Welcome to The Corner. In this issue, we introduce our new report on Amazon, which reveals how the corporation built a surveillance infrastructure to monitor its workers’ every move, and we announce the Oct. 27 publication of Monopolies Suck, the new book by Open Markets Director of Enforcement Sally Hubbard.
Remembering Our Friend Ted Halstead
In this short note, Open Markets Executive Director Barry Lynn remembers Ted Halstead, who founded the New America think tank, where Barry and Phil Longman first developed the Open Markets concept and built the Open Markets team. Ted died earlier this month at age 52.
Mall Landlords Buy up Their Tenants, Accelerating Retail’s Collapse Into Amazon’s Black Hole
Last week, the French luxury conglomerate LVMH backed out of a $16 billion agreement to buy the Tiffany chain of jewelry stores. But the collapse of that one deal is less a sign of the times than an exception to the current rule, which has seen ever more retail brands brought under the control of a few giant holding companies. Indeed, another deal last week is a more accurate example of how concentrated physical retail has become in the United States. This was the purchase by mall operators Simon Property Group and Brookfield Property Partners of J.C. Penney’s department stores for $800 million, after J.C. Penney filed for bankruptcy in May.
Simon Property Group is among the biggest commercial landlords in the country and is the largest mall operator in the U.S., with 204 mall properties. Before the pandemic, Simon held stakes in 400 of the stores in their properties. Since March, however, Simon has acquired Brooks Brothers and Lucky Brand Dungarees, in addition to J.C. Penney. Simon’s acquisitions are a part of what one industry consultant described as a strategy to be “the last mall owner standing.”
The J.C. Penney deal is also notable for Simon’s cooperation with Brookfield, the second-largest shopping mall operator, which controls more than 170 properties. Earlier this year, the two also collaborated in an ultimately successful effort to acquire struggling retailer Forever 21 for $81 million.
The spate of deals, and the new collaboration, come after a long series of similar moves by the two corporations. In the last decade, Simon in 2010 failed in an attempt to buy General Growth Properties in 2010, the second-largest mall owner at the time. Brookfield then stepped in to buy General Growth in 2018. Not all deals have worked out. In 2015, Macerich, the third-largest mall owner in America, rejected a $16.8 billion offer from Simon. Earlier this year, Simon abandoned a $3.6 billion deal to buy mall owner Taubman Centers, arguing that Taubman had failed to protect its value during the pandemic.
This accelerating roll-up of mall operators and retailers by a few giants marks the final stage of a process that began in the 1980s, soon after the Reagan administration radically relaxed antitrust enforcement. The effects were immediate. In the 1960s, there were hundreds of department store companies in the United States and no major chains. By the late 1980s, 10 holding companies had largely rolled up control over department stores.
Even before the crash of 2008, private equity firms had loaded massive amounts of debt onto these corporations. The resulting Great Recession then made matters far worse, driving retail sales to their lowest levels in 35 years.
Amazon’s hardening monopoly over e-commerce further weakened almost all retailers in the years before the COVID-19 crisis. In 2018, Amazon took almost half of U.S. e-commerce sales and has expanded rapidly into the apparel retail market. That same year, Amazon became the nation’s largest apparel retailer, with $30 billion in sales. The corporation has launched services such as Amazon Fashion, Prime Wardrobe, and Personal Shopper, and has also created more than 100 Amazon-owned fashion brands.
Although the deals may look like a smart effort by these commercial real estate conglomerates to take advantage of bargain prices during the pandemic, it’s hard to imagine any of these brands or holding companies prospering in the long run. Simon and Brookfield have precious little experience in apparel retail, and the idea of combining high-end Brooks Brothers with J.C. Penney would be difficult for even the most sophisticated of retailers.
More likely, Americans will find themselves in a retail landscape in which Amazon completely dominates online business, while the remaining physical retail outlets are controlled by a few real estate holding corporations, which cooperate more or less openly with Amazon. And indeed, in August The Wall Street Journal reported that Simon was in talks with Amazon to turn empty J.C. Penney and Sears stores into Amazon distribution centers.
NewOpen Markets Report Shows how to Return Co-Ops From Monopolies to Democratic Ownership Alternative
In the Populist and Progressive eras, farmers responded to the threat posed by railroad, grain, and meatpacker monopolists by strongly advocating for anti-monopoly laws. They also turned to another critical tool for building power: cooperatives. As a democratic, farmer-owned alternative to investor-owned firms, cooperatives allowed small producers to counterbalance monopoly power in the supply chain.
Earlier this week, the Open Markets Institute published Redeeming the Democratic Promise of Agricultural Cooperatives. The report details how cooperatives, if owned by employees or community members rather than by investors and financiers, provide a democratic alternative to traditional corporations, whose business model emphasizes maximizing short-term returns to shareholders, often at the expense of the organizations’ workers.
But the report also details how agricultural consolidation has led some cooperatives to become so large and powerful as to resemble the abusive monopolies that they were created to battle against. It’s a story that is closely related to changes in how the United States regulates competition. The same failure to enforce the antitrust laws has also led to increasing concentration among agribusiness players, encouraging cooperatives to consolidate, as well.
The number of agricultural cooperatives dropped fromroughly 4,000 in 1978 to fewer than 2,000 in 2016, largely due to mergers and buyouts. Monopolistic cooperatives often act much the way monopolistic corporations do, dominating regional markets, squeezing farmers, and failing to protect their members’ interests.
