Sachs is here. Where‘s labor? Activists? Frontline community leaders?”

 

  • Michael Bloomberg has not announced he’s running for president in 2020 yet, but has made clear he is seriously considering it. After re-registering as a Democrat and donating $110 million to Democratic candidates during the midterms, the billionaire and former New York mayor has been taking meetings with Democratic leaders in Iowa and said that if he were to run, he would likely sell his company or place it in a blind trust. When asked how Bloomberg’s political reporters might handle his potential presidential campaign, Bloomberg said he might just cease covering politics altogether. “Quite honestly, I don’t want all the reporters I’m paying to write a bad story about me,” said Bloomberg, according to BuzzFeed’s Steven Perlberg.

 

  • A wide-ranging Washington Post investigation by Robert O’Harrow Jr. ,Shawn Boburg and Renae Merle explores the state of the Consumer Financial Protection Bureau, one year after Mick Mulvaney’s appointment as acting director. Mulvaney and his political appointees, they write, have “used the levers of government to hinder career employees and roll back oversight of private industry”: enforcement actions by the bureau have dropped about 75 percent from average in recent years, while consumer complaints are at a high. “Created by Congress to protect Americans from financial abuses, the bureau under Mulvaney has adopted the role of promoting ‘free markets’ and guarding the rights of banks and financial firms as well as those of consumers, according to statements by Mulvaney and bureau documents,” they write.

 

  • From Scientific American: “Monumental disaster” at the Department of the Interior: Secretary Ryan Zinke and his political staff “have consistently sidelined scientists and experts while handing the agency’s keys over to oil, gas and mining interests,” writes former DOI employee 

 

  • From Bloomberg: JP Morgan CEO Jamie Dimon is being chased by angry activists “scaling Park Avenue flagpoles, blocking Seattle traffic with tepees, bursting into conferences, and blasting audio of crying children outside his apartment.” 

 

Provider Consolidation and America’s Rising Health Care Costs

 

  • Prominent doctors failed to disclose payments they received from drug and health care companies when publishing articles in medical journals, reveals a joint investigation by the New York Times and ProPublica: “The president-elect of the American Society of Clinical Oncology …. declared that he had no conflicts of interest in more than 50 journal articles in recent years, including in the prestigious New England Journal of Medicine. However, drug companies have paid his employer nearly $114,000 for consulting and speaking, and nearly $8 million for his research during the period for which disclosure was required.”

 

  • A new report by Emily Gee and Ethan Gurwitz from the Center for American Progress examines the role of provider consolidation in driving up US health care costs. 90 percent of provider markets in the US “met or exceeded the 2,500 HHI threshold for a highly concentrated market,” they write. “It is time to stop presuming that consolidation in health care will be innovative and pro-competitive. Deals that are good for business are not necessarily in consumers’ best interest. The loss of independent hospitals represents a loss of choice for patients, and lower costs for health systems do not translate into lower prices for patients.”

 

  • In related news, millions of Americans could face surprise emergency room bills in January due to a dispute between UnitedHealthcare and Envision Healthcare, the country’s largest employers of doctors, reports Bloomberg.

 

France, the US-China Trade War, and America’s Digital Divide

 

  • As Paris is reeling from its worst riots in decades, the Financial TimesDelphine Strauss provides some useful background on the overall tax resentment behind the yellow vest (“gilets jaunes”) protests. While President Emmanuel Macron’s plans to install a fuel tax were the catalyst for the riots, she writes, his overall tax policies have “hit the poorest households while making the very richest even richer,” thus fueling much of the anger behind the protest movement. An analysis by the Institut des Politiques Publiques, a French think tank, “shows that benefits cuts and tax changes in 2018 and 2019 will leave the bottom fifth of households worse off, while the abolition of the ISF wealth tax means that by far the biggest gains will go to the top 1 per cent. Most of those joining the ranks of the gilets jaunes are slightly higher up the earnings scale—workers on lower middle incomes who do not qualify for benefits but struggle to make ends meet after a decade in which real household incomes have stagnated while living costs have risen.”

 

  • China warned of “serious consequences” if Canada does not release Meng Wanzhou, the CFO of Chinese telecom giant Huawei that was arrested last week at the request of the United States on suspicion that she participated in a scheme to trick financial institutions into deals that violated US sanctions against Iran. While Meng’s arrest has inspired renewed concerns of an escalating trade war between the US and China, Bloomberg’s Noah Smith writes that the Huawei affair shows what the US-China trade war is really about: “The startling arrest in Canada of a Chinese telecom company executive should wake people up to the fact that there’s a second US-China trade war going on—a much more stealthy conflict, fought with weapons much subtler and more devastating than tariffs. And the prize in that other struggle is domination of the information-technology industry,” he writes.

 

  • In related news: American entrepreneurs who once flocked to China are now heading home, disillusioned, reports the Wall Street Journal.

 

  • From the New York Times: the FCC says 24.7 million Americans don’t have access to high-speed internet. A new research by Microsoft, however, finds that the number is actually 162.8 million. “The discrepancy is particularly stark in rural areas,” writes Steve Lohr. In Washington’s Ferry County, for instance, “Microsoft estimates that only 2 percent of people use broadband service, versus the 100 percent the federal government says have access to the service.”

 

  • From Bloomberg: “Send noncompete agreements back to the Middle Ages”

 

 

  • From the Washington Monthly: How America’s antimonopoly laws got turned against the little guy.

 

Stigler Center Goings-On

 

  • “The revolving door at the Securities and Exchange Commission is making it difficult for an already embattled regulator to fight the excesses of Corporate America,” Luigi Zingales tells Marketwatch’s Francine McKenna in a wide-ranging interview about the SEC’s enforcement record.

 

  • “An influential paper by Oliver Hart and Luigi Zingales last year argued that profitability is not the only criterion that should apply and that shareholders’ welfare is affected by a broad range of factors, including social and environmental conditions,” writes The Economist in a piece discussing the academic debate around shareholder value.

 

Check out our own coverage of the same paper here and here.

 

  • In the second of a two-part look at global inequality, Capitalisn’t hosts Kate Waldock and Luigi Zingales talk about the downside of globalization. A listener’s email sparks a conversation about what’s driving the growing wage gap within the US, and the two survey the latest research on the lingering effects of the ‘China Shock’ and debate how to reverse the trend before the people revolt.

 

Disclaimer: The ProMarket blog is dedicated to discussing how competition tends to be subverted by special interests. The posts represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty. For more information, please visit ProMarket Blog Policy

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