June 25, 2021— Some of the votes were exceedingly close, but in a grueling markup Wednesday and Thursday, the House Judiciary Committee cleared six bills each designed to target the biggest tech companies by limiting what they can do.
The goal of the Democratic-led agenda? To rein in the power of Big Tech through new antitrust liability.
The package follows a 16-month investigation by Judiciary’s Antitrust Subcommittee, completed last year and scrutinizing the business practices of Amazon, Apple, Google, and Facebook. The final report accused the firms of charging high prices to competitors, forcing small customers into low-quality contracts, and acquiring smaller companies that posed a competitive threat.
While some of the measures have gained traction on both sides of the political spectrum, they have also divided both the Republican and Democratic members of the Judiciary Committee. The controversy will continue as the measure goes to the House floor, and – if passed – on to the Senate.
Broadband Breakfast examined each of the six measures voted on by the committee, and some ways that they might impact Big Tech’s business practices.
American Choice and Innovation Online Act, H.R. 3816
The American Choice and Innovation Online Act, H.R. 3816, introduced by subcommittee Chairman David Cicilline, D-Rhode Island, is in some ways the core of a five-bill package introduced by Democrats on June 11.
Referred in short-hand as the “non-discrimination” measure, it aims to limit how online marketplace arbiters operate their platforms by making it illegal for operators to favor their own products over those of competitors in the market that they operate.
Cicilline’s bill would bar designated platforms from sponsoring their own products, and nor could they discriminate against either the pricing of or access to competing services offered on the same marketplace.
The bill applies only to companies with more than 50 million users, 100,000 business users, or a market capitalization of more than $600 billion.
This would make it so that Apple, for example, could not favor their own applications over that of their competitor Google on their own App Store, and visa-versa on Google’s search engine.
Some experts believe this bill would put an end to pre-installed iPhone apps, YouTube results in Google searches, and would bar Google from displaying their own Google map’s service in Google searches.
The committee vote for the measure was 24 to 20.
Platform Competition and Opportunity Act, H.R. 3826
The Platform Competition and Opportunity Act, H.R. 3826, introduced by Rep. Hakeem Jeffries, D-New York, restricts mergers and acquisitions facilitated by “covered platforms” under the same designations as Cicilline’s non-discrimination measure.
The bill prevents designated Big Tech companies from acquiring or merging with other firms unless the firm can prove:
- The acquired assets don’t compete with the buying platform’s business.
- The acquisition does not cover a company that poses a potential competitor, presently or in the future.
- It doesn’t enhance the company’s market position.
- It doesn’t enhance the company’s ability to maintain its current market position.
The bill explicitly states that both consumer attention and collected data count as assets and must be considered when completing a merger of acquisition.
The committee vote for the measure was 23-18, with one Republican, Rep. Burgess Owens, voting “present.”
Ending Platform Monopolies Act, H.R. 3825
The Ending Platform Monopolies Act, H.R. 3825, introduced by Rep. Pramila Jayapal, D-Washington, is similar to Cicilline’s non-discrimination bill, except that instead of prohibiting online marketplace arbiters from promoting their products, it makes it illegal to sell their own product on a market they operate.
The most controversial of the package, this would allow federal regulators to sue to break up companies that both operate a dominant platform and sell their own goods or services on it, if the arrangement poses an “irreconcilable conflict of interest.”
This could potentially target company-branded products sold by Amazon, as well as making it easier to breakup Google and Facebook.
It also explicitly states that covered platforms cannot offer a product that users may purchase to receive “preferred status” on the platform’s marketplace. Consumer Technology Association CEO Gary Shaprio said that the package could put an end to Amazon Prime services.
Also weighing in was Computer and Communications Industry Association President Matt Schruers, who said, “These bills unreasonably target leading U.S. tech companies that have improved users’ experience with innovation, efficiency, and low-cost or free-to-the-user services. These bills would harm consumers and thousands of smaller businesses that use digital services to reach worldwide markets.”
The final of the six measures voted on, the committee vote for the measure was 21-20. Three representatives present for the markup did not vote, and were recorded as neither “aye,” “no” or “present”: Rep. Lucy McGath, D-Ga., Rep. Deborah Ross, D-N.C., and Owens.
Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act, H.R. 3849
The Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act, H.R. 3849, introduced by Rep. Mary Gay Scanlon, D-Pennsylvania, aims to promote competition amidst platforms by making it easier for consumers to leave the platform and take their data to competitors.
Currently, the massive amounts of data that platforms collect help secure user attention for longer periods of time is believed to make advertisers more likely to purchase advertising space on the platform. Because users interact with the content for longer periods, there is a greater chance they will interact with advertised products. Because younger, smaller firms don’t have access to the quantity of data big platforms do, it makes it difficult for them to compete at scale.
