i would see, and i think that's the best result here. i don't know what you mean structurally, in terms of divestiture. >> i, you know, again, i -- i -- i think the best result is blocking the merger. >> thank you very much. >> thanks, everyone. >> and we've got our second panel which is sort of talking about the state of the big tech zeitgeist and whether the lessons of microsoft can be applied. i'm luther lowe, the vice president of public policy for

yelp. i'll introduce our panelist. first, we have to my immediate left and the audience's right we've got jim pethokoukis, a policy analyst at the american enterprise institute. previously he was a washington columnist for reuters, breaking view and commentary wing. he was the business editor and economic columnist for "u.s. news & world report" from 1997 to 2008. he's written for many publications, including the "new york times," "weekly standard," commentary, "national review," "washing examiner" and "usa today" and "investors business daily." thanks so much for being here today. to jim's left we have a partner, the antitrust group jonathan kanter who focus on litigation and counseling and has extensive experience. prior to this position jonathan worked at the u.s. federal trade commission bureaus of competition where he investigated major transactions involving internet providers,

music publishers, online producers and ver advice providers and others. to his left, we have leona khan who researches antitrust competition and policy and identifies potentially legal reforms. her work has been published by "the yale law journal" and "harvard lau and policy review," and several others. and sully pub hub board, to lina's left joined the capitol forum after serving as an assistant attorney general in the new york state attorney general's under elliott spitzer and andrew kwoem ore administrations. she specializes in a focus on health care and mergers. i would like to kick it off and start with sally and even a couple of reflections on the

conversations today and even just the topic of how microsoft might apply in today's climate. >> okay. so i want to say thank you for having me here today, and i also want to add a little disclaimer that i'm sharing my views today, not the views of my employer. i think that the microsoft case is highly relevant today, and i actually started covering the tech platforms exclusively about two years ago because i started seeing over and over again that they were all employing microsoft-like conduct, and to me that was risk of antitrust enforcement that people needed to know about, so it was literally seeing, wow, that's just like microsoft. that's just like microsoft. seeing that over and over again was what made me start writing about this exclusively two years ago, so i think all the major platforms are doing it, and why we should care i would like to echo some points that senator hatch made which is, you know,

anti-trust law is about having a fair shot, and i never thought i would agree so much with senator half. i'm a pretty lefty person myself, but to me it is about having a fair shot, and if you are dependant on a tech platform to reach users and then that tech platform is also going to be competing against you, you don't have a fair shot, right? and i like to say it's like there's the tech platforms are controlling the arena in which the game is played and then they are also playing the game. so i think it's really important that we not allow what i call platform privilege which is prioritizing. the platforms have incentives and ability to prioritize their own products and services in their platforms, and i think if we continue to allow that, we're not giving other competitors a fair shot, and that strikes at the heart of the american dream, the idea that whoever brings the

best idea to the fore and work withes hardest and offers the best product or services will reept rewards and this is something to be very concerned about because it's a critical part of the american ethos. it matters for the economy and for democracy and that's why i'm so passionate about these issues. >> lina. >> yeah. thank you for having me here. i echo some what have sally is saying with regards to the fact that these platforms have bing these critical gatekeepers. you know, they are effectively infrastructure for the 21st century economy and the fact that they are serving this infrastructure-like role and integrated in all these lines of business and creates a huge conflict of interest that they both have the ability and incentive to abuse and there's a lot of evidence, including some of the reporting that sally has done, that shows that they are in fact abusing this. i have a paper coming out soon that is exploring the historical tradition of structural separations.

so we have a long-standing tradition where we've said, okay, there's certain industries that are basically serving as, you know, essential distribution networks, and these -- these companies and industries should not be able to be in direct competition with all of the businesses that are reliant on their infrastructure, so one example is railroad. so in the early 1900s we passed a law that basically prohibited railroads from owning an interest in any of the commodities that they were transporting because there was a phenomena where the railroads were buying up all the coal mines and they would discriminate against independent coal producers. this is something that we've seen not just in the railroad sector but in banking law, in telecommunications law. we did this with tv networks in the '60s and '70s. the fcc did something called the computer inquiries where they prohibited dominant carriers from entering into data processing because they recognized that there would be, again, a conflict of interest that copotentially, you know,

retard or stagnate the developing of the data processing sector. so thinking about the role of structural separations is really important if we want to continue to promote an innovation and entrepreneurship because we have a lot of evidence that now suggests, you know, these gatekeepers also abusing their power. >> i why. i'll start with an anecdote that i have shared with some before, but it goes back to right around the heyday of the microsoft care, and i was leaving the ftc and going into private practice, and companies would call all the time looking for advice, and the advice was how do i avoid being sued for section two of the sherman act? help me, give me guidance so i can operate my business in a way that stays on the right side of the line. and that was what the power that -- that the microsoft case had, the example of bringing a case to court and litigating it in a public form.

toys, as i've said before, section 2, monetization issues, it's like jaywalking. people don't see them and the chances of many being investigated are so low risk and unlikely to impact a company that the -- that adhering to the law or changing your behavior because you're concerned about section 2 of the sherman act is a way greater cost than actually versus the behavior that you're engaging in. this is really important because we talk about the microsoft case and talk about the lessons learned, and there's a lot of discussion here throughout the day and everyone seems to think it's really important, but i fear that we haven't learned the lesson, right? because we're sitting here today 20 years later, and i can say that the last big section 2 case brought by the united states government under section 2 of

the sherman act is the microsoft case, 20 years ago. and so what has gone wrong? where have we lost our way or have we lost our way and part of it i think is a little bit of a rope-a-dope in that the antitrust thinking has evolved from let's protect the competitive process, and let's make sure that the markets have the opportunity to function in a competitive fashion and switch to something more like let's try to predict outcomes and try to come up with the most efficient outcome, and if we can't prove it to a certainty, let's do nothing. and that kind of capture and that kind of stalemate has resulted in essentially no meaningful section 2 cases being brought and certainly no movement in the law, and, if anything, the treatment of section 2 law being more narrow than what case law would provide so i guess i'm a little more

