Picking up where it left off in the last Congress, a House subcommittee renewed its focus on antitrust and anti-competitive behavior in the technology field with an eye to turning its massive report on the lack of competition in digital markets into legislation. The House Judiciary Committee’s Antitrust, Commercial, and Administrative Law Subcommittee will hold a new series of hearings on what changes to United States (U.S.) statutes and legal precedents are necessary to restore competition online and in the broader economy with many sectors having become more concentrated since the last major rewrite of antitrust laws in the “Hart-Scott-Rodino Antitrust Improvements Act of 1976” (P.L. 94-435).
In October 2020, the subcommittee issued its final report that focused on the market dominance of Amazon, Apple, Facebook, and Google. On the same day, a small group of committee Republicans released their report on “Big Tech” with their proposed policy and legal solutions. (see here for more analysis.)
Subcommittee Chair David Cicilline (D-RI) said the hearing would be the first in developing legislation to promote competition in online markets and update antitrust laws. He said this legislation would follow the subcommittee’s lengthy investigation in the last Congress that showed extensive evidence of online gatekeepers abusing their power through exorbitant fees, advantaging their own products and services, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them. Ciclline said the subcommittee heard the words “fear” and “hardship” during its investigation in interviews with people throughout the online world. He stated businesses said they had to deal with online gatekeepers because they had few if any other options. Cicilline added that because gatekeepers control the infrastructure of the digital age, they can surveil potential rivals and buy or bury competitive threats. He quoted a letter from Garmin’s CEO making the claim that Google and Apple’s absolute control over the apps smartphone users can download, they can make or break app developers. Cicilline said high barriers to entry generated by network effects and the costs of switching keeps rivals that may have better products out of the market, failing both consumers and competition.
Cicilline stressed two points. He said the problem is not about a market failure; he asserted the issue is whether the United States (U.S.) will have an economy in which companies fighting for economic survival can succeed and whether the best businesses with the best ideas will succeed. He said the alternative is a future in which the biggest companies with the biggest lobbying budgets continue to dominate. Cicilline said the investigation and follow on legislation are about more than dollars and data and also pertains to the spread of disinformation and hatred online. He cited a letter sent by the Democratic leadership on the House Energy and Commerce Committee to Facebook, making the case that the platforms lax or nonexistent moderation allowed misinformation to fester into the hatred that fueled the 6 January violent attack on the Capitol. Cicilline referenced the campaign to get advertisers to boycott Facebook last year, to which Facebook CEO Mark Zuckerberg reportedly said the company would not change its policies in response to pressure from advertisers. He stated Facebook has such a dominant position they do not need to listen to advertisers or customers. Cicilline claimed Republican and Democratic voters agree large tech companies have too much power and Congress must curb this dominance. He said there will be more hearings on how legislation should be crafted to address the ills of online markets. Cicilline said he and other Democrats would work together in a bipartisan fashion.
Subcommittee Ranking Member Ken Buck (R-CO) agreed that these technology companies have unrivaled power over the economy but also framed the deplatforming of people like former President Donald Trump as an exercise of power to “silence political speech they disagree with, which almost exclusively means shutting down conservative speech.” Buck stated:
- Whether their conduct is directed at potential competitors or at politicians and citizens they don’t agree with, these companies are able to act with complete impunity because of their status as monopolies.
- The status quo is not working, and we must act. But the key is to make sure that we do not take a chainsaw to the whole economy, but rather we should implement a scalpel-like approach for Big Tech.
- I believe there are several areas where we can work together on this: increasing funding for antitrust enforcement agencies, enacting data portability and interoperability requirements, and reforming the burden of proof in merger cases among others:
- The issue before Congress is what data is portable and what data isn’t. Congress and the courts should not be in the business of calling balls and strikes, but we need to give some guidance regarding where the strike zone lies. We could pass legislation in this area or perhaps grant very specific rule-making authority to the FTC with the admonition that the rulemaking is limited to online platforms and any rulemaking on data portability must promote competition and be pro-consumer. This would not be a foundation to regulate the internet because we do not want to see mission creep and the agency needs to retain a focus on promoting competition and making rules consumer focused.
- Similar to data portability, which is about the platform to consumer relationship, interoperability can also help competition in digital marketplaces. Interoperability is a time-honored practice in the tech industry that allows competing technologies to ‘speak’ to one another so that consumers can make a choice without being locked into any one technology. In the same way that data portability helps markets function better, so can interoperability. But interoperability does not always work in uncompetitive digital markets where dominant platforms have locked consumers into their technology.
- In addition to much more serious scrutiny of mergers and acquisitions, I think we should consider shifting the burden to the digital platforms to demonstrate that their proposed acquisition or merger is pro-competitive and pro-consumer.
Chairman Jerrold Nadler (D-NY) asserted:
- With today’s hearing, we take an important step in the process of restoring competition online. The rise and abuse of gatekeeper power by a few dominant firms has undermined the goals of the open Internet. Instead of having an open, competitive ecosystem, online gatekeepers can and do put a thumb on the scale in favor of their own business and against innovators, entrepreneurs, and startups. Simply put, this allows them to pick winners-and-losers rather than compete on the merits.
