Just One of These Five Pieces of Legislation Makes Sense
House Democrats, with bipartisan support, have introduced a series of completely misguided antitrust bills aimed at giving lawmakers and certain agencies greater power to control “Big Tech.”
The bills would give agencies and lawmakers the ability to interfere with a handful of cherry-picked technology companies based on mere potential conflicts of interest rather than demonstrable anticompetitive behavior. This would constitute a radical and reckless rewriting of U.S. antitrust law.
Not only will they not accomplish the purported goals of protecting consumers and ensuring more competition, but the bills make it clear that many lawmakers do not clearly understand the businesses, their customers, or even the purpose of antitrust.
These bills are the result of a 16-month investigation by Congress into the business practices of U.S. tech giants including Google GOOG, -0.69% GOOGL, -1.13%, Apple AAPL, -0.92%, Facebook FB, -1.38% and Amazon AMZN, +0.94%. Here is a quick breakdown of the five proposals and what lawmakers are getting right and wrong.
The “Ending Platform Monopolies Act,” introduced by Rep. Pramila Jayapal (D-Wash.), would empower the Justice Department to potentially break up U.S. tech companies over perceived conflicts of interest.
Its stated purpose is to “promote competition and economic opportunity in digital markets by eliminating the irreconcilable conflicts of interest that arise from dominant online platforms’ concurrent ownership or control of an online platform and certain other businesses.” The proposed legislation defines “dominant online platforms” as those with a stock-market valuation of at least $600 billion and at least 500,000 monthly U.S. users.
Instead, the bill, if it were to become law, would bypass a century of competition and antitrust law by lowering the bar from demonstrable anticompetitive behavior to a mere potential for conflict of interest.
The vague language in this bill feels like instant permission for lawmakers to say Amazon can’t also own its AWS cloud business or Apple can’t sell both hardware and software. But it would do little to curb major platforms from giving priority to their own products.
If you want to tell Amazon it can’t sell private-label products, then this law should also cover Target and Walmart, which sell their own labels as well as third-party products online. It’s also worth noting that private label is only 1% of Amazon’s business.
It also would hurt consumers, who have gained greater access to goods and services and often at lower prices.
The second bill, introduced by Rep. David Cicilline (D-R.I.) and dubbed the “Platform Monopoly Act“, is an attempt to expand the definition of self-dealing into the technology platform space and again targets platform companies with over $600 billion in stock-market value and at least 500,000 monthly U.S. users.
It would make it illegal for companies to prioritize their own products, services or lines of businesses on their own platform. It would also prevent platform companies from making use of the data from third-party businesses that use said platform in any way that advantages it – a move clearly aimed at Amazon
Should this bill pass in its current form, Google, Apple, Microsoft MSFT, -0.90%, and Amazon would no longer be able to prioritize their own products in search, app stores, and on their devices. U.S. regulators have unsuccessfully pursued Amazon’s prioritization of its own products using third-party data.
The bill also gives lawmakers powers to prevent platform players from penalizing or impeding companies that try to steer business off the platform to another route of purchase, such as from the App Store to the developer’s website. This feels a lot like the continuing Epic and Spotify disputes with Apple.
Enforcement of this bill will be a nightmare because most of the search preference is tied up in algorithms that evolve in real time. Furthermore, European regulators already tried and failed to fight Amazon over this because it was impossible to prove that Amazon intentionally gave preferential treatment to Amazon Private Label.
Competition-wise, it is not the platform companies’ job to help make other companies more competitive, but giving the world access to their audience and technology is a pretty fair trade from where I sit.
Next is a bill put forth by Pennsylvania Rep. Mary Gay Scanlon aimed at tackling the issue of data portability, called the “Augmenting Compatibility and Competition by Enabling Service Switching Act of 2021” (aka The ACCESS Act of 2021).
This bill would first require the entire Big Tech world to agree on how and what data is captured and stored, which will never happen. And yes, we love to say things like “put it in the cloud,” but this bill clearly displays a gap in understanding of how technology works and the amount of complexity it would take to successfully create data uniformity across Big Tech. The idea that a user can just pick up their data and move it to another platform is not only unrealistic but technologically problematic.