pessimistic on how far we've come. i think we've not learned enough from that care, and perhaps there's more work to do to figure out where to go next. >> jim. >> thanks for inviting me. it's such a fantastic panel and great humility that i sit on the panel. everyone has such deep experience and nornlgs and i'm pretty sure you invited me because i've told you in the past that i go to yelp directly. i don't use the search box. i go right to yelp. i want to review. i use the app, so i'm a dedicated yelp user. i guess speaking of humility that's what i would sort of advise policy-makers here. when thinking about this topic, i think every major magazine has now done like a 10,000-word piece, and i think the same four or five people, on we need to break up big tech and regulate

them like utilities, whatever that means. again, you see the same sources and everybody has to have one, and i -- it's certainly an issue in the air, and -- and when i look at i think, you know, it's 2008. ten years ago we had the start of this great recession, and we, you know, big market crash and economy went down and we've had a very slow are recovery and i think there's ban scramble for a decade to sort of think about what is happening with the economy. why hasn't the recovery been farther, and you've had i think a lot of people and economists run through reasons of what the problem is. for a while the problem was short-termism. i don't know if you remember that because of short-term investors and hedge funds, businesses, they weren't investing. they were all just sending the money back to shareholders and, therefore, the economy is slow. another was secular stagnation. larry summers, we would forever be sort in a low productivity economy whether it's

demographics or other kinds of headwinds, sort of that's the reason. none of those have really sort of caught on, so now it's -- you know what the problem actually is. it's corporate concentration and in particular it's the largest technology companies, that complains everything. that explains why we have high levels of inequality. that explains the threat to democracy. that explains the low wages. now it's the big technology companies, and i think ultimately i'm not sure that's the case either. i guess i'm approaching this with skepticism because when i look back on the past ten years and i think sort of what's gone right with the american economy. well, not a whole lot. i guess maybe the biggest thing that has gone right is we've had the emergence of these amazing technology companies which pir lots of people and provide lots of good jobs and spends tens of billions of dollars on r & d and are sort of the fonts of

innovation in the current economy, so i bush know, the first rule is never to get premise of the panel, and i certainly don't think -- that we should give them due scrutiny on antitrust. gosh, i'm not sure if i went back i would let, you know, facebook buy instagram. i don't know. maybe looking back that wasn't the best idea, but i certainly would not be eager, and i guess it's the sense of eagerness that i detect, not necessarily on this panel, but certainly others, to sort of immediately break these companies up, regulate them. listen, i work for a think tank and there's nothing more frustrating than having a fantastic idea that really doesn't address an actual problem. i think what we have are lots of clever solutions by people who have been waiting to apply these solutions for a number of years, but i'm not sure there's an actual problem here that these solutions are meant to solve.

>> lina, do you think that the field of antitrust at this point and the enforcement practices are overly differential to the e-con departments and can you sort of talk about -- if you agree with that, what you think the solution is or if you don't agree with that, why? >> sure. so as was also discussed in the earlier panel, i think there has been a privileging of a certain kind of welfare economics that, you know, i think focus and analysis on a very particular set of circumstances failing to capture the two effects of concentration. i want to follow up on the point, you know, maybe there isn't really a problem here. i think one of the reasons to think there is a problem here is because these companies are actually now inhibiting innovation. i think the result of this kind of integration -- these

essential mott forms means there's a systemic advantage they now have. they are not really competing in the market, they are subverting the market. a couple years ago facebook acrowder a vpn server but it also al louls facebook to track what rival companies are doing and that means facebook at the early stages can go out and aquite company and basically like, you know, squash competition in the burksd and i think that kind of dine sympathetic what you're seeing with goingled and amazon in ways that i think there's now reason to think, that you know, these companies, sure. they did innovate and brought a lot of services to market that have been very beneficial, by think the dominant positions that they now enjoy means they are stifling there. what antitrust analysis is capture that effect, i think it really comes down to enforcement

philosophy. and i think if you look at how the companies are acting in the marketplace, exclusion is something that should raise a lot of red flags. as to the role of economics and analysis, i think, you know, economics should certainly inform how law enforcers do their job, but i think there has been a kind of intellectual deference to economics, and i think the result of that is that there isn't as much questioning of what that economic analysis actually is capturing or isn't capturing, and so i think, you know, i think economics can be a tool, but it's important to ensure that the role it's playing is serving as a tool, not actually, you know, just deciding the outcome in and of itself. >> sally, did you want to say something? >> yeah. i just wanted to agree with lina. this is definitely a solution in search of a problem. i've been writing for two years about a problem. anyone who hants to see my articles. i'm looking at ways that

innovation is being crushed. there's monopoly leveraging happening in so many different ways, and a lot of it is public. like the eu is going after with google, very clear cases, be their android case, where the google said to phone manufacturers if you want google play that you need in order to operate the android operating system you have to take the other 33 suites of apps and you have to pre-install your phone and cannot pre-install any other apps into your phone, so if microsoft bing did improve its search engine it has no shot getting into the android smartphones which are i think 70% market share worldwide, 80%. okay. you can -- a user can go -- can install it after the fact, but there's not really a need to

when you already have a built-in broirs a browser and search engine into your phone. maybe they gain the market power literally by being the best product and then just kind of everything that touches it or depends on it, they are just kind of stifling. >> yeah. >> so i want to -- >> sorry for piling on. >> might as well. >> i'll have a response. >> i figured. >> i do want to take on this notion of humility because it is something that's used quite often as a talking point, and like i was saying before. >> is it a talking point? >> i just thought of that one. when we stumbled into the truth together. >> yes, we have. >> but, you know, not having a major section 2 case in 20 years i think is a pretty good evidence that this is not being

