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Big Tech Antitrust Actions Lack a United Front



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ImageCould partisan infighting take pressure off the tech giants?
Credit…Christie Hemm Klok for The New York Times

Republicans and Democrats agree that Big Tech has too much power. They also agree that something needs to be done about it. But they disagree on just about everything else, and as hearings are scheduled, subpoenas are issued and lawsuits are filed, partisan conflicts over the means could overshadow the ends.

Republicans are focused on censorship, arguing that platforms like Twitter and Facebook silence conservative voices. The Republican-controlled Senate Judiciary Committee is expected to vote this week on whether to subpoena Twitter’s Jack Dorsey and Facebook’s Mark Zuckerberg to testify about the “suppression” of information, after their platforms restricted the spread of an unverified New York Post article about Joe Biden. Amid the controversy, the F.C.C. chair, Ajit Pai, said he would move ahead with modifying Section 230, the law granting liability protection to tech companies over what appears on their platforms. Mr. Dorsey, Mr. Zuckerberg and Google’s Sundar Pichai are due to testify before a Senate subcommittee about the law on Oct. 28.

  • Will a Republican focus on censorship temper Democrats’ enthusiasm for action? Top Democratic senators yesterday dismissed censorship accusations as “baseless fantasy grievance” and questioned the timing of hearings and regulatory actions, despite the need for “reform that creates a structure for healthier online ecosystems.”

Democrats want sweeping antitrust changes. The Justice Department is expected to file a long-awaited antitrust suit against Google this week, reportedly without support from Democratic attorneys general, who say the case is too limited. The sides also largely split along party lines in a recent House antitrust investigation into Big Tech, with the Democrat-led majority calling for more significant changes to antitrust law than key Republicans like Ken Buck.

  • Will the Democrats’ expansive approach to antitrust enforcement turn off Republicans with narrower concerns? In the House, Mr. Buck and colleagues pushed for “targeted antitrust enforcement over onerous and burdensome regulation that kills industry innovation,” a position that may harden as Europe threatens antitrust actions against the U.S. tech giants, who are likely to appeal for support from lawmakers as a matter of national pride.

Then there is the election. If Joe Biden wins, he has said he will be tough on Big Tech, but Silicon Valley’s avid support of his running-mate, Kamala Harris, leads some to believe that his administration would be more moderate. His campaign has drawn support from the likes of tech stalwarts like the former Google chief Eric Schmidt, who hosted a fund-raiser last month, and major tech critics like Senator Elizabeth Warren, who will host a fund-raiser next week with a slate of speakers who share her views.

Today’s DealBook newsletter was written by Andrew Ross Sorkin and Lauren Hirsch in New York, Ephrat Livni in Washington, and Michael J. de la Merced and Jason Karaian in London.

Little progress in stimulus negotiations. House Speaker Nancy Pelosi said that the White House had “come to a place where they are willing to address the crisis,” but President Trump told reporters that she “does not want to do anything that’s going to affect the election.” The speaker had set today as the deadline for a deal that could pass before the election.

U.S. prosecutors charge six Russian intelligence officers with cyberattacks. The Justice Department accused them of running a global campaign to attack targets like a French presidential election, an electricity grid in Ukraine and the 2018 Winter Olympics, costing billions of dollars.

American airports screen more than one million passengers. The total on Sunday was the highest since mid-March, but still down 60 percent versus a year ago. Delta and United reported weak earnings last week, and analysts are bracing for more bad news from American and Southwest this week.

President Trump makes Dr. Anthony Fauci his foil. Mr. Trump called America’s top infectious disease expert “a disaster” in a campaign conference call, and said Americans were “tired” of hearing about the pandemic. Meanwhile, more than 70,450 new coronavirus cases were reported in the U.S. on Friday, and a Wisconsin judge reinstated statewide restrictions on bars, restaurants and other indoor businesses.

SoftBank is charging ahead with its public equity strategy. The Japanese investor has reportedly amassed more than $20 billion in holdings, Bloomberg reports, despite shareholder skepticism about the company’s huge bets on tech stock call options. It’s currently betting on a volatile third-quarter earnings season — and buying yet more options.

A flurry of big takeovers in the oil patch — the latest being ConocoPhillips’ $9.7 billion acquisition of Concho Resources — shows how the industry is turning to M.&A. to cope with persistently low petroleum prices, The Times’s Cliff Krauss reports.

Companies have slashed costs and jobs as oil prices remain around $40 a barrel, just above the levels that many businesses need to break even. Some analysts think prices may have peaked, thanks to electric vehicles, reduced driving because of the pandemic and tougher government regulations, including under a potential Biden administration.

  • More than 50 North American drillers have filed for bankruptcy protection, including once-mighty companies like Chesapeake Energy. Corporate restructuring advisers predict more Chapter 11 filings to come.

That has pushed big companies to get even bigger, eliminating competition and cutting expenses. Buying Concho will triple ConocoPhillips’ presence in the Permian shale formation, the world’s most productive oil field, and make it more competitive with the likes of Exxon Mobil. That’s also why Chevron bought Noble Energy, Devon acquired WPX and Pioneer is reportedly in talks to buy Parsley Energy.

