House Panel Says Tech Giants Hold Monopoly Power, Seeks to Break Them Up

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A House panel led by Democrats concluded that tech giants Google, Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), and Apple (NASDAQ: AAPL) hold a “monopoly power” in the digital markets and recommended significant changes including strengthening antitrust laws and enforcement.

On Tuesday, the House Judiciary Committee’s Antitrust Subcommittee released a report containing the findings of its more than 16 months investigation into the current condition of competition in the digital markets.

The House panel conducted seven congressional hearings and collected extensive evidence of almost 1.3 million documents from Google, Facebook, Amazon, and Amazon as well as from third parties. It also obtained testimonies from the tech giant’s CEOs including Sundar Pichai, Mark Zuckerberg, Jeff Bezos, and Tim Cook.

The tech giants captured dominant control over key segments of the digital economy. Google has a monopoly over search and advertising, Facebook over social networking, Amazon over e-commerce, while Apple over the mobile operating system and mobile app store markets. To maintain their dominance, these tech giants engaged in anticompetitive business practices, according to the panel.

Tech giant’s monopoly power reduces consumer choices and weakens democracy

Google, Facebook, Amazon, and Apple “differ in important ways” but their business practices have common problems.

First these big tech companies “serve as gatekeepers over a key channel of distribution.” It means that these tech giants can pick market winners and losers, charge excessive fees, impose oppressive terms of contracts, and obtain valuable data from businesses and consumers.

Second, these companies are using their gatekeeper position to maintain their market power by identifying their potential competitors and eventually acquiring or copying them and/or reducing their rivals’ ability to compete,

According to the panel, these big tech companies “have exploited their dominant power in order to become more dominant. 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… The result is less innovation, fewer choices for consumers, and weakened democracy.”

Judiciary Antitrust Subcommittee’s Majority staff recommendations

The recommendations from the panel’s Democratic staff include:

  • Imposing structural separations to prohibit platforms from operating in lines of business that depend on or interoperate with the platform;
  • Prohibiting platforms from engaging in self-preferencing;
  • Requiring platforms to make their services compatible with competing networks to allow for interoperability and data portability;
  • Mandating that platforms provide due process before taking action against market participants;
  • Establishing a standard to proscribe strategic acquisitions that reduce competition;
  • Improvements to the Clayton Act, the Sherman Act, and the Federal Trade Commission Act, to bring these laws into line with the challenges of the digital economy;
  • Eliminating anticompetitive forced arbitration clauses;
  • Strengthening the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ);
  • And promoting greater transparency and democratization of the antitrust agencies.

Republicans oppose “a thinly veiled call to break up Big Tech firms.”

Republicans such as Representative Ken Buck of Colorado agree with Democrats that the existing antitrust laws need reforms. However, he strongly opposed some of their proposals particularly imposing structural separations and forbidding the tech giants from entering adjacent lines of businesses.

Democratic Rep. David Cicilline of Rhode Island, the Chairman of the panel previously referred to it as a type of “Glass-Steagall” law for the digital marketplace, which Buck described as “a thinly veiled call to break up Big Tech firms.”

The Glass-Steagall is a Depression-era law that separated commercial and investment banking. Therefore, the Democrats are proposing to break-up tech companies or divest their businesses. For example, Facebook will be forced to separate from its other social media platforms such as Instagram or WhatsApp.

Buck said, “We do not agree with the majority’s approach to pass a Big Tech Glass-Steagall Act.”

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