The ACCESS Act of 2021 would mandate that all covered platforms maintain a set of “transparent, third-party-accessible” interfaces that enables a secure transfer of data to another business at the user’s request.
The ACCESS Act would prohibit companies from altering the transfer interface without consent of the Federal Trade Commission unless a threat to a user’s security was imminent.
The committee vote for the measure was 25-19.
Merger Filing Fee Modernization Act, H.R. 3843
The Merger Filing Fee Modernization Act, H.R. 3843, introduced by Rep. Joe Neguse, D-Colorado, offers additional resources to the FTC and Department of Justice to police monopoly power, at no additional cost to taxpayers.
The bill amends Section 605 of Public Law 101-162, granting additional funding to the departments. It also increases funding year to year beginning in 2022, based upon the consumer price index and inflation rate.
The bill also increases the cost of pre-filing merger fees and slates it to increase year by year based on the inflation rate.
Although seen as the least controversial of the package, this first measure for the committee resulted in a spirited debate between committee Ranking Member Jim Jordan, R-Ohio, about whether Democrats were writing a blank check to the Biden White House on antitrust enforcement.
The committee vote for the measure was 29-12.
State Antitrust Enforcement Venue Act, H.R. 3460
A sixth antitrust measure also voted on in the markup had been previously introduced by subcommittee Ranking Member Ken Buck, R-Colorado. Buck’s two-page measure was introduced in May.
It would give state attorneys general control over which courts hear antitrust cases. It emerged after Google attempted to move a multistate antitrust suit against it from Texas federal court to a venue in its home state of California.
The committee vote for the measure was 34-7.
Former Federal Trade Commission Chairman Says Biden is Inappropriately Exhorting the Agency
Former Chairman William Kovacic said that Biden’s direction of the FTC raises expectations for the agency.
WASHINGTON, January 28, 2022 – A former Federal Trade Commission chairman criticized the Biden administration’s direction of the FTC to accomplish the president’s antitrust goals.
At a Wednesday forum of the Mercatus Institute, former FTC Chairman William Kovacic criticized Joe Biden’s “instruction, direction, and exhortation” to the FTC, which is an independent agency and not part of the executive branch.
In July, President Biden directed regulators to craft rules preventing manufacturers like Microsoft and Apple from restrict consumers’ ability to fix their own devices. After the FTC voted unanimously to increase its enforcement against “right to repair” restrictions, both Microsoft and Apple announced plans for consumers to repair their own products.
Kovacic said that Biden almost appears to have the attitude that he “gave [the FTC and DOJ] an assignment” to advance the Biden administration’s consumer protection goals.
Then imagining that he was arguing from the perspective of the Biden administration, Kovacic said Biden could argue that he gave the FTC “an assignment to work on those guidelines and an exhortation to the FTC to get the work done,” as opposed to specific marching orders on the topics.
Mismatched capabilities at the FTC
Kovacic, who served as a commissioner at the FTC beginning in 2006, and who chaired the agency from 2008 to 2009, said the FTC has a history of mismatching its commitments with its capabilities.
In developing consumer protection programs, currently a professor of law at George Washington University, said the FTC often fails to ask “basic questions about who would do it, how long it would take, how much it would cost, and whether or not the institution has the credibility or capacity” to administer successful programs.
Kovacic said that in order to achieve a successful regulatory agenda, there must be a “stability of perspectives” that will endure across administrations.
Policymakers should be mindful not to abandon the resistance from total regulatory overhaul that he said “afflicted” his predecessors as chairs of the agency.
“Everybody will step forward and say, ‘I have my list.’ I suspect the Commission already is getting a letter each day from members of Congress saying, ‘here’s another one.’”
Recalling the many prior presidents’ push for regulators to control petroleum prices – including by President Biden in November – Kovacic said the FTC can’t always deliver.
“Whenever there’s going to be a problem the new leadership, seen as competition policy superheroes, will be exhorted to do something, and it will not be an adequate response to say, ‘we’ve already got a lot on the agenda, we’ll get to it when we can.'”
Consolidation, Bloat, and a Waning American ‘Brand’ Hurt the Economy, Says Tim Wu
He argued that fundamental changes must be made to restore peoples’ faith in an American system that works for everyone.
WASHINGTON, January 26, 2022 –White House Special Assistant Tim Wu said Wednesday that the U.S. economy is over-consolidated and bloated in the middle.
Speaking at an event hosted by the Institute for Local Self-Reliance, Wu, a member of the National Economic Council with a portfolio over Technology and Competition Policy, argued that that the “American dream” has suffered major setbacks in recent decades.