- Moreover, there is growing evidence that insufficient competition online has reduced the incentive for powerful companies to implement privacy protections or to address the rise and spread of hateful rhetoric and misinformation on their platforms. Despite public pressure, including from civil rights community leaders, the lack of a competitive marketplace results in many firms becoming simply ‘too big to care.’
- It is abundantly clear that competition online is not simply a click away. High barriers to entry—such as network effects and switching costs—protect the incumbents’ market power and make it nearly impossible for new entrants to get a foothold
Ranking Member Jim Jordan (R-OH) repeated his usual talking points about alleged impingement of conservatives’ First Amendment rights by online platforms. He made no remarks about the topic of the hearing.
Mapbox CEO Eric Gundersen asserted:
All of us have searched for something on Google. All of us have looked at a Google Map. All of us can see that search and maps are different products. But Google’s Terms of Service state if you’re a developer using Google Search on a map, that map has to be a Google Map instead of another company’s map, like Mapbox:
(e) No Use With Non-Google Maps. To avoid quality issues and/or brand confusion, Customer will not use the Google Maps Core Services with or near a non-Google Map in a Customer Application. For example, Customer will not (i) display or use Places content on a non-Google map, (ii) display Street View imagery and non-Google maps on the same screen, or (iii) link a Google Map to non-Google Maps content or a non-Google map.
So in order to use Google Search with a map, developers are forced to use Google Maps, and only Google Maps. There’s no technical reason to restrict interoperability in this way. Customers—developers—should be able to buy whatever maps they think are the best solution for their needs without anti-competitive interference from Google.
The Global Antitrust Institute’s Competition Advocacy Program Director Tad Lipsky asserted:
- I would oppose any legislative effort to implement an across-the-board requirement for structural separation or imposition of line-of-business restrictions for the technology companies examined in the Majority Staff Report and Recommendations (MSRR). These are extraordinary remedies and they have the clear potential to impose enormous costs on the sectors involved, to needlessly confine the development and evolution of leading technology firms in arbitrary and uneconomic ways and ultimately to deprive users and consumers of the benefits of innovation and competition. Our existing enforcement institutions are fully capable of ferreting out any anticompetitive conduct and implementing appropriate and feasible remedies within the existing framework provided by the federal judicial system. Without a full airing of the basic issues before neutral and objective decisionmakers – specifically, Article III judges – there is no way to obtain adequate assurances that the relevant facts and arguments have been fairly and thoroughly aired and resolved.
- That having been said, the suggestions contained in the MSRR for addressing certain aspects of the technology sector that may be inhibiting entry should not be dismissed on the basis of the considerations discussed above. The possibility of taking action to promote interoperability of different systems or reducing the friction and cost inherent in user and consumer interbrand switching by establishing “portability” protocols, merits further thought. At first encounter these proposals sound somewhat similar to the notion of standard setting, which has long been recognized as beneficial when carried out by private entities that are structured and guided by careful antitrust analysis. Indeed, Congress has enacted legislation recognizing the beneficial character of standard setting and has provided specific antitrust protections for the collective conduct of standards-development organizations that meet specified criteria.
- The world-leading performance of the U.S. economy and the clear achievements of its dynamic technology sector are sound testaments to the wisdom of the fundamental principles of the antitrust statutes, the leading Supreme Court precedents and the common-law process that unfolds within our carefully structured federal judicial system. This of course would not excuse illegal conduct within our technology sector if such has occurred, but for the time being Congress should continue to repose trust that the existing principles and institutions that constitute our present antitrust-law enforcement system stand the best chance to resolve specific cases appropriately. While some of the ideas contained in the MSRR may deserve further exploration, wholesale changes in the essential guideposts of antitrust-law interpretation are not warranted based on the existing record.
Econ One Managing Director Dr. Hal Singer stated:
- So while Amazon’s most-favored nation clause and requirements to purchase fulfillment service can and should be challenged under antitrust law, Amazon’s residual market power over merchants cannot. Similarly, while Apple’s exclusionary provisions in app developer contracts can be challenged under antitrust law, Apple’s residual market power over app developers cannot. Given this gap in protection, there is an urgent need to supplement antitrust enforcement with regulatory protections.
- There are two policy options to fill this gap. The first is structural separation or a line-of-business restriction: You can be the platform but you can’t also own the content riding over the platforms. Because structural separation only covers control through ownership, this approach must be bolstered with rules against control via contracting, such as bans on exclusive dealing.
- The second option is a nondiscrimination regime, which would allow platforms to have a toe in the content space, but would prevent them from leveraging their platform power into that content space. Nondiscrimination would be modeled after section 616 of the 1992 Cable Act, which was passed on a bi-partisan basis. The “program carriage” rules prevent cable operators from disfavoring independent cable networks that compete against the cable operator’s network affiliate. As with program carriage, nondiscrimination here would be enforced with a private right of action for victims of discrimination by the platforms.
