Big Tech Has Big Problems.
The House Antitrust Subcommittee has released a suite of legislation to break down Big Tech’s concentrated market power based on the recommendations from its in-depth report on the industry’s competition problems. Economists who study digital platforms recognize that these markets are prone to tipping to one or a few firms, so to avoid stagnation and monopolization, intervention is needed to address that underlying market structure. Each bill in the package addresses different, interlocking problems, and together can address anticompetitive conduct and market dynamics that ferment market concentration and encourage Big Tech’s anticompetitive tendencies.
Big Tech’s Problems Stem From Big Tech’s Power.
Big Tech takes advantage of network effects to keep consumers locked into their products. They block competitors from accessing consumers and key features. They use their control over the gatekeeper platform to discriminate against competitors and suppress rival products and services. They acquire competitors to buy consumer loyalty instead of earning it. They leverage their market power in one line of business to gain monopolies in others, locking consumers into their ecosystem of products and services.
Across the globe, academic experts, advocates, and governmental agencies have been investigating and reporting out their findings about the power of Big Tech. Let’s start in 2018, when the University of Chicago convened the Stigler Committee on Digital Platforms. The Committee’s report showed the special characteristics of dominant digital platforms and how antitrust was failing to keep these key markets competitive. The United Kingdom’s Competition and Markets Authority and the European Commission also published in-depth reports that detailed the dominance of just a few digital firms and the harms that consumers and the economy faced as a result. The key harms? Companies that aren’t owned by Big Tech can’t compete. Consumers are locked in — stuck with products and services that exploit them. The cycle of disruption and innovation is broken, and our current laws are not enough to fix it.
Then in June 2019, the Antitrust Subcommittee launched its own in-depth investigation into Big Tech company dominance. Over the course of their 16-month investigation, staff reviewed more than 1.3 million documents, conducted more than 240 expert stakeholder interviews, and convened 10 hearings (one even featured the Big Tech CEOs themselves) to produce the House Judiciary Committee’s 450-page report that would inform its legislative plan to address Big Tech’s power. The report recommends legislative action to restore competition in the digital economy. In April of this year, the House Judiciary Committee adopted the report and its recommendations.
Big Tech’s Problems Need Big Solutions.
In June, House Judiciary Chairman David Cicilline and Ranking Member Ken Buck, along with Representatives Pramila Jayapal, Hakeem Jeffries, Joe Neguse, and Mary Gay Scanlon, introduced the “Stronger Online Economy: Opportunity, Innovation, Choice” legislative package, a suite of bills that requires interoperability, prohibits anticompetitive discrimination, strictly limits mergers and acquisitions, and empowers the Federal Trade Commission to break up vertically integrated behemoths that have become too powerful. Here is a quick summary and analysis of each bill.
(1) “The Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act of 2021” requires dominant platforms to make their services interoperable with competitors. Cross-posting from one network to others simultaneously and messaging between platforms are examples of interoperability. Facebook serves over 2.85 billion users worldwide, making the social media giant the communication hub of an overwhelming majority of consumers’ friends and family. The sheer number of users entrenches and reinforces Facebook’s dominant power in the social media market because consumers lose access to their friends and family when leaving the network. Under the ACCESS Act, Facebook would have to make its network interoperable with other social media networks. Users from platforms that elect to be interoperable with Facebook can communicate with Facebook’s vast user network. This would solve the lock-in problem and would allow consumers to move between social media platforms without losing access to their existing networks.
(2) “The American Innovation and Choice Online Act” would prevent Big Tech companies from anticompetitively discriminating against other market actors to preserve their dominant market position. The law would prevent dominant tech companies from (a) discriminating against direct competitors, (b) self-preferencing their own products and services on their marketplaces, and (c) discriminating in more covert ways that protect their gatekeeping power. For instance, Google Search, the world’s largest and most-used search engine, would no longer be able to preference its own products in search results above Yelp and other competitors. Under this law, Google would be prohibited from putting a thumb on the scale in favor of its own products or demoting companies it fears might pose a competitive threat. And if Google wants its own products and services to appear first, it would have to improve those products and services to meet objective ranking criteria and compete to appear first. This nondiscrimination mandate assures that consumers are offered the best of the best and not just more of the same.
(3) “The Platform Competition and Opportunity Act” would make it much harder for incumbent Big Tech platforms to buy their competitors and potential competitors. Big Tech companies got so big, in significant part, by acquiring hundreds of smaller companies during the last decade, gobbling up the competition and rendering smaller, competing products and services mere features of the big platforms. The Antitrust Subcommittee highlighted salient acquisitions by Google, Amazon, Facebook, and Apple that encapsulated this anti-competitive strategy (e.g., Google’s purchase of Android, Youtube, and DoubleClick; Amazon’s purchase of Audible, Zappos, Whole Foods, and Ring; Facebook’s purchase of Instagram, WhatsApp, and Onavo; and Apple’s purchase of a myriad of music/podcasting apps like Beats Electronics and Shazam, as well as traffic/navigation and weather forecasting apps to improve its native products). The bill would invert the default rules for dominant platforms. All other companies can make acquisitions through the established FTC and Department of Justice merger review process. However, if the FTC or DOJ sue to block a Big Tech merger, this bill would now put the burden of proof at court on the merging companies, not the FTC, to show that the smaller acquired company does not already compete with, is not likely to compete with, and would not enhance the covered platform’s incumbent market dominance. The bill encourages the FTC, the DOJ, state attorneys general, and private parties to litigate potential violations.
