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Limit acquisitions, overhaul antitrust laws, enforcement to rein in Big Tech: US Antitrust Committee

Radical overhauls to the antitrust laws, stringent enforcement, and restricting acquisitions are some of the recommendations that the United States’ House Judiciary Committee’s report on Amazon, Apple, Facebook, and Google has made to limit the dominance of Big Tech in the country. The report has criticised these companies for buying off potential rivals, giving preference to their own products, and abusing their dominance against sellers and workers. Each of these companies has “expanded and exploited their power of the marketplace in anticompetitive ways” David Cicilline and Jerrod Nadler, chairs of the judiciary committee and the antitrust subcommittee, respectively, said in a joint statement.

These firms have “surveilled” other businesses to identify rivals, managing to ape or cut off any possible competition. The firms have exploited their intermediary roles to deepen their dominance, the report scathingly noted. The report lays out several concrete policy recommendations, along with their justification, to prohibit the key activities that led to the dominance of Big Tech.

Establish non-discrimination rules to prevent preferential treatment

Platforms have given preferential treatment by selectively showing their own products over others on their intermediaries, which is often the only way for others to access markets. For instance, Google has ranked its own content over third-party content even when it was “inferior and less relevant” for users, even forcing websites to lose money.

Congress should consider establishing non-discrimination rules to ensure fair competition and promotion innovation online. It would require dominant companies to offer equal terms, including around pricing and access, to all companies selling products or services on platforms run by Big Tech firms.

Change ownership structures and restrict markets in which Big Tech can operate: Big Tech companies directly compete with companies that depend on them to access users and market, giving rise to a conflict of interest. Additionally, the “surveillance” data they are able to collect — such as Amazon’s data on third-party sellers — lets them exploit that conflict with “unrivaled precision”. Congress should consider legislation to look at structural separation and line of business restrictions. The former prohibit a business from operating in markets that place the intermediary in competition with firms dependent on its infrastructure, while the latter limits the markets in which a dominant firm can engage.

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Assume all acquisitions are harmful unless proven otherwise

Several Big Tech firms have “built entire lines of business through acquisitions”, while others have used it to “neutralise competitive threats”. Antitrust regulators allowed this, leading to blocking of emerging rivals and undermining competition. Facebook has acquired Giphy and Google has acquired FitBit in the recent past. Now Big Tech is looking at start-ups in AI and virtual reality, which could give them control in an emerging market.

Get firms to prove that acquisitions are not anti-competitive: Congress should consider “shifting presumptions for future acquisitions”, that if any dominant firm wants to acquire another company, it should be presumed are anti-competitive unless the parties involved show that the merger “was necessary for serving public interest” and that companies cannot achieve growth and scale on their own.

It’s unclear whether current antitrust agencies have the power to block anti-competitive mergers in digital markets. The Justice Department allowed Google’s acquisition of data analytics company Looker, “despite serious risks” that it would eliminate an independent rival and allow Google to cut off access to rivals. Instead, antitrust laws should be suspect of existing dominant players purchasing innovative startups, since they often turn out to be potential competitors.

Consider reforms to strengthen enforcement against mergers: Regulators have not blocked a single acquisition made by a Big Tech firm since 1998. Cases in point are Google’s acquisition of Waze (which eliminated the possibility of an independent maps data provider) and Facebook’s acquisition of Instagram. Google’s DoubleClick, AdMeld, and AdMob acquisitions also gave it a dominant position in the digital ad tech market. Congress needs to consider reforms to strengthen merger enforcement.

Strengthen the Clayton Act to protect new and potential competitors: Congress need to prohibit acquisitions of potential rivals and nascent competitors. People should not need to prove that a nascent business would have been successful to prove that their acquisition would be harmful to competition. Essentially, an attempt to acquire a potential rival should be enough to trigger antitrust scrutiny. Congress should amend the Clayton Act to prohibit acquisitions that “may lessen competition or tend to increase market power.” Revising the law would “arrest the creation of trusts, conspiracies, and monopolies in their incipiency and before consummation”. The Clayton Antitrust Act, 1914, was passed to strengthen the Sherman Antitrust Act (1890). While the Sherman Act only declared monopolies illegal, the Clayton Act declared practices that could lead to formation of monopolies illegal as well.

Strengthen and rethink antitrust laws altogether

Apart from several enforcement recommendations, the committee seeks a reimagining of antitrust law altogether. Congress needs to “reassert the original goals of antitrust laws”, by clarifying that they are designed to protect “not just consumers, but also workers, entrepreneurs, independent businesses, open markets, a fair economy, and democratic ideals”. It noted that present antitrust laws are inadequate to deal with anti-competitive concerns in technology, and further that the court’s interpretation of existing antitrust laws through the lens of solely “consumer welfare” has limited the idea of competitive harm to focus heavily on price and output.

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The case of Amazon and Diapers.com: The subcommittee identified several instances in which a dominant platform was pricing goods or services below-cost to drive out rivals and capture the market. For instance, Amazon had been willing to lose $200 million in a single quarter to pressure Diapers.com, which it had recognised as a significant competitor. Amazon cut prices, starting a price war that eventually weakened Diapers.com.

  • Change the requirement to prove recoupment: Courts presently require complainants (against anti-competitive behaviour) to prove that the losses a larger company may have incurred though below-cost pricing were or could be recovered. However, dominant firms do recoup these losses over the long term using various means, during which smaller firms may break under the price war pressure, the report said. It’s difficult for complainants to prove that this happened in the short-term, it noted. The committee recommended that companies should not have to prove recoupment to prove that a is indulging in predatory pricing or buying.

Prohibit abuse of bargaining powers

Since they are often the only way to access markets, dominant platforms enjoy higher bargaining power over dependent third-parties. Such firms have collected greater data and money, charged excessive prices without losing customers, extorted an increasing amount of data from users, including trade secrets of businesses and proprietary content than they would have been able to if the market was competitive.

  • Congress should prohibiting abuse of such bargaining power, including through “potentially targeting anticompetitive contracts, and introducing due process protections for individuals and businesses dependent on the dominant platforms”.

Strengthen enforcement

In the recent decades, Congress has chosen to defer to courts and antitrust agencies, departing from its proactive oversight over narrowing of antitrust enforcement. It had set up the Federal Trades Commission and enacted the Clayton Act. Antitrust agencies have since consistently failed to block monopolists from gaining dominance; the FTC along with the Justice Department has abandoned enforcing antitrust laws entirely.

Congress needs to “revive its tradition of robust and vigorous oversight” of antitrust laws and enforcement. It can consider the following recommendations:

  1. Requiring the commission to regularly collect data and report on economic concentration and competitors
  2. Solicit public comments for merger reviews and explain all their enforcement decisions in writing
  3. Codify stricter prohibitions on revolving door between the agencies and companies they regulate, especially between senior officials
  4. Increase the budgets of the FTC and Antitrust Division of the DOJ.

Promoting interoperability and open access

Congress should consider data interoperability and portability to encourage competition by lowering entry barriers for competitors and switching costs by customers. Digital markets have network effects and high switching costs, making it hard for new firms to enter and compete with existing firms. Facebook’s most significant competitive pressure is from within its own family of products, such as Instagram and Messenger, rather than SnapChat or Twitter. And because Facebook is not interoperable with other social networks, switching to other platforms has high costs for users. Similarly, among the reasons that users do not move to other operating systems apart from Apple and Google is that they cannot port all their data such as messages, call history, and photos.

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