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Thursday, Aug 06, 2020

Big Tech Funds a Think Tank Pushing for Fewer Rules. For Big Tech.

Google, Amazon and Qualcomm finance a George Mason University institute teaching a hands-off approach to antitrust regulators and judges.

A year ago, antitrust officials from Australia, Brazil, China, Japan and eight other countries enjoyed $110-a-plate steak dinners and unlimited pours from $70 bottles of wine at a beachfront hotel surrounded by panoramic views of the sun setting over the Pacific Ocean.

The opulent meal was the culmination of a weeklong conference in scenic Huntington Beach, Calif., for 30 foreign government officials who enforce competition laws. The trip was organized and mostly paid for by the Global Antitrust Institute, a part of the Antonin Scalia Law School at George Mason University in Fairfax, Va.

Regulators spent the days in classes with the institute’s staff, which included a senior federal judge and a former commissioner at the Federal Trade Commission. The program was presented as continuing education for antitrust regulators — a way to learn more about the economic underpinnings of competition law.

But critics and past attendees of similar conferences run by the institute said the sessions were more about delivering a clear message to international officials that benefited the companies paying for the event: The best way to foster competition is to maintain a hands-off approach to antitrust law.

The Global Antitrust Institute is bankrolled in large part by tech companies — corporate donors like Google, Amazon and Qualcomm — that are facing antitrust scrutiny from some of the regulators who attended its programs, according to hundreds of pages of emails and documents obtained through open records laws, interviews with four past conference participants, and observation of a conference last year in Huntington Beach.

The documents included donation checks for hundreds of thousands of dollars from Google and Amazon, as well as a three-year, multimillion-dollar donation agreement from Qualcomm. Those checks were a key component of the institute’s $2.1 million budget in the year that ended in June 2019.

The emails illustrated how the institute’s leaders, including Joshua Wright, who has longstanding ties to Google, have worked closely with tech companies to fend off antitrust criticism. And they showed how the institute cultivated and tapped relationships with top competition officials — even, in an aggressive courtship, asking Brazil’s top antitrust regulator to recruit the country’s judges to attend its conferences with offers of business-class flights.

“This is not a significant expenditure for these companies. And the potential benefits, even making it moderately less likely to be on the losing end of an ambitious antitrust case is worth that price many times over,” said Michael Carrier, a professor at Rutgers University’s law school.

It’s difficult to determine the impact of the institute. But in Brazil, a tribunal last year dismissed three separate investigations into Google, which controls 97 percent of the country’s search traffic, for a lack of evidence.

Regulatory scrutiny is, unquestionably, a global issue for tech companies. Until recently, Europe was the main threat of antitrust action. Google has lost three competition cases there since 2017. Amazon is now the target of an inquiry in Europe for abusing its dominance in online commerce to squeeze smaller rivals. Qualcomm has paid more than $1 billion in fines to Europe for its anticompetitive behavior.

Now other countries are also starting to take a more aggressive approach. Australia and Brazil are investigating Google, while Amazon is also facing an antitrust probe in India.

The companies are also facing investigations at home. After years of a hands-off approach to monopoly enforcement, Google, Amazon, Facebook and Apple are under investigation from federal watchdogs, state attorneys general and Congress. The Justice Department is expected to bring a case against Google in the coming months in what would be one of the biggest antitrust actions in the United States since the 1990s.

The chief executives of Amazon, Google, Facebook and Apple will appear before lawmakers soon as part of a congressional antitrust investigation into their market powers.

Mr. Wright, the institute’s executive director, said its mission, curriculum and lectures were available online for the public to assess and that “open-minded observers” will see the quality of its instruction from legal academics and economists with experience enforcing antitrust laws and prosecuting cases.

“That combination of academic and practical experience is one reason enforcement agencies’ officials from around the world consistently choose to send their staff to our programs,” Mr. Wright said in a statement.

The long era of restraint in antitrust enforcement in the United States can be traced back, in part, to an ideology that tied economic analysis to legal cases. The view was that it’s not enough for a company to dominate a market and crush competitors, there must be evidence of so-called consumer harm — usually in the form of higher prices. That notion permeated through the American judicial system with the aid of economics seminars for federal judges funded by corporate donors.

The Manne Economics Institute for Federal Judges, which ran from 1976 to 1999, was organized by the Law and Economics Center — now housed at George Mason University’s law school. By 1990, about 40 percent of all sitting federal judges had attended one of these seminars, according to the program’s director.

Researchers found that judges who attended the seminars were more likely to approve mergers, rule against environmental protections and organized labor, and use economic language in rulings compared to judges who did not attend, according to an academic study looking at the effects of the program.

The Global Antitrust Institute, which was established in 2014 as part of George Mason University’s Law and Economics Center, has taken a page from the success of the federal judges program and adapted it for an international audience. It is also starting to offer an economics program for U.S. federal judges, with one scheduled for October in Napa, Calif.

Mr. Wright said it had already trained more than 850 foreign judges and regulators. It has hosted a senior judge at Supreme People’s Court, China’s top judicial body, as well as the current and former superintendent of Brazil’s top competition regulator as “visiting scholars.”