overused. the question is whether it's being underused and the question is whether we need to have a little more humility about the fact that the law is needed. it shouldn't have to be overenforced but it shouldn't be underenforced, but when it's not used it -- it -- the can't have a deterrent. it can'tp keep people from -- it can't keep companies on the right side of the line because they don't know where the line, is and it becomes a self-fulfilling prophecy, so i think just to build on this it's -- it's an important discussion to have. i don't mean to dismiss the concept of humility because i understand why you raise it, but at the same time i see a lot of one and nothing of the other. >> right. what sort of got me interested in this topic generally is because i'm really interested in economic growth and innovation. why we haven't been growing farther and trying to figure out, you know, who are the likely culprits, and it's

been -- you know, it's been a bit of a mystery because we had a huge surge in productivity in the mid-'90s to the mid-2000s and if you look at all the forecast back in the mid-'90s, they were all telling mow this was going to go on forever, and it didn't go on forever. there's been a lot of debate, you know, what exactly has been the problem, so i guess i'm so desperate for an answer. part of me would love if i found the answer, and that was the answer. then we can begin to work up, you know, some sort of policy agenda to address the problem, but i just don't hear a lot of evidence that the problem with u.s. innovation and productivity growth is that you have these -- you have these companies which spend tens of billions of dollars a year on research that china is trying to duplicate. that europe wishes they had, they don't, so i'm not sure necessarily that's the best model, that these companies which are not -- which are not only spending a lot on r & d and providing off ramps for

companies. not everyone that starts a company wants to shep yesterday that thing to become the next google. they are looking for off ramps. not the mere fact that companies are buying other companies necessarily means that they are bad for innovation. the amount of money going for venture capital says somebody thinks there's still some opportunity out there despite the wet blanket cyprusive effects of these big companies, but what's interesting is that the productivity slowdown began, you know, before some of these, i think in 2004 facebook i think was started in 2004. i don't think facebook is a problem, and i didn't attend other panels, but i'm sure ibm and at&t, sort of the golden age anti-trumpet well, it's amazing that after this golden age of antitrust is right when the u.s. productivity growth dropped through the floor in the early 1970s so i'm not sure exactly what was going on in the '50s and '60s, and there's been a lot of debate about why productivity growth slowed down but i'm not

sure we're ready to say that's how we did in in the post-war decades and we can copy and it will lead to blossoming production difficulty and that didn't after. after the golden age of productivity, we had decades of low productivity. i think before we begin dismantling the company, and later we can talk about the likelihood of all of of this happening, i think i would be very, very sure that there's -- again, that there's an actual problem that this will solve, that turning into google and to half a dozen gogglets or splitting off instagram or whatsapp is real going to get you more startups, more startups scaling, that could be the case, but i just think what you have is a few anecdotes strung together that don't lead to this very strong empirical evidence that that's -- that may come. you know, i'm sure there's people doing studies on this. i haven't seen a single

empirical study demonstrating to me that there is an innovation problem caused by these companies that are too big given that they are competing against each other, viciously competing against each other, that they are spending money in new areas new areas, where currently they don't compete, where perhaps consumers don't even realize they have a need there, but they're competing in those areas, competing for talent. so you have these companies that are competing holistically, highly innovative and yet they're the -- and i suppose i'll just finish off, when are we going to see the innovation appear in productivity numbers. i think the history of innovation, oftentimes it takes a while to diffuse through an economy. the merger of these big companies, they tend to come in waves. i hope we have another wave of innovation and productivity coming, but i think turning facebook into a social utility or into a public utility, to think that's going to result in more innovation down the road,

i'm not sure the evidence is ther there. >> sally? >> i think we're coming at these from completely different angles. i'm coming it at have the view of a former anti-trust enforcer. is there evidence? and we have found evidence of anti-competitive conduct. i'm not focusing on where do the productivity gains -- i'm focusing on competition. >> i was going to ask, do you agree with jim's assertion on some of these macrometrics, maybe the gafa issues don't register? or do you think that we are -- that these firms are resulting in reductions in productivity? anybody? >> yeah, so, i mean, i think the framing of it -- again, i go back to the framing of the problem. the purpose of the anti-trust laws is to protect the competitive process. it's not to dictate outcomes and it's ziped ed

it's designed to ensure there's ample opportunity for competitors to emerge and existing competitors to compete in a hard-knuckled way. the thing that's really unique about platforms, and i think this is why this discussion is important. is if you look at the googles of the world, right, google came to rise on a microsoft platform. amazon came to rise on a google platform. and so if these platforms allow competition to occur, then actually, you can see new innovation opportunities emerge, right? but if the companies that own the platform have the ability to exclude nascent rivals, and this goes right back to the microsoft case, then you're not going to see those new paradigms emerge. you're not going to see the model -- the new business models turn the old ones on their head. and that's why, i think, that's one of the -- at least to me, the important teachings of the microsoft case and one of the

things that's been lost. the other thing, and we can be looking for this golden nugget of empirical analysis, but -- again, we all have experience talking to people who compete in the market, who find themselves unable to make the investments they need. and then they see the companies who are very big. yeah, they make investments and they invest a lot, as they should, and that's a great thing, but they also sit on a tremendous amount of cash. they actually got investigated and found guilty by the department of justice for not competing over employees. and for the most part, they stay out of each other's backyards. and they kind of have their own dominant silos. and so, we're not seeing the kind of vibrant, multi-faceted competition that we hope, but from my perspective and from an anti-trust perspective, the real question is, are new paradigms allowed to emerge on these platform technologies? and if the answer is "no" or if

conduct is being undertaken by the platform owner that keeps new disruptive paradigms from emerging, then that's exactly what the anti-trust laws should be doing. that's exactly what happened in the microsoft case and that's exactly what a very conservative d.c. circuit upheld. >> and i'm -- i apologize that i did not attend, so this is -- maybe this is repetitive or this point was made. i know when anti-trust folks talk about microsoft, they credit their actions for creating, you know, googles and all of these companies, if not for these actions, you would not have these companies. yet when i talk to businesspeople, nobody thinks that. nobody -- everything -- what you had were a big company like many big companies, they fail to see around the corps. they're very good at doing what they do, but they tend to not want to disrupt themselves. and that was -- and perhaps that

