After years of being admonished by Washington lawmakers over how they run their business, Big Tech executives at Amazon (AMZN), Apple (AAPL), Facebook (FB) and Alphabet’s (GOOGL) Google now face a dogpile from Washington lawmakers in ways unlike ever before.
The pressure on Big Tech intensified in mid-June when the House Judiciary Committee began reviewing a package of six antitrust bills. The result could be the largest expansion of U.S. antitrust powers in generations.
Collectively, the bills cover a wide range of territory and are written in ways that specifically target Amazon, Apple, Facebook, Google. However, Microsoft (MSFT) also could be affected.
It comes as a coalition of activists and lawmakers and scholars, for years, has castigated Big Tech over their market dominance. This includes a lack of privacy and failure to control the spread of online misinformation.
U.S. Rep. Jerrold Nadler, D-N.Y., the Democratic chairman of the House Judiciary Committee, recently called the six antitrust bills a “historic package of bipartisan legislation” aimed at “reining in anticompetitive abuses of the most dominant firms online.”
Court Rules In Favor Of Facebook
But forcing Big Tech firms to fundamentally change how they operate is no easy task, as was demonstrated by a court ruling in favor of Facebook last week.
A U.S. District judge dismissed two antitrust lawsuits against the social media giant. One was by the Federal Trade Commission, the other a parallel suit brought by 48 state attorneys general, alleging anticompetitive practices.
The lawsuits, filed in December, alleged that Facebook’s acquisition of Instagram and messaging service WhatsApp created a monopoly and showed a pattern of behavior to neutralize competitive threats.
However, the court ruled that the FTC failed to prove its main contention that Facebook holds monopoly power in the social networking market. The court also said the plaintiffs can amend their suits and refile them.
The rulings show just how tough it will be for regulators at the FTC and the Justice Department to make their charges of tech malfeasance stick.
Big Tech: From Underground To Startups To Monopolies
The recent flurry of activity follows a 16-month investigation by the House Judiciary Committee into competition in digital markets. The panel has held seven separate hearings.
This included testimony from outgoing Amazon Chief Executive Jeff Bezos, Apple CEO Tim Cook, Facebook CEO Mark Zuckerberg, and Alphabet CEO Sundar Pichai. The investigation culminated with a 449-page report delivered in November that examined the dominance of Big Tech.
“To put it simply,” the report said, “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 six bills affect just a handful of large companies. They apply to companies that have a market capitalization of $600 billion or more and at least 50 million monthly active users or 100,000 monthly active U.S. business users.
That’s most clearly Apple, Amazon, Facebook and Google. Some aspects of the bills could also apply to Microsoft.
Among other things, the legislation would prevent Big Tech from favoring their own products on their platform. It would require their services be interoperable. It also allows consumers the ability to take their digital history to other websites.
Chilling The Creation Of New Jobs
Another measure would force Big Tech to divest some lines of business if there is a conflict of interest. They also make it harder for the tech giants to acquire venture capital-backed startup companies. That provision has drawn the opposition of the National Venture Capital Association.
“If acquisitions are made more difficult it will chill the creation of new high-growth companies that produce new American jobs,” NVCA CEO Bobby Franklin said in a written statement.
The most common way venture capitalists cash out their investments in promising young companies is through an acquisition. It’s far more common than an initial public offering.
Trade groups, think tanks and lobbyists paid by tech companies have lashed out at the legislation. They argue that it will diminish consumer choice, slow innovation, hurt small businesses and present other dire consequences.
For one, the bills target Amazon’s relationship with third-party sellers. They also target Apple and Google in the way they manage their app stores as well.
Further, it would be illegal for Google to own another business that relied heavily on online search. In other words, it could require Google to spin off YouTube if the streaming video site received preferable treatment over competitors.
European Pressure On Big Tech
Big Tech already faces increasingly hostile attacks from the European Union. They are taxing profits, issuing fines, attempting to halt acquisitions and passing laws to limit their powers.
For example, Europe has proposed the Digital Services Act, which focuses on content moderation and taking down social media posts.
That is something U.S. lawmakers are focusing on with plans to rewrite Section 230 of the Communications Decency Act.
Written and passed in 1996, the legislation largely shields tech companies from liability for what users post. This bill is separate from the six that were recently introduced in the House.
Events over the past year, such as the banning of Donald Trump by Facebook, Twitter and other social media websites elevated concerns over whether the protections and power granted internet companies under Section 230 give them an overabundance of control over free speech.
Google vice president of government affairs, Mark Isakowitz, urged Congress to slow down and give the legislation more thoughtful consideration.
A Loss Of Important Features
“The bills would require us to degrade our services and prevent us from offering important features used by hundreds of millions of Americans,” he said in a written statement. “American consumers and small businesses would be shocked at how these bills would break many of their favorite services.”
Brian Huseman, Amazon vice president of public policy, also warned of “significant negative effects” on users and businesses that sell on its e-commerce platform.
Facebook issued a statement saying any legislation should promote competition and not punish successful companies.
“These bills underestimate the unrelenting competition within the tech sector, including competition from foreign companies such as TikTok, WeChat, and Alibaba,” Facebook said in written remarks. “The proposed bills are not a solution to the ever-changing challenges of the consumer internet. The bills are a poison pill for America’s tech industry at a time our economy can least afford it.”
Differing Views On Antitrust Proposals
The ranks of both Democrats and Republicans showed splits on the proposals. Moderate Democrats raised questions about the breadth of the bills and their impact on innovation.
A handful of Republicans have joined Democrats in backing the proposals. However, many GOP members say the bills fail to address the party’s biggest beef with tech. That’s the alleged censorship of conservatives’ speech.
The introduction of these bills begins a long legislative process. Each bill has Democratic and Republican co-sponsors. Also, each has sparked opposition or concern from members of both political parties. The House has some bipartisan support. But there does not seem to be a clear path in the Senate.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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