The institute does not disclose the source of its funding, but The New York Times obtained copies of the group’s annual budgets and donation checks in document requests. It is funded almost entirely by companies and foundations affiliated with companies.

Tech companies have been major backers of the institute for several years. In 2017, Google, for example, donated $200,000 to the group and it contributed an additional $300,000 in 2018.

On its website, Google discloses a long list of organizations that receive money from its government affairs and public policy team. On that list is George Mason University’s Law and Economics Center and the George Mason University Foundation, which is where donations to the Global Antitrust Institute are directed. Google does not mention the Global Antitrust Institute by name.

“We’re committed to transparency about the academic organizations to whom we make grants. Such organizations aren’t acting on our behalf, and we expect and require our grantees to disclose their funding,” said Julie Tarallo McAlister, a Google spokeswoman.

Amazon, whose dominant shopping site and cloud computing unit are the target of antitrust inquiries, has donated at least $225,000 to the group, according to copies of donation checks. Amazon also listed the George Mason University Foundation among “trade associations, coalitions, nonprofits and social welfare organizations” that received more than $10,000 in payments from the company. It did not mention the Global Antitrust Institute.

In thanking Amazon last year, Mr. Wright told Pat Bajari, Amazon’s chief economist and vice president, that its donation would support the institute’s mission to provide competition enforcers and foreign judges with the “economic foundation for rigorous antitrust analysis.”

“Like most large companies, we support a broad range of organizations doing research in areas connected to our business. That does not mean we always agree with their viewpoints or that we direct the work that they do,” an Amazon spokesman, Jack Evans, said in a statement.

Another company secretly committed to donating $2.9 million over three years until 2020. While the company’s name was redacted in grant documents, one of the agreements directed questions about the donation to a manager who has worked at the chip maker Qualcomm for the last 14 years.

Qualcomm has spent years fighting regulators around the world and incurred billions of dollars of fines over accusations of anti-competitive practices.

In 2017, after the F.T.C. filed an antitrust lawsuit against Qualcomm, Koren Wong-Ervin, a director at the institute at the time, emailed an executive at the company to express that a recent debate about the technology licensing terms at the heart of the case was one-sided and not favorable to Qualcomm.

“I’m considering a GAI panel on the hill to counter this one,” Ms. Wong-Ervin wrote. The Qualcomm executive responded that she would appreciate that.

Ms. Wong-Ervin, a former legal adviser to Mr. Wright at the F.T.C., left her position at the Global Antitrust Institute in September 2017 to become the director of antitrust policy and litigation at Qualcomm. Ms. Wong-Ervin, who left her position at Qualcomm this year, declined to comment. Clare Conley, a Qualcomm spokeswoman, also declined to comment.

Though it’s not clear how much, if any, impact the group’s education programs have had on the decisions of international regulators or judges who attended, “nobody would be paying for this stuff if they didn’t think it had an effect,” said Suresh Naidu, a professor of economics and public and international affairs at Columbia University and one of the authors of the academic study on the economics seminars for federal judges.


Maintaining the Status Quo

The theme of the Global Antitrust Institute’s teaching is clear, said Marshall Steinbaum, an assistant professor at the University of Utah’s economics department. He reviewed a reading list and curriculum of last year’s conference in Huntington Beach and characterized the program as “in line with the institute’s long-term agenda of weakening antitrust laws.”

Among the reading material is a paper by Hal Varian, who is now Google’s chief economist and who argues that the usual economic hallmarks of monopoly power do not apply to tech companies because of the nature of digital products — they’re expensive to develop initially but can be resold again and again at little additional cost — and therefore should not be used by antitrust enforcers to justify aggressive action.

Tommaso Valletti, who served as the chief competition economist for the European Commission from 2016 to 2019, has attended one of the institute’s events and knows the group’s positions and teaching practices. He said the institute presented one-sided examples of competitive markets working correctly to reinforce the view that markets left on their own work well — to the benefit of entrenched tech companies.

“They do not give a balanced perspective of economics and its application to antitrust,” said Mr. Valletti, who now heads the economics and public policy department at Imperial College in London. “They still portray a simplistic vision of markets, which I believe fits well their goals.”

The Global Antitrust Institute’s head, Mr. Wright, is a divisive figure within the world of antitrust law. He became the institute’s executive director when he returned to George Mason University after serving as one of the five Federal Trade Commission members from 2013 to 2015.

When Mr. Wright stepped down from the F.T.C., he joined Wilson Sonsini Goodrich & Rosati — the law firm that represented Google in antitrust matters. He was a counselor at the firm until 2019 when he also served as the head of the antitrust institute.

Mr. Wright is an advocate of the status quo in antitrust enforcement. As a contingent of economists and lawyers push for a new approach for dealing with monopolies in the face of Big Tech, Mr. Wright, who also has a doctorate in economics, has derisively designated the movement “hipster antitrust” in a 2018 paper.

