WSJ-2019-06-20.pdf

* * * * *THURSDAY, JUNE 20, 2019 VOL. CCLXXIII NO. 143WSJ.comHHHH $4.00HUSSEIN FALEH/AGENCE FRANCE-PRESSE/GETTY IMAGESBLAST DAMAGE: An oil drilling compound used by Exxon Mobil and other companies was struck by a rocket Wednesday near the city of Basra, Iraq. It wasnt known whether the rocket was fired from outside Iraq, and no one claimed responsibility for the attack. A16fatal crashes of MAX aircraft when an automated flight-con- trol system malfunctioned. Turning the crank to adjust the horizontal stabilizer can help change the angle of the plane s nose. Under certain conditions, including at unusu- ally high speeds with the panel already at a steep angle, mov- ing the crank can take a lot of force. Among other things, the people familiar with the de- tails said, regulators are con- cerned about whether aviators with less upper-body strength may find it difficult to turn the crank in an emergency. Theanalysiscouldhave even wider significance be- cause the same emergency pro- cedure applies to the genera- tionofthejetlinerthat preceded the MAX, known as the 737 NG. About 6,300 of these planes are used by more than 150 airlines globally and they are the backbone of short- PleaseturntopageA7LE BOURGET, FranceEf- forts to get Boeing Co. s 737 MAX jetliners back in the air have been delayed in part by concerns about whether the averagepilothasenough physical strength to manually crank a flight-control wheel in extreme emergencies. The concerns have made the wheel and its crankused to move the horizontal panel, or stabilizer, on the plane s tail the focus of engineering analy- sis,simulatorsessionsand flight testing by the plane maker and U.S. air-safety offi- cials, according to people famil- iar with the details. The extent of the internal debate hasn t been previously reported. Use of the crank is intended as the final step in an emer- gency checklist to counteract dangerous movements of the tail shorizontalstabilizer, such as those involved in twoBYANDYPASZTOR ANDANDREWTANGELReturnof737MAX Runs Into New HurdleTOLLESON, Ariz.Armed with loads of cash and the latest in machine learn- ing, investors are reshaping the $26 trillion market for U.S. residential real estate, starting in Phoenix, the petri dish for America s housing experi- ments. At the edge of the city s stucco sprawl, a beige, three-bedroom house with a gravel yard sold last month for $240,000. The seller, Opendoor Labs Inc., paid $215,000 for the house in Jan- uary, replaced the carpet and repainted it, and put it back on the market. A computer told the company what to offer and how much to ask. Therewas no need to schedule a showing with a real-estate agent. Prospective buyers of Opendoor homes can down- load an app to unlock the door. Residential real estate has long been a fragmented industry. Renting, buying and selling a house generally means dealing with an assortment of local real-estate agents and local landlords, and working with the schedules of ev- eryone involved. Now companies such as Opendoor, among San Francisco s flushest start- ups, aim to bring Wall Street-style effi- ciencies and Silicon Valley software to the housing business. The house in Tolleson is one of sev- eral thousand around the city thatOpendoor and two competitorslist- ings giant Zillow Group Inc. and Offer- pad Inc.have bought since 2014 in an attempt to perfect programmatic house flipping. Last year, they bought nearly 5,000 houses in the metro area, roughly one in every 20 existing homes sold. They re after real-estate transaction fees and anything they can make on re- selling the property. Margins are low, so volumes must be high. They re treading the path worn by another group of deep-pocketed inves- tors after the foreclosure crisis: Wall Street firms that snap up suburban houses and turn them into rentals. The high-tech flippers often follow rental PleaseturntopageA8BYRYANDEZEMBER ANDPETERRUDEGEAIRAlgorithmsInvadetheHousingMarketHigh-tech flippers such as Zillow are using formulas to reshape residential real estateItsNoSnap: RovingGators VexPittsburghiii Chomp and two others get loose; this needs to stopBYJAMESR.HAGERTYWith its densely wooded hillsides, Pittsburgh abounds in wildlife, including deer, rac- coons, opossums and wood- chucks. Until recently, however, the city s police department wasn t used to dealing with al- ligators. When the first one was found, sunning itself on a trail near the Monongahela River on May 18, the 3-foot reptile was a novelty. The second specimen, found by a man walking his dog in the Beechview neighborhood June 6, seemed like an odd co- incidence. That gator, about 5 feet long and hissing, was cap- tured with considerable per- PleaseturntopageA8DJIA 26504.00À38.46 0.1%NASDAQ 7987.32À0.4%STOXX600 384.77g0.004%10-YR.TREAS.