Just as you suspected, Big Tech is dominated by monopolies, a House Judiciary antitrust subcommittee found.
After more than a year of investigating Apple, Facebook, Google, and Amazon’s behavior, lawmakers released a 449-page report with their findings on Tuesday, complete with recommendations that the four companies be broken up to make the market more competitive.
The committee found that each company dominated its respective markets—Facebook in social networking, Google in general online search and search advertising, Amazon in online retail, and Apple in mobile operating systems—to such an extent as to be anticompetitive. The companies “abuse their power by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people who rely on them,” the Democratic-led committee’s report outlined.
The report goes on to eviscerate the four companies: “To put it simply, 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. Although these firms have delivered clear benefits to society, the dominance of Amazon, Apple, Facebook, and Google has come at a price. These firms typically run the marketplace while also competing in it — a position that enables them to write one set of rules for others, while they play by another, or to engage in a form of their own private quasi regulation that is unaccountable to anyone but themselves.”
Not only do those companies acquire smaller ones, either to hire their talent or to kill or incorporate their products, but their mere existence chills potential investment to start-ups that may be considered competitive, the committee found.
The committee also noted that Big Tech’s acquisitions haven’t been closely vetted by regulators. For example, Facebook has snatched up nearly 100 smaller companies over the years, and just one, its deal to acquire Instagram in 2012, received scrutiny from the Federal Trade Commission.
That lack of oversight, according to the findings, has degraded the user experience in many cases because tech companies don’t have any competition to do better—particularly when it comes to privacy.
“In the absence of adequate privacy guardrails in the United States, the persistent collection and misuse of consumer data is an indicator of market power online,” the committee noted. “Online platforms rarely charge consumers a monetary price—products appear to be ‘free’ but are monetized through people’s attention or with their data. In the absence of genuine competitive threats, dominant firms offer fewer privacy protections than they otherwise would, and the quality of these services has deteriorated over time. As a result, consumers are forced to either use a service with poor privacy safeguards or forego the service altogether.”
In addition to recommending that the companies effectively be broken up, the committee recommended that antitrust laws and federal antitrust agencies be restored “to full strength.” Specifically, the committee advised that strengthening Section 7 of the Clayton Act and Section 2 of the Sherman Act would go a long way toward giving antitrust legislation more teeth.
Of course, the Big Four aren’t going to take this lying down. Amazon released a lengthy statement in which it argued that being a big company doesn’t necessarily make it an anticompetitive one, and that it comprises just 4% of the U.S. retail market. (Frankly, I am not at all sure how it arrived at that number—the antitrust committee pegged Amazon as controlling more than 40% of all online U.S. retail sales.) The company also argued that it helps consumers find low prices and small businesses find new markets. The committee noted that 37% of all third-party sellers on Amazon rely on the platform exclusively for income.
I have been talking about exactly this since the beginning of 2019 – it’s good to see others agree with me!
They are effectively accountable to no one and as a result “wield their dominance in ways that erode entrepreneurship, degrade Americans’ privacy online, and undermine the vibrancy of the free and diverse press. The result is less innovation, fewer choices for consumers, and a weakened democracy.”
It uses Facebook’s internal documents to argue that its “monopoly power is firmly entrenched and unlikely to be eroded by competitive pressure from new entrants or existing firms.” And it attacks the social network, arguing that “in the absence of competition, Facebook’s quality has deteriorated over time, resulting in worse privacy protections for its users and a dramatic rise in misinformation on its platform.”
Google, it says upfront, “has a monopoly in the markets for general online search and search advertising.” And, it finds, it has “maintained its monopoly over general search through a series of anti-competitive tactics,” including undermining other search providers, stealing content “to boost Google’s own inferior vertical offerings,” and penalizing competitors.
By growing into ever more services and connecting them together, Google “increasingly functions as an ecosystem of interlocking monopolies,” the report states.
Amazon has “engaged in extensive anti-competitive conduct in its treatment of third-party sellers” and has abused its role as both seller and marketplace controller, the report states. Both its Alexa digital assistant and Amazon Web Services (AWS) are identified as potential targets of antitrust activity and possible diversification.
And Apple “exerts monopoly power in the mobile app store market, controlling access to more than 100 million iPhones and iPads in the US.”
The reports notes: “In the absence of competition, Apple’s monopoly power over software distribution to iOS devices has resulted in harms to competitors and competition, reducing quality and innovation among app developers, and increasing prices and reducing choices for consumers.”
The report is also heavy on the impact of these monopolies: it accuses Facebook and Google of being a significant factor in “the decline of trustworthy sources of news, which is essential to our democracy.”
It argues that collectively the tech giants have “materially weakened innovation and entrepreneurship in the US economy.” And that they have undermined Americans’ basic right to privacy by developing and driving business models that work by selling personal data rather than accepting payment directly.
Give me liberty or give me… the FTC
And, in a final punch to the face, the report accuses them of “undermining both political and economic liberties” by instilling fear through the use of their “unaccountable and arbitrary power,” and using their massive resources to direct and influence policy-making “further shaping how they are governed and regulated.”
In order to counteract all these negative impacts, the report makes a long series of recommendations, including, most significantly, “structural separations and prohibitions of certain dominant platforms from operating in adjacent lines of business.” In other words, breaking up companies.
And it wants the Big Four to feel the force of the US legal system by “strengthening private enforcement, through eliminating obstacles such as forced arbitration clauses, limits on class action formation, judicially created standards constraining what constitutes an antitrust injury, and unduly high pleading standards.”
In short, the report is everything that Apple, Amazon, Facebook and Google feared it would be; the only surprise however is that what had become obviously during the committee’s investigations was watered down significantly in the final report.
Of course, there is still a long way to go before any of the report’s recommendations become a reality. Even within the committee, there is not unanimity, with some Republican members expressing concerns over breaking up companies in particular. Republicans will also be more ideologically opposed to adding regulations or removing companies’ ability to arbitrate disputes themselves, rather than through the courts.
And then of course there is the enormous collective power of Apple, Amazon, Facebook and Google – some of the world’s largest and richest corporations – who will be willing and able to do anything to protect their markets and profits.