Tech giants have skirted regulation because of how monopolies are defined by law. Democrats now want to rewrite those laws.
October 7, 2020 | technology | No Comments
- Now that House Democrats have completed a sweeping antitrust investigation into Facebook, Apple, Amazon, and Google, they’re prepared to introduce new laws to curb the tech giants’ power.
- The 449-page report published by the House Antitrust Subcommittee on Tuesday, as well as public statements by Democrats on the heels of the report, signal how they might go about changing the laws.
- Antitrust court decisions in recent decades have focused on consumer welfare, but Democrats say laws need to be updated given that many tech companies don’t charge consumers for their products and have wide-ranging impacts on workers and other businesses.
- Meanwhile, Republicans have signaled that they’re on board for some — but not all — of Democrats’ plans for new antitrust laws.
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In their scathing report published on the heels of a 16-month investigation into Apple, Amazon, Facebook, and Google, House Democrats concluded that the four companies are powerful monopolies the likes of which America hasn’t seen in over a century.
“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,” they wrote.
But now, in order to regulate the companies, Democrats say the antitrust laws that were used to lasso robber barons of centuries past need to be majorly updated.
Lawmakers on the House Antitrust Subcommittee said they want to move quickly to introduce new laws in the coming weeks and months that could effectively break up the big tech companies and rewrite the rules that current dictate much of the US economy.
—David Cicilline (@davidcicilline) October 6, 2020
Not everyone agrees with Democrats’ conclusions — Republicans on the subcommittee signaled that they support tougher regulation but may resist the push to separate parts of the companies’ business. All four of the companies under investigation responded to the report by denying that they have monopoly power or unfair dominance.
Here’s how Democrats could rewrite antitrust law to restore competition in tech.
Democrats want to establish a definition of monopolies that extends beyond “consumer welfare”
Antitrust laws in the US haven’t been significantly changed in decades. The Sherman Act and the Clayton Act were passed in 1890 and 1914, respectively, granting the federal government authority to regulate monopolies and mergers.
Since 1914, most of US antitrust law has been determined by court precedent in lawsuits over those two laws. As antitrust experts testified before the subcommittee, court decisions in the 20th Century weakened the federal government’s ability to break up monopolies by focusing on “consumer welfare” as a test of unfair market power.
In other words, current US antitrust law hinges on the idea that in order for a company to be a monopoly, it must be imposing unfair costs on consumers.
But this test doesn’t make sense for the tech giants, Democrats now argue, because the companies don’t charge consumers anything for many of their products — instead, they make money by collecting people’s personal data and selling ads, in the case of Facebook and Google, or from charging other businesses for using their platforms, in the case of Amazon and Apple.
To remedy this, Democrats say Congress should reassert that antitrust laws “are designed to protect not just consumers, but also workers, entrepreneurs, independent businesses, open markets, a fair economy, and democratic ideals.”
New laws could also chop up tech giants’ businesses to stop them from competing against third parties using their platforms
Democrats concluded in their report that the tech giants’ businesses are rife with conflicts of interest, in which they compete against smaller businesses that rely on platforms the tech giants own.
Here are just a few of the conflicts of interest outlined in the report:
- Amazon competes directly with third-party sellers on its own online marketplace, gathering data on competition to give its own products an edge.
- Apple imposes a 30% commission on revenue for apps in the App Store, charging competitors like Spotify fees that its own Apple Music doesn’t face.
- Facebook uses data gathered from its wealth of social media users to anticipate which other apps are becoming popular and adjust its strategy accordingly.
- Google prioritizes its own sites and products over competitors in its dominant search engine.
Democrats say those conflicts of interest should be eliminated in order to restore competition. Antitrust Subcommittee Chairman Rep. David Cicilline has called for a sort of modern Glass-Steagall Act, referencing the 1933 law that prohibited firms from operating as both investment banks and retail banks simultaneously.
Passing such a law is central to Democrats’ strategy to regulate the tech giants, subcommittee member Rep. Pramila Jayapal said in an interview with CNBC Wednesday.
“I think time will continue to show that it’s absolutely essential that we take on issues like structural separation,” Japayal said.
Democrats could face roadblocks from Republicans and court challenges from the big tech companies
While Republican members of the subcommittee said they agree regulators need more resources to crack down on the tech companies, they balked at proposals to separate parts of the companies’ businesses, saying the plan would amount to breaking up the companies.
“We agree that antitrust enforcement agencies need additional resources and tools to provide proper oversight,” Rep. Ken Buck, a Colorado Republican, wrote in response to the report. “However, these potential changes need not be dramatic to be effective.”
The tech giants themselves will also likely mount legal defenses that aim to reaffirm antitrust laws that focus on a “consumer welfare” standard. The Department of Justice is expected to file an antitrust lawsuit against Google before the end of the year, which is likely to play out in court over the course of several years.
However, both Democrats and Republicans think Congress should allocate more funding to regulatory bodies like the DOJ and the Federal Trade Commission to regulate future mergers and possible anticompetitive behavior by tech companies.
“It is fundamentally anticompetitive to simultaneously serve as the only substantial marketplace operator, including setting terms, policies, and fees; host third-party sellers; and use marketplace data to launch and sell competitive products,” Buck wrote.