was the case with microsoft. they just missed it. they missed the internet. they missed mobile. certainly people that are at those companies believe that. there are people who currently work at amazon and especially at google who certainly don't credit, you know, what they've achieved to anti-trust action. so i think there is at least a reasonable debate that if we're going to -- we're going to move forward under the assumption that we are going to get more innovation because of anti-trust, because of microsoft, or because of ibm, because of at&t, again, you know, i love humility, i like to be sure about what i'm doing, and try to have as much empirical evidence behind whattime doing before i take action. especially action -- you know, we're not belgium. i love a good economic experiment. i prefer not to do a radical economic experiment on the leading companies on the leading technological frontier in the leading economy of the world. i would at least like a little

bit of caution there. >> sorry, sally, i cut you off earlier. go ahead. >> since you mentioned hayek, i think it's worth thinking about, so hayek wrote this essay called the use of knowledge in society. and the premise of his piece, one of the key challenges in society is one of information. that you never really have an entity that can have all the information. and the reason the markets are superior to kind of command and control systems is because they rely on dispersed information. so you have this price mechanism and that's what's doing the work of conveying information. i think increasingly, we're now seeing markets where all of the information is concentrated in the single platform, right? so because these platforms are kind of mediating so much activity, there's a huge information asymmetry. so i think, increasing removing towards the system, where we don't actually have markets in the way that hiayek used to thik about them, given how concentrated information is. i'll note, we're talking about the platforms today, but the

competition problem is greater than just looking at the platforms. and i think, you know, your point that people are arguing, that if we break up the platforms, that lead to all of these benefits. there's now a lot of research showing that competition has declined across sectors. that this is now not just an isolated feature, but it's, in fact, a systemic feature of the american political economy. so look at airlines, at rental cars, at health care. we've seen consolidation across the board. the platforms are actually hasteening the consolidation across the board, because you're seeing them all scramble to now try to compete. and i think it's important to, you know, now recognize that this is a systemic issue, it's getting worse because of how people are responding to the platforms. and that it kind of requires a rethinking of the enforcement philosophy that's been in play for, you know, three, almost three to four decades. the motive case being one of the exceptions. i think we've been living in this natural experiment in some ways and now we're seeing the result of that experiment around

us. and i think that is what is, in fact, causing people to rethink this, how we've been doing anti-trust. >> do you want to add something to that? >> just adding to the point that lina made. in every merger that is looked at by the government, the attorneys in favor of the merging parties point to either the existence of facebook, amazon, google, or apple to justify why the merger should be allowed. it's like, you know, basically, those four companies touch almost everything and it can be, you know, any kind of merger is like, but there's amazon? it's literally, i'm sure the department of justice is getting tired of hearing that argument and hopefully they're not giving it too much credit, but it's made by pretty much all of the attorneys representing mergie i parties in favor of why the merge you are should be permitted. >> i'm going to open it up to the audience in just a second. but i want to ask, do you accept the premise that anti-trust enforcement is highly discretionary from a political standpoint? and if so, let's talk about

today's politics. you know, sally, you studied this closely. i know you're here in your personal capacity, but if i'm -- if i'm making bets on gofa, give me some short, long tips. what is the process -- what can we take from the, you know, joe simons, and we just saw some news that the new ftc commissioner is calling for increased scrutiny of facebook and google. what is your prognosis for the next year or two? do you feel like trump anti-trust, blocking at&t/time warner, when asked on the day of vestier's $2.7 billion ruling, sarah huckabee sanders says, we're not going to talk about a private company matter, where under the obama administration, they probably would have had a

line around the block ready to finger wag on that. talk about that and what your predictions are for these four firms. and i would be interesting in hearing the whole panel's views on this. >> i think trump anti-trust is very hard to predict. i did write an article right when the new administration came in saying that i thought that enforcement risk for the tech platforms had gone up, and that was largely because the obama administration was in a close relationship with silicon valley, so they were largely protected. i think from any major enforcement under the obama administration. i do think we're rike likely toa case against one of the major tech platforms. i don't know which one would come first. i think apple is the safest. you know, amazon has a lot of kind of -- there's kind of a lot of easy, discreet practices that they do in terms of prioritizing their own items in their -- in

the search rankings and giving themselves the buy box and kind of taking over entire categories of products. you know, some of the google enforcement we've seen in europe is pretty low-hanging fruit, especially, like i said, the google android case. but i do think we're likely to see a case against a tech platform in the next year or two. but i'm not sure which one. >> i think we're living through kind of a set of historical factors that are all converging at this single moment. so i think now more than ever, we're perhaps likely to see another section two, if there is that enforcement will. you know, we're seeing growing interest on the hill, so there's an anti-trust caucus that was formed last year. you know, more and more members are reaching out to kind of get educated about this issue. you know, there's a new set of commissioners at the ftc. i think, you know, trump anti-trust is difficult to predict, but it's interesting to

see that many of the key people that were appointed are not kind of deep libertarians, right? so there's a school of anti-trust that thinks the best an anti-trust is no anti-trust and i think the people who were appointed are not necessarily of that school. i think there are conflicting signs within the ftc, but i think the appetite is growing and i think some of the revelations around facebook have made people wake up to the fact that these platforms have a lot of power, that they have a lot of ways that that power can be abused, whether consciously or unconsciously. and anti-trust is not going to solve all of the issues. but i think the market power that these platforms enjoy is a source of many of the kind of dysfunctions and problems that we're seeing. so it's an interesting time, to say the least. >> the tension around the issue has reached a criminal mass and it's on so many different levels, that i think the prior

environment of nothing is not sustainable. you know, the one observation i'll make, and we'll see how this works, but i'm constantly amazed by talking to folks in the business community, often ceos, who can't understand why we haven't seen anti-trust enforcement. so they're like, well, we have the anti-trust laws, how come they're not being used? and then you have to go through this whole rigmarole and say, well, you know, there's this thing called consumer welfare and then there's bjork and in this case and that case and trinco and their minds start to spin and they just don't get it. and they say, that doesn't make a lot of sense to me. and i think what's happened is there's this view from the world, people who arguably have common sense. and then there's the anti-trust community of which i'm apart of, which tends to do to contortions to try to put things into boxes and models that don't necessarily match up with the business realities that we find in the marketplace. and so, you know, i think there's more and more.

