By: Matt McCarthy
A 449-page report investigating competition and antitrust issues in the digital marketplace was published by the House Judiciary Committee’s Antitrust Subcommittee on October 6. The Democrat-led committee’s findings are a result of a 16-month investigation into the state of competition in the digital marketplace and the issue of large tech companies like Apple, Amazon, Google, and Facebook’s dominance. The investigation reveals that companies use their power for anti-competitive practices and competitive threats, leading to less innovation and fewer choices for consumers. This report highlights the challenges presented due to the market dominance of these large tech companies and aims to restore competition in the digital economy, strengthen antitrust laws, and reinvigorate antitrust enforcement.
To understand the measures proposed by the committee, one must understand anti-trust law in the United States and its history. Early in the United States’ history, many industries were controlled by several business giants called “trusts,” the most famous of which were U.S. Steel and Standard Oil. To “bust-up” these trusts, several antitrust laws were passed to help promote competition by outlawing unfair methods of competition. These early laws included the Sherman Act, The Clayton Act, and the establishment of the Federal Trade Commission (“FTC”). These remain the foundation of antitrust law and are supplemented by further amendments to strengthen the Clayton Act’s prohibition against the acquisition of competing companies to be a tide of corporate mergers and acquisitions.
Like the trusts of old that needed to be busted up, the committee believes that new antitrust reform is required to reign in the tech giants to foster a fairer market and Competition. The Democratic staff of the committee has offered a series of recommendations to solve these problems.
First, the implementation of structural separations to prohibit dominant platforms from entering adjacent lines of business, which means that tech companies should be broken up or structured in a way that makes different lines of business functionally separate from the parent company. This could manifest in the form of Facebook being forced to divest and separate from Instagram, or Google divesting and separating from YouTube.
Second, the committee believes that instructing antitrust agencies to presume mergers by dominant platforms to be anticompetitive, which would shift the burden onto the merging parties to prove their deal would not harm competition, rather than forcing agencies like the FTC from proving the merger would harm competition. The committee also recommended a number of smaller solutions: preventing dominant platforms from preferring their own services, requiring dominant firms to make their service compatible with competitors, overriding “problematic precedents” in antitrust case law, increasing budgets for the FTC and Department of Justice Antitrust Division, and strengthening private enforcement by eliminating forced-arbitration clauses and limits on class-action lawsuits.
Some of the tech giants have been extremely vocal in their opposition to these recommendations. Amazon argued that “these ill-conceived ideas demonstrate a misunderstanding of the size and shape of the retail industry” and that “unlike industries that are winner-take-all, retail has ample space for many winners.” Facebook also responded by defending its acquisition of companies like WhatsApp and Instagram, arguing that without billions of dollars of investment these companies would not have achieved as much success, and regulators at the time did not see a problem with the merger. Google and Apple also strongly disagree with the reports and believe that their innovations have created more of a benefit for consumers and developers than it has harmed them.
Republicans on the committee, though disagreeing with some of the Democrat’s more extreme recommendations, supported many of the findings of the investigation and recommendations. Chiefly, the Republicans are concerned with sweeping changes that may cause overregulation and stifling the competition of the tech market. That being said, the Republicans agree there is a need for additional resources for antitrust enforcers who can create rules that ensure users can transfer their data between platforms and shifting the burden of proof in merger cases to make it more possible for antitrust agencies to bring successful merger challenges. The Republicans also expressed their interest in investigating certain matters further such as leveraging monopoly power from one market to threaten a separate market, predatory pricing, forcing competitors to allow for “reasonable use” of a facility it owns if those competitors rely on it to succeed in the marketplace and how platform monopolies should be allowed to make design changes to their services. One area that Republicans were especially interested in investigating is the supposed tendency for these tech companies to “censor” opinions of individuals when it comes to politics, especially Republican politicians.
Rarely in today’s political climate do we see bipartisan cooperation on an issue, which should alert the average American to the power that many of the tech giants wield in the marketplace and the need for change. There are ample examples of Google, Amazon, Facebook, and Apple using their vast assets and platforms to practice unfair competitive practices to protect their platforms and market share. Though the Democrats and Republicans disagree with the extent to which these giants should be regulated, it is clear that there needs to be more stringent regulations to protect the tech industry from forming new “trusts” in the tech marketplace.
Instituting the recommendation for a presumption that all mergers in the tech industry are uncompetitive is a good first step that can receive bipartisan support and will hopefully stunt the growth of many of these tech giants while legislators attempt to come to an accord on what antitrust issues need to be addressed and updated. From there, it will be up to legislators to work together to find the middle ground between the Democrats’ approach of a “chainsaw” to cut down these giants or the Republicans’ “scalpel” to address the fine issues of antitrust laws.
Student Bio: Matt McCarthy is a second-year law student at Suffolk University Law School. He is also a Staff Member on the Journal of High Technology Law. Prior to Law School, Matt received his Bachelor of Arts Degree in International Relations from Boston University.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