Our new report proposes several reforms to revitalize the cooperative as a form of ownership. Our proposals would ensure that cooperatives follow democratic governance principles and serve as an effective counterweight to monopolized supply chains.
These reforms include:
· Requiring greater transparency and reporting in cooperative management
· Mandating one-member, one-vote systems in cooperatives’ elections
· Revoking the antitrust protections and tax benefits of cooperatives that do not benefit their members
· Promoting federated cooperative structures
· Ensuring cooperative decision-making processes have no biases against smaller members
· Increasing public investment in research, technical support, and financing for cooperatives
· Limiting horizontal mergers between cooperatives, if the mergers would create a harmful level of power among either buyers or sellers
· Limiting vertical integration in large cooperatives that have monopsony pricing power over farmers
· Ensuring that mergers, joint ventures, and partnerships between cooperatives and investor-owned corporations are demonstrably in the interest of co-op member owners
Upcoming Event: Open Markets and the Center for Journalism & Liberty to Host Online Conference on Sept. 23 with Report For America President Steven Waldman
TheOpen Markets Institute and the Center for Journalism & Liberty invite our readers to join an online conference featuring Steven Waldman, president of Report for America, in conversation with media advocates about his new paper and proposals. Waldman’s forthcoming paper outlines a plan to acquire and transfer hundreds of newspapers owned by private equity funds and replant them with local community groups.
Waldman will be joined by Elizabeth Hansen, lead researcher of the News Sustainability and Business Models project at the Shorenstein Center on Media, Politics and Public Policy at Harvard’s Kennedy School, and Marc Hand, CEO of Public Media Venture Group. Hansen and Hand are proposing a new National Trust for Local News that would assemble capital to finance the transition of locally owned newspapers to more sustainable forms, including new business models and operating structures.
· Sally Hubbardtestified at a New York Senate hearing in support of the 21st Century Antitrust Act, introduced by state Sen. Michael Gianaris. The bill would amend existing state antitrust law by allowing private class-action antitrust suits as well as state suits against individual companies. Antitrust professor Tim Wu said that the bill “would transform New York state into a pioneer, a center of antitrust enforcement.” (City & State)
· A group of predominantly Republican state attorneys general are likely to join the Department of Justice’s upcoming antitrust suit against Google for anti-competitive practices related to several lines of business, including the company’s dominance in search, advertising, and its Android operating system. (Bloomberg)
· Daniel Hanley published an article inWired on the need for strict, bright-line merger rules. Hanley argues that bright-line rules would free journalism from the digital advertising duopoly of Google and Facebook, prevent dominant firms from entrenching market power through mergers and acquisitions, and foster a competitive environment where firms invest in better reporting and technological innovation rather than in mergers and acquisitions.
· Claire Kelloway published an article inThe Washington Monthly about how dairy cooperatives, originally meant to let farmers join forces to get a good price for their milk and to stand up to powerful interests, now often squeeze the farmers that ostensibly own the co-ops.
· The Open Markets Institute was mentioned in an opinion by the First Circuit Court of Appeal inPNE Energy Supply v. Eversource Energy. The court praised as cogently presented our arguments in an October amicus brief asserting that the plaintiffs in the case have the right to bring their antitrust claims to trial.
· Barry Lynn was interviewed by Julia Angwin, editor-in-chief of The Markup, in aconversation about the future of antitrust.
· Sandeep Vaheesan was quoted inL.A Focus Newspaperdiscussing the Epic Games antitrust lawsuit against Apple and Google.
· The Open Markets Institute was mentioned inThe Verge as a signatory of a joint letter urging the Biden campaign to commit to not appointing any Facebook lobbyists to a prospective Biden transition team or to a prospective Biden administration.
· The Open Markets Institute was mentioned in aPolitico article as a signatory of a joint letter urging the Department of Justice and state attorneys general to pursue an antitrust suit against Google.
· The Open Markets Institute co-signeda letter to Maryland Gov. Larry Hogan calling on him to protect Maryland’s vulnerable farmworkers, poultry, and seafood processing workers with an executive order or legislation instituting mandatory and enforceable protections against COVID-19.
· Tristan Harris, a member of Open Markets’ advisory board, starred in anew documentary called "The Social Dilemma," which examines the corrosive effects of Facebook and Big Tech on democracy.
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📈 VITAL STAT:
The percentage of drugs distributed by pharma giants Pfizer and Johnson & Johnson that were created by smaller producers.
📚 WHAT WE’RE READING:
· “How to Destroy Surveillance Capitalism” (OneZero, Cory Doctorow): Doctorow argues for restructuring monopoly corporations that engage in abusive and manipulative behavior by collecting, selling, and using consumer data. The author asserts that monopolization of the technology industry is the root of the problem of surveillance capitalism.
The New American Autocracy vs. The Will of the People
St. Martins Press will publish Open Markets Executive Director Barry Lynn’s new book, Liberty From All Masters, on September 29. The book is Barry’s first since Cornered, in 2010. In it, he details how Google, Amazon, and Facebook developed the ability to manipulate the flow of news, information, and business in America, and are transforming this power into autocratic systems of control. Barry then details how Americans over the course of two centuries built a “System of Liberty,” and shows how we Americans can put this system to work again today. Pre-order your copy here.
7 Ways Big Corporations Rule Your Life and How to Take Back Control
And don’t forget that Simon & Schuster will publishMonopolies Suckby Open Markets Enforcement Director Sally Hubbard on Oct. 27