The other problem is that many of these services we use are free. We, in essence, are the product. Facebook and Google come to mind here. Their entire business model is to capture valuable data and monetize it.
I’m a fan of greater transparency of data usage and having Big Tech provide more rights to consumers to delete, update, remove and augment their own data. If the bill solved this issue, I would be more encouraged. Instead, this bill lacks the foundation to deal with the technical complexities to streamline data and would need to mandate ownership of data to the platform user, which would essentially destroy said platform’s business model.
Breaking up these platforms would also hurt the user experience that has been streamlined through acquisition and integration. Not a single platform would function better as a result of enforcement, which should be viewed as a clear negative for consumers.
The Last Two Bills
The fourth bill, the “Merger Filing Fee Modernization Act of 2021” introduced by Rep. Joe Neguse (D-Colo.), would increase premerger filing fees and boost funding for the Federal Trade Commission and Justice Department’s antitrust enforcement. It aims to set aside $670 million for antitrust efforts in just the government’s fiscal year that ends Sept. 30, 2022.
Frankly this bill is fine and potentially necessary. Having said that, I just don’t see it offering nearly enough resources to meaningfully regulate Big Tech—and certainly not enough to try regulating the other four bills.
The last of the five is the “Platform Competition and Opportunity Act,” introduced by Rep. Hakeem Jeffries (D-N.Y.) and designed to make it more difficult for Big Tech companies to acquire potential competitors or companies that could help their competitors position themselves better against them.
Under the bill, M&A involving large technology companies would be unlawful unless it could be shown that the company being acquired does not “compete with the covered platform or with the covered platform operator for the sale or provision of any product or service offered on or directly related to the covered platform” and does not “pose a potential competitive threat.”
There are two major problems with this sweeping bill. First, it would set a new and prejudicial standard against large technology companies that depend on the ability to acquire companies, technologies and IP portfolios to grow, expand into new markets and consolidate services around their customers and users’ needs.
Second, there is a massive startup ecosystem that generates some of the world’s most beloved and necessary innovation like mobile phones, streaming services, social media, fitness wearables and more. These companies are designed from day one is to go public or be acquired. Take the incentive out of innovation and you stifle competition and innovation rather than create it.
Summing up Efforts to Regulate Big Tech
I can almost appreciate what lawmakers are doing here in trying to appease a subset of constituents who think of Big Tech as the evil empire. However, I would recommend those folks put down their iPhone, close their Facebook account, put a book of maps in their car and get back to playing their favorite CDs on their car stereo.
Misguided antitrust regulation will severely harm consumers and competition. Lawmakers need to go back to the drawing board to create proposals that provide the ability to regulate Big Tech in a way that is effective and achievable.
Breaking up companies should always be a last resort and predicated on demonstrable harm to competition and or to consumers. These bills, should they become law, appear to seek permission to break up companies as a first resort, even if material harm to competition or to consumers is only hypothetical.
None seems to help protect, strengthen, or drive competition. They seem more intent on breaking up Big Tech on ideological grounds than on trying to address legitimate competition concerns.
If these bills pass as proposed, they will either be impossible to enforce or economically detrimental. Either way, we can’t put the genie back in the bottle, and a series of unreasonable and unenforceable bills that would give Congress, the Federal Trade Commission and the Justice Department more power to break up Big Tech isn’t the answer.
The original version of this article was first published on MarketWatch.
Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. From Big Data to IoT to Cloud Computing, Newman makes the connections between business, people and tech that are required for companies to benefit most from their technology projects, which leads to his ideas regularly being cited in CIO.Com, CIO Review and hundreds of other sites across the world. A 5x Best Selling Author including his most recent “Building Dragons: Digital Transformation in the Experience Economy,” Daniel is also a Forbes, Entrepreneur and Huffington Post Contributor. MBA and Graduate Adjunct Professor, Daniel Newman is a Chicago Native and his speaking takes him around the world each year as he shares his vision of the role technology will play in our future.