À11/32, yield 2.023%OIL $53.76g$0.14GOLD $1,344.60g$2.00EURO $1.1226YEN 108.10WASHINGTONFederal Re- serve officials held benchmark interestratessteadyon Wednesday but strongly sug- gested they would cut them in the months ahead if an eco- nomic outlook clouded by un- certaintyovertradepolicy didn t improve. “The case for somewhat more accommodative policy has strengthened,” Fed Chair- man Jerome Powell said at a news conference after the cen-BYNICKTIMIRAOStral bank announced its deci- sion. Still, citing recent favor- able economic data, the Fed didn t bow to pressure from President Trump for an imme- diate rate cut. U.S. stocks rose toward re- cord highs. The S email: wsj.ltrswsj.comNeed assistance with your subscription? By web: customercenter.wsj.com; By email: wsjsupportwsj.com By phone: 1-800-JOURNAL (1-800-568-7625)Reprints the timing of the trans- action wasn t motivated by an increase in New York state real-estate taxes that kicks in July 1. A Mansion article Fri- day about the New York taxes failed to make clear that Mr. Griffin s purchase wasn t moti- vated by the tax change.CORRECTIONS ? AMPLIFICATIONSReaders can alert The Wall Street Journal to any errors in news articles by emailing wsjcontactwsj.com or by calling 888-410-2667.fore the change, around a third of merger investigations involved deals of less than $50 million. After the change, the number of such deals in- vestigated fell to close to zero. In new research, Mr. Woll- mann found that between 1997 and 2017 more than 4,000 acquisitions of kidney dialysis centers were pro- posed. About half were above the reporting threshold, and in 265 cases, the FTC required divestitures to resolve compe- tition concerns. Among the half below the threshold, theFTC required just three dives- titures. Two companies con- trolled about 31% of facilities in 1997. By 2016, two compa- nies, DaVita Inc. and Frese- nius Medical Care, controlled 77% of facilities, he concluded. Mr. Wollmann hasn t docu- mented the impact on patient health, but his preliminary re- sults suggest the numbers of nurses per technician declined and patients per hemodialysis machine rose at facilities ac- quired in mergers below the reporting threshold. That, he said, could be evidence of re-CAPITAL ACCOUNT | By Greg Ip Stealth Consolidation Erodes CompetitionWith the Trump admin- istration heightening its scrutiny of big tech compa- nies and several states trying to stop the third- and fourth- largest wireless carriers from merging, you might think the tide is turning against corpo- rate concentration. Think again. Big tech and big mergers get the headlines, but the real monopoly problem is beneath the surface. In numerous in- dustries and regions, competi- tion has declined and corpo- rate concentration risen through acquisitions often too small to draw the scrutiny of antitrust watchdogs. This stealth consolidation may be as harmful, if not more so, than the much publi- cized and criticized practices of Alphabet Inc. s Google, Ap- ple Inc., Facebook Inc. and Amazon.com Inc. The number of enforce- ment cases brought by the Justice Department s antitrust division against alleged anti- competitive agreements and monopolistic behavior has plummeted in the past de- cade, according to data com- piled by the Washington Cen- ter for Equitable Growth, a left-leaning think tank.At both the Justice Depart- ment and the Federal Trade Commission, antimerger en- forcement has been largely stable. But the authorities may be more permissive than this data suggest. John Kwoka at Northeastern University has documented that the FTC, while continuing to challenge mergers resulting in just two to four competitors, has since the mid-2000s been less likely to challenge mergers that result in five to eight competitors. Meanwhile, a great deal of concentration is coming via small mergers that escape federal scrutiny. Until 2001, deals of more than $15 million had to be reported to the antitrust authorities. That year, the threshold was raised and in- dexed to economic growth, and is now $90 million. For transactions involving few tangible assets such as in technology and pharmaceuti- cal startups, the threshold is $360 million. A study by Thomas Woll- mann of the University of Chi- cago found that after the 2001 changes, the number of merger notifications dropped 70% and the number of merg- ers that didn t require notifi- cation jumped nearly 50%. Be-duced quality of care, though he acknowledged it could also reflect increased efficiency. A spokeswoman for DaVita, citing federal data, said that as the industry has consoli- dated over the past 15 years, dialysis patient mortality has decreased by 30%. Meanwhile, she added, the percentage of patients immunized and the percentage of patients safely dialyzing at home have im- proved, “the result of large scale clinical investments.” A Fresenius spokesman also cited the federal data showing declining dialysis patient mortality. Stealth consolidation is under way in other in- dustries, too. Physician practice groups have been merging, often as part of larger hospital groups via nu- merous small deals. According to a 2017 