that worked for a while for the anti-trust community, because it was able to move along in relative obscurity. now that these issues are being brought to the front pages of our newspapers and news online sites and apps, i think it's going to be harder for the anti-trust community to ignore. and i think with increasing frequency, there are going to be calls to reorient how we approach anti-trust. and there'll be lots of different views on how to do it. and some will be more extreme than others. but i think some sort of correction is highly likely. >> yeah, i guess as long as -- i think they've learned the lesson. i think tim cook and mark zuckerberg and larry page, don't buy a newspaper that's going to criticize the president. that's probably a very good first lesson, if you don't want the undue attention on your

company. sorry, amazon, they've already missed out on that one. i think there was like an anti-trust moment, and i think that it -- to some degree, it may already be passing. i think particularly in congress, i think you're going to have anti-trust and activists and anti-tech activists make the case against these companies. and then what they're going to say is, well, aren't these our champion companies against baidu and ten cent and alibaba. i think this is going to get wrapped up in this digital cold war we have with china. i think there's going to be a growing reluctance to do anything, which is going to be able to be portrayed, and i'm sure the companies are very aware of this, but to undercut companies that will portray themselves as being america's national champion companies and sort of this global, technological race. i'm not sure that's necessarily the only factor, but something to consider when you're talking about not just anti-trust, but

future regulatory actions. >> can we pull up that clip from ted cruz? and while we're getting that pulled up, i want to open it up to any questions. let's start back with teddy there. why don't we watch this cruz clip real quick, if they've got it cqueued up. we can wait until after the question. oh, there it is. >> just recently in "esquire" that pointed out that facebook and google together are worth $1.3 trillion, which you could merge the company's top-five advertising agencies, wpp, omnicom, the five major media companies, and add also the five major communications companies, at&t, verizon, comcast, charter, and dish and you'd only get to 90% of what google and facebook are worth. the scope of market power and

size of public discourse is unprecedented. how should the commission approach this development, which i find unprecedented? >> so i think the commission needs to -- it's a fun ny thing. it reminds me, the old joke about, people would ask jesse james why he robbed banks, and he said, that's where the money is, right? so with respect to anti-trust, the corollary is, the place most likely to have anti-trust problems is places that have market power, right. so those are the places you want to look the most, the places that you want to make sure you're monitoring careful andly paying attention to, and if some anti-competitive conduct is occurring there, that's where you get a big bang for the taxpayer's buck for enforcement in those areas. >> of course, as chairman joe stineman is the chairman of the current ftc. teddy, why don't you?

>> i don't want to get back to this idea that there's no problem or there's no harm. yeah, i certainly understand there's no harm for, you know, jeff bezos or eric schmidt, from their perspective. but i'm kind of interested in, what are the groups that are harmed? are they authors? are they musicians? what are the entrepreneurs or small businesses that are being harmed that you can point to and discuss to talk more about the problem? >> i think the people who are being harmed are the people who are dependent on these platforms to get to market, right? with amazon, the first clear incidence of it flexing its power was against book publishers. so, you know, it views the fact that so many publishers are going on amazon to basically toe try to cut them off when they tried to negotiate with amazon, disable the buy buttons. i think the book market is a

place where if you were interested in looking at amazon's market power, you would have a lot of signals that it's using that power. if you talk to people from the book industry, they will admit that, you know, amazon's power, single handedly, has reshaped that market. it's kind of upended the business model that publishers used to have, which is that they would be able to cross-subsidize between books they news would be best sellers, and books that were a bit more of a risk, but they thought were going to help advance a conversation in society. they were really deep, rich works. and the fact that amazon has pushed them all to give it extreme discounts means that they're not able to really sustain that same business model in the same way, which has a direct affect on the quality of books that are now published. so the idea that a single company is now directly shaping the books that are available to americans, i think, is quite stark. and i think this is something that you see with facebook and google and journalists and the

fact that, you know, all these publishers are reliant on the algorithms of thaese two companies to determine whether readers get to see their content. you hear all of these reports about facebook will have these a algorithmic changes. and they'll be emphasizing video or another kind of story or format another week. so the fact that these companies have so much power over the people who are reliant on their platforms is deeply troubling, not just for concerns about competition, but for concerns about democracy and kind of the, you know, the flow of information in society. >> yeah, i also wanted to bring up the point, i wrote this article back in january of last year saying that i thought that fake news was, in part, an anti-trust problem. and i think that also applies to these data breaches that we're

seeing. and it has to do with there being a complete lack of choice. like, how many people do you know that when they found out about the cambridge analytica scandal, they wanted to leave facebook. and then they thought, i guess i could just communicate with my friends on instagram. oak oh, wait, facebook owns instagram, too. and the other social networks that are out there are not really a substitute for what most people use facebook for. so i think that, you know, the lack of choice means that how important it is for people to vote with their feet. you can vote with your feet about a lot of different things. you can vote with your feet about privacy breaches and go somewhere else, if you don't like the amount of data being collected about you. if you can vote with your feet, that competitive constraint actually disciplines companies. if they have competition, it disciplines their behavior. right now, facebook and google both can kind of pursue their

business model without any concern about the consequences. because people don't have the tooblt vo the ability to vote with their feet. google has 80% worldwide search market share. facebook has 2 billion monthly users. and facebook chooses to make its algorithm prioritized, content that causes the most engagement. and that content is often the stuff that makes you angry and fearful. it does that because it helps its business model, of keeping ewe on the platform as long as possible, keeping you from going to other websites that need also digital advertising revenue, like legitimate news companies and keeping people clicking and sharing. facebook is choosing to prioritize the fake news over the real news and it can do it with impunity, because people can't vote with their feet. that's another realm of the harms that are happening. i think not just to the small businesses that depend on the platforms, but to all of us, honestly, that depend on the fair flow of information and not having two powerful gait keepers that can control that. >> and i think as the scope of

