• The House Judiciary subcommittee on antitrust, commercial and administrative law released a major report on four companies: Apple, Amazon, Facebook and Google, saying that they all engaged in anti-competitive monopoly tactics
• Either via acquiring their competition, using self-preferencing tactics, or taking advantage of their massive stockpiles of consumer data, the report says that these companies have established and maintained dominance and have exploited their power to minimize competition. 
• The subcommittee has suggested sweeping antitrust reform in response to this, an action that is supported by Democrats but opposed by Republicans. 
• The companies have responded to this report, defending themselves and their practices. 

Findings in Subcommittee Report

The House Judiciary subcommittee on antitrust, commercial and administrative law released a lengthy report on Tuesday accusing Apple, Amazon, Facebook and Google of engaging in anti-competitive tactics to enjoy monopoly power in their respective arenas. 

The report was the result of a 16-month investigation into those companies and is around 450 pages long. The subcommittee has a Democratic majority and has suggested sweeping reform to antitrust laws as a result of their findings. 

During the investigation, the CEOs of each company gave testimonies about their business practices and the evidence suggesting that they have exploited their power in digital markets in abusive ways. The report says their answers were “often evasive and non-responsive, raising fresh questions about whether they believe they are beyond the reach of democratic oversight.”

While the report notes that each company is different, it concludes that their business practices all have the same issues and that each acts as a gatekeeper in key channels of distribution.

“By controlling access to markets, these giants can pick winners and losers throughout our economy,” the report says. “They not only wield tremendous power, but they also abuse it by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them.”

It also claims that these companies use their gatekeeper status to maintain their power by surveilling potential rivals so they can either buy them out, copy them, or cut out their competitive threats by other means. 

“Whether through self-preferencing, predatory pricing, or exclusionary conduct, the dominant platforms have exploited their power in order to become even more dominant,” the subcommittee wrote. 

“To put it simply, companies that once were scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons,” the report adds. “Although these firms have delivered clear benefits to society, the dominance of Amazon, Apple, Facebook, and Google has come at a price.”

Amazon and Facebook Acquisitions

The report says that Amazon got to the top by acquiring competitors, and now, the company’s control reaches across business lines “in ways that undermine free and fair competition.”

“As a result of Amazon’s dominance, other businesses are frequently beholden to Amazon for their success,” the report says. 

Much of the subcommittee’s findings with Amazon pertain to its relationship with its third-party sellers. There are 2.3 million active third-party sellers on the platform, 37% of which rely on Amazon for their sole source of income. While Amazon publicly calls their third party sellers “partners,” documents studied in the report reveal that behind closed doors they are referred to as “internal competitors.” The report says this creates an inherent conflict of interest in the company, which then incentives Amazon to exploit its access to competing seller’s data and information. 

The report also claims that Amazon’s ability to acquire so much of its competition has not only led to fewer consumer choices but has also reinforced its stockpile of consumer data. 

“Amazon is first and foremost a data company, they just happen to use it to sell stuff,” a former employee told the subcommittee. 

The report accused Facebook of similar acquisition and data exploitation tactics. 

“The company used its data advantage to create superior market intelligence to identify nascent competitive threats and then acquire, copy, or kill these firms,” the report says.

“In the absence of competition, Facebook’s quality has deteriorated over time, resulting in worse privacy protections for its users and a dramatic rise in misinformation on its platform.”

One of Facebook’s largest and most prominent acquisitions occurred back in 2012 when the social media giant absorbed Instagram. Instagram is now so massive that Facebook’s biggest competition is, in many ways, itself. A former Instagram employee said that the head of the app wanted Instagram to grow as widely as possible, which was discouraged by Facebook CEO Mark Zuckerberg, who did not want the photo-sharing app to compete with his social networking platform.

“It was collusion, but within an internal monopoly,” the employee said. “If you own two social media utilities, they should not be allowed to shore each other up. It’s unclear to me why this should not be illegal. You can collude by acquiring a company.”

Self-Preferencing at Apple and Google 

When it came to Apple, much of the subcommittee’s findings had to do with the App Store. The report said that while the company’s ecosystem has “significant benefits” for both app developers and customers, the company still functions on an extreme and controlling bias. This control creates barriers for competition and allows Apple to discriminate against rivals so it can promote its own apps.

“Apple also uses its power to exploit app developers through misappropriation of competitively sensitive information and to charge app developers supra-competitive prices within the App Store,” the subcommittee said. 

When it comes to Google, the report says that small businesses, entrepreneurs and major corporations alike depend on the web giant for traffic and have no alternate search engine to adequately serve as a substitute. The report accuses Google of conducting an “an aggressive campaign to undermine vertical search providers, which Google viewed as a significant threat.”

“Google appears to be siphoning off traffic from the rest of the web, while entities seeking to reach users must pay Google steadily increasing sums for ads. Numerous market participants analogized Google to a gatekeeper that is extorting users for access to its critical distribution channel, even as its search page shows users less relevant results,” the report says. 

The report also says that Google uses anti-competitive contracts. For example after buying the Android operating system, Google used contractual restrictions so that Google’s monopoly could extend beyond desktop to mobile. Those contracts required Google apps to be pre-installed or given default status. 

Congressional Suggestions

As a result of these findings, the subcommittee said that there is a “pressing need for legislative action and reform.” The report then laid out extensive and detailed suggestions, which would lead to some of the most sweeping antitrust laws against these tech giants. Those reforms include addressing anti-competitive conduct in digital markets, strengthening merger and monopolization enforcement, and improving the sound administration of the antitrust laws.

The report listed out dozens of potential policies to that could be in this kind of legislation, including enacting nondiscrimination requirements that would prevent these companies from favoring their products and boosting them ahead of rivals; a presumptive prohibition against future mergers and acquisitions by the dominant platforms; reasserting the anti-monopoly goals of the antitrust laws and their centrality to ensuring a healthy and vibrant democracy; and restoring congressional oversight of antitrust laws and bringing federal antitrust agencies to their full strength.

These recommendations come from House Democrats and are not fully supported by Republicans. While many on the right oppose much of what the Democrats have put on the table when it comes to this, some see it as a starting point for negotiations.

Company Responses

The tech companies, for their part, are all on the defense when it comes to the report’s findings and suggestions. All four are advocating against any legislation that would limit their practices and maintaining that none of their behavior has been anti-competitive. Now, as far as what these companies are saying, well they all seem to be on the defense. 

“All large organizations attract the attention of regulators, and we welcome that scrutiny. But large companies are not dominant by definition, and the presumption that success can only be the result of anti-competitive behavior is simply wrong,” Amazon said in a blog post. 

Facebook told CNBC that the company is an American success story with plenty of competition. 

“Acquisitions are part of every industry, and just one way we innovate new technologies to deliver more value to people. Instagram and WhatsApp have reached new heights of success because Facebook has invested billions in those businesses,” the company added. 

Apple released a statement with similar messaging to that of Amazon and Facebook.

“We have always said that scrutiny is reasonable and appropriate but we vehemently disagree with the conclusions reached in this staff report with respect to Apple,” the company said.

“We’ve built the App Store to be a safe and trusted place for users to discover and download apps and a supportive way for developers to create and sell apps globally.”

Google also put out a blog post addressing the report, saying that the suggestions laid in it are not best for the American people. 

“Americans simply don’t want Congress to break Google’s products or harm the free services they use  every day,” Google wrote. “The goal of antitrust law is to protect consumers, not help commercial rivals.”

See what others are saying: (CNBC) (New York Times) (Washington Post)