study in Health Af- fairs, 22% of markets for phy- sicians are highly concen- trated (under federal guidelines), and they got that way mostly via acquisitions too small to be reported. Another study by Florian Ederer at Yale University and two co-authors found that pharmaceutical companies of- ten halt development of com- peting drugs at startups they acquire, especially when thedeal is just small enough to escape antitrust reporting re- quirements. This doesn t prove anti- trust enforcers have been negligent; they can t investi- gate mergers they don t know about. Nonetheless, it suggests the Trump administration s new- found interest in competition policy is too narrow. Its scru- tiny of big tech is being driven by concerns, shared in both parties, that the firms quash competition, have too much influence on what is said on social media, and exploit us- ersprivate information. Yet outside technology, it has been more relaxed, suing (un- successfully) to stop only one major dealAT two states say they will sue to stop it.House Democrats plan to bring their own version of the pack- age up for a vote next week. “While House Democrats are still reviewing the Senate border supplemental legisla- tion, my colleagues and I have concerns with the Senate bill as currently written,” said House Appropriations Chair- woman Nita Lowey (D., N.Y.). The Trump administration made an initial request forlarity with children to illegally amass data on minors under 13 without parental consent, the people said. The groups also alleged that the website subjected children to inappro- priate content. The company has said that in 2015 it created YouTube Kidswhich doesnt collect data on minorsin part to ad- dress concerns like those. An FTC spokeswoman de- clined to comment. YouTube in recent years has grown into a media force. The company says users watch one billion hours of content each day. The possible changes, though still under discussion and not considered imminent, would be among the biggest ever for the platform, not least because they would re- quire alterations to YouTubes infrastructure and significant negotiations over the bound- aries of childrens content. “We consider lots of ideas for improving YouTube and some remain just thatideas,” a YouTube spokeswoman said. Theinternaldiscussions come in response to critiques inside and outside YouTube that it has been flat-footed in addressinghate-basedand conspiracy-strewncontent,ContinuedfromPageOneand failed to adequately police videos featuring or targeted to children. The incidents have helped drive internal debates to areas once considered off- limits, according to people fa- miliar with the discussions. Google Chief Executive Sun- dar Pichai has become in- volved in steering the unit through recent stumbles, peo- ple familiar with the matter said.YouTubeCEOSusan Wojcicki has conceded mis- steps, privately telling employ- ees in a memo that some re- centdecisionswere “disappointing and painful.” YouTube in recent months previewed adjustments to its rules around which videos to allow and to promote. The platform changes are designed to choke viewership for cer- tain content by burying it far from most users. There is also a new company mantra, en- dorsed by Ms. Wojcicki: “Its not about free speech, its about free reach.” A survey from the Pew Re- searchCenterlastyear showed that more than four out of five parents with chil- dren 11 and younger have giventhempermissionto watch a YouTube video. Since its 2006 acquisition by Google for $1.65 billion, YouTube has become the sec- ond most popular website in the world by traffic, behind only its parents eponymous search engine. Some two bil- lion people use YouTube each month, the company says. Crises roiled YouTube this spring. In March, footage of massshootingsattwoWashington Post previously re- ported on the probe. Also in June, progressive video producer Carlos Maza gained national attention for highlightingtwoyearsof provocation from conservative shock-jock Steven Crowder. In YouTube videos for his four million followers, Mr. Crowder described Mr. Maza as an “an- chor baby,” a “lispy queer” and “a Mexican.” Mr. Maza, who is gay, was born in Miami and is of Cuban descent. When Mr. Maza complained to YouTube, it responded pub- licly that the language was hurtful, but not in violation of companypolicies.YouTube yanked advertising from Mr. Crowders videos, citing “harm to the YouTube community.” Mr. Crowder didnt respond to requests for comment but has said the company dispro- portionately punishes conser- vative commentators. In the controversys wake, Googles Mr. Pichai hosted a privatemeetingforLGBT Google and YouTube employ- ees in which he was peppered with questions about why You- Tube didnt more regularly en- forceitsbehavioralrules, which ban “hateful content,” and develop new systems to policeconductlikeMr. Crowders, say people familiar with the matter. Mr. Pichai re- sponded that Google and You- Tube fa