Joel Trenaman: As the U.S. Congress moves to curb its power, Big Tech remains one step ahead

American efforts to rein in Facebook, Google, Apple, Amazon and Microsoft are laudable, but unlikely to succeed

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On June 23, six bills that aim to challenge the market power and anti-competitive tendencies of the dominant technology companies cleared the U.S. House Judiciary Committee. The controversial legislation, now queued up before the full House of Representatives, has faced stiff opposition from industry, which has successfully fought off past attempts. Efforts to make substantive or fundamental changes to the lax regulatory environment enjoyed by Facebook, Google, Apple, Amazon and Microsoft are laudable, but unlikely to succeed.

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The bills

The broadly named Ending Platform Monopolies Act is the most ambitious bill, attempting to eliminate “conflicts of interest that arise from dominant online platforms’ concurrent ownership or control of an online platform and certain other businesses.” This includes companies (valued above US$600 billion) that double up as they attempt to control a market: operating as a platform for online commerce, but also competing with businesses that are reliant on their platform to reach customers. Does Amazon come to mind? The implication here is that their business model, which benefits from compelling other sellers to rely on Amazon logistics, would become illegal. The bill passed the committee by just a single vote, indicating its perilous status moving forward.

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Similarly, the American Choice and Innovation Online Act would make it so that a platform could not advantage its own products and services in a way that disadvantages those of another business using its platform. For example, Google could not rank search results to drive traffic to YouTube or its other properties. Representatives also aimed directly at monopoly ownership concerns by introducing an act to prevent platforms from buying current or potential competitors. Facebook has been targeted here, despite regulatory approval of its previous takeovers.

Enabling service switching for consumers is the focus of a bill that would require platforms to allow users to transfer their personal data in a portable format to other platforms, who must keep it secure. The two bills least contentious thus far concern fees and venues, seeking to generate more funds for antitrust reviews, and close a loophole that allowed defendants to move antitrust cases against them to courts in other states.

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How they could succeed

Despite major divisions on how (or whether) to regulate, there’s always a chance that some or all of the bills could pass both the House and Senate to become law. There are at least two plausible paths through the legislative labyrinths.

Although the loudest change proponents are Democrats, as a recent article by three co-authors at Politico noted, the “politics of antitrust don’t cut neatly across ideological lines.” Bipartisanship, though fragile even at the judiciary committee level, may persevere if it continues to be motivated by anger: Democrats are upset about the spread of pandemic misinformation and election interference, and Republicans have for years taken turns railing at the platforms’ perceived biases against conservative voices. Influential Colorado Republican Ken Buck is a co-sponsor on each of the six bills. Even Fox News host Tucker Carlson has called Big Tech “a threat to the country,” declaring, “if you care about democracy you have to break up the monopolies.”

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A divide-and-conquer strategy could also lead to changes. Infighting among industry players means that the companies don’t necessarily have a united front. Apple and Facebook are at odds on many privacy and commerce issues, for example. Facebook has started a newsletter that will operate outside its own app, partly to avoid the 30 per cent fee that Apple and Google charge for in-app subscriptions. This ongoing push for competitive advantage could lend itself to Congress negotiating concessions from some players if new rules hurt other platforms more.

Why they will fail

We’ve been here before. The Federal Trade Commission (FTC) has been through many rounds of investigations, proposals and lawsuits over the years, none of which has moved the needle. In the 1990s, Microsoft escaped serious consequences after deep scrutiny. In 2013, Google was investigated for antitrust violations, but no suit transpired.

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Yet the new legislation package still relies on FTC enforcement and civil penalties. This legal structure has not provided any true remedies. Antitrust law doesn’t seem to be the way to blunt Big Tech’s power: recent returns show that regulators lack backing from courts on their arguments surrounding market dominance. Less than a week after the six bills moved ahead, a federal judge denied two lawsuits by the FTC and a group of 48 states that had accused Facebook of gaining a monopoly in social networking after its purchases of Instagram and WhatsApp.

The crux of the issue is that there are a lack of clear-cut antitrust violations under the arguably antiquated consumer harm-based law. And by the time legal machinery gets moving, market conditions have changed. It is hard to prove that any one company holds a monopoly in their realm, or that consumers are being disadvantaged. Google, Facebook and Amazon control virtually the whole online advertising market, but technically they compete with each other. Google’s Android dominates smartphones, but Apple iOS has not exactly been left in the dust. YouTube and Facebook co-dominate information-sharing platforms. Apple exercises vast control over apps … on the iPhone. And so on.

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European courts have also blocked EU antitrust moves and related attempts like the one to tax Apple €13 billion due to its Ireland-based tax avoidance structure. Canada remains indolent when it comes to the application of competition policy, so it’s hard to know how courts here would react if called upon.

Now that the bills could go before the House of Representatives, drawing interest from proponents in the Senate, lobbyists have redoubled their efforts to affect outcomes. About 700 tech companies spent US$436 million on federal lobbying in 2020, including about US$100 million by 15 firms. Their emissaries will ensure company counter arguments are being heard: that regulation stifles innovation, government action would lead to unintended consequences, and that they are taking their own steps to improve social responsibility and accountability. Large numbers of congress members are sympathetic to those positions, especially in California and other districts that reap economic benefits.

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Then there are the statements that tend to sound a lot like threats. Before the judiciary committee voted, Apple sent a letter to representatives warning that if the bills were passed, users would lose privacy and security features. Google says they would “break” their services, and Amazon said it will hurt small businesses that rely on their selling platform, and that they might shut down their Prime service. These alarm bells are very effective, especially if they mobilize their most loyal consumers by stoking fears of losing their toys.

Another powerful ploy is to challenge Biden administration appointments seen as unfavourable to Big Tech interests. In July, Facebook and Amazon demanded that new FTC chair Lina Khan be recused from any cases involving them, due to her previous legal writing advocating for stricter antitrust enforcement.

Joe Biden’s July 9 executive order, as well as the appointment of a justice department official on the same page as Khan, indicates that his administration will continue its version of sabre-rattling against Big Tech. Pending lawsuits and new regulatory attempts will continue. However, the fragility of bipartisan commitments, weak structure of antitrust law and polished industry counter tactics mean there’s no clear solution in sight.

National Post

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