A Blog by Jonathan Low


Oct 8, 2020

Congress Just Declared Big Tech Anti-Competitive. Now It Plans To Act

The history of American antitrust, especially as it regards technology, from railroads to electricity to digital, is that eventually, when companies get so big that they are perceived to pose a real threat to economic competitiveness, is that Congress acts.JL

Gilad Edelman reports in Wired:

The congressional investigation of Apple, Amazon, Facebook, and Google (says they) have monopoly power that threatens economic and political liberties. The report recommends strengthening antitrust enforcement through new laws to rein in the companies. The boldest is a call for “structural separation,” prohibiting a dominant firm from competing against other businesses in a market it controls. There is historical precedent. It might bar Amazon from selling its own products. Structural separation can mean forcing a company to sell off certain divisions

ANYONE WHO'S PAID even slight attention to the congressional investigation of the power wielded by tech giants won't be surprised by the report released Tuesday by the subcommittee’s Democrats. They say four companies—Apple, Amazon, Facebook, and Google—have monopoly power that threatens core economic and political liberties. The report, which ends a 16-month investigation and includes a trove of internal documents, lays out the most thorough case yet that Big Tech exploits its advantages in unfair ways. And it outlines a detailed vision for new legislation to fix those problems—with implications that could extend far beyond the tech industry.

The case against each firm is complex, but some key themes emerge in the 400-plus-page report, built on hearings, other testimony, and more than a million documents. The subcommittee accuses Apple of using its control over mobile apps to squeeze excessive fees out of app developers, who often pass those costs along to users. Amazon allegedly uses its dominant share of online retail to unfairly compete against the outside sellers who use its platform—37 percent of whom, the subcommittee finds, derive all their income through Amazon. The case against Google focuses on the company’s use of its dominant share of the search market to entrench its own position, advantage its own products, and take over other markets like maps and advertising. As for Facebook, the report contains explosive internal emails, some revealed for the first time, showing that the company’s executives openly discussed acquiring companies, including Instagram and WhatsApp, in order to snuff out growing competitors.

In emailed statements, all four companies said they welcomed regulation but vehemently denied the critical findings in the report.

The tech companies aren’t the only entities who come in for abuse. The report heaps scorn on antitrust enforcers at the Department of Justice and Federal Trade Commission for waving through literally every one of the several hundred mergers and acquisitions the four companies made between 2009 and 2019, even cases that helped the companies cement their dominance, like Facebook’s acquisition of WhatsApp or Google’s takeover of DoubleClick. Unfettered by regulators, the companies continue to make deals to swallow rivals, such as Google’s planned purchase of Fitbit.

To address that problem, the report recommends strengthening antitrust enforcement, including through increased funding for the agencies. It also recommends new laws, drawing from “the antimonopoly toolkit,” to rein in the companies’ power. The boldest is a call for “structural separation”—prohibiting a dominant firm from competing against other businesses in a market that it controls. There is historical precedent for this: Congress kicked the railroad industry out of the coal business in the 1890s, and it barred banks in the 1950s from acquiring companies that might compete against other bank customers. In the case of Big Tech, it might bar Amazon from designing and selling its own products, or prohibit Google from competing against independent apps in the Android app store. The report notes that structural separation can mean divestiture—forcing a company to sell off certain divisions—but doesn't have to.

It has become fashionable among a certain set of the tech pundit class to dismiss the antitrust movement on the grounds that “break up Big Tech” is too simplistic. In fact, the proposals for addressing the monopoly problem in Silicon Valley have always been more sophisticated than breakups alone. But the House report helps explain why the misconception persists: A great deal of the recommended solutions involve highly technical issues of antitrust doctrine that make no sense to anyone not steeped in the law.

The basic story of antitrust is that, since the late 1970s, the Supreme Court has interpreted the federal antitrust statutes so narrowly that it has become extremely difficult for the government to win a monopolization case or block a merger—which partly explains why enforcement has gotten so scarce. As a result, the report acknowledges, many of the anticompetitive practices it cites by tech firms are probably legal under current law. So much of the meat of the report suggests passing new laws to overrule those Supreme Court decisions.

One example: The subcommittee report confirms something that many people have long suspected about Amazon—it sometimes sells at a loss to hurt competitors. (The investigation uncovered emails in which Amazon executives said they were willing to lose $200 million to defeat rival Diapers.com, whom they didn’t think they could compete with on the merits. Amazon later acquired the firm.) Under modern antitrust doctrine, however, this practice, known as “predatory pricing,” is almost impossible to prove. To win a case against a predatory pricer, you have to convince a judge or jury that the company will be able to raise prices in the future enough to more than make up its current losses. That’s very hard to do, even if common sense suggests it happens all the time. And so the report recommends passing legislation to overturn three Supreme Court decisions that hardly anyone besides antitrust lawyers have ever heard of.

The Democrats’ report isn’t the only one published Tuesday. Republican members of the subcommittee issued their own rival documents. One came from Jim Jordan, the Trumpian chaos agent who spent his allotted time during the CEO hearing trying to distract from any serious antitrust discussion. The other, however, was issued by Ken Buck, a Colorado congressman who has proven to take the competition issues seriously.

The press generally reported the existence of these reports as evidence that the subcommittee’s bipartisan ethos had broken down. What is striking, however, is how much agreement exists between the two sides. Forget Jordan. The Buck counter-report, cosigned by three other Republicans, agrees with many of the majority’s findings. Yes, Buck rejects the call for structural separation as “a thinly veiled call to break up Big Tech firms.” (The majority doesn’t call for any specific breakups, noting that it would be inappropriate.) That’s one of a few serious sticking points. On the other hand, Buck signs onto many of the majority’s recommendations, including revising the burdens of proof in antitrust cases to make it easier for the government to block mergers.

The implications of that agreement go beyond regulating Big Tech. While Facebook, Google, Amazon, and Apple have become the public face of antitrust, the truth is that many sectors of the economy have become incredibly concentrated—from agriculture to hospitals to eyeglasses and beyond—and punish American consumers, frankly, in ways that are much easier to prove than with the tech companies. (Think higher-priced chickens, hip surgeries, and lenses.) That’s the result of two generations of letting monopolists monopolize. If the Big Tech investigation convinces Democrats and Republicans to tip the scales back in the little guy’s favor, it could reshape the US economy in ways that ripple far outside the borders of Silicon Valley.


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