He is also known for his close ties to Google. During the F.T.C. nomination process in 2012, Mr. Wright was criticized for his paid work for the search giant and agreed to recuse himself from Google matters. Google had helped to fund several of his academic works including a 2011 paper: “Google and the Limits of Antitrust: The Case Against the Case Against Google.”

A week before he was sworn in, the agency announced that it had wrapped up an investigation into Google without taking any action. While he had not played a direct role in that decision, Mr. Wright’s emails with Google reveal how closely they worked together.

In a 2012 email, Adam Kovacevich, a former public policy director at Google, asked Mr. Wright whether he planned to attend an event in which Senator Mike Lee, a Republican from Utah and vocal critic of Google, would be speaking. At the time, Mr. Lee seemed to be toning down his criticism of the company.

Mr. Kovacevich, who left Google in 2019, suggested that it “might be worth lobbing a question about his comments about Google.” Mr. Wright replied “Cool… absolutely. Heh - maybe get one of my antitrust students to ask.”

Mr. Wright also worked closely with Google to deflect media criticism of the company. When a CNN reporter asked Mr. Wright in an email whether Google favoring its own content in search results violated antitrust laws, he defended the company in a lengthy reply. He forwarded his response to Google and added “Just FYI.” Mr. Kovacevich responded: “Thanks, I encouraged him to get in touch.”

In a 2011 email, Mr. Wright asked a legal assistant at Google about an outstanding invoice. When she said it had already paid $125,000, Mr. Wright said there should be “another one or two.”

A Brazilian Budget Squeeze

The gap between the deep pockets of the institute's corporate donors and the overseas regulatory agencies is especially stark in a country like Brazil, where the annual budget for Brazil’s antitrust regulator is about $15 million.

Brazil’s competition authority, the Administrative Council for Economic Defense, better known as CADE, is clear about its financial constraints. So when the institute invited CADE officials to attend a conference in 2016, Alexandre Cordeiro Macedo, the agency’s general superintendent, who oversees its antitrust investigations, said that they were eager to participate, but that it would be difficult to afford sending staff.

“I must let you know, however, that we are facing severe budgetary restraints and unless the expenses are covered, we cannot unfortunately assure we will be able to send a representative,” said Mr. Cordeiro.

The institute offered to pay for up to six CADE officials to attend the conference in Washington. Since then, other CADE staff have attended institute conferences in Oahu, Santa Monica and Tokyo. In each case, the institute has covered travel, hotel, transportation and most meals — even allowing some officials to spend an extra night at a resort to recover from jet lag.

Since 2015, 27 CADE officials have attended the group’s conferences, according to the agency. Last year, the institute paid for 10 Brazilian judges to fly business class to attend a conference at a Four Seasons hotel in Lisbon, Portugal. Mr. Cordeiro was also a visiting scholar at the institute, spending two months there in 2017.

It’s created a close working relationship. When CADE received an invitation for the Huntington Beach conference, the agency could barely contain its excitement.

“I just want to let you know that among all the other training opportunities that we offer along the year, the one from GAI is without a doubt the most appealing to our staff,” wrote a CADE official in an April 2019 email.

CADE has allowed the institute to handpick attendees. After 24 agency candidates applied for the six spots at the 2016 conference in Washington, the institute selected the six candidates it wanted. A year later, for a conference in Dubai, G.A.I. selected from a pool of eight CADE candidates for two attendees and two wait-list spots.

When the institute was trying to recruit Brazilian judges for a conference in Lisbon last year, Douglas Ginsburg, who is a senior judge with the U.S. Circuit Court of Appeals in Washington and chairman of the institute’s board of advisers, appealed to Mr. Cordeiro.

“It would be particularly good if you could recruit judges,” Judge Ginsburg wrote in February. He added that a secretary for one judge had asked about whether the institute would pay for business class flights for others. A few days later, Mr. Cordeiro responded by saying he had recruited seven judges.

In a written statement, Mr. Cordeiro said he was an academic as well as a public servant so it “is natural to be consulted about possible parties interested to take part in debates of this nature” and that there is nothing wrong with recommending “other public authorities for a renowned international academic conference.” He said the institute has paid for his flights and accommodations in the past, but he has never received any other form of financial support.

Judge Ginsburg did not respond to emails seeking comment or a phone call.

Separately, CADE said it was not aware of the institute’s corporate donors and noted that its officials do not participate in training sponsored “directly” by private companies.

“CADE has strict rules regarding the performance of its employees and that participation in events of any nature does not influence the work carried out within the scope of the municipality,” the agency wrote.

In addition to the three separate investigations into Google dismissed by the tribunal last year, there are two open investigations into Google’s handling of Android, its smartphone software, and Google’s use of third-party content in Google News and Google Shopping.

Elizabeth Farina, a former president of CADE from 2004 to 2008, said there needed to be transparency about the source of the money and accountability for the staff who take part. When asked whether she would have let her staff attend conferences like the ones offered by the Global Antitrust Institute, Ms. Farina, who is now the chief executive of a consultancy, said no.

“In general, I don’t think it’s a good idea,” she said.

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