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Antitrust

American Antitrust Institute Experts Concur That Breaking Up Big Tech Is Hard to Do

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WASHINGTON, June 20, 2019 — Talking tough against Silicon Valley may be popular. But breaking up big tech will be hard to do.

That, at least, was one of the key messages coming from the American Antitrust Institute’s annual conference here on Thursday.

While progressives and populists are resurgent in the public eye, it isn’t going to be easy to take apart the tech giants, said Andrew Gavil, a noted antitrust law professor at Howard University.

The widespread calls for breakup ignore huge legal hurdles and dramatic societal implications from such a move.

Gavil expressed skepticism about the legal practicalities of plans to break up tech companies with antitrust laws, comparing such a move to the lawsuit brought against Microsoft in 1998.

The case against Microsoft wasn’t particularly driven by popular sentiment, although that might be a difference in any new cases against the tech giants two decades later.

Keynoting the event was House Judiciary Antitrust Subcommittee Chairman David Cicilline, D-R.I. Although Cicilline said he didn’t know what a recently announced bipartisan investigation into the tech sector would find, he did emphasize the urgency in confronting big tech.

Recalling the widespread anger and hostility to John D. Rockefeller’s Standard Oil and other so-called “trusts” in the early 1900s, Cicilline said, “Today, we are in a similar moment.”

The judges in the Microsoft case showed the limits of populist-driven antitrust

But that popular anger against big tech – if it even exists – might not be enough to break any of them up.

Gavil particularly emphasized how difficult it was to take down a giant and bully like Microsoft – even after a multi-year investigation and a months-long trial.

The late District Court Judge Thomas Penfield Jackson ruled in June 2000 that Microsoft should be broken into two separate companies, one producing the Windows operating system and one producing other software and web properties.

However, following the appeal, the D.C. Circuit Court of Appeals overturned divestiture in June 2001. They still held Microsoft liable for antitrust violations and subjected it to several behavior remedies. But Microsoft was ultimately allowed to stay together.

The fact that big tech companies have grown to their current success primarily because of consumer satisfaction and value makes it unlikely that a judge would rule in favor of such a sweeping antitrust action, Gavil said.

Antitrust cases might be more successful in some cases than others. New York University Law Professor Scott Hemphill emphasized the importance of proposing a remedy to match the harm, suggesting that in Microsoft’s case, a breakup did not make sense.

Out of all the big tech companies currently under scrutiny, lawmakers might have the most success in breaking up Facebook. According to Hemphill, unwinding the acquisition of Instagram and WhatsApp would be straightforward and standard, especially relative to what is being proposed for the other companies.

In such a case against Facebook, the remedy of a breakup would match the harm of a lack of competition, he said.

Going after Google would be much more complex that unwinding Facebook/Instagram

By contrast, tackling Google would be much more complex.

Georgetown Law Professor Howard Shelanski recommended proceeding with extraordinary caution before attempting to break up the big tech companies.

Why? He said that the cure could be much worse than the ill. Any divestiture—even one that seems like a natural undoing—could easily become complicated because the technology has evolved so rapidly.

Moreover, judging by the terms of traditional antitrust enforcement over the past 35 years, it’s hard to immediately see a detriment to consumers from these acquisitions.

Instagram and WhatsApp are both still free: Instagram has a 4.8-star average from more than 12 million ratings on Apple’s app store, and WhatsApp follows close behind with 4.7 stars and almost 5 million ratings.

Moreover, when Facebook purchased Instagram in 2012, the latter platform only had 30 million users. On June 20, 2018, Instagram announced that it had reached 1 billion users worldwide.

Although Facebook has come in for considerable fire over the issues of privacy, the tech giant also helped to elevate the stature of these platforms, said panelists. That has resulted in significant consumer satisfaction. Indeed, 72 percent of Americans actively use social media, the majority of them on a daily basis.

There is simply no way of knowing how the market will respond to undoing the acquisition and all the side effects that such an action may have, said Shelanski.

Politicians go after Silicon Valley as paradigms begin to shift

That hasn’t stopped politicians and presidential candidates – on the left and the right – from gunning for the biggest Silicon Valley giants.

Sen. Elizabeth Warren, D-Mass., has been especially vocal about her plan to break up big tech, which includes undoing previous mergers such as Google and YouTube, Facebook and Instagram, and Amazon and Whole Foods.

Republican senators have jumped on the anti-big-tech bandwagon as well. In April, Sen. Ted Cruz, R-Texas, suggested using antitrust enforcement to take down powerful tech companies. On Wednesday Sen. Josh Hawley, R-Mo., introduced a bill that would strip significant immunity protections from the biggest tech platforms.

But finding a solution to the potential harms of detriments of information technology players will require some paradigm shifting. Indeed, the country would need to completely redefine the way it thinks about monopolies, said Shelanski.

