Tech giants brace for Washington showdown in echo of Bill Gates
Tech giants brace for Washington showdown
in echo of Bill Gates
David McLaughlin and
Ben Brody, Bloomberg News July 16, 2019
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The Open Tech execs face antitrust grilling in Washington
Executives from Google, Facebook, Apple Inc. and
Amazon.com Inc. are set to appear Tuesday before the House antitrust panel,
whose Democratic chairman is leading an investigation into the market power of
the biggest tech companies and their effect on competition.
The hearing harkens back to Microsoft Corp.
co-founder Bill Gates’ appearance before the Senate in 1998 when Microsoft was
the target of government scrutiny into its monopoly in computer operating
systems. Two months later, the Justice Department filed a landmark antitrust
lawsuit against Microsoft that reined in its practices and nearly led to the
company’s breakup.
“This is really a deep dive by the committee to
understand what’s going on in the tech sector, what needs to be done in terms
of antitrust enforcement but also to understand better whether there is a need
for change in the law,” said Gene Kimmelman, a senior adviser at the policy
group Public Knowledge, who served in the Justice Department’s antitrust
division under President Barack Obama.
While the executives testifying Tuesday don’t have the star power of Gates, their appearance marks the
first time the largest technology companies will face questions from lawmakers
amid a rising chorus of criticism that they are violating antitrust laws. That
was the same accusation leveled at Microsoft two decades ago.
Rhode Island Democrat David Cicilline, who leads
the antitrust panel, is bearing down on technology companies as antitrust
enforcers prepare their own scrutiny of the industry. The Justice Department
and the Federal Trade Commission, which share antitrust jurisdiction, have
taken the first steps toward investigating conduct by the biggest companies,
with the Justice Department taking responsibility for Google and Apple, and FTC
overseeing Facebook and Amazon.
Tuesday’s hearing will focus on innovation and
entrepreneurship. One of the key complaints from critics of the big tech
companies is that they can use their power to thwart competition from smaller
rivals. Academic research has shown a steady decline in business start-ups
across the economy. One possible explanation is that rising market
concentration across industries effectively shuts out entry by new businesses.
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While some barriers to competition are inherent
in any business, the key question for the antitrust committee is whether and
how dominant tech platforms can intentionally raise barriers to new entrants,
said Michael Kades, the director of markets and competition policy at the
Washington Center for Equitable Growth.
A report by the University of Chicago’s Stigler
Center this year found that digital markets tend to be winner-take-all in which
one firm comes to dominate. That creates an incentive for the companies to edge
out new challengers that could threaten that dominance.
Lack of competition can lead to reduced
innovation, which harms consumers over time, according to the report. “The
evidence thus far does suggest that current digital platforms face very little
threat of entry and are negatively impacting investment in key digital areas,”
it said.
One of the authors of the Chicago report -- Yale
University economist Fiona Scott Morton -- will testify Tuesday. The company
executives scheduled to appear are Adam Cohen, Google’s director of economic
policy, Matt Perault, head of global policy development at Facebook, Amazon
associate general counsel for competition Nate Sutton, and Kyle Andeer, vice
president of corporate law at Apple.
E-commerce trade association NetChoice, which
includes Google and Facebook, will tell the committee a different story: The
reach of tech platforms gives small businesses the opportunity to target large
audiences of potential customers through digital advertising. Not long ago, their
only choice was expensive advertising in a local newspaper or television
station, the group said.
“These platforms are helping small businesses
the same way a large retailer operates as an anchor for a shopping center or
mall,” Carl Szabo, vice president of NetChoice, will say, according to his
prepared remarks. “The larger these platforms grow means the more customers
small businesses can reach with better targeting and lower costs.”
Sarah Miller, deputy director of Open Markets
Institute, which advocates for aggressive antitrust enforcement, countered that
tech platforms are harming entrepreneurs.
“These companies were the darlings of most
Democrats and now the dynamic has changed profoundly,” she said. “There is
really a period of learning going on in Congress, with staffers, with the
broader public, around the varying ways that all of these tech companies, these
tech monopolies, are destructive.”
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