- No proposal is a panacea. Line-of-business restrictions would solve the problem of cloning and self-preferencing. But to the extent platforms have anything of value to add in the content space, that value or “economy of scope” would be eliminated. A nondiscrimination regime would permit cloning, but would prevent the platform from monetizing the clone via self-preferencing. However, the nondiscrimination regime would have to be policed by an agency or tribunal, which would entail administrative and monitoring costs, and could be gamed by platforms with superior information and resources.
- There is a hybrid approach that I’d like the Committee to consider—namely, Congress could empower a tribunal with the authority to offer three types of relief as it policies acts of discrimination on a case-by-case basis: (1) injunctive relief or ending the discrimination; (2) compelling the respondents to pay lost profits to the victims of discrimination; and (3) structural separation. In cases involving a recidivist discriminator who shows no respect for the nondiscrimination regime, or where injunctive relief proves unworkable, the tribunal could require the platform to sell off its content arm or cease operations in the content space.
Public Knowledge Competition Policy Director Charlotte Slaiman stated:
- When the problem is network effects, the solution must be interoperability. Gatekeeper platforms must be interoperable with competitors and potential competitors. This means they must offer competitors and potential competitors access to key features of their networks to facilitate competition. Today, dominant digital platforms are largely free to offer or withhold interoperability with their platforms, granting and denying access as an anticompetitive tool. With interoperability, users would be empowered to choose the “best” service for them, without worrying about how popular it is.
- Interoperability has a lot of advantages. Startups would be more willing to take risks and enter once-stagnant markets knowing that the threat of the dominant competitor cutting them off at the knees is gone. This increased competition would force dominant platforms like Facebook and Google, which claim people choose their products because they’re the “best,” to innovate and respond to their users to remain on top. We know interoperability can work because it has worked in the past with then-novel technologies dominated by only a few players. Our phone networks are interoperable — one need not worry whether the person you’re calling is on Verizon’s or AT&T’s network. Customers choose a provider based on price or network quality, not just how many others are also on the network. Interoperability in this area was no historical accident. It took strong regulatory intervention to create — beginning as early as the 1913 Kingsbury Commitments, and increasing to the 1996 Telecommunications Act. Congress can and should pass similar laws tailored for platform markets.
- Data portability is another useful tool to promote competition. along the same lines as interoperability. Data portability allows a user to move her data from one platform to another, potentially severing her relationship with the prior platform. Think of how you can keep your phone number when you switch carriers or download all of your pictures stored on Facebook before deleting your Facebook account. Although the platforms offer some level of data portability today, much of the most useful data (i.e., your friends list) remains inaccessible. Data portability lowers the costs to leave a platform and thus makes competition more likely. But to truly promote competition we also need interoperability so that users can continuously connect across competing services.
Kellogg, Hansen, Todd, Figel & Fredrick Partner John Thorne stated:
- Recommendation #1: Start with Time and Money. There should be bipartisan support for increasing the resources of the federal antitrust enforcers. If Republicans were leading the Department of Justice, they would be asking Congress for additional resources. When Judge Garland is confirmed as Attorney General and a new AAG for Antitrust is nominated and confirmed, they will be asking for additional resources. The request is well-founded.
- Recommendation #2: Add a New Enforcement Tool to Pause Imminent Harm. As noted, winning an antitrust case is hard. It is even harder to win a temporary restraining order or preliminary injunction. The burden on the party seeking such a remedy is high, and when you are facing an emergency situation with imminent irreparable harm there is less time for the plaintiff to gather evidence and prepare a case.
- Recommendation #3: Learn from Experience with Prior Monopoly Remedies. I recommend that in looking at particular legislative proposals, you take advantage of what worked and didn’t work in the remedies and regulations that have been tried before. I further recommend that legislation recognize the institutional benefits (and limits) of courts versus full-blown agency regulation.
- Recommendation #4: Distinguish Between Competition and Harm to Competition. Section 2 of the Sherman Act, going back at least to the 1920 case United States v. United States Steel Corp., 251 U.S. 417 (1920), does not condemn monopoly itself. U.S. Steel declared that Section 2 “does not compel competition” and does not condemn “size.” Other cases have reaffirmed that possession of a monopoly, if obtained without violating the Sherman Act, is not a Section 2 offense. What that means is that Section 2 does not compel a monopolist to give rivals a helping hand in displacing its own sales, that is, in dispossessing itself of its monopoly. Although regulations such as the ones created in the 1996 Telecom Act do impose a duty to create competition, Section 2 has been restricted to preventing monopolists from interfering with independently arising competition through conduct that can properly be condemned.
© Michael Kans, Michael Kans Blog and michaelkans.blog, 2019-2021. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Michael Kans, Michael Kans Blog, and michaelkans.blog with appropriate and specific direction to the original content.
Photo by Michael Dziedzic on Unsplash