He referred to an informal threshold of seeing 65 to 70 percent of market share as being necessary to have exercise a presumption of monopoly power.

That, he said, is a “bizarre threshold to overcome,” Particularly where in certain markets, just 30 percent of market shares could act as a monopoly.

In  1961, the United States sued Brown Shoe Company for antitrust violations after the company purchased its competitor Kinney, ultimately ordering Brown to completely divest all new assets within 90 days based on the Clayton Act’s prohibition of any acquisition where the effect “may be substantially to lessen competition, or to tend to create a monopoly.”

In a unanimous decision, the Supreme Court emphasized the word “may,” pointing out that the concern was “with probabilities, not certainties” and therefore mergers with even just a “probable anticompetitive effect” could be prosecuted under the Act.

This decision is especially surprising today when considered in light of the fact that Brown Shoe and Kinney only owned about 7 percent of U.S. retail shoe stores, combined.

Google has more than 90 percent of search; Facebook owns more than 70 percent of social

By contrast, said Cicilline, Google controls more than 90 percent of search engines and Facebook accounts for over 70 percent of social networking sites.

Cicilline, whose official title is chairman of the House Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law, earlier this month announced that his subcommittee would conduct a bipartisan investigation “to document whether dominant market participants are exercising their market power in anticompetitive ways and to assess whether our existing laws and current enforcement levels are adequate to address these problems.”

Over the next several months, he said, the investigation will complete a thorough review of online markets through a hearings, information requests, and discussions with key stakeholders and policy experts.

Cicilline said that he didn’t have preconceived ideas about what the investigation could find or what the ultimate answer to big tech should be.

(Photo of House Judiciary Antitrust Subcommittee David Cicilline, D-R.I., by Emily McPhie.)

Antitrust

Federal Trade Commission Will Likely Not Be Able to Implement Competition Rules, Panelists Say

Panelists at TechFreedom event said judiciary will prevent the FTC from developing proposed antitrust policies.

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Photo of Peter Wallison from C-SPAN

WASHINGTON, October 22, 2021 –The Federal Trade Commission’s attempts to use rulemaking authority to issue antitrust policy governing technology companies will be struck down in federal courts, said panelists participating in a TechFreedom event on Thursday.

Recently formed conservative majorities on the Supreme Court and other panels have expressed opposition to the idea that the FTC possesses such rulemaking authority, these panelists said.

Hence, unlike past supreme courts, they current bench is likely to strike down FTC-issued binding rules.

Panelists highlighted former President Donald Trump appointees Brett Kavanaugh and Neil Gorsuch as justices who have opposed legal reasoning often used to permit FTC rulemaking.

Indeed, some panelists said early 20th Century legislation governing the FTC makes the case that the agency was created as an investigative body rather than a regulatory one.

Peter Wallison, senior fellow emeritus at the American Enterprise Institute, said that between five and six Supreme Court justices would ultimately vote to weaken precedents that allow for FTC rulemaking.

The Judiciary Committee of the House of Representatives recently advanced six antitrust bills that attempt to regulate the tech industry and foster greater competition, including the Ending Platform Monopolies Act and the Platform Competition and Opportunity Act.

FTC rules have taken on increased importance in terms of economic regulation due to the frequent inability of Congress to pass major legislation due to partisan gridlock. The FTC has proposed new procedures to ensure competition since Lina Khan was appointed as chair.

However, NERA Economic Consulting on Wednesday concluded that legislative proposals to regulate competition would impose costs of around $300 billion while impacting 13 additional American companies in the near term and more than 100 companies in the next decade.

Study author Christian Dippon contends that the legislation would limit American startup growth and international competitiveness while at the same time increasing costs for Americans.

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Antitrust

Public Interest Groups Urge Passage of Six Antitrust Bills Targeting Big Tech

Nearly 60 public interest groups signed a letter to House leaders to call a vote on six antitrust bills.

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WASHINGTON, September 2, 2021 – Nearly 60 public interest groups signed a letter Thursday urging the House party leaders to push for a vote on six antirust bills that cleared the House judiciary committee in June.

The goal of the six bills is to rein in the power of Big Tech through new antirust liability provisions, including new merger and acquisition review, measures to prevent anticompetitive activity, and providing government enforcers more power to break-up or separate big businesses. They include American Choice and Innovation Online Act, H.R. 3816, Platform Competition and Opportunity Act, H.R. 3826, Ending Platform Monopolies Act, H.R. 3825, Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act, H.R. 3849, Merger Filing Fee Modernization Act, H.R. 3843, and State Antitrust Enforcement Venue Act, H.R. 3460.

The letter, which was directed at House Speaker Nancy Pelosi, D-California, and House Minority Leader Kevin McCarthy, R-California, were promoting a package of six bills that were the result of a two-year bipartisan investigation that included 10 hearings, featuring the testimony of the CEOs of the major tech companies, 240 interviews, 1.3 million documents and a 450-page report, the letter notes.

