It has been more than a century since Theodore Roosevelt took on the titans of 20th-century industry and there are signs that the government could be moving toward a new era of trust-busting, this time aimed at the internet giants.
Pressure is mounting on companies like Amazon, Facebook and Google as politicians on both sides of the aisles, regulators and consumers raise concerns about the consolidation of economic power around a select few tech leaders.
Last week the Justice Department hinted at the beginnings of antitrust action against social media companies like Facebook and Twitter citing two separate areas of concern, one political and one economic. In a statement, the Justice Department announced that Attorney General Jeff Sessions will meet with state attorneys general later this month to discuss “a growing concern that these companies may be hurting competition and intentionally stifling the free exchange of ideas on their platforms.”
The statement was issued after President Donald Trump spent days attacking the companies claiming they manipulated their platforms to censor conservative voices on the internet. In a series of tweets and public statements, Trump accused Google of having “RIGGED” search algorithm and accused Facebook and Twitter of blocking conservative accounts. In a recent interview, Trump suggested all three companies represent “a very antitrust situation.” He stopped short of calling for a breakup of the companies.
President Trump’s war of words may be only the beginning of a broader government effort to rein in Silicon Valley and reconsider how antitrust rules are applied in the 21st-century economy.
Sen. Orrin Hatch, retiring Republican from Utah and chair of the Senate Finance Committee, sent a letter to the Federal Trade Commission (FTC) last week asking them to take a hard look at Google’s dominant position in search, user data aggregation and online advertising. He urged the commission to “reconsider the competitive effects of Google’s conduct in search and digital advertising” including whether the benefits of the company outweigh its “anticompetitive potential.”
Google and Facebook together account for approximately 73 percent of online advertising sales, according to a 2017 study. Google’s browser Chrome, dominates its competitors on desktop computers and mobile devices and more than 90 percent of all online searches are conducted on Google platforms.
The Federal Trade Commission has already started the process of reevaluating competition in an increasingly consolidated and digital 21st-century economy. The commission is holding a series of hearings that will continue through November. The hearings mark the first time since the 1990s that the FTC has made a comprehensive assessment of competition and antitrust matters in the high-tech economy.
Others are pushing for a more serious crackdown on tech companies. The Open Market Institute and a coalition group called Freedom from Facebook has called on the FTC to break up Facebook.
“Big is one thing, monopoly is another,” said Sarah Miller, deputy director of the Open Market Institute. “In our economy, we thrive on competition. That allows the best to rise up, but it doesn’t mean they should be able to abuse their dominance.”
Facebook is already facing scrutiny from the FTC. The commission is looking into whether Facebook violated a 2011 consent decree where it agreed to safeguard user data from third parties. Facebook acknowledged earlier this year that it allowed Cambridge Analytica to improperly access information on some 87 million users. Facebook could face trillions of dollars in fines if the commission rules against them.
In the context of that investigation, the Open Market Institute and others are urging the FTC to restructure Facebook, linking the issues of consumer privacy violations to the lack of competition and limited platform options for consumers. In addition to breaking up the company, the advocates also want to block Facebook from acquiring competitors, as it did in 2014 when it bought WhatsApp and in 2012 with Instagram.
The Open Market Institute has also advocated reforming antitrust laws, specifically related to Amazon, which not only dominates online retail but is now a major competitor in everything from delivery and logistics to film production and cloud computing. The Institute’s former legal policy director Lina Khan, a strong advocate for reform, was recently hired by Democratic FTC Commissioner Rohit Chopra as the commission reconsiders antitrust matters in the digital economy.
Khan has compared Amazon to the railroad monopoly in the early 20th century, namely one company controlling how businesses get their goods to market. At the same time, Amazon competes directly with the companies that use its services to get to market while also collecting data on its business practices.
Amazon has created opportunities for small businesses to get to market while undercutting prices, which is a benefit to consumers. It has also become the second largest private sector employer in the United States. Still, Khan and others worry about the potential longterm negative impact of eliminating competition.
After years of taking a hands-off approach, there are signs that the government is taking the threat of digital monopolies seriously, Miller said. “We are seeing legitimate concerns about the anticompetitive practices of these platforms both on the left and the right at a time when there is not a lot of agreement on policy issues.” The danger is in politicizing the issue, she warned.
In the current antitrust debate, there are two separate tracks. One through the Federal Trade Commission, which is largely insulated from political pressures, and the other through the Department of Justice.
According to Berin Szoka, president of Tech Freedom, the Justice Department’s scheduled meeting this month to address social media companies “hurting competition and intentionally stifling the free exchange of ideas” is political and will have a hard time standing up in court.
“Sessions may be invoking competition and alluding to antitrust laws but that is not what this is about,” he said. “This is pure political theater prompted by the president’s tweets.”
The attorneys general invited to the meeting have a history of complaining about anti-conservative bias on social media platforms. Sessions has reportedly not invited a single Democrat to attend.
Szoka also took issue with the argument that the tech giants should be broken up or penalized because of their size. “Having market power alone is not an antitrust violation,” he stressed. There has to be evidence that they are using that power to skew the market and suppress competition.
At a conference last week, the Justice Department’s antitrust chief acknowledged the difficulties in bringing a case against Amazon, Google or the social media giants.
“Just because somebody is big does not mean they have violated the laws. Nor should we condemn them because they have succeeded,” said Makan Delrahim, the head of the Department’s Antitrust Division. Any antitrust action against a company will depend on credible evidence of wrongdoing or consumer abuse, not merely market share.
Delrahim underscored the importance of not penalizing companies for their success, particularly in the tech industry where disruption is the norm and giants are regularly toppled (i.e., Microsoft, AOL, MySpace).
“It’s not go out, compete, be successful, but only to a limit,” he told Recode in a recent interview. “We want every one of them to become monopolists as long as they’re behaving properly.”
Outside the United States, the European Union’s antitrust enforcers have been more aggressive, potentially providing a framework for U.S. regulators to follow.
In recent years, the European Commission (EC) has targeted Amazon, Facebook and Google for a variety of anticompetitive practices. Just two months ago, the EC hit Google with a record-breaking $5 billion fine after finding the company engaged in three separate incidents of market dominance abuse related to Android. President Trump, somewhat ironically, defended Google, saying the fine was evidence of Europe taking advantage of the united States.
Amazon reached a settlement with the EC last year following a lengthy investigation into the company’s efforts to eliminate competition in the European e-book market. The Commission faulted the company with forcing publishers into unfair contracts, which was killing competitors in Europe’s trillion-Euro e-book market.
In Germany, the country’s competition watchdog is planning on taking steps to curb Facebook’s ability to collect data on millions of users without their knowledge or consent. Following a monthslong investigation, the German Federal Cartel Office is linking the issues of consumer data protection and abusive competition and could block some of Facebook’s data collection practices in the near future.
Facebook and Google are each facing greater scrutiny in Europe for lax data privacy practices. In May, Europe’s General Data Protection Regulation (GDPR) went into effect. The framework represents the strongest data privacy regulations in place and could result in multibillion dollar fines for companies that misuse citizens’ data.
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