August 20th, 2019

Some Friendly Chats Between Big Tech and Its Regulators

Xavier Vila/SIPA/AP Images

Communications obtained through FOIA requests reveal top staff at the Federal Trade Commission in constant contact with Big Tech lobbyists, relying on them for information, and generally seeing them as partners rather than companies subject to FTC regulation.

Last week, Federal Trade Commission (FTC) Chair Joseph Simons told Bloomberg News that the antitrust inquiry into tech platforms could end with breaking companies like Facebook apart, a statement he hedged almost immediately. “It’s not ideal because it’s very messy,” Simons said. “But if you have to, you have to.”

The resignation with which Simons viewed the prospect that the FTC might have to use statutory law to its logical conclusion makes clear that our Second Gilded Age’s inability to restrain runaway monopolies is the product of deficient will. And we know this not just because of one line in a news report, or the recent history of the FTC effectively taking bribes to halt investigations. Just take a stroll with me through a selection of available FTC internal emails.

When journalists or outside groups petition the FTC for Freedom of Information Act (FOIA) requests, the agency helpfully posts the results if the same subject gets requested more than three times in a calendar year. There are frequently requested records—internal emails and documents, mostly—about crowdfunding and football helmets, hotel pricing and online dating, even some personnel information about the most well-known former director of the Office of Policy Planning in agency history, a certain Ted Cruz.

But it’s the files involving Facebook, Google, Amazon, and Apple—the four Big Tech firms under scrutiny from the FTC and the Justice Department—that will sap your faith, if you had any left, that the agency will engage in a full investigation of the platforms. The communications depict top staff at the FTC constantly in contact with Big Tech lobbyists, relying on them for information, and generally seeing them as partners rather than companies subject to regulation. That this stuff has just been sitting on the FTC website for years suggests that the agency isn’t particularly ashamed of it, either.

The key documents involve communications between FTC staff and representatives from Facebook, Google, and Apple between January 1 and March 25, 2015. This was a particularly critical time for Google, because of a separate FOIA report filed by The Wall Street Journal. That March, the FTC inadvertently released a 160-page report of the Bureau of Competition, which recommended that the agency sue Google over the anti-competitive conduct of its search engine. In 2013, the FTC overruled the Bureau of Competition and settled with Google for peanuts.

Some of the communications involve this Wall Street Journal report, but the overriding sense one gets on reading them is just how much time Google and its Big Tech brethren spend with FTC staff. In just this three-month period, there are 19 instances of Rob Mahini, a senior policy counsel with Google, setting up meetings, lunches, or other meetups with FTC personnel. “Have a minute to chat this afternoon?” Mahini asks Aaron Burstein, an FTC adviser, in January 2015. “It would be great to have coffee to catch up,” Mahini writes to Henry Su in February. “I’d love to get together for lunch again. What works for you this month?” he asks Shaundra Watson the next day. There’s also a fair bit of flattery: little nuggets of information that Mahini passes around to FTC staff, pre-release demos of new site features, a flow of updates that make staff feel like trusted insiders.

This constant, low-level communication to work the staffs of the FTC’s top staffers and the commissioners themselves is surely common practice among other lobbyists and other agencies, but the relentlessness and aggressiveness in these emails is striking.

In some cases, the conversation goes the other way. On January 14, 2015, Neil Chilson, at the time an attorney adviser to Republican commissioner Maureen Ohlhausen, wrote Mahini looking for advice. “One of the offices here (you can guess which) is convinced that a major weakness of the use-based approach is that it cannot address sensitive inferences,” Chilson wrote. “You and I know that is exactly backwards, but I am looking for concrete examples to counter (to the Chairwoman’s office) that mistaken perception.”

To translate this from alien to English, then-Chairwoman Edith Ramirez’s staff had expressed concern about Google’s creating targets for advertising based on a user’s gender, age, height, and weight (the so-called “sensitive inferences”), and Chilson (who doesn’t consider that a problem) wanted Google’s lobbyist to give him examples of how this is no big deal. So this is Google working directly with an FTC official, who is giving the company intel about what a (mildly) adversarial commissioner is thinking, and asking for specific examples to rebut it, which Mahini gladly supplies. (After being made acting chief technologist at the FTC, Chilson now works for the Charles Koch Institute. The Kochs have been siding with Big Tech in policy debates.)

But the most interesting stuff in the FOIA documents concerns that Wall Street Journal article. On March 18, the day before the story’s release, Mahini wrote to top advisers to then-chair Ramirez. “We have an urgent situation that Kent Walker would like to speak with the Chairwoman about,” Mahini writes, and you can feel the panic. Kent Walker is the chief legal officer at Google. He’s quoted in the Wall Street Journal piece. Clearly he wanted to go over the imminent story release. Mahini even offers Walker’s personal cellphone for Ramirez to call.

