Experts Spar At Hearing on Journalism, Tech and Market Power

On Wednesday, a hearing in the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights-- titled Breaking the News: Journalism, Competition, and the Effects of Market Power on a Free Press-- allowed scrutiny of a legislative proposal to permit news media companies to collectively negotiate terms for how their content is distributed by major tech platforms.

"Local news is facing a crisis in the U.S.," noted the Chair, Senator Amy Klobuchar (D-MN), describing the steep decline in local news revenues and employment in recent years, which she contrasted to the growth and dominance of the "digital advertising titans," Google and Facebook. "These Big Tech companies are not friends to journalism; they are raking in ad dollars while taking in news content, feeding it to their users and refusing to offer fair compensation. And they are making money on consumer's backs by using the content produced by news outlets to suck up as much data about each reader as they can." Senator Klobuchar indicated she is in favor of "stepping in" to level the playing field, highlighting her proposed Journalism Competition and Preservation Act (JCPA), as well as the Future of Local News Act, and the Local Journalism Sustainability Act.

Senator Mike Lee (R-UT) agreed with Klobuchar regarding the overwhelming dominance of the tech platforms and the danger they pose to news businesses. But he also blamed the problems of the news media on what he regards as poor standards, referencing a litany of conservative grievances: the publication of the Steele dossier, initial reports around an incident involving a high school student from Covington, "denials that critical race theory is being taught in schools," and a variety of other examples he referred to as "misinformation" that has caused citizens to lose faith in the news media. He pointed to poor business decisions by news organizations, including investing too little into innovation and relying on digital advertising revenues instead of pursuing diversified business models. Sen. Lee voiced opposition to the JCPA- "this would be competitors themselves colluding with the approval of law," he said. He called the JCPA a "hall pass" for an industry that would pass the costs of "an inferior product" and "partisan hackery" to citizens.

Expert witnesses at the hearing included:

• Jennifer Bertetto. President And CEO of Trib Total Media and a board member of the News Media Alliance;
• Joel Oxley, General Manager of the radio station WTOP News who testified on behalf the National Association of Broadcasters;
• Dan Gainor, Vice President of the Free Speech America and Business for the Media Research Center and a Fox and OAN commentator;
• Daniel Francis, a Lecturer at Harvard Law School, an expert on regulation and competition, and a former FTC official;
• Hal Singer, an economist, expert on competition, and Managing Director of Econ One Research, who recently wrote a report on behalf of the News Media Alliance.

Bertetto and Oxley described the challenges to competing in a market dominated by Big Tech gatekeepers and spoke in favor of the JCPA and the leverage it would provide news organizations.

Francis said that while he acknowledged the "seriousness of the difficulties that many publishers are facing across the country today," he could not "think of anything the country needs less, now or ever, than a national news media cartel," calling cartels the "supreme evil of antitrust." He said that he did not regard the power of the platforms as monopsony power, and reminded the lawmakers that the platforms have the right to share news content under existing property law. He said the harm of the JCPA would "far outweigh the good," and would create a monopoly power in the form of a news industry "cartel."

Singer, in contrast, pointed to the decline in news revenues and newsroom employment. He said "if these trends are left unchecked, we might not have local newspapers in the near future." He pointed to private and public harms caused by the decline in local journalism, such as "less competent local governments, greater spread of partisanship and misinformation, removal of economic stimulus to local economies, and a reduction in the diversity of viewpoints." He advocated for a "targeted intervention" similar to the negotiation framework adopted in Australia. Singer suggested a narrow exemption for the news media to form a negotiating block has precedent in the labor exemption and farm cooperative exemption to antitrust law.

Gainor, for his part, spoke against the JCPA, suggesting local news struggles because newspaper companies failed to reinvest outsized profits and made strategic mistakes in the transition to digital. He also suggested large news publishers are themselves a major threat to local newsrooms, referring to a piece by Aron Pilhofer, who recently wrote about how the New York Times acquisition of The Athletic threatens newspapers in local markets where the sports publication offers coverage.

In response to a question from Senator Klobuchar, Singer took a swipe at Francis's depiction of the collective bargaining rights that news industry advocates seek as a 'cartel.' He said the coordination rights would be very limited, "so the notion of a cartel being created is fanciful." He said assertions that news publishers would raise its prices as a result of a windfall from tech firms are unsupported by economics.

Francis disagreed. "The idea that a cartel is only a cartel if it deals with your dealings directly with consumers or workers- that is really not right, and that would be news to the Department of Justice." He agreed with Singer that a single payment from the tech platforms would not affect the downstream economics; but that ongoing payments would. Later, Francis said exposure to competition would permit news businesses to adapt their business models, and that despite the "horror and sadness" we may feel at the pain that change brings, it is a necessary part of the competitive process.

Senator Blumenthal (D-CT), countering the "sophisticated economic arguments that might be made against this Act," pointed to the failure of news organizations including the Hartford Courant, the paper of record in the capital of his state. "I would like to say that the market will self correct, that we can use existing antitrust law, but it ain't working."

Senator Blumenthal asked Singer, "are we too late? Can we still rescue American journalism?" Singer said the proposed legislation would "put money back into the pockets of the news publishers," and therefore may "breath life" back into the industry.

Francis said that "digital monopoly and monopoly in general is a problem that at the minute vastly overmatches the ability of our antitrust agencies," and he told Senator Mike Lee that those agencies need more funding.

Singer, asked whether news organizations should be compensated for the use of "snippets" of news by tech platforms, said they should be paid when the platforms "scrape, and index, and use rich text and images" to keep users on the platforms, because the platforms are thus hoarding the value created by the news organizations. He came back to the argument about "cartels" -- "there will be no cartel price effect from this lump sum transfer, you can take my word for it."

Been thinking A LOT about the use of word "cartel" to describe a coalition of sellers, especially when the term is deployed by a dominant firm* that is itself the target of regulation or antitrust scrutiny. 🧵

* and its minions https://t.co/En5UpZVul2

— Hal Singer (@HalSinger) February 4, 2022

Outside of the hearing, supporters and detractors advanced their own arguments.

• The editorial board of the Atlanta Journal-Constitution came out in favor of the JCPA, arguing that "Given good journalism’s role as an underpinning of the American way of representative democracy, we have much to lose as a free society if this bill does not quickly make its way into law."
• The editorial board of Trib Live followed suit, backing up the testimony of its top executive at the hearing. "The solution — a necessary one in a landscape where so many newspapers have stopped publishing and so many communities have no access to local news — is a level playing field."
• The editorial board of the Nebraska McCook Gazette wrote in favor, saying that "With the passage of the JCPA, all news publishers, especially small and local newspapers, would finally be able to ask the tech platforms for the compensation they need and deserve."
• Politico reported that executives at the far-right publication Breitbart lined up with Facebook and Google in opposition to the bill, out of concern they might be "left out" of the negotiating block it would form.
• Free Press led a letter signed also by Public Knowledge, Wikimedia and Common Cause, among others, that said the JCPA “may actually hurt local publishers by entrenching existing power relationships between the largest platforms and largest publishers. News giants with the greatest leverage would dominate the negotiations and small outlets with diverse or dissenting voices would be unheard if not hurt.”

"I want to get something done here, that is my goal," said Senator Klobuchar, closing the hearing. The Washington Post's Cristiano Lima and Aaron Schaffer report the legislation has picked up more support-- including from Sen. John Neely Kennedy (R-LA) and Senate Minority Leader Mitch McConnell (R-KY), as well as support in the House-- making it a potential contender to advance in this legislative session.