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On October 2, 2020 the United States House Judiciary Committee released the “Investigation of Competition in Digital Markets.” This report published the results of a bipartisan investigation that was launched on June 3, 2019 targeting big tech companies with the four main ones being Amazon, Apple, Meta (previously known as Facebook), and Alphabet (Google’s parent company). The investigation focused on three main areas: competition in the digital markets; possibility of major technology companies practicing anti-competitive methods; and assessing if the current laws, regulations and policies related to antitrust and competition were sufficient enough for current market conditions.
Brief History of Antitrust in the United States
To better understand the current circumstances relating to big tech companies and antitrust, it is important to understand the history of antitrust in the United States. The first antitrust law that was passed in the US was the Sherman Antitrust Act of 1890. This law, which prohibited any type of practice that would promote monopolization or restrain trade, resulted in the breaking up of major industry-leading companies like Standard Oil and American Tobacco. However, this did not completely resolve the issue. JP Morgan and his Wall Street bankers had access to large amounts of capital that was utilized for major mergers and acquisitions (M&A). Through Morgan’s financing, monopolies like US Steel, AT&T, General Electric, and the railroad monopolies were formed.
As a result, in 1914, the Clayton Act was passed, which prohibited M&A when the effect “may be substantially to lessen competition, or to tend to create a monopoly.” In addition, it prevented individuals from sitting as a board member for multiple competing companies in the same industry. This forced Morgan to give up his position as director in over two dozen different companies. In the same year, the Federal Trade Commission Act of 1914 was passed and formed the Federal Trade Commission (FTC). The FTC was given the ability to “prevent unfair methods of competition,…conduct investigations, provide reports to Congress, and enforce the antitrust laws.” From this point up until the Nixon Administration, there were constant efforts to fight monopolistic efforts. Once Nixon entered office, he released a study stating that concentrated industries caused no damage to the economy. Until very recently, this school of thought has been influencing the US economy.
The Current Environment: Big Tech & Antitrust
Attention towards big tech companies has increased as a result of the COVID-19 pandemic. William Kovacic, Professor of Law and Director of the Competition Law Center at George Washington University has stated that,“COVID underscored their significance. The good story for them is they became lifelines of goods and services. The bad news was that their importance and those lifelines became more evident.”
After the 15-month bipartisan congressional investigation in 2019, the “Investigation of Competition in Digital Markets” was published concluding that antitrust laws must be strengthened and even arguing for the possibility of the monopolies being broken up.
With the release of this report, several bills were introduced in the House Judiciary Committee. These bills included the Merger Fee Modernization Act, the Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act, the Platform Competition and Opportunity Act, and the American Choice and Innovation Online Act. The Merger Fee Modernization Act aimed to increase the FTC and DOJ’s budget by 30% in their respective Antitrust Divisions and was introduced by Senator Amy Klobuchar (D-MN), chair of the Senate Subcommittee on Competition Policy, Antitrust, and Consumer Rights, and Senator Chuck Grassley (R-IA). In June 2021, the bill passed the Senate. The Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act required dominant digital platforms to share their systems with their competitors and to allow for their users to transfer data to their competitors. The Platform Competition and Opportunity Act, introduced by Senator Klobuchar and Senator Tom Cotton (R-AK) would prohibit most M&A by big tech companies aside from small acquisitions under $50 million that may be permitted under special circumstances. The American Choice and Innovation Online Act, also introduced by Senator Klobuchar and Senator Grassley, aims to stop big tech companies from promoting their own products on their platforms. The main provisions of this bill include preventing companies from misusing data to gain a competitive advantage, implementing preferential treatment towards their own products in search results, and charging competitors to have their products favored in search results. In January 2022, this bill passed the Senate Judiciary Committee 16-6.
Many state that support from the White House is going to be crucial for the passing of the American Choice and Innovation Online Act. A corporate lobbyist has stated, “The White House’s position is going to be key. Right now, I would give the Klobuchar bill a 20 to 50 percent chance of passing. But that changes if Biden gets involved.” As of now, the White House has not made any official statements about the bill, however, they have sent “technical support” on drafting the legislation. It would be safe to assume that President Biden is in support of tightening antitrust legislation. Since his first day in office, he has placed strong supporters of Big Tech antitrust in positions of power, for example, Lina Khan as the FTC Chair, Jonathan Kanter as Assistant Attorney General for the DOJ’s Antitrust Division, and Tim Wu on the National Economic Council. President Biden also released “Executive Order on Promoting Competition in the American Economy” in July 2021. The executive order states how, “robust competition is critical to preserving America’s role as the world’s leading economy.”
While there is strong support for big tech antitrust legislation from both parties, there are still disagreements on what this legislation should focus on. Bhaskar Chakravroti, Dean of Global Business at The Fletcher School of Business at Tufts University and founding Executive Director it’s Institute for Business in the Global Context, stated that there are too many different types of complaints about the tech industry (including anti-competitiveness, privacy issues, data protection, and vulnerability to misinformation), too many different big tech companies that offer different types of products, and too many different agencies involved (DOJ, FTC, Senate, House of Representatives, etc), each with different approaches and plans. It is because of these reasons that Chakravorti believed that regardless of whether any antitrust action is taken, the process will be “long and drawn out.”
Additionally, Amazon, Apple, Meta, and Google have stated that the customer experience will significantly decrease in quality from any of these types of antitrust actions. For example, Apple would not be able to provide any pre-installed apps like iMessage, FaceTime and Music). Another issue is that historically, antitrust laws have been industry agonistic. David Reichenberg, an antitrust litigator stated, “The reason people have resisted industry-specific legislation for so long is it’s hard to administer, it’s hard to predict scenarios and know what’s going to harm consumers. We need laws that can adapt to the facts.” This is especially relevant with the tech industry because it is constantly advancing and improving at a rapid pace.
Antitrust legislation is gaining a big push in the United States, with the rare combination of bipartisan support in both the House and Senate supporting it. The COVID-19 pandemic and the reliance on technology today have made the problems with big tech obvious to many people. Whether or not legislation will actually be passed however, is still in question. If it were to be passed, for better or for worse, there will be major changes to the way we utilize technology today.