A few days later, Johanna Shelton, Google’s top lobbyist, wrote an official-sounding email to FTC staff, describing Google as “deeply troubled by the FTC’s lack of an on-the-record clarification about the effect of the Bureau of Competition staff memo.” Shelton pushed the agency to correct what Google saw as erroneous news stories that the FTC’s settlement went against the Bureau of Competition’s recommendations (which it did). She was also upset that the FTC didn’t comment for the record about the story. “We believe it is critical for the FTC to defend its reputation, showing that it followed a thorough process and fully took into account the Bureau of Competition staff memo, among other internal agency opinions including the Bureau of Economics,” Shelton wrote.

Google wanted the FTC to take Google’s side and read from Google’s talking points about the settlement, which the FTC effectively did, in a formal statement from Ramirez, two days after the Shelton email. “Contrary to recent press reports, the Commission’s decision on the search allegations was in accord with the recommendations of the FTC’s Bureau of Competition, Bureau of Economics, and Office of General Counsel.” This mirrors precisely what Shelton wanted the FTC to say.

A separate public FOIA document series shows that Facebook CEO Mark Zuckerberg was initially named in a draft 2011 consent decree with the FTC over privacy violations. You can see the track changes where Zuckerberg’s name and all references to him were crossed out. Zuckerberg came up again in the recent $5 billion settlement with Facebook over violations of that 2011 consent decree; the FTC admitted they took more money from Facebook to keep Zuckerberg from testifying in the case. If Zuckerberg had been named in the 2011 consent decree, such an arrangement would have been nearly impossible. Perhaps Zuckerberg’s personal exposure would have kept Facebook on a cleaner path; clearly the company is desperate—and willing to pay a fortune—to protect its founder and CEO.

The larger point is that the FTC appears in these documents as practically an adjunct of Big Tech. Staffers are in constant contact with lobbyists, accommodations are made for their interests, and advice is sought from them on how to best protect the industry from scrutiny. If you think this same agency is going to do a 180 and become a strict regulator bringing down the most powerful actors in our economy, you are far more optimistic than I.

No Seat at the Table: Steven Greenhouse on Labor’s Silenced Voice

John Locher/AP Photo

Members of the the Culinary Union paint a wall at a union hall in Las Vegas. While many unions have declined in size, the Culinary, which represents hotel casino workers, hotel housekeepers, dishwashers and waiters, has risen from 18,000 members to 60,000 members.

Capital & Main is an award-winning publication that reports from California on economic, political and social issues. The American Prospect is co-publishing this piece.

Author Steven Greenhouse is convinced that too few Americans fully understand what, he says, “unions have accomplished for tens of millions of workers in the United States.” It’s a central inspiration behind his new book, Beaten Down, Worked Up: The Past, Present and Future of American Labor. Greenhouse, who covered labor and workplace issues for the New York Times for 19 years, provides a dynamic picture of labor’s role in advancing income equality and workplace protections in the United States—from teenage garment workers in New York fighting for a 52-hour week in 1909 to the current struggle for a $15 minimum wage, even as union membership has declined to just 10 percent of the national workforce.

Greenhouse recently spoke with Capital & Main. The interview has been edited for concision and clarity.

Capital & Main: In your book you report on some of the most energetic and effective labor organizing campaigns in recent years. You also outline the decline of union power over the last few decades. 

Greenhouse: One of the reasons I wrote this book is that there’s a phenomenon that far too few Americans understand. Worker power in the United States, not just union power, but worker power overall, has fallen to its lowest level, certainly since World War II and probably since the Great Depression.

That has hurt tens of millions of Americans because it’s a big contributor to wage stagnation. Consumers don’t have enough money to spend. That’s depressed the economy a bit.

Another unfortunate result of this declining worker power is income inequality. One study I looked at showed that income inequality has increased faster in America since 1995 than in any of three dozen industrial nations. One reason for that is that unions and worker power in the U.S. have grown so weak.

A third bad result of the decline of worker power is that corporations have undue domination of our nation’s politics and policymaking.

In the 1950s unions were vigorous—nearly one-third of American workers were union members—how did labor become so strong?

We all learned about the Great Depression in school. One in four Americans were unemployed. Wages were going nowhere. Unions at the time were very weak. President Roosevelt and the New Dealers thought—how could we help lift the nation out of the Depression? One way would be to put more money in workers’ pockets.

