US lawmakers release big tech antitrust report

US lawmakers have identified a “pressing need for legislative action and reform” to rein in the monopoly power enjoyed by Apple, Amazon, Facebook and Google, suggesting “structural separation” as a primary solution.

Following a 16-month investigation into the competitive practices of the four tech giants, the Democratic majority of the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law have published a report detailing their recommendations on how antitrust laws and enforcement can be changed “to address the rise and abuse of market power in the digital economy”.

The majority found that although the four corporations differ in important ways, the investigation into their business practices revealed common problems.

“First, each platform now serves as a gatekeeper over a key channel of distribution,” it said. “By controlling access to markets, these giants can pick winners and losers throughout our economy. They not only wield tremendous power, but they also abuse it by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them.”

This echoed the opening remarks made by David Cicilline, chairman of the antitrust subcommittee, during its questioning of Facebook, Amazon, Apple and Google’s CEOs in July.

The report continued: “Second, each platform uses its gatekeeper position to maintain its market power. By controlling the infrastructure of the digital age, they have surveilled other businesses to identify potential rivals, and have ultimately bought out, copied, or cut off their competitive threats.

“Finally, these firms have abused their role as intermediaries to further entrench and expand their dominance. Whether through self-preferencing, predatory pricing or exclusionary conduct, the dominant platforms have exploited their power in order to become even more dominant.”

The 449-page report made a number of policy recommendations which, if adopted by Congress, would dramatically change how these four companies and the wider tech sector operate.

This includes imposing “structural separations and line-of-business restrictions” on the companies, which will respectively “prohibit a dominant intermediary from operating in markets that place the intermediary in competition with the firms dependent on its infrastructure… and generally limit the markets in which a dominant firm can engage”.

The report added that several enforcement bodies around the world are exploring the use of structural separations in digital markets. In July 2020, for example, “the UK’s Competition and Markets Authority recommended that its digital regulatory body have powers to ‘implement ownership separation or operational separation’, concluding that ‘there could be significant benefits if there were more formal separation between businesses with market power in digital advertising markets in particular’.”

It also recommended changing the presumptions of antitrust agencies so that any attempted merger or acquisition by a dominant firm is automatically as anticompetitive “unless the merging parties could show that the transaction was necessary for serving the public interest”, essentially shifting the burden onto merging parties to prove their deal would not harm competition, and requiring the firms to make their services interoperable with competitors’ while also giving users greater data portability.

In terms of empowering antitrust regulators and enforcers, the report recommended: increasing the budgets of the Federal Trade Commission (FTC) and the Department of Justice’s Antitrust Division; requiring the FTC to regularly collect data on market concentration; and strengthening private enforcement by eliminating forced-arbitration clauses and limits on class-action lawsuits.

“Over the course of the investigation, the subcommittee uncovered evidence that the antitrust agencies consistently failed to block monopolists from establishing or maintaining their dominance through anticompetitive conduct or acquisitions,” said the report. “This institutional failure follows a multi-decade trend whereby the antitrust agencies have constrained their own authorities and advanced narrow readings of the law. Restoring the agencies to full strength will require overcoming these trends.”

However, Republicans have been reluctant to endorse some of the recommendations set out in the Democratic majority report.

These includes Ken Buck of Colorado, who in a draft report of his own, obtained by CNBC, said that although he agrees “in principle” with the findings of the report, he “cannot endorse all of the legislative recommendations offered by the majority” because of his concerns that sweeping changes could lead to “overregulation and would carry unintended consequences for the entire economy”.

The minority Republicans, which include Buck, released their own report focused on reining in big tech’s censorship of conservative voices, which it said amounted to “ideological discrimination”.

However, the minority report mentions the term “antitrust” only 31 times in 28 pages, most of which appear in the footnotes, suggesting that there will be a significant divergence in what course of action the House will end up pursuing, potentially giving the big tech companies an opening to take action or lobby against measures that they view as too onerous.

Facebook, for example, has already begun legal action against the Irish Data Protection Commissioner after being told by the watchdog to suspend its transfers of European citizens’ data to the US following a landmark decision by the European Court of Justice in July. Meanwhile, all of the firms except Apple are lobbying through the Internet Association for US-UK trade deal negotiators to prohibit a number of potential measures that could make it easier for the UK government to tax and regulate tech firms.

Both the majority and minority reports come off the back of the subcommittee’s sixth antitrust hearing in July, where the CEOs of Facebook, Amazon, Apple and Google were questioned for nearly six hours.

The majority report noted: “Their answers were often evasive and non-responsive, raising fresh questions about whether they believe they are beyond the reach of democratic oversight.”