Elizabeth Warren’s plan to break up Big Tech and other mergers

Sen. Elizabeth Warren loves talking about antitrust. In fact, she says, she can’t think of anything more fun to talk about.

Antitrust is not a topic most people associate with “fun,” but the Massachusetts Democrat’s passion for it is entirely believable. It’s not just the excitement and earnestness with which she talks about competition laws and how to change them; it’s also the fact that she has been talking about it for years. Longer, in fact, than many of the politicians who talk about it now.

She’s also why many of them are talking about it now. Warren took antitrust reform and anti-monopoly power out of relatively small academic and advocacy circles and thrust it into the national conversation. Then she ran for president and brought the phrase “break up Big Tech” — and the concept — into the mainstream. Now there’s an administration and a Congress in place that might actually do some of the things she’s been pushing for. And Warren is still talking, because she still has a lot of work to do.

“Getting everybody lined up to push back against a powerful, well-financed industry is tough,” Warren told Recode. “But the fact that it’s tough doesn’t mean it’s okay not to do the work. It just means shame on Congress for not sucking it up and doing what needs to be done.”

She’s referring to a package of bipartisan, Big Tech-targeted antitrust bills. Some of those would change things a lot; they could, indeed, break up Big Tech. Those bills are also going nowhere in Congress. The bills that are much more likely to pass — but whose progress has been slow — give a few massive companies new rules about how they can run their digital platforms and services.

If you’ve only been paying attention to the Big Tech antitrust reform movement for the last, say, year and a half, you may not realize how instrumental Warren has been in building it. She ceded much of that Break Up Big Tech spotlight to the prominent Big Tech critics heading up the two federal agencies that enforce antitrust laws — the Federal Trade Commission (FTC) and the Department of Justice (DOJ) — and the lawmakers heading up those antitrust bills. Warren isn’t on the Judiciary Committee that those bills came out of, and her name isn’t on any of them.

But now Warren has an even more ambitious project: Her new bill, the Prohibiting Anticompetitive Mergers Act, doesn’t just break up Big Tech: It breaks up Big Everything, and it prevents companies from getting too big in the future. It would also fundamentally change how agencies evaluate and block proposed mergers, a process that currently gives companies a lot of power and agencies relatively little. Warren says the bill crystallizes her vision for how the government can stop industry consolidation that has broken America’s markets, hurt its economy, and threatened its democracy.

The bill comes at a time when the auspicious beginnings of the Biden administration’s pro-competition, anti-monopoly agenda have given way to the reality of how difficult it is to actually get things done. With midterms approaching, however, things appear to be picking back up. Congress is poised to pass some of those antitrust bills and confirm Alvaro Bedoya, the Democratic commissioner the FTC needs to fully carry out its chair’s vision. Warren says she “gives props” for Biden’s pro-competition executive order, which is making progress. But Biden was also slow to officially support those antitrust bills, and his administration has pushed back on the European Union’s attempts to regulate Big Tech.

Elizabeth Warren has a few things to say about all that.

Mergers don’t just affect consumers — sometimes workers bear the impact

Why introduce a big new antitrust bill when Congress is close to passing a few other antitrust laws? The answer lies in chicken sandwiches.

The Big Tech antitrust bills address one industry, and only a few players in it. But many other industries have become hugely consolidated over the last several decades. Chicken, for example. That consolidation has been blamed for everything from the high prices you pay for that chicken to the low prices farmers are forced to sell their chickens for to the few poultry-producing giants out there. But the harm isn’t just in the prices, Warren says. It’s also in who makes sandwiches out of that chicken.

“Think about two fast food chains in a region,” she said. “One of them does hamburgers almost exclusively, and the other one does chicken sandwiches almost exclusively.” They can merge, and keep their prices and products the same. As far as the consumer is concerned, nothing has changed for their wallet or their taste buds. Antitrust agencies, which typically only look at consumer welfare when reviewing mergers, will likely approve it. But mergers don’t just affect consumers: “The world has changed for those workers,” Warren said.

The two chains no longer have to compete with each other for employees by offering superior wages, benefits, and working conditions — so, Warren says, they don’t offer those things. Studies have shown that as markets become more concentrated, wages stagnate. And that means you might have less money to spend on that chicken sandwich. It’s more expensive, even if its price stays the same.

“If we want the benefits of competition, then it means when markets get very concentrated, we need to look at what we’ve lost,” Warren said. “Not just in terms of consumer choice. It’s very important, but it’s not the only thing.”