There was an idea that the federal government would pass a law to make it easier for workers to unionize. They’ll bargain, they’ll win better contracts, bigger paychecks, they’ll put more money in their pockets. That will create a virtuous cycle that will lift industry, cause more people to be hired, and thus reduce unemployment. In 1935, President Roosevelt and Congress enacted the National Labor Relations Act, which gave workers a federally protected right to unionize.

[Unions] make some landmark contracts and settlements, especially in 1950 with the United Auto Workers and [UAW leader] Walter Reuther reaching a five-year contract with General Motors. That so-called Treaty of Detroit between the UAW and General Motors, which was then the world’s largest corporation, really went far to set a pattern that created the world’s largest middle class.

But later labor’s strength declined drastically. Fast-forward a few decades to the 1981 air controllers strike under President Ronald Reagan that ended up with the union, PATCO (Professional Air Traffic Controllers Organization) being decertified. Was that a labor turning point?

[In] 1981, all sorts of bad things were happening to the economy. During the 1970s, inflation rose over 10 percent. Come 1980 and 1981, the Federal Reserve raised interest rates to 20 percent [and]  a very severe recession [followed]. You saw financial losses for many American companies. They thought, “What do we do?” One thing they did is take a much tougher attitude toward unions. One could say that unions are kind of swaggering and powerful in the ‘50s and ‘60s, and even into the ‘70s, but in the ‘80s it was management that went on the offensive.

Adding to all that, in 1981 the air traffic controllers went on an illegal strike. They went on the strike without trying to get any solidarity, any support from other unions. They had very ambitious demands, raises twice as big as other federal employees, and to go from a five-day week to a four-day week. The Reagan administration just said, “You’re asking too much from folks. You’re asking far more than other unions,” and fired the 11,300 air traffic controllers.

It was a severe blow for labor. The President of the United States for the very first time fired workers and basically decommissioned their union. It sent a message to corporate executives across the country.

Let’s move forward  three decades to another turning point—the term of Governor Scott Walker of Wisconsin—he essentially busted the state’s public-sector unions in 2011. 

Scott Walker and his billionaire backers and Republican allies really wanted to weaken public-sector unions because they saw that unions help Democrats win. And some of the public-sector workers in Wisconsin had some good things. They didn’t pay premiums on their health coverage. They had good pensions. It’s right after the Great Recession. A lot of private-sector workers are hurting.

Walker saw this as a great political opportunity to weaken unions. He said the public sector workers are the haves, they have it great while  other Wisconsinites are the have-nots. All sorts of surveys show that public sector workers really earn no more than private sector workers.

Walker used his rhetoric and the great majority that the Republicans rolled up in Wisconsin to push through this law that really has hugely hobbled public-sector unions in Wisconsin. Then he also had the legislature pass an anti-union fee bill, which some people call a right-to-work bill, and as a result in the past decade union membership in Wisconsin has fallen by 43 percent.

But you do tell some hopeful stories of successful labor fights. 

In my book I look at the decline of unions and how that’s hurt Americans. Then I devote several chapters to looking at models for rebuilding worker power. One of them is the Culinary Union in Las Vegas. While many unions have declined in size, the Culinary, which represents hotel casino workers, hotel housekeepers, dishwashers and waiters, has risen from 18,000 members to 60,000 members. (Disclosure: The Culinary Union is part of UNITE HERE, a financial supporter of this website.)

They did it by organizing and holding strikes and mobilizing members. They formed great contracts. Housekeepers in Las Vegas average over $19 an hour, compared to $11 around the nation. Housekeepers in Las Vegas are guaranteed a 40-hour week, so that means they make at least $760 a week, almost $40,000 [a year]. Many housekeepers in nonunion cities get only 25 or 30 hours a week and might make $18,000 a year.

Another model is the “red thread” teacher strikes in these red states where teachers’ unions are quite weak. The teachers got fed up with year after year of wage freezes and having to pay more for health-care premiums. They used a new model of mobilization—Facebook, meetings, meetups—and created this powerful movement to fight back against the austerity [budgets].

And what about the Immokalee, Florida tomato pickers who eventually led successful boycotts to change working conditions?

The tomato pickers in Florida were horribly exploited. Terrible sexual harassment. They made very little money. They worked in the very hot sun without clean water, without toilet facilities, without shade. Strikes didn’t work because it’s very hard for very poor laborers to go on lengthy strikes to beat corporations. They came up with the idea of boycotts against some of the biggest tomato buyers like Taco Bell. By pressuring these big companies through boycotts, they got the companies to pledge to pressure the tomato growers to pay better, to treat their workers better. That’s become a wonderful model.

