In July, tech chief executives including Jeff Bezos of Amazon spoke at a House antitrust hearing. Lawmakers found the companies exercised monopoly power and abused their dominant positions. Photo / AP
In a report led by Democrats, lawmakers said Apple, Amazon, Google and Facebook needed to be checked and recommended they be restructured and that antitrust laws be reformed.
House lawmakers who spent the last 15 months investigating the practices of the world's largest technology companies said on Tuesday that Amazon, Apple, Facebook and Google had exercised and abused their monopoly power and called for the most sweeping changes to antitrust laws in half a century.
In a 449-page report that was presented by the House Judiciary Committee's Democratic leadership, lawmakers said the four companies had turned from "scrappy" startups into "the kinds of monopolies we last saw in the era of oil barons and railroad tycoons." The lawmakers said the companies had abused their dominant positions, setting and often dictating prices and rules for commerce, search, advertising, social networking and publishing.
To amend the inequities, the lawmakers recommended restoring competition by effectively breaking up the companies, emboldening the agencies that police market concentration and throwing up hurdles for the companies to acquire startups. They also proposed changing antitrust laws, in the biggest potential shift since the Hart-Scott-Rodino Act of 1976 created stronger reviews of big mergers.
"Our investigation leaves no doubt that there is a clear and compelling need for Congress and the antitrust enforcement agencies to take action that restores competition, improves innovation and safeguards our democracy," Reps. Jerrold Nadler, D-N.Y., chairman of the Judiciary Committee, and David Cicilline, D-R.I., chairman of the antitrust subcommittee, said in a joint statement.
The House report is the most significant government effort to check the world's largest tech companies since the government sued Microsoft for antitrust violations in the 1990s. It offers lawmakers a deeply researched road map for turning criticism of Silicon Valley's influence into concrete actions.
The report is also expected to kick off other actions against the tech giants. The Justice Department has been working to file an antitrust complaint against Google, followed by separate suits against the search giant from state attorneys general. Antitrust investigations of Amazon, Apple and Facebook are also underway at the Justice Department, the Federal Trade Commission and four dozen state attorneys general.
But the House antitrust subcommittee split along party lines on how to remedy and corral the power of the tech companies, pointing to an uphill battle for Congress to curtail them.
Democrats proposed legal changes that could substantially restructure Facebook, Google, Amazon and Apple. They said Congress should consider making it illegal for the tech giants to provide preferential treatment to their own products, as Google does in search results. They suggested breaking up the companies in "structural separations" and forbidding them from operating in similar businesses to those they were already dominant in. They also recommended adding to antitrust laws, including clearer rules that could block the tech giants' attempts to buy other companies.
Some Republicans agreed with proposals to bolster funding for antitrust enforcement agencies, but balked at calls for Congress to intervene in restructuring the companies and their business models. Others have refused to endorse any of the Democrats' findings.
Rep. Jim Jordan of Ohio, the top Republican on the committee, said that the report was "partisan" and that the committee had not tackled conservatives' anecdotal allegations that the online platforms were biased against their views. In a letter to Nadler, Jordan said that ignoring the topic "ultimately discredits the draft report's findings."
Rep. Ken Buck, R-Colo., joined three other Republican lawmakers in releasing a separate report in recent days — titled "The Third Way" — outlining their mixed reception of the Democrats' proposals.
"I agree with about 330 pages of the majority's report," Buck said. But he said he could not agree with recommendations to embolden consumer lawsuits and the breakup of companies, calling them "the nuclear option."
The House Judiciary Committee began its investigation into the four tech giants in June 2019, interviewing hundreds of rivals and business clients of the platforms. In July, the tech chief executives — Jeff Bezos of Amazon, Tim Cook of Apple, Mark Zuckerberg of Facebook and Sundar Pichai of Google — testified in a hearing to defend their companies.
The four companies, which have a combined market value of more than $5 trillion, largely operate in different digital businesses. But the report revealed monopoly abuses across them.
Amazon, Apple, Facebook and Google had roles as "gatekeepers" in common and controlled prices and the distribution of goods and services, the report said. That made third-party businesses — like app developers on Apple's App Store and sellers on Amazon's marketplace — beholden to the companies' demands, the report said. The word monopoly appeared in the report nearly 120 times.
"With no restrictions of tech companies to own and compete on their own platforms, which are the only options for so many small businesses, it takes away any real sense of competition," said Rep. Pramila Jayapal, D-Wash., who has been a vocal critic of Amazon.
Even without full bipartisan support, the report sets important groundwork, said Gene Kimmelman, a former senior antitrust official at the Justice Department. He said the breakup of AT&T in the 1980s was supported by policies set forth by Congress. Tuesday's report, he said, was "the foundation for legislation and regulation that enables antitrust cases against Google, Facebook and others to actually break markets open to more competition."
Apple did not immediately have a comment, saying it was reviewing the report.
Amazon said the committee's recommendations could end up harming small businesses and consumers.
"The 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," Amazon said in a blog post. "Far from enhancing competition, these uninformed notions would instead reduce it."
Facebook disagreed that its mergers with Instagram and WhatsApp were anti-competitive. "We compete with a wide variety of services with millions, even billions, of people using them," the company said in a statement. "Acquisitions are part of every industry, and just one way we innovate new technologies to deliver more value to people."
Google disagreed with the findings and said its free service had been a boon to consumers. "Google's free products like Search, Maps and Gmail help millions of Americans," the company said in a statement, "and we've invested billions of dollars in research and development to build and improve them. We compete fairly in a fast-moving and highly competitive industry."
The report devoted most attention to Google and Amazon, then Apple and Facebook, based on the number of pages devoted to them.
Google holds a monopoly in search and search advertising, the report said. The company used anti-competitive tactics, such as adding information without permission from third-party providers like Yelp, to improve the quality of features within its search results, lawmakers added.
Amazon's market power was spread across several industries, the report found. The committee focused on the company's conduct in online commerce, where it sells products that compete with independent merchants who use its platform. The report said Amazon promoted its own smart-home products ahead of those of other makers, and also dealt unfairly with open source software developers in its cloud computing business.
In total, about 2.3 million third-party sellers do business on the Amazon marketplace worldwide, the report said, and 37 per cent of them relied on the site as their sole source of income — essentially making them hostage to Amazon's shifting tactics.
The lawmakers also concluded that Apple had a monopoly on the apps marketplace for iPhones and iPads, forcing all developers to go through it to reach users of those devices. That setup has enabled Apple to take a 30 per cent cut of many apps' sales. That fee, the subcommittee found, has led to higher prices for consumers.
Facebook's monopoly power over social networking was also "firmly entrenched," the report said. The company had taken steps, like acquiring new competitors or copying their features, to maintain that power, the lawmakers found. In particular, they said, after Facebook acquired the photo-sharing site Instagram in 2012, the social network's executives had gone to great lengths to stop the service from overtaking its main product.
"It was collusion, but within an internal monopoly," a former high-level Instagram employee told the committee during its investigation. "If you own two social media utilities, they should not be allowed to shore each other up. It's unclear to me why this should not be illegal."
Written by: Cecilia Kang and David McCabe
© 2020 THE NEW YORK TIMES
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