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The Case for Investigating Northern Virginia’s HQ2 Deal

The state "didn't have to give them a penny," says antitrust specialist Barry Lynn
Barry Lynn of the Open Markets Institute wants Amazon's HQ2 decision investigated. (Photo courtesy OMI)

When Amazon announced its arrival in Northern Virginia on Tuesday, the decision was greeted with hosannas from public officials, Washington residents, and permanent members of the investor class. One person, though, was not celebrating: Barry Lynn, director of the DC-based Open Markets Institute, a non-profit advocacy group focused on the country’s federal antitrust laws. Lynn’s work earned acclaim after he alleged he was ousted from the New America Foundation on behalf of Eric Schmidt, then the CEO of Google’s parent company. He is one of a growing chorus of public intellectuals who argue that America’s largest corporations, the Silicon Valley behemoths among them, enjoy wide berth to operate as de facto monopolies, which help drive the country’s record levels of wealth concentration and inequality.

Rather than spike the football on behalf of Washington’s newest corporate neighbor, Lynn this week called for an investigation into the public and private protocol that resulted in Amazon choosing Crystal City (sorry, I mean National Landing).

Lynn spoke with Washingtonian about what Amazon’s imminent arrival spells for the future of antirust law.

This interview has been edited for length and clarity.

Yesterday OpenMarkets called for an investigation into why Amazon chose Northern Virginia. Why?

A primary purpose of Congress, state legislatures, and city councils is to investigate. It’s part of what government was created to do. In this case, it’s not like there’s a crime that is evidenced here. It’s more within the confines the existing regulatory structure: A group of folks in power made what looks to be a bad deal. So it’s incumbent on pertinent authorities―in this case, the legislature in Richmond and in Albany, the city officials in Northern Virginia and New York City―to ask, was this a wise decision? Has everything been put out for the public to look at? Or are there parts of this deal [with Arlington and with the Commonwealth of Virginia] that haven’t yet been released?

One of the provisions of the Virginia deal appears to suggest that the state is supposed to embark on a deregulatory agenda to make the state more open and responsive to big business and outside investors. Is that really what was necessary to lure this corporation to town?

Isn’t it unrealistic to expect officials to turn around and investigate the company they just spent more than a year wooing?

But that’s where checks and balances come in, right? This was done by the executive―by the governor’s office, by the mayor’s office. But we also have the legislature, which can actually start to say, Let’s see what really happened here, and let’s understand the full extent of what you gave away. It’s just a normal way the government should work. We want the legislatures in Virginia and in New York to serve as a check on what the governors are giving away. What are “Amazon Cuomo,” as he named himself, and Ralph Northam and their administrations giving away?

Moreover, this competition, which pitted city against city, and state against state, is a whole new level of degradation that Jeff Bezos forced onto some of America’s largest cities and states. It’s like, Hey guys! I got something for you. But you gotta scrap over it. And we’ll see who comes out the winner in your little battle.

Or, as the Onion’s Clickhole put it, he tossed a nail-studded baseball bat.  

Exactly. It might be the Onion, but that’s exactly what we just witnessed in the United States of America. And the saddest thing about this is that neither New York nor Northern Virginia needed to put a penny on the table, probably. Amazon probably needed those places at least as much as they think they need Amazon.

Why do you say that?

In Seattle, the combination of Amazon and Microsoft kind of overwhelmed the city. The rents are skyrocketing. They’re having trouble fitting workers into the city. They [Amazon] don’t know what to do, right? They needed to go out and find people in other parts of the country. Now, New York already has this really big rich body of workers, tech workers included, that Amazon is really going to benefit from. The same for Northern Virginia. So it’s like, who needed whom here?

Prognosticators had suspected that the Washington area would be a winner because of Amazon’s ostensible interest in heading off antitrust regulation. Were you one of the people expecting Washington?

Actually, from the first, we assumed they were going to New York. Amazon has a lot of influence in Washington already through their contracts with government, and through Amazon Web Services.

There are two ways to look at what they just did. Is this a really smart tactic that they used to shake out all of this information about dozens of US states and cities, and shake down a bunch of very large states and cities for payoffs? Or is this going to turn into some kind of strategic mistake on their part?

Because what this does is reveal, for everyone to see, just how powerful Amazon truly is. That you can get Andrew Cuomo to rename himself “Amazon Cuomo”? Even when they didn’t actually need this investment. And that we ended up having two of the richest states in the United States basically taking taxpayers’ money, and giving it to the richest company, and the richest man, in America.

Your focus is antitrust law. So why do you care where Amazon’s headquarters goes? Some would suggest this has to do with a personal animus you hold against these companies.

It’s a great question. When you’re dealing with a monopoly, what you’re dealing with is a power structure, a government structure, a system that is designed to corrupt people. There are various forms of corruption. Corruption doesn’t mean, necessarily, that you slip me this money under the table, and I do you this favor. Corruption is when you have been elected by the people to serve their interests, and you choose not to do that, because of fear of the power in front of you, or because of some implicit promise of a favor in the future.

That’s what the headquarters choice signifies to you? Corruption?