the companies get bigger, more people have to ride their rails. so taking it back from the small business or sometimes medium-sized or big business owner, they're often paying out substantial sums of money in order to reach consumers who are mediated by those platforms. so a few examples with search, right? used to be that you would build a website and you would try to attract people based on the quality of that website and you would invest your money and quantity. then the search engines, you'd start putting some money into search engine optimization. you might buy a few ads, okay. but as long as you have real good quality, you have the chance to earn users, because you were innovating. then, as google got more market power, it started taking more of the page, removing it from unbiased results, and instead, including biased results that essentially, you have to buy. and so they're taking things that usually were unpaid, understand you have market power and forcing you to pay a

substantial sum of money. in all the advertising in one place, you're no longer being paid to be found. you're paying to not be demoted. and it feels a little bit like a ra racket. and that's what's happening. you can look at the advertising industry. any add-supported product, advertisers are paying out substantial sums of money. google is a dominant player there, so they're spending a boatload of money. apps, digital services, companies who have digital subscriptions are paying out 30% of their revenue to people like google in order to mediate when they can do it for far less on their own, because they have no choice. amazon. people use amazon fulfillment are spending roughly 27% of their gross revenue in order to take advantage of that platform, which you can't build out on their own. so when you talk to a lot of these businesses, they say it's impossible, unless you have such massive scale and see such

consolidation to have, you know, profitable businesses, because, you have to pay out so much in order to ride these rails. and that's one of the reasons why companies are feeling it very frustrating to have to live in a world where you have very little choice about which plafrs to use. >> i think another way to think of these companies is that they're now private tax collectors. they're basically collecting a tax on everyone now reliant on their infrastructure. and i think people who are suspicious of regulations to be even more suspicious of private regulation. and that's what we're now, i think, seeing. >> i think my advice to those, you know, who would love to take anti-trust action and regulate these companies is figure out a theory of harm. i spent, amazingly, on a saturday, infuriating my family watching a 90-minute -- actually, it was more than 90 minutes of a university of chicago panel on anti-trust. and there was a scramble on this panel to figure out exactly what

the problem was. because, okay, if it's consumer welfare, we're never going to win that. we need to come up with an alternate theory. maybe it's innovation. that's a novel theory. maybe it's -- now they're tax collectors. that's a novel theory. maybe it's the addiction. maybe that's it. maybe that's why we have to break them up, because they're hijacking our brain stems, one panelist said. the advice is to figure out a theory of why these companies suddenly need to be heavily regulated, need to be broken up, and stick to it. i thought it was very interesting with ted cruz up there doing his day trading of the market cap with these companies. these are big numbers. maybe amazon will be the first trillion-dollar company. maybe apple. when you look at these market caps as a share of the market, since 1925, they're only like 9th, 10th. you can look at other companies that have much bigger market caps that share the economy. dupont, general motors, consolidated edison. is anybody still concerned about

consolidated edison? this is not -- >> always. >> always concerned. >> and there are those companies that are part of our anti-trust case -- >> but the issue is that this is not an end of -- i hear this is kind of the end of history argument that these companies can never be challenged. listen, i don't know how you're going to challenge google. i don't think it's going to be on search. it's going to be on superseding search. these companies act like they're under dire competitive threat, certainly from others. they don't act like companies that are under threat. and i would be loathe to bet that the same -- that those five companies, whatever the nickname is, the frightful five, furious five, that those will also be the frightful five 25 years from now. it could be a cryptocurrency company, a vr company, an autonomous vehicle company. i don't know. but i would bet it won't be these exact same four, five, six companies. >> i think it's important not to rely on strawman arguments. i think all of us on this panel --

>> that's historical argument, actually. >> yeah, but you keep saying that people are just saying, oh, these platforms are problems and trying to ask anti-trust to do all this work. actually, no, we're pointing to problems that anti-trust law is supposed to address, which looks at competition in the marketplace. and these companies are now, you know, amassed positions that mean that they're not playing by the rules that competition is supposed to enforce. >> are they supposed to fix inequality too? >> did anybody say that? >> yes! yes, because i've been reading the work of all of these -- and i can't keep track. i literally cannot keep track of all the problems that they're causing. another one is inequality. that's the problem. i suggest if you're worried about silicon valley and inequality, that you have them build a lot more homes in silicon valley. that's the problem with silicon valley, inequality. not that they're creating inequality among that there's too many tech billionaires. >> the theory of harm is the same theory of harm that was in u.s. v. microsoft. that's the entire point of the day. it's foreclosure. >> i disagree with that.

here's my advice. my advice, don't hire steve ballmer to run your company. that would also be very helpful. >> and i have written about the ties between anti-trust and inequality and i will say, what i have written about is that monopolies amplify gender inequality and i'm not advocating for us to look at gender inequality and say, we need to alter our anti-trust analysis at all. i'm saying that when we have very weak anti-trust enforcement, as we've had for the last three decades, we are getting a very concentrated economy and inequality is one of the rauesults of a concentrated economy. now, i don't think we need to change our anti-trust analysis, at all. i think we use the same principles we've always used in anti-trust to say, you know, is there a level playing field for competition? is there a vertical for closure that's happening here? and when we actually standard

enforcing the anti-trust laws against the way they've intended to be enforced, we will see greater equality. i do believe that. i don't think it needs to change our way of analyzing anti-trust. i think it's a consequence of having a very highly concentrated. >> if we had to take a case today and work within the existing doctrine, what do you think is the -- what conduct has the highest likelihood of success? from any of the aforementioned companies? >> i think the google android case in eu -- >> let's just stick with the u.s. >> but it's happening in the u.s., too. >> so android -- do you accept the premise that android, jim is -- and this is the tying of apps to the android operating system, that that is parallel to microsoft. >> how that different than netscape? >> or do you reject the premise

that the enforcement action had an oxygenating affect on the market? >> listen, if you want to bring a case against any of these companies, ftc, doj, under the consumer welfare standard, i'm not going to feel bad for any of these companies if they find that they are engaging in anti-competitive behavior. you know, that's fine. i don't care. i own a broad s&p 500 index fund. i don't think it's going to be hurt by something happening to google or facebook. i would just be very careful about moving away from the current standard to create these novel standards, because for all -- for all of these other reasons, and there's -- you know, there's a huge sort of political atmosphere. these are operate iing in. the fact that they haven't brought this case in the last 20 years.

