Tech companies under the microscope

Last week, the US House Judiciary Committee published the report on tech companies’ monopoly in the digital space that we had been expecting since the summer. The report argues in favor of reducing tech companies’ power and reexamining the way antitrust laws are understood. However, it does not show a way forward on how to implement those changes, reeling in the Big Four. What’s clear is that there’s a renewed interest in implementing antitrust measures in the United States, but first, we need to reassess what anti-competitive practices are.

As we have explained in previous posts, antitrust policies in the US were first designed in the late 1800s and implemented at the beginning of the 20th century (read Antitrust measures for the 21st century). At first, monopolies were understood to be harmful because they had too much political power, extolled higher prices, and crushed competitors. However, that perception changed over time. By the end of the 20th century, it was accepted that a monopoly should only be broken if it harmed the customer. Generally, this meant that the firms were manipulating prices. It is known as the consumer welfare standard. 

With the rise of tech companies and the digital economy, that standard should no longer be used as an antitrust baseline. Consumers do not pay with money to use social media platforms such as Facebook and search engines like Google. And they also pay a lower price for many products on Amazon. But that consumers are not paying with dollars does not mean that they are not paying at all. They pay with another currency: their data. We need Gmail to access Google services and Facebook to stay connected with our friends, and we use them because they are free (and on our phones). But in exchange, the tech moguls get all the personal information that willingly or perhaps unwillingly we give them: our locations, our network, our preferences, our searches, the most intimate desires that we have dared to type online. And with the current legislation it’s definitely hard to set control of data as the basis for an antitrust lawsuit.

However, measures are needed. A market dominated by tech companies does not only lead to less competition, but it also gives a group of individuals too much political power in terms of lobbying and controlling information. According to a Pew Research report from 2019, 55% of US adults get their news from social media—Google-owned YouTube, Facebook, Instagram, or Twitter. It’s also on social media where the fake news problems have gone viral, with the tech companies having to curate what’s true and what’s false sometimes effectively, others not so much. This gives tech monopolies more political and social power than we realize—especially those that most concern us and have to do with information (Facebook and Google). 

Other anti-competitive practices are also of concern, as reported by The Verge. In the report published on October 6, the committee analyzes each of the Big Four tech companies, listing some of their monopolistic abuses. For example, Amazon is accused of controlling the online retail market, something that the firm has long countered with the existing competition by brick and mortar stores such as Walmart. Still, if a small company wants to sell their products online, doing so on Amazon offers advantages versus using its own, probably unrecognizable, website. This poses a problem when the latter also has its own product lines that compete with other retailers. The solution presented by the report is to separate businesses and prevent the firm from entering more industries in which its monopoly could be established. In our opinion, it is the easiest monopoly on which to implement antitrust measures—retail is still a fairly traditional business. The report also criticized Apple, specifically its App Store. The company can charge firms a fee for using the App Store and has banished some of them from the store in the past. Those are anti-competitive practices, but it is hard to see how antitrust measures would affect Apple—will the company be forced to spinoff the app store as a separate business? 

For Facebook and Google—the information moguls—the implementation of antitrust measures could be even harder. The report analyzes how Facebook has grown—by acquiring other companies such as Instagram—to the point in which its quality has deteriorated, as it has no competitors. Competition, one concludes, leads to better products because companies must offer the best to keep their market share. Still, besides separating Facebook into multiple social apps, it’s hard to see what else could be done. Google’s monopoly is clear —it is the most popular search engine in the world. But it also may be the hardest one to untangle in the traditional antitrust way.

For that reason, there’s a need for a new understanding of what antitrust means, both on the baseline (consumer welfare) and the remedies (breaking up a company into different pieces). What that new understanding looks like is hard to say. But if the currency is data and the limits between a company’s different businesses are blurry, we cannot apply the same policies as we did with Standard Oil. However, the report does set a new standard with a comprehensive understanding of social media platforms. If Congress takes on the report’s conclusions, tech companies will start to be reeled in. How will that happen is yet to be seen.

To access the full report, click here.