• Tue. Jan 26th, 2021

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Technology

House Democrats say Facebook, Amazon, Alphabet, Apple enjoy ‘monopoly power’

A Democratic congressional staff report recommends changes to antitrust laws and enforcement that could result in major changes for Big Tech companies like spinning off or separating parts of their businesses or making it harder to buy smaller companies.

The staff found, after a 16-month investigation into competitive practices at Apple, Amazon, Facebook and Google, that the four businesses enjoy monopoly power that needs to be reined in by Congress and enforcers.

In a nearly 450-page report, the Democratic majority staff laid out their takeaways from hearings, interviews and the 1.3 million documents they scoured throughout the investigation. They conclude that the four Big Tech companies enjoy monopoly power and suggest Congress take up changes to antitrust laws that could result in parts of their businesses being separated.

You can read the full report here.

The recommendations from Democratic staff include:

  • Imposing structural separations and prohibiting dominant platforms from entering adjacent lines of business. This means that the Democratic staff recommends solutions including forcing tech companies to be broken up or imposing business structures that make different lines of business functionally separate from the parent company. For example, this could include a scenario like forcing Google to divest and separate from YouTube, or for Facebook to do the same with Instagram and WhatsApp. Subcommittee Chairman David Cicilline, D-R.I. has previously referred to this method as a type of “Glass-Steagall” law for the internet, referring to the 1930s era law that separated commercial from investment banking.
  • Instructing antitrust agencies to presume mergers by dominant platforms to be anticompetitive, shifting the burden onto the merging parties to prove their deal would not harm competition, rather than making enforcers prove it would.
  • Preventing dominant platforms from preferencing their own services, instead making them offer “equal terms for equal products and services.”
  • Requiring dominant firms to make their services compatible with competitors and allow users to transfer their data.
  • Overriding “problematic precedents” in antitrust case law.
  • Requiring the Federal Trade Commission to regularly collect data on concentration.
  • Increase budgets for the FTC and Department of Justice Antitrust Division.
  • Strengthen private enforcement by eliminating forced arbitration clauses and limits on class action lawsuits. 

Republicans have voiced objections to some of the bolder proposals in the report, like imposing structural separations. Rep. Ken Buck, R-Colo., a key ally of the subcommittee majority who has been in favor of antitrust reform, has prepared his own response to the report outlining areas of “common ground” and “non-starters,” according to a draft version obtained by CNBC. A GOP spokesperson confirmed to CNBC that Judiciary Committee Ranking Member Jim Jordan, R-Ohio, plans to release his own response about allegations of platforms’ bias against conservatives, which the companies have repeatedly denied. Axios first reported the news of Jordan’s planned response.

Buck stressed in his own response, however, that he is supportive of the investigation and its findings and continues to push for bipartisan antitrust reform. 

The Democratic report found that the four tech companies enjoy monopoly power in the following areas: 

  • Apple: distribution of software apps on iOS devices.
  • Amazon: most third-party sellers and many suppliers.
  • Facebook: online advertising and social networking.
  • Google: online search.

One surprising finding in the course of the investigation had to do with Facebook’s acquisition of Instagram, according to a counsel for the antitrust subcommittee who spoke with reporters Tuesday. According to the counsel, documents outlining Instagram’s projected growth just before its $1 billion acquisition by Facebook in 2012 painted the picture of a fast-growing company, rather than a weak competitor that might have floundered without Facebook’s help. While there is no way to reverse engineer what would have happened to Instagram were it to remain independent, the question of whether Facebook bought Instagram to squander a growing competitor has been a recurring one for many antitrust observers.

Recommendations by the Democratic majority staff would address the concern that dominant companies may be able to engage in “killer acquisitions” of competitors by shifting the burden onto those companies to prove their deals won’t harm competition.

The report also discusses what it calls the “Cunningham memo,” a document produced in 2018 by a senior Facebook data scientist named Tom Cunningham that was first reported by The Information in 2019. According to the report, it was prepared for senior executives including Facebook CEO Mark Zuckerberg.

In an interview with the subcommittee staff, a former senior employee at Instagram who sat in on meetings as the memo was being prepared said the document was meant to answer how the company could “position Facebook and Instagram to not compete with each other,” according to the report. The former employee told the staff in an interview cited with Friday’s date that then-Instagram chief Kevin Systrom, “wanted Instagram to grow naturally and as widely as possible. But Mark was clearly saying ‘do not compete with us.’ . . . It was collusion, but within an internal monopoly.”

CNBC previously reported that new information on the Facebook-Instagram deal from a whistleblower had prompted the report’s first delay, according to a source.

In a statement, an Amazon spokesperson said: “All large organizations attract the attention of regulators, and we welcome that scrutiny. But large companies are not dominant by definition, and the presumption that success can only be the result of anti-competitive behavior is simply wrong. And yet, despite overwhelming evidence to the contrary, those fallacies are at the core of this regulatory spit-balling on antitrust. This flawed thinking would have the primary effect of forcing millions of independent retailers out of online stores, thereby depriving these small businesses of one of the fastest and most profitable ways available to reach customers. For consumers, the result would be less choice and higher prices. Far from enhancing competition, these uninformed notions would instead reduce it.”

Representatives from Apple, Facebook and Google were not immediately available to respond to the report.

This story is developing. Check back for updates.

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