i mean, what is our model? is the model -- and i oftentimes -- and i'm certainly newer to the subject. and again, people have deep experience -- but if the model is europe, i'm not sure i want us to have the same technological capabilities and supremacy as europe. to me, if i want a vibrant technology sector with companies that are doing, you know, really bleeding edge research, i'm not sure that's example we want to turn to. so the mere fact that europe is doing it, fantastic. why that is a model for what we want to do? i don't know. >> next comment, jonathan. >> so just a quick comment and question. so, we'll start the question. when you say consumer welfare stand, what do you mean? what's consumer welfare. and not just one comment, which is novel. it was novel and someone in the late '70s made it up. and basically said that this is what anti-trust should be about, without necessarily changing the law. and that's what changed. >> things can change. i'm not saying that standard

needs to be the standard f forever. i have a great deal of sympathy that there might be something different about these companies, because of network effects. maybe because of their size. maybe how they compete. maybe because they compete in all these different ways, that we need a new way of looking at these companies. that is absolutely fine, and i hope that we do all kinds of research. i'm thinking of new ways to think about these companies. and at the end of the day, maybe that's the case. i mean, sometimes it is -- sometimes it is different. listen, i used to cover the stock market back in the '90s and it was, this time it's different. it didn't work out too well. maybe it will work out better this time. that's fine. again, my base point is, i would be careful, at this time, when we clearly -- we have an economic problem, we've had a productivity problem, we've had an innovation problem. let's not be turning our fire on the companies that i still think are the ones doing the most to

help that problem. make maybe productivity won't go up. maybe we're stuck. we have all of these head winds. i would be very reluctant. and it's really, sort of the enthusiasm about doing something that really -- that concerns me. >> let's go to a question. any questions over here? go ahead. here we go. >> thanks. so, kind of, two questions. i mean, one, i think -- i'm kind of surprised by the idea that we look at the obama administration as sort of just being blanketly tight with the tech companies, given that they had a couple of fairly major ones against tech companies. not an anti-trust, but google had a half-billion-dollar settlement based on what it was doing with pharmaceutical advertising. you know, apple, of course, had the anti-trust case with ebooks, where, you know, a lot of the common sense view that i heard from people at that time was, wait, why are they going after apple?

wouldn't you be going after amazon for this, and you know, that was really where you had to explain to people, well, no, what they're doing is section 1-prohibited conduct because it's creating a cartel, blah, blah. but just looking at it, oh, what was happening with the obama administration was close to tech companies. i'm not sure that's a strong explanation. so i would be interested in maybe thinking about that further than that, as an explanation of why the obama administration wasn't bringing more cases like that. and then competition on the merits, where you have smaller competitors, you know, bringing good products, coming up with new things, being innovative and larger companies seeing that and sort of picking it up. and the question being, especially if they're competing on amazon's platform, how did they do it? i would be interested in how jim says that would be working in the economy. if you have it visible to the larger platforms, where the good

work is happening, where basically the only barrier you would have is if the small company can come up with ip to prevent the large platform from picking it up. but at the same time, i think it's complicated. facebook shouldn't add new features it sees on snapchat, because snapchat is the one that came up with them. and facebook should stay mediocre without ever coming up with stuff that consumers want to see. >> i'll start on the obama question. i think what people are reacting to is two things. one is, there were just certain kpae companies where the obama administration was very close in terms of the campaign. so that creates perhaps an appearance that there's a closeness between an administration and a company. and you know, whether or not there's any wrongdoing or intervention is a question for another day and beyond my knowledge. but i think it just sort of creates this problem of appearances. the other thing i will point out

is, for a lot -- despite a lot of bluster, and although it did really ratchet up anti-trust enforcement on the merger side, the agencies didn't really bring any section 2 cases against anybody. and so i think a lot of the criticisms that's being lodged is, in lack of section 2 enforcement as a whole, forgetting any one particular company. go ahead. >> yeah, i'm sorry, you're going to have to -- i was focused on the obama part. what is your question, specifical specifically? >> basically, how do you address the problem of competition on the merits failing when the competition has happened on these platforms. and i was pointing out specifical specifically, and we're looking for empirical data. i think she has provided some good examples in the work she's done of where companies say we're competing on amazon. amazon would see that their product was selling successfully and would come up with something like that. and they have a platform, so they could place their product higher in search results. they could do a lot of other things, make it the amazon choice version, et cetera. does that seem to you like

competition? >> you beat me to the punch. the mere fact that a company learns from other companies and incorporates those features, that's not a problem. i'm sure lina has fine, exhaustive research on that answering that. so that's my answer. >> other questions? here? >> i have a question on the -- i mean, we really only have one big case in big tech so far, which is the google eu shopping case, and the remedy was basically, fix it yourself. and in a situation where it's a marketplace that is -- i mean, the european commission founded it's preferencing its own vertical, what do you think about the remedy? and if you don't like it, what would you recommend? >> so i think that's -- i don't think we've seen the end of that case yet. i'm sure the others have some

views on that. but i think the commission had learned from the mistakes of kind of dealing with microsoft and how hard it is to craft a remedy that a company can't just kind of get around. you know, the companies know their business the best. so this is a problem that would generally have with behavioral remedies for corporations. they can kind of technically not violate the conditions, but really violate the spirit of the conditions and accomplish their same goals. so i think she was smart in putting the onus on google to say, you have to fix it, you have to fix the problem in this way to make there be equal treatment. i don't think that's happened yet, i don't think we've seen the end of that. i think we're going to keep seeing ongoing monitoring of what google is doing, probably ongoing fines. i expect to see more fines in that case. >> i think there's a question over here? >> i think the panel's done an

