House Panel Says Big Tech Wields Monopoly Power
House
Panel Says Big Tech Wields Monopoly Power
Democratic-led report concludes after 16-month probe that Amazon,
Facebook, Google and Apple stifle competition
A report by the House Antitrust Subcommittee
says Facebook and Google have monopoly power, while Apple and Amazon have
‘significant and durable market power.’
By Ryan Tracy Updated Oct. 6, 2020 8:07
pm ET
WASHINGTON—America’s biggest technology companies have leveraged
their dominance to stamp out competition and stifle innovation, according to a
Democratic-led House panel, which said Congress should consider forcing the
tech giants to separate their dominant online platforms from other business
lines.
The report released
Tuesday from Democratic staff of the House Antitrust Subcommittee capped a
16-month inquiry into the market power of Amazon.com , Facebook Inc., Alphabet Inc.’s Google and Apple Inc.
THE HOUSE PANEL’S FINDINGS
Republicans issued a
separate response endorsing strong antitrust enforcement targeting the
companies but didn’t endorse many of the Democrats’ policy prescriptions. It
also accused the companies of bias against conservative viewpoints.
No legislative changes are
imminent, but the report’s sweeping conclusions boost the odds for new laws in
the future and publicizes evidence that will give momentum to the companies’
critics in both parties.
In one snippet, the report describes an alleged effort by
Facebook’s leadership to prevent the company’s Instagram app from competing
with the original Facebook platform.m
A 2018 memo by Facebook
executive Tom Cunningham on the possible “end states” of Facebook’s family of
apps concluded that “it is unclear whether Instagram and Facebook can coexist,”
the report said, with Mr. Cunningham worried about a possible tipping point in
which one might come to dominate the other.
“Instagram and WhatsApp
have reached new heights of success because Facebook has invested billions in
those businesses,” Facebook said in a statement. “A strongly competitive
landscape existed at the time of both acquisitions and exists today.”
The company is facing an
antitrust investigation by the Federal Trade Commission, which is preparing a
potential lawsuit, The Wall Street Journal has reported. Google is
also expected to be the subject of an antitrust lawsuit filed by the Justice
Department this fall.
Amazon disputed the report’s conclusions.
“All large organizations
attract the attention of regulators, and we welcome that scrutiny,” it said in
a blog post. “But large companies are not dominant by definition, and the
presumption that success can only be the result of anti-competitive behavior is
simply wrong.”
Google said in a statement
it disagrees with the findings, which it said “feature outdated and inaccurate
allegations from commercial rivals.”
“Americans simply don’t
want Congress to break Google’s products or harm the free services they use
every day,” the company said.
Apple disputed the
report’s findings. “We have always said that scrutiny is reasonable and
appropriate but we vehemently disagree with the conclusions reached in this
staff report with respect to Apple,” a company spokesman said in a statement.
“Our company does not have a dominant market share in any category where we do
business.”
The Democratic staff
report says all four companies wield
monopoly power and criticizes U.S. antitrust enforcement
agencies as failing to curb their dominance.
“These firms have too much power, and that power must be reined
in and subject to appropriate oversight and enforcement,” the 449-page report
says. “Our economy and democracy are at stake.”
The report outlines a
series of responses Congress could adopt, including legislation forcing at
least some of the companies to separate certain dominant online platforms from
other business lines, as well as changes to antitrust laws to reinvigorate a
perceived lack of strong enforcement.
“This report could end up
being a turning point in antitrust and tech,” said Paul Gallant, an analyst for
investment bank Cowen Inc. “It creates
momentum for legislation next year, and it also might nudge regulators to bring
cases even under existing law knowing they’ve got congressional backup.”
Republicans on the panel
issued a 28-page response, detailing what they say are abuses of power by
social-media companies in censoring online speech. “Big Tech is out to get
conservatives,” the report concluded, criticizing Democrats for ignoring the
issue. The tech companies say they don’t make content moderation decisions
based on political bias.
The report concluded that
Amazon has monopoly power over its third-party sellers, bullies its retail partners
and improperly uses third-party data to inform its strategy for selling
self-made private-label products on its e-marketplace.
In April, the Journal
reported that Amazon’s private-label employees had used individual third-party
data to copy products for its own line of goods. The subcommittee uncovered
similar behavior in its interviews with Amazon’s employees.
The report lays out
Google’s dominance of the search industry, where it commands default placement
for 87% of desktop search traffic and more than 99% of mobile traffic.
The subcommittee
attributed that to Google’s ability to make billions of dollars in annual
payments to companies like Apple and Firefox to keep Google the first choice
even on rival browsers.
Separately, the findings
echoed longstanding complaints from businesses that Google’s shift to trolling
the internet for facts that it can place at the top of the search page has been
a blow to websites that would otherwise have received incoming traffic from the
search engine to answer such queries.
“With the flip of a
switch,” one website owner told the subcommittee, “Google turned our original
content into its own content.”
Google has said previously
that changes to search were designed to get information to users faster.
Alphabet produced 1,135,398 documents for House investigators, though the
report noted that “subcommittee staff did not view this volume as a proxy for
quality.”
The report concluded that
Apple exerts monopoly power as it controls software distribution to more than
half the mobile devices in the U.S. and allows it to generate “supra-normal
profits” from its App Store and service business.
Apple has said in the past
that its restrictions on mobile app sales for its devices are necessary to
control the quality of user experience.
The subcommittee’s
findings cast a harsh appraisal of Apple’s control over the App Store, saying
the iPhone company uses its gatekeeper power in ways that harm third-party
software developers and favor its own apps on its devices. The report noted an article by
the Journal last year that said Apple’s app routinely appeared
first in search results in its App Store ahead of rivals.
The report also casts
doubt on Facebook’s argument that its apps
could never be separated, a case it made in a summary of its legal
arguments reported by the Journal on Sunday. The report cites an unnamed former
Instagram employee who told the subcommittee that Facebook and Instagram could
potentially be pulled apart. “It’s not building a skyscraper; it’s turning
something on and off,” the employee said.
Ahead of the report’s
release, the Consumer Technology Association, an industry group, said in a
statement the tech sector is “the reason for America’s global innovation
leadership and powers our economy” and warned against action targeting its most
successful companies. “To undercut our nation’s ‘crown jewel’ companies would
take our competitiveness out at the knees.”
Republicans on the House
panel are split about the report’s policy recommendations. Some believe U.S.
antitrust laws don’t need to be changed, while others support some of the
Democrats’ recommendations. Rep. Ken Buck (R., Colo.) said antitrust laws need
updating, but “it’s very important that we proceed with a scalpel and not a
chain saw.”
—Rob
Copeland, Tim Higgins, Dana Mattioli, John D. McKinnon and Jeff Horwitz
contributed to this article.
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& Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Appeared
in the October 7, 2020, print edition as 'House Panel Says Big Tech Has
Monopoly.'
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