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 come from a document released today (PDF) that is the culmination of a 16-month investigation carried out by the antitrust subcommittee, part of the House Judiciary Committee.
The report concludes that although these Big Tech companies maintain different kinds of monopolies, each effectively acts as a gatekeeper in today’s digital markets — with the power to pick winners and acquire or dispose of competitors. The document details monopolization and anticompetitive behavior by each of the four companies. Members of Congress say their power is used to extract concessions and dictate terms to competitors in ways that wouldn’t be possible in a competitive market. Examples include Apple’s high App Store fee and Amazon’s 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 it supports data portability and interoperability as a way to promote competition by allowing users to transfer data to another platform.
You can’t solo security
COVID-19 game security report: Learn the latest attack trends in gaming. Access here
Additional recommendations include:
– Strengthen portions of the Sherman Act, which addresses competition and monopoly by prohibiting abuse of dominance or monopoly leveraging.
– Bring back stronger oversight of antitrust enforcement by Congress. This comes after the report uncovered multiple instances in which regulators failed to stop monopolists from consolidating market share and eliminating competitors
– Put rules in place to prevent favoritism and discrimination, such as the practice of placing 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. The report found that the four companies have between them acquired more than 500 startups since 1998. On the topic of Facebook’s 2012 acquisition of Instagram, an unidentified former senior Instagram employee who testified to the subcommittee 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 is not 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 has reached out to Amazon, Apple, Facebook, and Google for their response to the report and its conclusions. In a statement shared with VentureBeat, Apple argues that the company does not maintain a 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 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.”
A Facebook company spokesperson told VentureBeat in a statement that a competitive landscape existed when Instagram and WhatsApp acquisitions took place and still exists today. The spokesperson said, “Regulators thoroughly reviewed each deal and rightly did not see any reason to stop them at the time.”
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. But U.S. regulatory officials have been far less likely to act in recent decades to ensure open, competitive markets. The congressional report, which is titled “Investigation of Competition in Digital Markets,” finds that each of the Big Tech companies maintains distinct monopolies: Facebook in social media and advertising, Google in search and advertising, Amazon in online retail, and Apple through the App Store. The report also states that online markets became particularly vulnerable to market concentration and monopolization in the past decade. Its authors outline hundreds of mergers and acquisitions by Big Tech companies in recent years, alongside general declines in early-stage startup funding and business formation.
The report also describes how Big Tech businesses have aggressively defended their dominance through acquisitions, anticompetitive practices, amassing user data, and leveraging existing monopolies. And all four of the tech firms have recently focused on acquiring artificial intelligence (AI) startups in other emerging markets in order to “control the technology of tomorrow,” according to the report. Members of the subcommittee and staff also describe tech companies’ growing political power.
“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 document reads.
Authors of the report also assert that although companies like Facebook offer services that are free to use, consumers pay a steep price. The report states that these tech giants have “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 acknowledges that individuals on the subcommittee, which is led by Democratic members of Congress, may not fully agree with all of the investigation’s results or recommendations. Roughly coinciding with the release of the report, five Republican members of the antitrust subcommittee released their own report. Their 28-page staff document is titled “Big Tech is out to get conservatives” and calls for reform of Section 230 liability protection extended to social media platforms.
The congressional subcommittee report was expected on Monday, but multiple news outlets reported that its release was postponed in order to include additional Republican feedback and address portions of the draft document considered untenable by some members.
Antitrust protections are essential to small business prosperity, startup innovation, competitive business practices, and a functioning democracy. Economists fear the dominance of large companies in the U.S. will grow even more pronounced as small businesses are wiped out by a pandemic-induced recession. In contrast, since July Big Tech companies have reported record profits in quarterly earnings. Currently, eight of the 10 largest companies in the world are in technology.
Today’s report marks the first significant antitrust investigation by a congressional committee in decades. Antitrust hearings held in the late 1990s preceded a United States v. Microsoft lawsuit and settlement, which some say enabled the growth of companies like Amazon, Facebook, and Google. Legislation stemming from the congressional report may not emerge until a new term begins in 2021, but the document is intended to furnish Congress with a menu of options for regulating Big Tech and antitrust law reform in the coming months and years.
The investigatory process leading up to the report included seven hearings and more than a million documents. 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 on 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 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 similar efforts currently underway in Washington, D.C., the Senate Commerce Committee held hearings related to antitrust concerns last month and recently subpoenaed CEOs of Facebook, Google, and Twitter to testify in the coming weeks about potential reforms of Section 230, which shields the owners of any “interactive computer service” from liability for content posted by third parties. U.S. President Donald Trump called for Section 230 reforms earlier today after Twitter labeled his COVID-19 tweet as misleading and potentially harmful. Incidentally, a Cornell University analysis last week named Trump the biggest source of COVID-19 misinformation in the U.S. today. And 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 will place limits on how companies can use consumer data. Chinese officials are also considering antitrust action against Google in response to Android’s dominance of smartphone markets, a person familiar with the matter told Reuters.
Updated at 6:29 p.m. to include responses from Amazon, Apple, and Google and at 7:01 p.m. to include a Facebook response.