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The House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law yesterday issued its long-anticipated report on competition in digital markets. The report from Democratic Subcommittee Chairman David Cicilline (RI) was accompanied by a second report from subcommittee member Ken Buck (R-CO) representing the views of his fellow Republicans on the subcommittee.
Both sides allege large Internet companies have engaged in anticompetitive actions that have harmed consumers and slowed innovation. But they largely differ on their proposed remedies. The majority report calls for breaking up big tech companies and other measures that would amount to an extreme makeover of current antitrust law. Indeed, the report appears to be based on a view that all industries are alike when it comes to ideal industrial structure, and that competition is the central goal of antitrust policy. For the majority, any industry that doesn’t have significant numbers of competitors is flawed and requires the antitrust hammer to break the firms apart. In contrast, the Buck report wisely recognizes that most innovation industries are naturally more concentrated than “widget” industries, and as such it cautions against such actions, advocating instead for beefed up oversight within the bounds of existing law, including further congressional hearings and larger budgets for regulators. The majority should seize this opportunity to take a deliberative, bipartisan approach to advancing the public interest instead of adopting drastic, ill-advised measures that would harm consumers and deter innovation.
Areas of Bipartisan Agreement
According to the Buck report, a few of the majority’s recommendations are likely to receive bipartisan support. Perhaps most notable would be to ensure that the government’s two antitrust enforcers, the Federal Trade Commission and the Justice Department’s Antitrust Division, have the necessary resources to adequately police market developments and take enforcement action when warranted. Americans benefit when firms compete and innovate. Many sectors of the economy display rapid innovation and great complexity. Regulators must have a strong understanding of how they work. The Buck report refers to “broad agreement” among members on this point.
The Buck report also supports increasing data portability between platforms. Like commentators, it points to the successful case of letting consumers keep their phone numbers when they switch phones. However, the report also notes that portability raises several implementation problems. For example, who has the responsibility of making sure different systems use common data platforms, or for ensuring data security? Assuming these issues are worked out, better portability could increase consumer welfare.
Finally, the Buck report supports shifting the burden of proof in some merger cases. Some have suggested lowering the thresholds for when dominant companies must notify regulators of a proposed merger or requiring companies to prove that a merger increases competition or innovation once the government has shown there are possible anticompetitive effects. Although the Buck report does not mention these options, it does express concern with the large number of past mergers. Such a modified review would be an improvement over current guidelines.
Areas for Further Investigation
The Buck report also mentions several areas in which further investigation by Congress and regulators may lead to bipartisan support. These are in areas where Republicans agree there is a potential problem but are wary of a return to a 1950’s style of antitrust that reflexively saw “big as bad” that would slow innovation, reduce productivity, or have other unintended consequences.
Most of these deal with acquisitions by the largest tech firms. The Buck report favors a better understanding of when a company uses market power in one area to enter other markets. Although the report mentions evidence of where companies have used market-dominant positions to expand into new business lines, it rightly warns against issuing new bright-line rules or creating a burdensome regulatory framework. Instead, it suggests studying cases further to gain a better understanding of whether the enforcement agencies are following congressional intent.
The Buck report also rightly raises concerns about applying the essential facilities doctrine to tech firms. Doing so could result in their being regulated as natural monopolies, which would likely slow innovation. The report instead advocates for ensuring that regulators have the necessary resources to expeditiously spot problems and order fixes. It expresses similar concerns with proposals that would restrict a company’s ability to modify its platform or overturn the recent Supreme Court decision in Ohio v. American Express Co, which required private plaintiffs to show that a policy harms all sides of a platform, rather than just one.
Overall, the report is right to express skepticism about dramatic changes to antitrust that could hurt innovation. The nation went down this path from the 1950s to 1970s, with serious harm to U.S. innovation and global competitiveness. These proposed changes now would include restrictions on future acquisitions, presumptively banning acquisitions that involve arbitrary market shares, and changing policy toward vertical mergers. In each of these, the Buck report seems to prefer further study by beefed-up enforcement agencies and congressional hearings.
Areas of Disagreement
Finally, the Buck report rightly expresses clear opposition to three proposals recommended by the majority. These include prohibiting firms from inserting arbitration clauses or limits on class actions suits in their terms of service, creating a regulatory framework that would force platforms to treat all companies equally, and reducing the evidentiary burdens on private antitrust plaintiffs. Again, the report defers to regulators to use existing law to make these calls.
The most important point of opposition, however, is to the majority’s effort to prevent large tech companies from both owning a platform and competing with other private companies on it. Recommendations for a new “Glass-Steagall” approach would force regulators to break up the largest companies, almost surely reducing, not increasing consumer welfare. The government has used this remedy only a few times in the past. Applying it to tech firms would outlaw practices that are both legal and common in offline retail markets. Allowing platform operators to offer their own products, as long as they do so in ways that do not unfairly discriminate against competitive sellers, provides consumers with lower prices and more choices. The report also is right to clearly oppose efforts to break up Big Tech firms, favoring “tailored and targeted” efforts instead.
The Way Forward
In contrast to the Buck report, the majority report contains a number of objectionable recommendations. The most extreme one calls for breaking up the largest companies by restricting them to specific businesses. Doing so would almost certainly harm consumer welfare by slowing innovation and reducing companies’ incentives to invest in new technologies such as artificial intelligence, automated vehicles, and broadband deployment. In part, these recommendations appear to come from a view of antitrust focused on protecting competitors, rather than competition and innovation. Over and over, the report discusses how some company lost market share because of fair and legitimate actions by a big tech competitor. Changing U.S. antitrust to protect competitors would be a major and negative step, taking us closer to the European approach, with deleterious consequences for innovation.
However, the majority report also contains a few recommendations that should get bipartisan support. As Rep. Buck stated: “Of the 350 pages, I’m agreeing with the majority in 330 pages. I think that’s historic.” These include giving regulators more resources and finding sensible approaches to data portability. They also include continued debate involving Congress and regulators about the proper application of antitrust law to America’s most innovative companies. Those believing, as ITIF does, that antitrust policy should be guided by a careful study of individual markets, guided by the desire to increase overall economic welfare, including innovation and competitiveness, should support these areas of tentative agreement.