Over the years, the U.S. government has broken up some monopolies that were considered too big and powerful for the good of the public. Standard Oil was broken up into 34 separate companies back in 1911. 71 years later, AT&T
controlled just about every facet of the phone industry; it’s Western Electric unit was also the main supplier of handsets. Breaking up this monopoly created a number of “Baby Bells.” Ironically, most of these regional bell companies merged with each other to create a new AT&T proving that Humpty Dumpty can be put back together again.
One sector that Congress is seriously eyeing with breakups in mind is technology. CNBC reports today
that after a 16-month investigation, a Democratic congressional staff report
concluded that Apple
, Amazon, Facebook, and Google, are monopolies that the government needs to address. The report weighs in at approximately 450 pages and the conclusions that members of the staff reached came after they held seven hearings and heard testimony from CEOs Jeff Bezos (Amazon), Tim Cook (Apple), Mark Zuckerberg (Facebook), and Sundar Pichai (Alphabet, parent of Google). They also ran through 1.3
The House Report suggests that mergers between dominant tech firms automatically be considered anti-competitive
In the report, staff members said, “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.”
The Federal Trade Commission in one of the main antitrust agencies in the U.S.
Some suggestions made in the report include separating dominant parent companies from some of their smaller business units. Examples would include forcing Google
to divest and get rid of YouTube, or forcing Facebook to no longer control Instagram and WhatsApp. Another suggestion in the report calls for anti-trust agencies to automatically assume that any merger involving “dominant platforms” will be anti-competitive and lead to such behavior. Instead, once a deal is announced, the burden of proof will be on both companies involved in a merger to prove that their deal does not harm competition; currently, the onus is on agencies like the DOJ to prove that the merger does cause competitive issues.
The report also recommended that instead of allowing dominant platforms to choose their own services, they be forced to offer other companies “equal terms for equal products and services.” The staff members also would like to see these “dominant platforms” make their services compatible with competitors, and hike the budgets for agencies concerned with anti-competitive behavior such as the Federal Trade Commission (FTC) and the Department of Justice’s Antitrust Division.
The Republicans objected to the issues and suggestions laid out in the report with one, Ohio Rep. Jim Jordan, completely missing the point of the hearing. Instead of focusing on possible anti-competitive behavior on the part of Apple, Amazon, Facebook, and Google, Jordan used it to complain about how the four aforementioned tech firms cited tend to have a bias against conservatives.
In the report, Facebook was accused of buying Instagram for $1 billion
back in 2012 in order to slow down and possibly destroy an up and coming competitor. In addition, memos discovered by the commission discovered that Facebook and Instagram, after the acquisition, were discussing internally how to stop Instagram from challenging Facebook in certain markets. This internal collusion is considered anti-competitive.
The App Store is where staff members found the company to be anti-competitive
With 40%-50% of online sales in the U.S., Amazon’s power over its third-party sellers does not produce a free market. As the report notes, “Amazon has engaged in extensive anti-competitive conduct in its treatment of third-party sellers. Publicly, Amazon describes third-party sellers as ‘partners.’ But internal documents show that, behind closed doors, the company refers to them as ‘internal competitors.” Yet, Amazon says that it is not in its best interests to work against third-party sellers on its platform.
Thanks to its walled garden, the App Store is the main focus of anti-competitive behavior at Apple
As we’ve pointed out too many times to count, the App Store is the focus of anti-competitive behavior by Apple. Apple does not allow iOS users to install apps from other platforms other than the App Store. This gives Apple control over app pricing and distribution. Yes, it is an epic problem. The report says, “In the absence of competition, Apple’s monopoly power over software distribution to iOS devices has resulted in harm to competitors and competition, reducing quality and innovation among app developers, and increasing prices and reducing choices for consumers. Apple responded by pointing out that last year in the states, the App Store generated $138 million in revenue with third-party developers keeping 85% of that total.
And the staff came to the conclusion that Google has monopolies in Search and in Search-advertising. The report says that “Numerous market participants analogized Google to a gatekeeper that is extorting users for access to its critical distribution channel, even as its search page shows users less relevant results.” Google responded by stating, “Google’s free products like Search, Maps and Gmail help millions of Americans 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. We disagree with today’s reports, which feature outdated and inaccurate allegations from commercial rivals about Search and other services.”
These investigations do have support among the U.S. population. After all, 85% are concerned about the amount of data these online platforms have about them with 81% concerned that collecting this data is just a prelude to these firms collecting more information on them. 58% are not confident that the search results they are receiving are unbiased. 79% say that big tech mergers are bad for competition and consumer choice. And 60% would like to see more regulation of online platforms and the ability to switch from one platform to another without losing data or connections.