Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law.
Editor’s note
As they say, the sun never sets on the Google empire. That said, the role of antitrust law in tech has been on the rise in recent years. Every indication is that the situation is only going to get worse for mega tech firms.
So Jeff Bezos’ departure from the top spot at Amazon may well have been a beautifully timed case of quitting while you’re ahead. As I’ve mentioned before — “harped on about” might actually be more accurate — this is a widespread problem. The titans of tech have stepped on the wrong toes the wide world over. While governments spent much of the past 20 years looking indulgently upon tech industries, those wells of goodwill are running dry.
But what does that mean for crypto? Despite acting at times like an island, the crypto industry is still tightly tied to the mainland of the tech industry. But current crypto industry players are not really on the radar of antitrust enforcement. The industry’s familiar mechanisms for decentralized governance, open-sourcing software, and real-time viewable data, however, stand to attract more interest as regulators crack down on abuses of client data and proprietary digital secrets at firms like Facebook and Apple. A number of regulatory bodies are actually looking to blockchain technology as a means of securing data on firms that they might want to investigate for anticompetitive practices.
Casting back, the first mass push for antitrust laws came about in the U.S. after the Civil War, as a means of cracking down on Rockefeller/Vanderbilt/Carnegie-era dominance of shipping, rail, steel and oil industries — critical network industry for the task of united a nation recently divided against itself. Similarly, the highest profile enforcements of the past 50 years were modern variants like AT&T and Microsoft. Political antipathy towards Web 2.0 kingpins continues to grow and seems to be shaping into a new wave of antitrust.
Anarchy in the M&A
Yesterday, Amy Klobuchar, who chairs the Senate’s Antitrust Subcommittee, introduced new legislation to overhaul the U.S.‘s foundational anti-monopoly laws.
Taking particular aim at tech, the new bill would allocate major boosts for the budgets of the Federal Trade Commission and the Justice Department’s antitrust division. In particular, it earmarks new authority to gather data on and nix new mergers and acquisitions among major companies. Companion legislation is expected in the House’s Antitrust Subcommittee.
`Coming on the heels of a tide of antitrust suits against Google and Facebook and the DoJ stamping out acquisitions of fintechs by Visa and Intuit, the new legislation will obviously stir up waves amid an industry that has become dependent on a strategy of gobbling up user data.
Though the current bill has four sponsors, they are all democratic senators. The party has a wide majority in the House, but only a razor-thin margin in the Senate. More business-friendly republicans will likely take issue with the sweeping provisions of the current bill, but big tech firms seem to have run out of friends in Congress on both sides of the aisle. Seem! The Biden administration is stacked with former employees of Facebook, and the Big Four have broken into the ranks of largest spenders on lobbying in the country. As always, money makes miracles.
The Chinese variation
China has been busy getting its home-grown tech industry in line. Ant Group has had to restructure to placate authorities, who shot down its IPO back in November after CEO Jack Ma criticized the country’s financial regulations.
Ant Group is the fintech wing of Ma’s empire, which most famously began with Alibaba — confusingly, Alipay is actually an Ant Group product. Alibaba is the largest private company in China, and Ant Group’s prospective IPO had hinged upon an unprecedented $300 billion valuation. This success had given Ma special privilege to speak his mind, until it didn’t.
The newly proposed structure would reconfigure Ant Group as a holding company for separate firms handling different branches of its business. Less punitive than investors had feared, it would subject the firm to stricter capital requirements, along the lines of what is required of banks. However, none of this has been finalized.
More broadly, China has been at a crossroads when it comes to its tech industry for some time. Giants like Alibaba and Huawei have proved critical economic ambassadors for a country that’s made huge strides in its international presence over recent years. Hesitant to kill these geese while they were still laying golden eggs, capitalism with Chinese characteristics has let these firms flourish. But, those characteristics still require these firms to pay tribute to the Party. Leaders like Ma may have gotten above themselves.
At the same time, many have associated these efforts to curtail the local tech industry with that industry’s dominance in the Chinese payment market. With China’s central bank pushing its digital yuan forward, they may be working to clear away private competitors, or at least put them in their place.
The Senate’s new Bitcoin champion
Following committee appointments, recently elected Senator Cynthia Lummis has gotten a strong position for her pro-crypto platform.
The Senate Banking Committee is the tip of the spear for financial regulation in Congress’ upper chamber. Lummis is the first vocal Bitcoin bull in the Senate. This week, she also expressed interest in establishing a financial innovation caucus.
Featuring both more frequent turnover and a much wider cast of characters, the House of Representatives has long been home to a small but growing contingent of congresspeople openly interested in the fate of digital asset regulation, including a Blockchain Caucus and a Fintech Task Force. Those representatives have, however, faced a chronic bottleneck when it comes to getting legislation introduced in the Senate. Lummis’ dedication to crypto has, therefore, been worth watching for a long time. A spot on the Banking Committee promises, at the very least, to give the crypto industry an ally in critical discussions on new applicable legislation.
That said, Lummis’ success will depend on her ability to forge alliances in the Senate. Congress is also currently tied up with both the Trump impeachment and a new stimulus package. I anticipate very little forward motion for financial regulation in general and crypto in particular until those issues are resolved.
Further reads
Law professor J.W. Verret argues for greater clarity from the SEC on the subject of digital assets.
Reporters for Bloomberg run down the challenges that the rash of class-action suits against Robinhood are likely to face.
Brendan McCord and Zoe Weinberg of Brookings TechStream propose a new approach to emerging technologies at national security agencies.
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