The United States House of Representatives Antitrust Subcommittee on Monday opened an investigation into competition in digital markets, increasing the pressure on big tech companies over antitrust issues. The subcommittee is part of the House Judiciary Committee.
The bipartisan investigation will include a series of hearings on antitrust, commercial and administrative law about the rise of market power online, as well as requests for relevant information.
“The growth of monopoly power across our economy is one of the most pressing economic and political challenges we face today. Market power in digital markets presents a whole new set of dangers,” said Antitrust Subcommittee Chairman David N. Cicilline, D-R.I.
“It is critical that Congress step in to determine whether existing laws are adequate to tackle abusive conduct by platform gatekeepers or whether we need new legislation to respond to this challenge after four decades of weak antitrust enforcement and judicial hostility to antitrust cases,” Cicilline added.
Gatekeepers Stifling Competition
The investigation will focus on three main areas:
- Documenting competition problems in digital markets;
- Examining whether dominant firms are engaging in anticompetitive conduct; and
- Assessing whether existing antitrust laws, competition policies, and current enforcement levels are adequate to address these issues.
The open Internet has delivered enormous benefits to Americans, said House Judiciary Chairman Jerrold Nadler, D-N.Y., “but there is growing evidence that a handful of gatekeepers have come to capture control over key arteries of online commerce, content and communications.”
Google and YouTube will have 41 percent of net digital ad revenue in the U.S. market this year, while Facebook and Instagram will have 29 percent, according to eMarketer.Third-place Amazon will have nearly 9 percent, while Microsoft and LinkedIn, tied for fourth-place, will have nearly 5 percent.
Such digital duopolies foster super-efficient, extreme capitalism that will lead to massive job losses, decreased market competition, and a failure of the free market as we know it, according to Ray Wang, principal analyst at Constellation Research.
“Given the growing tide of concentration and consolidation across our economy, it is vital that we investigate the current state of competition in digital markets and the health of the antitrust laws,” Nadler said.
Feeling the Pain
Several big tech companies — specifically Facebook, Google, Amazon and Apple — are under the antitrust cloud.
- Sen. Elizabeth Warren, D-Mass., has made breaking up big tech a focal point of her presidential campaign platform;
- Both Republican and Democrat lawmakers have called for curbing the power of these four companies; and
- The U.S. Department of Justice and the U.S. Federal Trade Commission recently agreed that DoJ would have jurisdiction over potential antitrust probes of Apple and Google, while the FTC would have jurisdiction over investigations into Amazon and Facebook, Reuters recently reported, triggering speculation that more investigations could be opened soon.
Apple faces two antitrust lawsuits in the European Union — one from Spotify, and the other from parental control app developers Qustodio and Kidslox. Also, the U.S. Supreme Court last month allowed a class action lawsuit against Apple for monopolizing the market for iPhone apps.
Impact on Big Tech
Opinion is divided as to the effect growing antitrust pressure will have on big tech companies.
“Their survival is on the line,” said Rob Enderle, principal analyst at the Enderle Group, “but I’m not convinced they recognize the real risk any more than Microsoft did decades ago.”
On the other hand, it’s possible that big tech will face no more than “a small fine and a massive political and legal nuisance,” suggested Constellation’s Wang.
The issue “is all about money,” said Michael Jude, program manager at Stratecast/Frost & Sullivan.
“Big tech has it and the government wants it,” he told the E-Commerce Times.
Big tech already has offered mitigations such as self-policing and some corporate leaders have been calling for more regulatory oversight.
There will be “a protracted period of maneuvering by both sides,” Jude said, because of the companies’ size and reach. Facebook’s billions of subscribers, for example, constitute “a powerful homegrown lobby.”
In the end, though, the regulators likely will win, Jude predicted.
The Trouble With Breaking Up
“If we over-regulate, like Sen. Warren wants, we will lose our competitive edge in economic efficiency and national security, as AI, logistics and commerce need massive scale to deliver consistently high-quality services,” Constellation’s Wang told the E-Commerce Times.
“We need massive scale in order to compete at the global level with Chinese players Baidu, Alibaba and TenCent,” he said.
Breaking up Google is possible because it is already segmented, Enderle told the E-Commerce Times. However, the other big tech players “could be destroyed by such a move, and that would have a dire impact on the tech segment in the U.S. and mostly benefit China.”
Breakups could be “very good for shareholders” because the companies could divest themselves of their worst-performing parts, Jude pointed out, noting that after deregulation, “AT&T walked off stage with the very lucrative long distance business and left the Baby Bells to deliver very expensive and highly regulated local service.”
Breaking up big tech could shift control of the related markets offshore, Enderle warned.
“The Standard Oil move shifted power to Saudi Arabia,” he pointed out. “The RCA move shifted power to Japan, and the moves against AT&T were eventually reversed, but you could argue Huawei resulted.”
The AT&T breakup did boost innovation, Jude agreed, and consumers “would probably benefit from more choice.”
Regulators “should be using a blend of targeted financial penalties, incentives, and targeted laws,” suggested Enderle, “to directly address the problems at a granular level rather than proposing the firms get hacked apart.”