(4) The Subcommittee’s report analyzed the unique and nuanced ways that Google, Amazon, Facebook, and Apple simultaneously operate in many porous, adjacent markets and how they vertically integrate their services to leverage dominance in one market to another. Prohibiting new acquisitions is not enough to correct 15 years of market concentration. So, while the Platform Competition and Opportunity Act would forbid dominant platforms from acquiring new companies to stomp out competition, “The Ending Platform Monopolies Act” would empower the FTC and DOJ to divest covered platforms’ existing subsidiaries in an identified line of business, and restrict covered platforms from opening new iterations of the divested subsidiary. To address non-traditional vertical structures, the Act would also allow regulators to scrutinize other vertical ownership conflicts of interest that create the incentive and ability for the covered platform to disadvantage competitors. Essentially, the Act would give the enforcement agencies the powers to impose structural separations and line of business restrictions on a covered platform to restore competition to digital markets. This bill is often mischaracterized as an indiscriminate wrecking ball that would kill services many consumers love. That is not the case. This bill would actually improve beloved services by divesting product lines into separate companies that actually have to compete for consumers.
(5) “The Merger Filing Fee Modernization Act” streamlines and increases the merger filing fees that all companies pay in an effort to directly fund FTC and DOJ Antitrust investigations and enforcement. The bill would ensure that larger corporations pursuing mega-mergers pay larger fees while smaller companies pursuing small deals would pay smaller fees. The bill has received overwhelming bipartisan support and would be among the most cost-effective means of sourcing enforcement revenue and resources without burdening taxpayers.
For more information about the legislative package and the operational definitions the bills employ, see Public Knowledge’s One-Pager on House Antitrust Package to Promote Competition in Big Tech.
Big Solutions Surface Other Issues.
On June 23, the Subcommittee held a marathon public markup of these bills where members were given the opportunity to voice their support for the legislation or raise concerns and submit amendments. The hearing revealed the foundational areas of bipartisan consensus and thematic pressure points like privacy, content moderation, operative definitions, and the continued service on popular apps and services.
In the United States, the consumer privacy landscape consists of a patchwork of company policies, state privacy laws, some FTC competence and precedents, and 13 pending federal legislative proposals in both chambers. To be clear, there is no comprehensive federal consumer privacy law to govern what rights U.S.-based users have in their data online. The House antitrust package is not a privacy bill but can actually improve user privacy while leaving adequate room for the eventual reality of a federal privacy law. Privacy is especially relevant in the interoperability bill because the new law would make it much easier for users to communicate and move their data between platforms. To make sure users’ data are protected when they take advantage of interoperability, the bill empowers the FTC to make agile privacy rules for the incumbent platforms and the competitors availing themselves of the new interoperability tools. The FTC can terminate interoperability rights for competitors that violate the privacy rules. Further, the law prohibits both the covered platforms and business users from commercializing data that is collected while the user is on the other platform.
The second issue arises from varying content moderation standards between companies. Some believe the nondiscrimination law, as proposed, would punish Big Tech companies that make important content moderation calls to combat misinformation or to spare individuals or groups from harassment or harm. Members debated granting covered platforms limited exceptions which would permit them to decline, deprioiritize, or remove content that violates the covered platforms’ terms of service. At first blush it might seem like a good idea to create an affirmative defense for good-faith content moderation, but in reality, it would most likely be a blank check permitting covered platforms to pretextually block business users that threaten the platforms’ core business. Other legislators warn that the provision allowing private litigants to sue Big Tech companies for discrimination claims would be a probable avenue for bad faith, proxy fights about content moderation decisions. Ultimately, the legislation gives the correct guidance to the FTC and the courts on how to mediate these concerns. Anticompetitive discrimination is prohibited while removing content that’s against the platform’s terms of service is protected. For more on the content moderation implications of the antitrust bills see our blog.
Third, the legislative package’s operative definitions raise questions about which platforms would be regulated. Each of the four substantive bills relies on the same definitions of “online platforms,” “covered platforms,” and “critical trading partners.” An online platform characteristically allows users to generate content for others, facilitates transactions, or enables user searches for information. Online platforms can be large or small. A critical trading partner is an online platform that controls access to a business’ customers or key tools to access customers. Critical trading partners are powerful intermediaries and hold a lot of influence. This definition tracks closely the concept of “gatekeeper power” explored in several of the detailed reports upon which the legislation is based. A covered platform is an online platform that (a) has a $600B market capitalization (indexed to inflation); (b) serves at least 50,000,000 United States-based monthly active users, or at least 100,000 United States-based monthly active business users; AND (3) is a critical trading partner. These operative definitions capture Google, Amazon, Facebook, Apple, and most likely Microsoft. While Microsoft meets the numerical criteria, the applicability of these bills to them would likely depend on the determination of the FTC and courts as to whether they are a critical trading partner and for which products. There are critics dissatisfied with these definitions. Some argue the bills should apply more broadly, to cover more companies in other sectors, smaller companies, etc. We believe that Big Tech is a special case, so it makes sense to target their anticompetitive behavior and their asymmetrical impact on the digital economy differently. We can expect ongoing debates about the package’s operational definitions.
Finally, Big Tech lobbying around these bills has falsely inspired a belief that consumers will lose popular, convenient services offered by dominant tech companies like Apple’s native apps, Amazon’s trademark two-day Prime Shipping, and Google’s hyper-targetedadvertisementsif this package becomes law. This is false. The interoperability and nondiscrimination mandates, acquisitions restrictions, and the antitrust enforcers’ new tool of suing to impose structural separations and line-of-business restrictions all work together to restore market dynamics that compel all companies — big and small, old and new — to consistently offer the best products to all consumers.
This legislative package restores competition and improves services we rely on by preventing Big Tech from bullying, buying, or bumping off competitors. In other words, they will finally have to compete for our loyalty — something they will fight tooth and nail against.
If you want the digital economy working for all of us, tell Congress to Rein In Big Tech.
Image credit: Huzaifa Abedeen