  • None of these deals came with much of a premium, a reflection of the travails of smaller players in the industry.

— David Solomon of Goldman Sachs, on how working habits will change (or not) after the pandemic, at the Milken Institute’s Global Conference

Jay Powell is in no hurry to issue a digital dollar. When it comes to central bank digital currencies — a hot area in the crypto world — it’s more important for the U.S. to get it right than to be first, he said at an I.M.F. panel discussion. This deliberate pace worries some in the U.S. fintech industry, especially given China’s haste in the space.

China’s central bank just concluded its largest digital currency trial, distributing online wallets with 200 digital yuan (about $30) to 50,000 people to spend at 3,000 retail outlets. It initiated pilot projects in April, and the commerce ministry announced additional efforts for the 2022 Winter Olympics in Beijing.

“It’s not a matter of competition with China,” Benoît Cœuré of the Bank for International Settlements suggested at a separate D.C. Fintech Week conference. The Chinese project is “primarily domestic” and “not geopolitical,” he argued. Other countries should watch closely and take notes, Mr. Cœuré said, because the conversation about digital currencies is widespread and there are “lessons for everyone.”

  • “Can countries play catch up?” asked the Georgetown Law professor Chris Brummer. China is thinking decades, if not a century, ahead, Brad Garlinghouse of the virtual currency company Ripple replied. The playing field won’t level once a country establishes a lead in “the internet of value,” in his view.

What’s next? The pandemic has raised interest in central bank digital currencies, along with other forms of cashless payments that enable online commerce and remote transactions. Still, regulators are preoccupied by the legal, technological and economic challenges presented by that new money and its movement across borders. “We need to go slow, because we are in a hurry,” said Agustín Carstens of the Bank of International Settlements, echoing Mr. Powell’s warnings on the same panel. “With payments, there’s no room for mistakes.”

A recent fine imposed by the Securities and Exchange Commission over a questionable stock buyback by the energy company Andeavor may have big implications for all publicly traded companies.

The back story: Late in Andeavor’s negotiations to sell itself to Marathon Petroleum in 2018, it announced a $250 million buyback, repurchasing 2.6 million shares at an average price of $97 each. Shortly afterward, Andeavor announced a deal with Marathon that valued its stock at more than $150 per share.

  • The S.E.C. punished the move by applying an accounting rule in an unexpected way. The regulator found that the buyback was initiated when Andeavor had material nonpublic information that wasn’t disclosed to shareholders. But instead of charging the company or executives with fraud or insider trading, it “zeroed in on the company’s accounting controls, and found them inadequate to ensure compliance” with Andeavor’s own rules about buybacks, according to lawyers at Davis Polk. (Andeavor admitted no wrongdoing and agreed to pay a $20 million penalty.)

That makes share repurchases a little dicier. Buybacks were already under increased political and regulatory scrutiny. Now, there is a new accounting twist, adding extra concerns over internal controls. “The process of approving a buyback now seems more complicated than it was a day before the case came out,” Robert Cohen, a partner at Davis Polk and a former S.E.C. enforcement lawyer, told DealBook.


  • Intel agreed to sell its memory chip unit to SK Hynix of South Korea for $9 billion. (NYT)

  • Didi Chuxing is reportedly weighing going public in Hong Kong instead of the U.S., seeking a valuation of over $60 billion. (Reuters)

  • Microsoft’s longtime in-house deal maker, Marc Brown, has stepped down to start a new growth-investment team at the Swedish private equity firm EQT. (Bloomberg)

Politics and policy

  • To limit the spread of the coronavirus, Ireland announced a new national lockdown, closing nonessential businesses and imposing local travel restrictions for the next six weeks. (NYT)

  • While Congress and the White House fight over additional stimulus, the Fed is sitting on billions in untapped pandemic relief funds. (WaPo)

  • Tax authorities from four countries are investigating Euro Pacific, a financial firm based in Puerto Rico, over its potential role in tax evasion and money laundering. (NYT)


  • WeWork has withdrawn from a deal to pay the company’s co-founder, Adam Neumann, $185 million in consulting fees because he “violated” the agreement. (WSJ)

  • Pakistan lifted its ban on TikTok after the social network committed to blocking accounts that spread “obscenity and immorality.” (NYT)

  • The return of start-ups being born in garages, thanks to the pandemic. (NYT)

Best of the rest

  • U.S. diplomats and spies suspect that high-tech audio weapons have been deployed against them in China, Cuba and Russia. (NYT)

  • How Freshfields, one of Britain’s top law firms, is trying to become a powerhouse in the U.S. (FT)

  • Perdue Chicken wants you to know that it has no ties to Senator David Perdue, Republican of Georgia. (Business Insider)

We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com.


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The Trump campaign celebrated a growth record that Democrats downplayed.



The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.


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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.



The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.


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Ant Challenged Beijing and Prospered. Now It Toes the Line.



As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.


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