“We believe that these bills will bring urgently needed change and accountability to these companies and an industry that most Americans agree is already doing great harm to our democracy,” the letter said. Public Citizen was the first of the 58 groups on the letter.

America has a monopoly problem. Monopoly power lowers wages, reduces innovation and entrepreneurship, exacerbates income and regional inequality, undermines the free press and access to information, and perpetuates toxic systems of racial, gender, and class dominance,” the letter alleged.

“Big Tech monopolies are at the center of many of these problems,” it continued. “Reining in these companies is an essential first step to reverse the damage of concentrated corporate power throughout our economy. The bills that passed out of the House Judiciary Committee, with bipartisan support, do just that and it is imperative that they move forward in the House.”

List of signatories:

  • Public Citizen
  • Accountable Tech
  • Action Center on Race & the Economy
  • ALIGN: The Alliance for a Greater New York
  • Alliance for Pharmacy Compounding
  • American Booksellers Association
  • American Family Voices
  • American Independent Business Alliance
  • American Specialty Toy Retailing Association
  • Artist Rights Alliance
  • Athena
  • Cambridge Local First
  • Center for American Progress
  • Center for Digital Democracy
  • Center for Popular Democracy
  • Committee to Support the Antitrust Laws
  • Decode Democracy
  • Demos
  • Electronic Frontier Foundation
  • Friends of the Earth
  • Future of Music Coalition
  • Gig Workers Rising
  • Global Exchange
  • Indivisible Georgia Coalition
  • Indivisible Hawaii
  • Indivisible Ulster/NY19
  • Institute for Local Self-Reliance
  • International Brotherhood of Teamsters
  • Jobs With Justice
  • Kairos Action
  • Local First Arizona
  • Louisville Independent Business Alliance
  • Main Street Alliance
  • Mainers for Accountable Leadership
  • Media Alliance
  • Metropolitan Washington Council, AFL-CIO
  • National Employment Law Project
  • New York Communities For Change
  • New York Communities for Change
  • North American Hardware and Paint Association
  • Open Markets Institute
  • Our Revolution
  • PowerSwitch Action
  • Public Knowledge
  • Running Industry Association
  • Secure Elections Network
  • Service Employees International Union
  • Shop Local Raleigh/Greater Raleigh Merchants Association
  • SIMBA (Spokane Independent Metro Business Alliance)
  • Small Business Rising
  • Stand Up Nashville
  • StayLocal, an initiative of Urban Conservancy
  • Strategic Organizing Center
  • SumOfUs
  • The Democratic Coalition
  • UltraViolet
  • Venice Resistance
  • Warehouse workers for justice

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Antitrust

FTC Commissioner Phillips Warns About Shifting Direction of Agency

Noah Phillips voiced concern about the scope and practices of the Biden administration’s FTC.

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FTC Commissioner Noah Phillips

WASHINGTON, September 2, 2021 — Federal Trade Commissioner Noah Phillips said at a Hudson Institute webinar on Monday that he’s concerned about the direction the competition watchdog is moving toward considering recent events.

Phillips said the left-leaning voices in Washington and the appointment of Lina Khan to chair the agency has left him wondering about the legacy of the last 40 years of competition regulation in America – which have been hallmarked by the Hart-Scott-Rodino Antitrust Improvements Act of 1976. That legislation effectively gave the FTC the ability to review mergers and acquisitions before they were finalized, rather than afterward, which governed pre-legislation.

Under Biden-appointee Lina Khan, Phillips described how the FTC has done away with the process of early termination. In the past, this process made it unnecessary for every single company to provide advanced notice and advanced approval for mergers. “Historically, parties have been able to come to the agencies and say, ‘You’re not interested in this, can we just go ahead and finish our deal,’ and the agencies have said ‘yes.’”

He said this is no longer the case, and that every single merger must provide advanced notice and approval. “What we’re introducing is an inefficiency in the market for transactions that we have no interest in pursuing, just for the sake of it. I think that’s a problem,” he continued. “My concern is that it is making merger enforcement less effective, less efficient, and less fair.”

Phillips pointed to left-of-center and leftist voices in Congress, such as Rep. David Cicilline, D-New York, Sen. Elizabeth Warren, D-Massachusetts, and Rep. Alexandria Ocasio-Cortez, D-New York, who, at the outset of the pandemic, wanted to ban all acquisitions and mergers—regardless of their merit. He described this view as falling outside of mainstream perspectives, but noteworthy nonetheless.

“I don’t think that is what most people believe,” Phillips remarked. “I don’t think that is what Hart-Scott-Rodino envisions.”

This webinar took place only a couple of weeks after Phillips spoke at the Technology Policy Institute’s 2021 Aspen Forum, where he voiced similar concerns, stating that he feared that this new direction would make it more difficult for the FTC to hear cases that it should, and defended the commission’s record against critics who said it was lax under the Trump Administration.

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