Why AI Needs Antitrust Intervention — ft. Jonathan Kanter
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode of PropG Markets, Scott Galloway and Ed Elson interview Jonathan Cantor, former Assistant Attorney General for Antitrust at the DOJ under the Biden administration. The conversation centers on the concerning concentration of power emerging in the AI industry, where tech giants are creating circular investment patterns reminiscent of the oil and railroad trusts that originally prompted antitrust legislation. (10:18)
• The main theme explores how companies like Google, Microsoft, Amazon, and NVIDIA are investing in AI startups while simultaneously selling those same companies chips and compute power, creating interdependent networks that may stifle competition and innovation.
Speakers
Jonathan Cantor
Former Assistant Attorney General for the Antitrust Division of the US Department of Justice under the Biden administration. During his tenure, he brought major antitrust lawsuits against Google, Apple, Live Nation and Ticketmaster, UnitedHealth, RealPage, American Airlines, and the meat packing industry. He also previously served as an attorney at the FTC and founded his own law firm, Cantor Law Group.
Scott Galloway
Professor of Marketing at NYU Stern School of Business and serial entrepreneur who has founded multiple companies including Red Envelope. He is a bestselling author and frequent commentator on business and markets.
Ed Elson
Co-host of PropG Markets and Scott Galloway's research partner, providing analysis and insights on financial markets and business trends.
Key Takeaways
Prevention is Better Than Surgery in Antitrust
Cantor emphasizes that "smaller intervention early on" is far more effective than trying to break up entrenched monopolies years later. (31:18) He explains that during the Internet era, regulators were told to err on the side of doing less rather than more, which resulted in incumbents exerting tremendous power. When antitrust cases were finally brought, they were "stuck trying to retrofit remedies into markets that had calcified." This insight suggests that addressing concentrated power structures before they become entrenched is crucial for maintaining competitive markets.
Circular Investments Create Systemic Risk
The modern AI ecosystem mirrors the trust structures that originally prompted antitrust laws, with companies like Amazon and Google investing in Anthropic, Microsoft in OpenAI, and NVIDIA having stakes across multiple AI companies. (11:33) This creates what Cantor calls "resiliency risk" - if one major player fails or turns out to be significantly overvalued, it could trigger cascading effects across all dependent companies. This interconnectedness makes the entire system fragile and vulnerable to collapse, similar to how Enron's failure affected many other companies.
Conflicts of Interest Must Be Addressed
Cantor identifies platform conflicts as a clear area for intervention, stating "If you own a platform and you compete on that platform, then and you have power, those conflicts of interest are something that should be easy to address." (28:40) He draws parallels to financial markets where being on both sides of a transaction is prohibited. This principle could be applied to tech platforms that both operate marketplaces and compete within them, ensuring fair competition for all participants.
Competition Drives Reinvestment in the Economy
True competition forces companies to reinvest money back into the economy through R&D, job creation, and lower prices rather than circular payments between dominant firms. (15:13) Cantor points out that in the Google search case, over $20 billion per year was flowing from Google to Apple - money that wasn't being reinvested in the US economy. When markets lack competition, companies spend substantially more on stock buybacks than R&D, as Apple does, which doesn't create the same economic benefits as genuine innovation and job creation.
Public Support Enables Effective Antitrust Enforcement
The Ticketmaster case became the "most popular antitrust case in the history of antitrust" because consumers could directly relate to how monopolization affected their daily lives through higher ticket prices. (48:25) Cantor explains that public support is crucial because "we need public support for representatives who are gonna fund the work" and to restore faith that markets and government can work for ordinary people. When citizens see tangible benefits from antitrust enforcement, they're more likely to support policies that maintain competitive markets.
Statistics & Facts
- Over $20 billion per year flows from Google to Apple as part of their search default agreement, representing money that's not being reinvested back in the US economy but rather circulating between dominant tech companies. (15:13)
- Apple spends substantially more on stock buybacks than it does on research and development, illustrating how lack of competition leads to capital allocation that doesn't benefit broader economic growth. (15:29)
- Live Nation controls somewhere between 50-70% of all live event tickets by dollar volume, with the percentage being even higher for certain types of events and venues, demonstrating the extent of their market dominance. (39:49)