Wu, who is credited with coining the term “net neutrality” and a longstanding critic of telecom monopolies, has more recently become an outspoken critic of big technology companies.
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“We can see very vividly how fragile this concentrated economic system we built has been and how poorly it is working for the whole country,” Wu said.
“Our country has become too centralized. It is too national in its character – in terms of where businesses are location – too centered on consumption, as opposed to production.
“Too many of the [economic] returns go to too few people who often live very far away from the communities they serve.”
Hearkening to the post-World War II decades in which Western nations endorsed significant government intervention in the economy as part of social democracy, Wu said that America is “relearning the virtues and merits of a mixed economy – that is the truer American tradition of small and medium business – market structures where [people] can all survive and prosper; what [President Joe Biden] calls ‘an economy that works for everyone.’”
Can elements of a new form of social democracy be revived in a technology-drenched age?
Wu distilled his criticisms to three primary points: Too many industries have become too consolidated, a bloated “middleman” economy has emerged, and the “American brand” has diminished.
“We have all seen so many industries consolidate into just the ‘big three’ or ‘big four,’” Wu said. “That is a traditional problem that I think extracts a lot from the economy.”
Wu went on to explain the “middleman” economy – a rise of a “highly concentrated middle layer” across many industries. This bloat on the processing end takes place somewhere between the inception of a product or service and the consumer is extracting too much revenue, Wu said.
“When you think about monopoly – which is just high prices – it leads to this problem where the middlemen have power over their suppliers and are able to squeeze their suppliers and also often able to squeeze their employees,” Wu said. This is “a new kind of problem for the economy, and one that we need to face.”
What is the ‘American brand’?
Wu’s final point related to what he referred to as the “American brand.”
“There has been a real sense that the sense of opportunity that has been the ‘American brand’ has diminished,” he said. “The statistics are a little depressing that confirm this.”
75 percent of U.S. industries are controlled by fewer companies than they were 20 years ago, Wu said. He pointed to mergers that skyrocketed in the 1980s and predicted that 2022 will feature a record number of mergers.
“These are real challenges and I just want to assure you that the administration of the White House is very focused on [them] and we see it not just in terms of the economy, but in terms of the Democratic soul of this nation,” Wu said. “Freedom and opportunity are not trivial things when it comes to describing what democracy is all about.
FTC Mum on Microsoft-Activision Deal, Proposes Review of Merger Guidelines
The deal would elevate Microsoft in an even more favorable position in the games-as-a-service market.
WASHINGTON, January 24, 2022 – As Federal Trade Commission Chairwoman Lina Khan does media rounds this past week, she has refused to comment on last week’s news that Microsoft has agreed to buy video game making giant Activision-Blizzard for nearly $70 billion.
As per policy, the FTC and the Department of Justice, which on Tuesday jointly held a press conference on merger reform on the same day of the announced consolidation, said they could not comment on the deal, which would increase the Xbox maker’s gaming market share and allow it to better compete with Japanese behemoth Sony.
During the press conference, Khan, installed as chairwoman in June as an already outspoken critic of certain big tech practices, announced that the organizations would be launching a review of merger guidelines. Khan stressed that the current guidelines do not adequately protect consumers and promote competition in the era of the digital economy.
“While the current merger boom has delivered massive fees for investment banks, evidence suggests that many Americans historically have washed out with diminished opportunity, higher prices, lower wages, and lagging innovation,” she said. “These facts invite us to assess how our merger policy tools can better equip us to discharge our statutory obligations and halt this trend.”
She reiterated those goals on a CNBC interview on Wednesday. The purchase of the highly influential Call of Duty franchise maker will have to go through her office. It also presents another stress test for the office, as it is already engaged in an existing lawsuit against Facebook practices. Both Facebook and Amazon have asked for Khan to be recused from investigations in their companies because of her past positions on them.
The deal would significantly expand Microsoft’s Game Pass platform, which offers free games to play for a monthly subscription. Microsoft announced on the day of the proposed deal that Game Pass surpassed 25 million subscriptions.
“Upon close, we will offer as many Activision Blizzard games as we can within Xbox Game Pass and PC Game Pass, both new titles and games from Activision Blizzard’s incredible catalog,” said Microsoft Gaming CEO Phil Spencer said in a statement.
Despite its numerous successful intellectual properties, Activision Blizzard has been marred with scandal in recent years. In 2021, the company was sued by California Department of Fair Employment and Housing for promoting a “frat boy” culture, whereby female employees were not only allegedly discriminated against, but also subjected to sexual assault and misconduct.
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