Middleboro Review 2: POLITICO NIGHTLY: The DOJ sets its sights on Google. Again.

Wednesday, January 25, 2023

POLITICO NIGHTLY: The DOJ sets its sights on Google. Again.

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A television displays Attorney General Merrick Garland's remarks during a news conference at the Justice Department to announce a new antitrust lawsuit against Google. | Anna Moneymaker/Getty Images

BIG TECH BREAK UP? — The Justice Department is going after Google, the internet search and advertising colossus, in what could be one of the most important antitrust cases ever. The DOJ, joined by eight states, today filed a lawsuit that alleges the tech giant has illegally monopolized the market for online advertisements for years.

While the DOJ under President Donald Trump brought suits against multiple tech giants — including Google — it’s the first major tech antitrust punch thrown by the department under President Joe Biden. The case follows a similar complaint from the Texas attorney general filed in 2020, that Google has acquired too many of the tools that sell and place ads, forcing businesses to use the slate that it offers and often “self-dealing,” acting in the company’s own best interests instead of clients.

The Justice Department argues in the lawsuit that Google built a system that forced advertisers to pay higher rates than a competitive marketplace would allow. Google responded in a statement saying there’s plenty of competition in the online advertising space — estimated to be worth roughly $280 billion in 2023 — and that the DOJ’s argument would “slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow.”

Nightly spoke with Josh Sisco , an antitrust reporter at POLITICO, about the case and the DOJ’s strategy. This interview has been edited.

What’s the DOJ’s argument in this case? Why do they think Google has too much power?

The DOJ and a group of states, including California and New York, are attacking Google’s market-leading role in a digital advertising market estimated to be around $280 billion this year. Google is involved in all facets of the business, helping companies sell ads, websites sell ad space, and providing the tools that match buyers and sellers and taking a cut. It also sells its own ad space on sites like YouTube. According to the lawsuit, this is a massive conflict of interest akin to letting Goldman Sachs own the New York Stock Exchange.

How similar is this to previous antitrust lawsuits against Google? What’s the goal of going after Google in this specific way now?

At this point, there are five different lawsuits from federal and state antitrust enforcers, targeting the company’s search and advertising businesses, as well as its Play app store and contracts with cell phone makers and wireless companies for the use of its Android mobile operating system. This new case is very similar to a case from 2020 led by the Texas attorney general. Google’s various businesses have long been under fire from customers and competitors and the DOJ and states see all of them as crucial to creating a fair and innovative digital economy now, and in the future.

Some of the 2020 Texas attorney general’s lawsuit has been thrown out, and these lawsuits tend to drag on. What’s the timeline for resolution here, and what is the potential range of outcomes?

We’re definitely talking in years with this. The DOJ and states filed this new case in a court known for speed, but it’s still likely to be at least two years before it’s resolved. And that’s before any appeals. There’s a whole host of possible outcomes. The DOJ is asking for a break up of a key part of Google’s business, along with damages and court orders preventing a wide array of current business practices. A judge could fully find for either side, or try to split the difference in some way

From your perspective, is increased scrutiny and calls to break up Big Tech likely to continue? Does this look like the first of many such suits from the Biden DOJ?

This is just the first in a likely long line of cases from both the DOJ and Federal Trade Commission. We’ve reported that the DOJ is also working on an antitrust case against Apple, and the FTC has been investigating Amazon for several years.

Are there other efforts in Washington directed towards attempting to regulate these companies?

There was a huge push in the last Congress to pass antitrust legislation targeting Google, Apple, Meta, Amazon and Microsoft. None of that passed, and hopes from backers of the bills on both sides of the aisle are fairly low that anything will get done in a divided Congress this term. That won’t stop senators like Amy Klobuchar (D-Minn.) and Mike Lee (R-Utah) and Reps. like David Cicilline (D-R.I.) and Ken Buck (R-Colo.) from continuing to press for new laws, but it might be a while before anything gets done on the Hill.

It seems like all of the outcomes you’re talking about are a few years away from resolution. Is there anything potentially closer at hand or are we just in wait-and-see mode?

We’re pretty squarely in wait-and-see mode. There are some merger cases, like the FTC’s case to block Microsoft’s deal for Activision Blizzard that will get decided fairly quickly, but none of these companies are getting broken up anytime soon.

Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com . Or contact tonight’s author at cmchugh@politico.com or on Twitter at @calder_mchugh .

