Members of Congress investigating the activity of Amazon, Apple, Facebook, and Google say antitrust law reform is needed to safeguard democracy and “ensure that our economy remains vibrant and open in the digital age.” The findings comes from a document released today (PDF), the culmination of a 16-month long investigation carried out by the antitrust subcommittee, a part of the House Judiciary committee.
The report concludes that although each Big Tech company maintains different kinds of monopolies, each effectively acts as a gatekeeper in digital markets today with the power to pick winners and acquire or dispose of competitors. The document details monopolization and anticompetitive behavior by each of the companies. Members of Congress say that power is used to extract concessions and dictate terms to competitors in ways that wouldn’t be possible in a competitive market, like Apple’s high App Store fee or Amazon third-party seller fees for millions of small businesses.
“To put it simply, companies that once were scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons,” the report reads. “Although these firms have delivered clear benefits to society, the dominance of Amazon, Apple, Facebook, and Google has come at a price. These firms typically run the marketplace while also competing in it—a position that enables them to write one set of rules for others, while they play by another, or to engage in a form of their own private quasi regulation that is unaccountable to anyone but themselves.”
The report recommends Congress and the antitrust subcommittee pass legislation to strengthen enforcement of existing antitrust law, and supports data portability and interoperability so users can transfer data to another platform in order to promote competition. Also among recommendations:
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– Strengthen portions of the Sherman Act which addresses competition and monopoly by adding a prohibition of abuse of dominance or monopoly leveraging.
– Bring back stronger oversight of antitrust enforcement by Congress; multiple incidents were found where regulators failed to stop monopolists from consolidating market share and eliminating competitors
– Put rules in place to prevent favoritism, discrimination, or placing for example an Amazon product ahead of a third-party seller using Amazon’s platform
– Increase scrutiny of merger and acquisition activity to ensure monopolies don’t consume competitors. On the topic of the 2012 acquisition of Instagram by Facebook, an unidentified former senior Instagram employee who testified to the committee last week said “It was collusion, but within an internal monopoly. If you own two social media utilities, they should not be allowed to shore each other up. It’s unclear to me why this should not be illegal.”
– Shift the burden of proving a merger isn’t anticompetitive from regulators to Big Tech companies with merger presumptions. As the report reads: “Under this change, any acquisition by a dominant platform would be presumed anticompetitive unless the merging parties could show that the transaction was necessary for serving the public interest and that similar benefits could not be achieved through internal growth and expansion.”
– Give news publishers the ability to collectively bargain with Facebook and Google
VentureBeat reached out to Amazon, Apple, Facebook, and Google for response to the report and its conclusions. In a statement shared with VentureBeat by Apple argues that the company does not maintain dominant market share in any category and that “we have always said that scrutiny is reasonable and appropriate but we vehemently disagree with the conclusions reached in this staff report with respect to Apple.” An Amazon blog post in response to the report Tuesday warned against “misguided interventions” and criticized what it calls “fringe notions of antitrust.” A Google spokesperson told VentureBeat in a statement that Google competes fairly and that “Americans simply don’t want Congress to break Google’s products or harm the free services they use every day.”
Antitrust law in the U.S. began to rein in the power of companies dominant in industries like steel and railroads starting in the late 1800s, however U.S. regulatory officials have been far less likely to act in recent decades to ensure open, competitive markets. The report titled “Investigation of Competition in Digital Markets” says each of the companies maintain different monopolies: Facebook in social media and advertising, Google in search and advertising, Amazon in online retail, and Apple through the App Store. The report states that online markets became particularly vulnerable to market concentration and monopolization in the past decade. Hundreds of mergers and acquisitions by Big Tech companies in recent years are outlined in the report alongside general declines in early-stage startup funding and business formation.
User data, leveraging existing monopolies, acquisitions, and anticompetitive practices helped defend the dominance of Big Tech businesses. All four of the tech firms have recently focused on acquiring startups in artificial intelligence other emerging technology markets in order to “control the technology of tomorrow,” the report finds. Members of the subcommittee and staff also describe growing political power for tech companies.
“Through a combination of direct lobbying and funding think tanks and academics, the dominant platforms have expanded their sphere of influence, further shaping how they are governed and regulated,” the report reads.
Authors of the report also assert that though companies like Facebook offer services with no monetary cost, people pay a cost due to “diminished consumer choice, eroded innovation and entrepreneurship in the U.S. economy, weakened the vibrancy of the free and diverse press, and undermined Americans’ privacy.”
The report concludes that every member of the committee led by Democratic members of Congress may not agree with all investigations results or recommendations. Rep. Ken Buck (R-CO) and Rep. Jim Jordan (D-OH) have plans to release separate reports. Prior to the report’s release, multiple news outlets reported the report was delayed in order to include additional Republican feedback, and that portions of the draft document were untenable to some committee members.
Antitrust is important to small business prosperity, startup innovation, competitive business practices, and democracy. Economists fear the dominance of large companies will grow even larger in the U.S. as a large number of small businesses are wiped out by a recession sparked by COVID-19. By contrast, since July Big Tech companies reported record profits in quarterly earnings. Currently, 8 of the 10 largest companies in the world are in technology.
This is the first significant antitrust investigation by a congressional committee in decades. Antitrust hearings held in the late 1990s preceded a US v. Microsoft lawsuit and settlement, which some say enabled the growth of companies like Amazon, Facebook, and Google. Legislation stemming from the report may not be proposed until a new term begins in 2021, but the document is meant to lay out a menu of options for Congress to regulate Big Tech and antitrust law reform for the coming months and years.
The investigatory process leading up to the release of the report today consisted of seven hearings and more than a million document. The process reached a high point in July when Amazon CEO Jeff Bezos, Apple CEO Tim Cook, Google and Alphabet CEO Sundar Pichai, and Facebook CEO Mark Zuckerberg testified before the House Judiciary committee.
Speaking with antitrust experts at Yale Law School Sunday, Antitrust subcommittee chair David Cicilline (D-RI) said he believes some basic recommendations in the report are attainable like enacting separations of power that prevent the owner of a platform from favoring their own products over others, and giving federal agencies that enforce antitrust law — like the Federal Trade Commission (FTC) — resources for more robust enforcement. He also said that any meaningful legislation from Congress will require the help of the American people due to the power and resources available to Amazon, Apple, Facebook, and Google.
In the realm of other actions being taken in Washington DC to limit powerful businesses, the Senate Commerce committee held hearings related to antitrust last month, and recently subpoenaed CEOs of Facebook, Google, and Twitter to testify in the coming weeks about potential Section 230 reforms. President Trump called for Section 230 reforms earlier today after Twitter labeled his tweet as misleading and potentially harmful information about COVID-19. A Cornell University analysis last week have named Trump the biggest source of COVID-19 misinformation in the U.S. today.
The U.S. Department of Justice is expected to launch a case against Google later this week.
Outside of antitrust activity in the U.S., Big Tech companies continue to face antitrust lawsuits and backlash in Australia and the European Union. According to multiple reports last week, a draft of the Digital Services Act being considered by the European Parliament will require dominant tech companies to share some data with rivals and place limits on how companies can use consumer data. Chinese officials are also considering antitrust action against Google due to Android’s dominance of smartphone markets, a person familiar with the matter told Reuters.
More to come.
Updated 6:29 p.m. to include responses from Amazon, Apple, and Google.