excellent job in articulating actual anti-trust properties of harm in the tech program, i don't think there needs to be more piling on, but the idea that you would rely on statistics on aggregate productivity growth and its slowdown over time to say we should not have an anti-trust case against the tech platforms, the papers you're talking about specifically find that innovation slowdown has been sharpest in the tech sector. there's all sorts of other findings about how basically high-profits and low productivity growth in the economy are only consistent with an aggregate lack of competition in the macro economy. you said that there's no evidence that anti-trust actually increases innovation, but we have good evidence, in fact, that compulsory licensing of bell labs patents was important in seating the silicon valley in the growth of the technology industry in the first place. i mean, you know, i don't think that aggregate productivity growth statistics and the papers in that literature demonstrate

on their own an argument for stepped up anti-trust enforcement and specifically in tech, but the idea that they militate against it is just not consistent with any of the economic literature that i am aware of. i think that's exactly the literature that's caused economists outside this fear of industrial organization to take an interest in this and think, well, maybe the economy really does have a big competition problem. >> i agree. i don't think you can draw one conclusion or another about the impact of the algae industry on productivity, when you look at those productivity statistics. one reason i bring them up, when i talk to people who are saying that these companies are really -- for all they're doing, they're not really helping productivity or innovation. they point to those exact same statistics. if we're not going to use those statistics as not giving us any meaningful information about what's going on, then let's not use them, but people keep using them with me and i think it's ridiculous for the exact point that you raised. >> can we maybe shift gears. you know, in this topic, are

there -- on the topic, when you hear from folks that are keen to curb the power of big tech, you sometimes hear section 230 brought up. and i'm wondering from maybe sally, lena, jonathan, if you believe that esectisection 230 to be re-examined. i'm personally very biased on this. yelp is a strong supporter of jex 230 and i have been very concerned by the watering down of, you know, intermediary liability shields. so, why don't we start with you, sally? >> i have not been looking at section 230 as a main solution. i mean, i think apart from anti-trust enforcement, some of the regulatory fixes that i've heard that make more sense to me are data portability and interoperability. >> so you don't think --

>> sorry to just be quick, because we're running a little bit low on time, in your view, we don't need to rewrite the rules of intermediary? >> i can't claim to be an expert on that statue, so i'll refrain from comments. >> okay. lina? >> i think it's a complicated issue, because in part, section 230, immunizing platforms for liability for different things, i think can make sense, but i think what we're seeing right now is that these -- section 230 assumes that these companies are kind of neutral intermediaries, but they're actually not neutral intermediaries. they already do a lot to discriminate effectively. and so i think what we need is a regime that kind of brings the power and the responsibility that tease companies have in line with the legal obligations. and i think we also need to ensure that we're not kind of adopting a system where we have these like effective like private censors, given how much information and news travels through facebook and google. so i think it's a complicated issue, but i think the thing that -- the problem that we face

right now is there this disjunction. >> cant >> kanter? >> yeah, i think at least from my perspective and from a competition perspective, there should be distinction between the largest company and medium-sized and smaller companies. and i think some of the frustration around 230 comes from the fact like a google can hide behind section 230 rather than fulfilling its obligations and use it to gain a competitive advantage in things like the media space. >> so let's get rid of 230, let's oxygenate the markets, make google liable, give a lot of little fines, and now we have a lot of little start-ups that are now liable -- >> no, no, which is why i think it's important to have a distinction between the largest companies and the smallest companies. so i think that's worth exploring. >> how would you write that legislation? >> i haven't thought about it enough to do that yet, but just giving some general observations. in terms of the other thing, i think the -- you know, it shouldn't be lost that, you

know -- and again, i'll pick on google, because, why not? >> is they're keen to use government-led -- the government when it helps them, but then they advocate against government when it hurts them. i think some of the frustration is, this sort of jekyll and hyde or this perceived hypocrisy. i think a lot of times, there's great interest, particularly among republicans, where you have this -- this is a merging, certainly anti-big tech feeling, to make these companies more liable. that is one -- and i have not heard anybody make the distinction between big companies, because they feel other companies are against them. that's why the -- sort of the theory of the case from the left is very different than the theory of the case from the right, where we're all meeting,

there's a problem. a lot of their theory of harm comes up, they think these companies are all a bunch of left-wing companies and they're trying to drown out conservatives. and in section 230, having talked to people, i would not be surprised if you see these -- legislation on that front. >> okay. >> further legislation. >> i don't know, is the -- well, why don't we go down the road and do sort of closing -- actually, we've got the sitter here. so no closing arguments. >> if you want to give a 30-second closing argument, let's go down the road here and start with sally. >> i just wanted to say, earlier today, there was a lot of talk about bringing more cases and i think that's important. but i think there could be some legislative fixes to make it easier for anti-trust enforcers to prevail some bad case law that would make it hard to prevail. >> pass. >> just a fear that, you know, to the extent that people think microsoft case was helpful and

oxygenated the market, i'm not sure it would get brought today given the current state of anti-trust law. >> thanks for having us. >> thank you so much. let's give a round of applause to the to the panel. [ applause ] tonight, american history tv is in primetime. from our series, "the presidency," we'll hear from clifton truman daniel, president harry truman's eldest grandson, speaking about the restoration of the white house that took place between 1948 and 1952. american history tv prime-time begins at 8:00 p.m. eastern, here on c-span3. this weekend on "real america" on american history tv, the 1988 u.s./moscow summit

between president ronald reagan and soviet leader mikhail gorbachev -- >> the way of democracy is sometimes a complicated way. and sometimes trying. but it is a good way and we believe the best way. and once again, mr. general secretary, i want to expend to you and to all of those who labored so hard for this moment my warmest, personal thanks. >> reporter: watch "real america" sunday at 4:00 p.m. eastern on american history tv on c-span3. ryan mckrimmen joins us for a look at the upcoming house debate on the first of the federal spending bills to come to the house. he's an appropriations and tax reporter for cq roll call. and ryan, why is the house just now starting this debate process, so late in the game? >> that's right. well, the house and the senate both were sort of late to start,