The bill would require antitrust agencies to take factors like impact on the labor market into account in addition to the impact on consumers. The bill isn’t limited to Big Tech (or chicken sandwiches), but Big Tech companies won’t be thrilled if the criteria for evaluating mergers expand — especially the ones that haven’t had to worry about consumer welfare standards because their products are free. That’s also assuming their proposed merger isn’t prohibited outright. Under Warren’s new bill, mergers over a certain size or that consolidate the market too much are forbidden. And consummated mergers that have harmed competition, workers, consumers, or competitors can be broken up.

The Prohibiting Anticompetitive Mergers Act also fundamentally changes the agencies’ merger review process and power. Right now, if companies want to merge, it’s on the FTC or the DOJ to make the case for why they shouldn’t, and they have to sue the companies to block them. The onus is entirely on the agencies, which oversee thousands of mergers a year. With relatively little in resources, they can only challenge a few of those mergers. Doing so may mean a long court battle that’s difficult to win.

With Warren’s bill, it’s the companies that have to do the work. They have to show that their proposed merger won’t harm competition, consumers, and the labor market. If they can’t, the agencies have to reject it. The companies have to sue if they still want to merge. Ideally, companies will try to merge less, and the mergers they do try won’t be harmful.

“It’s going to change how mergers are even conceived of by the companies,” Alex Harman, director of government affairs, antimonopoly, and competition policy at Economic Security Project Action, said. “Because then it’s not like the game of Monopoly where it’s just collecting assets. It’s now going to be like, ‘Oh, I actually need to make a case for this,’ that there’s a lack of harm, and that there’s a benefit.”

It’s a seemingly complicated bill that tries to make things simpler. Instead of adding regulations to one industry that its most powerful players can figure out how to work around, she just wants to break them apart.

“Structural change, where possible, minimizes regulation and maximizes the benefits of a functioning market,” Warren said.

Charlotte Slaiman, competition policy director at nonprofit Public Knowledge, says she likes what the bill is trying to do and sees the need for it. But she’d like more antitrust experts to weigh in before the bill becomes law, because it’s such a big change: “to make sure that we’re getting the details right.”

And William Kovacic, a competition law professor at George Washington University and former Republican FTC chair, said the bill left him with too many questions on how it would actually work in practice. For example, he said, there’s a list of general things agencies have to consider when deciding to approve a merger, but not much detail or guidance beyond that. So it’s left to the agencies to create the definition of harms to competition, workers, and small and minority-owned businesses.

“And where you have lots of discretion, here come the political influencers from Congress, from the executive departments from the White House, the lobbyists all come parading into my office and tell me what to do,” Kovacic said. “If I’m going to have to do this, I just want to know how … [Congress] can’t just drop this into my lap. You figure it out.”

How Warren went from taking on Big Banks to breaking up Big Tech

Warren’s political career has been defined by advocating for consumers, laborers, and small businesses against the big, powerful companies that make a lot of money at their expense. First, it was big banks in the wake of the financial crisis. Then she went broader: When she gave the keynote speech at New America’s Open Markets conference in 2016, she was one of the first nationally recognizable politicians in decades to talk about comprehensively addressing monopoly power. A week later, antitrust was on the Democratic party platform for the first time since 1988. A year later, it was a major part of its agenda.

“She fought hard behind the scenes to bring that back onto the platform,” Stacy Mitchell, co-director of the Institute for Local Self-Reliance (ILSR), an anti-monopoly, small business advocacy group, told Recode.

It was a major part of Warren’s 2020 presidential campaign platform, and her call to break up Big Tech was one of the best-known parts of it. Her plan for that: reversing mergers like Meta’s acquisition of Instagram and WhatsApp, and prohibiting companies like Amazon from owning platforms while offering their own products on them. And although Warren was one of the first and most prominent figures to recognize the threat of Big Tech’s power and demand that it be reined in, she wouldn’t be the last.

In the years since, we’ve seen a massive House investigation into competition in digital markets and the bipartisan antitrust bills, some of which are quite similar to Warren’s campaign proposals. Her allies and so-called “acolytes” have key, influential positions in the Biden administration. That sweeping executive order promoting competition was partially written by former Warren aide Bharat Ramamurti, who is now a deputy director of the National Economic Council. And Warren strongly advocated for Lina Khan and Jonathan Kanter to head up the FTC and the DOJ’s antitrust division, respectively.

“Personnel is policy,” Warren said.

Personnel also isn’t perfect. Biden’s commerce secretary, Gina Raimondo, criticized the European Union’s efforts to rein in Big Tech at an event for pro-business lobbying group the Chamber of Commerce, saying they disproportionately targeted American businesses. That’s a message the Biden administration seemed to echo in its endorsement of America’s antitrust bills. Warren has sent two letters to Raimondo since (neither answered) asking who she’s talking to in Big Tech and their lobbying groups.