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Dear 118th Congress: How will you be defined? Like those before you, will you be known for partisanship and political theater? Or, will you help solve the economic crises of our time? For too long, conventional wisdom has been that divided government is a free pass for gridlock. You can be the Congress that bucks that trend and makes life more affordable. Americans need you to succeed. Will you? Learn more at www.Dear118Congress.com.

WHAT'D I MISS?

Former Vice President Mike Pence. | Paul Morigi/Getty Images

— Mike Pence had classified documents at home, turned them over: The Justice Department has taken possession of a “small number” of documents with classified markings that former Vice President Mike Pence found in his Indiana residence earlier this month, according to Greg Jacob, the custodian of Pence’s White House records. In a Jan. 22 letter to the National Archives, Jacob indicated that FBI agents came to Pence’s Indiana home on the night of Jan. 19 to retrieve documents that the former vice president had located a few days earlier.

— U.S. closer to approving ‘significant number’ of Abrams tanks to Ukraine: The Biden administration is leaning toward sending “a significant number” of M1 Abrams tanks to Ukraine , two U.S. officials said, and an announcement could come as early as this week. The development comes amid a public standoff with German officials, who are under pressure to send their own Leopard tanks and allow other European countries that operate the German-made vehicles to do so as well. The transfer of U.S. and German tanks would mark a major development in the West’s effort to arm Ukraine. Top Ukrainian officials have spent weeks pleading for tanks as Kyiv prepares for fresh Russian offensives in the country’s east.

— RNC to consider resolution condemning Kanye West and antisemitism: Republican National Committee members are set to vote on a resolution this week condemning not just antisemitism, but Ye, better known as Kanye West, and other conservative provocateurs who have made antisemitic remarks . The resolution was filed by California national committeeman Shawn Steel, an Orange County attorney and past California Republican Party chair who said in an interview that he did not want a handful of antisemitic “nitwits” to represent the GOP. The push follows comments by Trump warning Jews in the United States to “get their act together” and show more appreciation for his policies toward Israel.

— Biden’s human rights pick withdraws: Biden’s nominee for a top human rights position is withdrawing after facing unrelenting opposition from a Senate Republican who questions her support for Israel . The loss of Sarah Margon, whose nomination to serve as assistant secretary of State for democracy, human rights and labor was announced in April 2021, could damage an administration push to prioritize human rights in its foreign policy. It also highlights the partisan logjams in the Senate confirmation process, where actions by a single senator have left some foreign policy and national security positions empty for years.

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AROUND THE WORLD

RESIGNATIONS ROCK KYIV — Ukraine’s Deputy Defense Minister Vyacheslav Shapovalov resigned today in the wake of a major procurement scandal that has rocked the country’s political establishment, writes Gregorio Sorgi and Veronika Melkozerova .

Shapovalov, who oversaw logistical support for the army, tendered his resignation following an exposé from the Ukrainian news website ZN.UA revealed last week that the defense ministry purchased overpriced food supplies for its troops.

In his resignation letter, the minister asked to be dismissed in order “not to pose a threat to the stable supply of the Armed Forces of Ukraine as a result of a campaign of accusations related to the purchase of food services.”

Other senior figures from the Ukrainian government resigned or were dismissed this week. Just today, Prosecutor General Andrii Kostin dismissed his deputy Oleksiy Symonenko and President Volodymyr Zelenskyy also dismissed Kyrylo Tymoshenko, the deputy head of his office. Deputy Infrastructure Minister Vasyl Lozynskiy was also recently fired amid allegations related to the public purchase of electricity generators.

These revelations come as a severe blow as Kyiv’s officials have been trying to show that the nation is improving its record on corruption in a bid to make headway in the EU’s accession process.

“Ukraine is of course expected to further strengthen the fight against corruption, in particular at a high level through proactive and effective investigations, and a credible track record of prosecutions and convictions,” a spokesperson for the European Commission said.

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NIGHTLY NUMBER

The number of journalists killed in 2022 according to a report published today from the New York-based Committee to Protect Journalists. The number of journalists killed in 2022 reflects a 50 percent rise since a year prior , and is the largest since 2018. The report also notes that more than half of the journalists on the list were slain in Ukraine, Mexico and Haiti. CPJ confirmed that 41 of the 67 journalists were killed “in direct connection with their work” and is investigating the motives for the killing of the 26 others.