The Fight for 15, a $15 minimum wage, is another type of model. The Service Employees International Union, which underwrote [the campaign] wanted to change the conversation to make the nation focus more on the problem of low-wage work. There are tens of millions of low-wage workers having problems making ends meet. It knew it would be hard to unionize these tens of millions, but it would be easier to mobilize lots and lots of workers to decry low wages. (Disclosure: SEIU is a financial supporter of this website.)

I covered the very first Fight for 15 strike on November 19, 2012, where maybe 200 workers went out at maybe 20 restaurants. That was a tiny, tiny acorn and I didn’t think it was going to go very far. Now you have California, New York, Illinois, Maryland, Massachusetts … Seven states have passed a $15 minimum wage. Thanks to the Fight for 15, wages have increased for 22 million workers.

There are models that are succeeding, but it’s still not as powerful as the great UAW was in the 1950s when it was achieving these landmark deals. I think they all point to the importance of trying to expand worker power to help create a fairer nation and a fairer economy.

The Business Roundtable’s Strange Outbreak of Social Conscience

Andrew Harnik/AP Photo

JPMorgan Chase CEO Jamie Dimon, right, listens as President Obama speaks at the quarterly meeting of the Business Roundtable, Sept. 16, 2015.

This week, the Business Roundtable put out a statement signed by 181 corporate CEOs purporting to redefine the purpose of the corporation.

The statement, which has garnered widespread praise among commentators, basically proposes to junk the idea, fashionable since the 1980s, that the purpose of a corporation is to “maximize shareholder value.” Now these captains of industry propose to have the corporation revert to something like its posture during the New Deal–Great Society era, when corporations recognized a broader duty to “stakeholders,” meaning workers, communities, and the economy as a whole.

That earlier model didn’t just happen, of course. It was the result of a power shift against capital and in favor of labor, and three decades of tough regulation.

In the press release, Jamie Dimon, CEO of JPMorgan Chase and also chairman of the Business Roundtable, is quoted as saying:

Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term. These modernized principles reflect the business community’s unwavering commitment to continue to push for an economy that serves all Americans.

Isn’t that swell? Call me a party pooper, but I’d say: Hold the champagne.

A bit of background: The theory of “maximizing shareholder value” was always BS. It was a smoke screen for pumping up stock prices, the better to enrich executives paid substantially in stock options. The maximize-shareholder-value school also became the justification for leveraged buyouts and hedge fund takeovers, whose entire business model was to screw stakeholders.

One should always welcome deathbed conversions, I suppose, but consider who the Business Roundtable is and its role in the legislative process. The Roundtable can be counted on to oppose all regulations that require a more socially accountable brand of capitalism. They are reliably and viciously anti-union, as well as opposed to needed environmental regulation. Did you see the Roundtable oppose Trump’s $1.6 trillion tax cut for robber barons? I must have missed that.

This latest move should be seen for what it is—defensive public relations in the face of increasingly hostile public opinion. The test of good faith, of course, is not what the Roundtable says, but what it does.

JPMorgan Chase and the other big money-center banks that invented and traded toxic securities are responsible for the financial collapse of 2008; they led the lobbying to prevent regulators from doing their jobs, and still lead the lobbying to further weaken the Dodd-Frank Act. They finance vicious takeovers by hedge funds and by private equity firms. They now have more market share than they had before the collapse.

In April 2009, the aftermath of the collapse, President Obama, pleading for support from financial executives, famously told them that he was “the only thing between you and the pitchforks.”

Obama would have done much better if he had sided with the pitchforks, as FDR had done in similar circumstances. Then maybe, Obama would have been the instrument of deep reform, rather than the object of popular backlash. Maybe his party would have gained seats in the first midterm election of his presidency, as FDR’s did, rather than Obama losing a record 63 House seats for the Democrats in 2010.

What’s required of the bankers and corporate CEOs is less PR and more pitchforks. If corporate America does mend its ways, it will not be because CEOs belatedly acquire a social conscience. Reform will come because the public demands it, and Congress passes something like Elizabeth Warren’s proposed Accountable Capitalism Act.

Rather than trusting corporate CEOs to do the right thing, Warren’s legislation requires large corporations to be run in the interest of their stakeholders. One searches the Business Roundtable manifesto in vain to see if the Roundtable supports the Warren bill.

But the statement is still a very hopeful sign—because it shows that America’s business elite is running scared. It’s up to the rest of us to turn that anxiety into real reform and altered behavior.

This is not about a defensive outbreak of conscience. It’s about power. For more than four decades, America’s corporate titans have had too much power, and everyone else has had too little.

Wall Street has never reformed voluntarily, and Wall Street never will. As FDR said, rallying the people against the economic royalists, “They hate me, and I welcome their hatred.” Lyndon Johnson, speaking in a different context, put it more pungently. “If you grab them by the [private parts], their hearts and minds will follow.”