Big Tech poses a grave threat to markets that might require breaking up the most prominent U.S. tech companies and limiting their acquisitions, concluded a House subcommittee report issued Tuesday.
The House Judiciary Antitrust, Commercial and Administrative Law Subcommittee has held hearings for more than a year to investigate the business practices of Amazon.com Inc. AMZN, Apple Inc. AAPL, Facebook Inc. FB, and Google parent Alphabet Inc. GOOGL GOOG Last week, the Judiciary subcommittee held its seventh and final hearing, and issued a withering report on the companies’ actions Tuesday.
“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,” Rep. David Cicilline, D-R.I., chairman of the House Judiciary Antitrust, Commercial and Administrative Law Subcommittee, said in a statement accompanying the report. “Although these firms have delivered clear benefits to society, the dominance of Amazon, Apple, Facebook, and Google has come at a price.”
The report suggests breaking apart tech companies in an effort to separate businesses so they do not benefit each other and potentially harm competition, as well as other potential measures.
“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,” Cicilline said.
The report also suggests that Congress decree that “any acquisition by a dominant platform would be presumed anticompetitive unless the merging parties could show that the transaction was necessary for serving the public interest and that similar benefits could not be achieved through internal growth and expansion.”
The most contentious hearing came in late July, when the chief executives of all four companies faced a barrage of piercing questions about their market power and business strategies.
At the time of those hearings, Cicilline — a fierce critic of Big Tech — said many of their business practices “have harmful economic effects. They discourage entrepreneurship, destroy jobs, hike costs, and degrade quality. Simply put: They have too much power. This power staves off new forms of competition, creativity, and innovation.”
While some tech observers
initially called the recommendations overly ambitious, others said they may be
merely providing broad guidelines to potential reforms in the next Congress.
“My biggest concern is it tries to do too much by effectively addressing privacy, competition, and free speech,” said Will Rinehart, senior research fellow at Center for Growth and Opportunities, an economic research firm. “I hoped it would be more focused on competition.”
If the Democrats win control of the Senate, and maintain a majority in the House following the Nov. 3 elections, the party is widely expected to ramp up investigations and legislation of Big Tech. Sens. Elizabeth Warren of Massachusetts, Amy Klobuchar of Minnesota, and Richard Blumenthal of Connecticut are expected to lead the political charge.
“The House staff report lays out clearly how our online marketplace is increasingly stacked against us, and is not serving consumers fairly,” Marta Tellado, CEO of Consumer Reports, said in a statement. “A handful of powerful companies are restricting and controlling the choices of everyone else, in order to enrich and entrench themselves.”
Pro-business groups immediately pushed back at the report, claiming such punitive actions would damage small businesses.
“It is clear that Rep. David Cicilline and House Democrats do
not understand the extraordinary value that so-called “Big Tech” digital
platforms deliver to our economy, and most importantly, to small businesses
during the COVID-19 recession,” Jake Ward, president of the Connected
Commerce Council, said in a statement.
“Amid a global pandemic that has cost American lives,
decimated the U.S. economy, and disrupted our way of life, small business tools
and services made by America’s leading technology companies are helping
millions of Main Street businesses adapt and survive,” Ward said.
News of the report sent shares of Amazon, Alphabet, Facebook, and Apple down in trading Tuesday amid President Trump’s avowal to end stimulus negotiations until after the election. Amazon’s stock took the biggest hit, dropping 3%. Apple was down 2.9%, while Facebook declined 2.3%, and Google slid 2.1%.