RADAR SWEEP

WILDLIFE WASTELAND — Thousands of animals in Amboseli National Park, in southeastern Kenya, have died in the last year. Not from thirst or predators, but from a lack of pasture and green shrubs, which are typically abundant but have not grown for years. The park, which used to bring tens of thousands of tourists a year and is considered a major economic engine for the region, has turned into a wasteland as a result of a years long drought driven by warming ocean waters thousands of miles away. In response to dwindling resources, ranchers have fenced off their property to protect their crops and animals from predators. The efforts choked off ancient migratory routes or paths to watering holes that some animals have used for decades or more, which has subsequently exacerbated the problem of low resources. Georgina Gustin investigates how warming temperatures have upended an animal sanctuary for Undark Magazine.

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PARTING WORDS

Saxophonist Jordan Cohen, right, listens as singer-songwriter Clyde Lawrence, left, testifies before a Senate Judiciary Committee hearing. Cohen and Lawrence are members of the soul-pop group Lawrence. | Andrew Harnik/AP Photo

I KNEW YOU WERE TROUBLE — Live Nation/Ticketmaster came under fire from Democratic and Republican senators today in a Capitol Hill hearing, as executives at the conglomerate accepted blame for their ticketing process’s breakdown during the sale of Taylor Swift tickets last November.

Live Nation Entertainment sells around 70 percent of the concert tickets in the U.S. according to information from a lawsuit filed by customers last year, and also owns and books venues. The stranglehold the company has on the market has frustrated artists for years, who often see profits that are a fraction of the revenue made from tickets sold.

In addition to hearing from Live Nation executives , senators also got testimony from two members of the eight-piece band Lawrence , Clyde Lawrence and Jordan Cohen. In their testimony, they described a show where their tickets sold for $30 with a $12 fee, for $42 total. But after costs ranging from $30,000 in the venue’s fixed fee to $250 for clean towels, the band takes home only $12 per ticket, and $6 after touring costs.

After hearing their testimony, Sen. Richard Blumenthal (D-Conn.) said that “unwinding the [2010] merger [between Ticketmaster and Live Nation]” ought to be on the table.

Nightly’s Calder McHugh spoke with Lawrence and Cohen about their day in Congress and their hopes about how the industry might change. This interview has been edited.

What is Live Nation’s role as a promoter as well as a ticket-seller, and how does it impact costs?

Lawrence : Live Nation puts up all the costs (although notably not most of the artists’ costs), but they put a lot of the costs into putting together the event. But the problem, and the misalignment of incentives, comes from the fact that in addition to being the promoter, they also are the exclusive operator or in many cases the owner of a wide variety of venues. And they are also through their merger with Ticketmaster, the exclusive ticketing company of those venues. So when an artist chooses to play a show at a given venue, in the case of many, many venues across the country, they have no choice but to have Live Nation be the promoter because Live Nation owns or exclusively operates the venue, and they have no choice but for Ticketmaster to be the ticketer. So there’s very little choice, very little leverage.

Does solving this fee problem require a broad reimagining of how artists tour and interact with venues and ticket companies?

Lawrence : I think that some minor and major changes would improve the business, including: better and clearer settlement sheets, more artist choice about what promoter they’re using, more flexibility for an artist to take a different kind of deal whether it be a lower guarantee and a higher door deal, changes to the way that artists receive ancillary revenues like merchandise sales and venue concession, and greater regulation on ticket fees.

But at the end of the day, a lot of money is being put into the live music industry. I just think that fans and artists would probably agree that a little too much of it is ending in the pocket of people that it shouldn’t be.

What do you hope happens from here, after this congressional hearing?

Cohen : We feel that our role is spreading awareness. We’re hoping that through this big platform, not only is the government going to see our issues, but hopefully the public will as well and have a better understanding of how their money is actually getting split up. Often people say, ‘the venue takes a piece of your merch? That’s crazy. We had no idea.’ So hopefully we can get some rallying of the public and maybe some government assistance, and this is the first step in a bigger solution towards a more fair music industry.

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A message from Americans for Prosperity:

Congress at a Crossroads: Americans are facing a cost-of-living crisis. Divided government can’t be an excuse to do nothing. The 118th Congress can drive a policy agenda to make life more affordable by reining in spending to get inflation under control, cutting red tape to bring down energy costs, and expanding opportunities for fulfilling work. But to do that, Washington needs to rise above the political dysfunction to get things done. Americans can’t afford to wake up two years from now to a country on the same path. Learn how we can change course at www.Dear118Congress.com.

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