That’s certainly what it seems to be. The headquarters gives them a whole bunch more carrots and sticks to use against the people that we elect to represent us. That’s one part. The other part is, we see inequality in the United States at record levels, and that is a function of concentrated market power. This is an example of how concentrated power makes that even worse, time and again. What we see here is a giant corporation―the biggest corporation by certain measurements―headed by the richest man in the world, by certain measurements, basically extracting wealth from taxpayers. All taxpayers in Virginia―that includes everyone who pushes a broom for a living, drives a truck for their living, everyone who teaches kindergartners for a living―they’re all taking money out of their pockets to put into Mr. Bezos’s pocket.

Do you think Amazon’s choice to reward Washington might pour accelerant on much of the country’s cynicism and distrust toward the capital? The country’s permanent lobbying class hobnobbing with mandarins of the tech elite?

We saw a bit of that in the previous administration―this kind of merger with the Silicon Valley moguls and the Obama White House. And I think that actually played into, to some degree, people’s disgust with Washington. But will this actually exacerbate the problem? The only reason I’m going to say “not necessarily” is because, in this case, it wasn’t the federal government that was really part of the process. Basically, it’s just suckers out there. The Northam administration and the folks in Northern Virginia who put together this deal―they probably didn’t have to give them a penny to lure them in. But people understand that this is going to be played as a matter of state governors and local mayors falling all over each other, hitting each other with nail-studded baseball bats, in order to win this so-called prize.

You really think Northern Virginia could have won Amazon’s bid without giving up anything?

Yes. Without giving up a penny. And without promising to turn the state’s regulatory power over to one of the world’s most powerful corporations, too. But we’ll never know that, will we? Because as far as we can tell from the evidence available, the Northam administration and the governments of Northern Virginia simply assumed they had to pay off Amazon to have a shot at HQ2. It’s hard to negotiate a good deal when your starting point is to give everything away for free.

OK, let me ask you about antitrust. Now that Amazon is going to have a footprint in Washington, will Amazon be able to shape policy?

Let’s be honest. When their headquarters was only out in Seattle, their ability to recruit, pick up, suborn, and corrupt the best and brightest in the federal government was because people did not want to, or could not for some reason, move to Seattle. But now that they have a new headquarters here in the DC area, their ability to target various high-level actors in Congress, among the staff level in the executive, is much greater.

You’re imagining a K Street in miniature, in which Amazon presents as a viable alternative to lobbying for ex-officials?

Even just dangling out that promise of a job. We saw this with Google, which did this remarkably well with the Obama administration. One of the benefits of monopoly is that the bigger you become, the more you appear to own the future. That means when people mid-career are thinking about their own personal future, they become less and less likely to use their power―the power that’s been entrusted to them by the government to regulate you, as you should be regulated. And instead they become much more subject to your enticements. Because they perceive you as a likely future mate, a likely future employer.

Was that true in the era of Rockefellers and Vanderbilts―government officials striking out to work for Standard Oil?

You don’t even have to go back in time. We certainly saw that recently with Google, with Uber. Look at David Plouffe, who ran the Uber thug operation for a period of time, and used his thug operation to terrorize the mayor’s office and the city council in New York City into ceding to Uber’s demands.

But certainly: The Mellon banking operation, the JP Morgan banking operation, the railways, they all gave away all kinds of little treats, little sweeteners, promises of jobs, as part of their way of exercising control over governments at the local state and federal level. There’s nothing new here. For a long time, the railroads in the late nineteenth century gave all kinds of free passage to members of Congress, and local regulators and local legislators, and sometimes their families, just as a way of buying protection.

So Amazon is now in Washington. Does that make your movement―to usher in a new national antitrust regime―harder? Or easier? I wonder if the proximity to Amazon offers the drama and close-up optics that reformers prefer. Much easier to haul your Zuckerbergs in for flogging by committee when they live next door, right?

It’s exactly that. It could be read as both.

Which do you lean toward?

In the near term, I think it’s going to end up buying off certain people. Now, who gets bought off, we don’t know. It will be really interesting to see what way Chuck Schumer comes down on this. Was this enough to buy off Chuck Schumer’s protection? Is he just going to say, they’re hiring some of my constituents, so they’re my best friend? That’s actually a really good way to track this. Where does Schumer come out? Does this buy his protection? Or does he stand up for the American people?

Last week, Democrats take the House; this week, Amazon takes Washington. When that shakes out, how do you gauge the prospects for the antitrust movement? Are we headed for a political collision?

That’s a good question. And it’s’ something that we’re going to discover. I think that most of the incoming freshmen [Democrats] are much less beholden to the old ways. They’re come of age in this period of concentrated power. The Tea Party in 2010. Occupy in 2011. The Trump candidacy in 2016. A large part of these was a rebellion against concentrated market power. And then we have all these hearings about the power of Google and Facebook over our data and over our media.

My sense is that, even though a lot of these folks have never read anything necessarily about antitrust law, or the history of anti-monopoly in the United States, that they’re walking in with a different view of the world than, say, people who took power in the nineties or ten years ago. People who’ve taken power since then are coming in with a different view of whether we have a monopoly problem, and of who should be be answering to whom. They’re coming go power at a time when there’s much more of an understanding that we have a problem. The problem is huge. And that, in the end, the problem is a threat to democracy.

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Benjamin Wofford
Staff Writer