It’s finally here. After an investigation that lasted more than a year, a U.S. House antitrust subcommittee has come up with a robust game plan to rein in the biggest tech giants. In a report issued Tuesday, the panel accused Amazon.com Inc., Apple Inc., Facebook Inc. and Google parent Alphabet Inc. — whose collective market value is more than $5 trillion — of abusing the power of their platforms to cut off competitors and extend their dominance. It calls for a structural breakup of their businesses. I can’t argue with the logic, especially when it comes to Amazon.
“These firms have too much power, and that power must be reined in and subject to appropriate oversight and enforcement. Our economy and democracy are at stake,” the nearly 450-page final report said. “Our laws must be updated to ensure that our economy remains vibrant and open in the digital age.”
Each of the company’s anticompetitive practices were presented in excruciating detail in the document. Facebook, for instance, was accused of maintaining its monopoly power among social networks by using its data advantage to stifle and identify potential competitors and then “acquire, copy, or kill these firms.” Google was said to have used its dominance in search and online advertising to bolster its own vertical offerings and create an “ecosystem of interlocking” monopolies. Further, the internet behemoth allegedly used third-party app usage data from its Android operating system to inform the creation of its own apps. And Apple was stated to have “significant and durable market power” with its iOS mobile operating system, exerting a monopoly-type hold with its App Store, the panel said.
Out of the group, though, Amazon seems to have engaged in the most egregious anticompetitive behavior, especially in regards to third-party sellers on its marketplace platform. Earlier this year, the Wall Street Journal reported Amazon’s employees used these vendors’ data to inform the development of its own products. The company had previously vowed it would not use individual seller data to launch its private-label offerings, but the House investigation confirmed through several interviews with former employees and current sellers that Amazon had misused seller data and “routinely bullies and mistreats” them. And while Amazon publicly called third-party sellers “partners,” the investigation showed that behind closed doors, it referred to them as “internal competitors.” This is not great news for the nearly 2 million small and medium-sized businesses that sell on Amazon’s platform, roughly 40% of which rely on the company’s marketplace as their sole source of income.
So, what are some of the House panel’s recommendations to counter Big Tech’s abusive practices and do they make sense?
First, the subcommittee is calling for the structural separation of business lines by prohibiting any dominant platform from operating in the same market as other competitors dependent on the same platform. Accordingly, it asks for legislation to require either divestment or functional separation inside the companies. This makes sense. At least for Amazon, given its poor pattern of behavior, Congress should consider forcing the company to either give up its private-label business or separate it from the company. For the other tech giants, greater oversight on internal organizational separations among their various platforms may be enough.
Second, the panel wants to implement rules that will prevent preferential or discriminatory treatment on the dominant platforms. Here Google should definitely come under the purview of these new regulations, owing to its dominant search engine and practice of ranking its own services higher in search results, even if its own offerings aren’t as good as the competition.
Not all the report’s recommendations are as feasible. The panel calls for restrictions on the use of “superior bargaining power” by the technology companies in dictating terms and negotiating agreements. This seems overly ambitious and difficult to enforce.
But overall, the steps and ideas presented are a good place to start. Sure, many of the most aggressive remedies will be difficult to get passed in a partisan Congress, but with the November election, who knows what the makeup will be next year. And given all the details and behaviors outlined in the report, Big Tech frankly deserves a bit of a reckoning.- Bloomberg