“It is not the job of the Secretary of Commerce to echo the lobbyists’ talking points on behalf of Big Tech,” Warren said.

Other appointments don’t have the tools they need to do the job they want to do. Khan has a clear vision for how to approach antitrust in Big Tech (and beyond), and how to re-shape the FTC to carry it out. But she’s only had a few months in her tenure with the majority Democratic votes. Commissioner Rohit Chopra (another big Warren ally) left the FTC to head up the Consumer Financial Protection Bureau last fall. Republicans have held up his replacement’s confirmation for seven months — and counting.

“We are entirely committed to getting the FTC commissioner through,” Warren said. “And I understand the urgency of the moment on that. With an FTC that is divided two-two, we’re not getting the work done over at the FTC that we need.”

Even a gridlocked FTC has been able to do some things. Lockheed Martin and Nvidia abandoned their acquisition plans when the FTC sued to block them. Khan and Kanter announced they would be rethinking merger guidelines over the next year. When Chopra was still on the commission, it was able to successfully re-file its lawsuit against Meta. But the FTC didn’t challenge Amazon’s merger with MGM. Microsoft and Google have announced huge mergers of their own. They don’t seem too worried that Khan’s FTC will be able to stop them. And while the DOJ is believed to be preparing to go after Google’s ad tech business, it also recently approved Discovery’s $43 billion merger with WarnerMedia. The Microsoft, Google, and Discovery acquisitions, by the way, would all be prohibited under Warren’s bill.

But Warren’s legislation isn’t what we’re likely to get. Those would be the Open App Markets Act and the American Innovation and Choice Online Act. The first bill would force Apple and Google to open their devices up to alternate app stores and payment systems. The second would forbid Big Tech companies from preferencing their own products on their platforms. Amazon wouldn’t be able to give its Basics line special placement on its Marketplace and Google wouldn’t be able to give its restaurant rankings special placement on its search page.

While we wait for Democratic leaders in the House and Senate to give those antitrust bills a floor vote, Big Tech companies are doing everything they can to defeat them. They’ve spent record amounts of money on lobbying and tried to take their case against the bills to small businesses and the American people. They’ve bankrolled their own advocacy groups. Sen. Ted Cruz said that Apple CEO Tim Cook personally called him about the Open App Markets Act the night before it was voted out of the Judiciary committee (Cruz voted for the bill to advance). Some moderate Democrats, especially California’s lawmakers, are openly opposed to the bills, making cooperation (and votes) from Republicans especially important.

Warren says Congress had a lot of essential issues on its plate to tackle, and that’s caused some of the delay. But she’s still frustrated that Congress hasn’t taken up antitrust as quickly as it could. Not just this session, either.

“Much of this work should have been done 15 years ago, before the concentration was as bad as it is,” she said.

Warren’s bills don’t have to pass to create change

Warren’s bill has been introduced in the Senate, with a companion version in the House. It’s got several cosponsors, including Sens. Bernie Sanders, Ed Markey, and Richard Blumenthal, and Reps. Katie Porter (a former Warren student), Mondaire Jones, and Alexandria Ocasio-Cortez.

But none of them are Republicans, who balk at both the prospect of giving government agencies any authority and appearing to agree with Warren on anything. The incremental and targeted approach of Sen. Amy Klobuchar, who headed up the antitrust bills in the Senate, is different from Warren’s. It’s also the approach that will get the bipartisan support needed to pass anything now.

So will the Prohibiting Anticompetitive Mergers Act become law in this Congress? No, but that’s probably not the point. The bill is a look at what could be, and maybe sooner than you think. When Warren first started talking about antitrust reform back in 2016, any change at all seemed far away at best. It’s very close now. Don’t be too surprised if we see bills influenced by Warren’s vision become law in the future, or in the FTC’s and DOJ’s revised merger guidelines.

“She continues to be a major leader in articulating how we should think about concentrated market power and what we should do about it,” Mitchell, of the ILSR, said. “She’s continuing to lay out policy architecture that I’m certain will be influential.”

How influential does Warren think she’s been? Her initial answer was a rare (for her), “I don’t know.” But here’s what she does know: “These are good ideas and I’m willing to get out there and fight for them.”

“I’m willing to challenge both people in government and the big companies,” Warren said. “The status quo is letting giant companies rake off billions and billions of dollars in profits that, in competitive markets, would have stayed in the hands of consumers, employees, and small businesses. Today, they’re just getting shut out.”