That was the message antitrust experts delivered on Tuesday at an Information, Technology and Innovation Foundation panel on the FTC’s lawsuit against the online retailer in U.S. District Court in Seattle, Washington.

The agency’s complaint argues that the Amazon exerts unlawful monopoly power by forcing third party sellers to fulfill orders on Amazon and by preventing third parties selling products on Amazon from charging lower prices on other platforms.

The first policy coerces third-parties to fulfill orders on Amazon in order to get the e-commerce giant’s premium two-day shipping, the FTC has argued.

The second policy, dubbed anti-discounting, can be used as a form of price control despite having pro-competitive benefits like discouraging free riding and encouraging investment, said Kathleen Bradish, president of the Antitrust Institute.

Because Amazon requires merchants to maintain a price point on its marketplace, it can create barriers to entry when other marketplaces cannot attract merchants to sell their products at a lower price, she said.

A debate about anti-discounting

Steve Salop, professor of antitrust law at Georgetown University, added that “what Amazon does is it has algorithms that scrape all the relevant websites and if it discovers that the merchant’s product is being sold at a lower price anywhere else it contacts the merchant and says [that it has to] lower the price to [Amazon] or raise the price to” the consumer.

Herb Hovenkamp, an antitrust professor at the University of Pennsylvania, said that anti-discounting policies “only work on a product-by-product basis.”

When you look at each product Amazon sells, there may not be anticompetitive power impacting each product, said Hovenkamp.

Amazon sells almost 12 million products on their e-commerce site and its individual market shares for all those products varies, he said. That means it is hard to argue that Amazon holds a monopoly for every product it  sells.

Hovenkamp noted that while Amazon may succeed in areas such as streaming – which has no offline alternative – it struggles in “markets like try on clothing, tires, groceries…. Product by product, the question of how much competition Amazon faces from offline sellers varies immensely,” he said.

Bilal Sayyed, senior competition counsel at TechFreedom, a non-profit tech policy group, echoed this point: Anti-discounting policies can have anti-competitive consequences, but that they can also have pro-competitive benefits.

Sellers may not switch to other fulfillment companies because it does not make sense to do so given the “scale that Amazon has,” Bradish said, even if they prefer to use another e-commerce platform. But she acknowledged that having witnesses testify that those policies have impacted their behavior could favor the FTC’s point.

The role of Amazon’s fulfilment services

Amazon’s fulfillment services apply to several products it sells. But the FTC will need to demonstrate that monopoly prices are a result of those fulfillment services, said Hovenkamp.

“The hard part is going to be for the FTC to convince the fact finder that that’s a grouping of sales that’s capable of sustaining a monopoly markup,” he added. “It may be able to do that.”

While a large-scale operation like Amazon might have a cost advantage with fulfillment services, monopoly power will have to be determined by a finding of fact, he said.

By contrast, Sayyed argued that there is a clear pro-competitive justification for sellers using Amazon’s fulfillment services. That comes from the company’s reputation for quickly delivering goods to consumers.

“This idea that parties should be able to take advantage of the platform and the Amazon brand, but then [sell] their merchandise [through] a third party that may or may not meet the same fulfillment and delivery standards, really strikes me as very dangerous ground for the agency” to argue, said Sayyed.

“We’re really firing on all cylinders to make sure that we’re meeting the moment and the enormous and urgent need for robust and vigorous enforcement,” Lina Khan said at the AI and Tech Summit hosted by Politico on Wednesday.

Khan emphasized that the FTC’s statute on consumer protection “prohibits unfair deceptive practices” and that provision extends to AI development.

The comments come as artificial intelligence products advance at a brisk pace. The advent of new chat bots – such as those from OpenAI and Google that are driven by the latest advances in large language models – has meant individuals can use AI to create content from basic text prompts.

Khan stated that working with Congress to administer “more simplicity in rules” to all businesses and market participants could promote a more equal playing field for competitors.

“It’s no secret that there are defendants that are pushing certain arguments about the FTC’s authority,” Khan said. “Historically we’ve seen that the rules that are most successful oftentimes are ones that are clear and that are simple and so a regime where you have bright line rules about what practices are permitted, what practices are prohibited, I think could provide a lot more clarity and also be much more administrable.”

Khan’s comments came the day before the agency and 17 states filed an antitrust lawsuit against Amazon, which is accusing the e-commerce giant of utilizing anticompetitive practices and unfair strategies to sustain its supremacy in the space.

“Obviously we don’t take on these cases lightly,” Khan said. “They are very resource intensive for us and so we think it’s a worthwhile use of those resources given just the significance of this market, the significance of online commerce, and the degree to which the public is being harmed and being deprived of the benefits of competition.”

Since being sworn in 2021, Khan’s FTC has filed antitrust lawsuits against tech giants Meta, Microsoft, and X, formerly known as Twitter.

The hearing of the Innovation, Data and Commerce Subcommittee showcased sharp partisan tension over Chair Lina Khan’s aggressive approach to antitrust — heightened by the fact that both Republican seats on the five-member agency remain vacant.

Khan, alongside Democratic Commissioners Rebecca Slaughter and Alvaro Bedoya, argued that the $160 million budget increase was necessary for maintaining existing enforcement efforts as well as “activating additional authorities that Congress has given us.”

But Republican lawmakers seemed unwilling to grant the requested funds, which would bring the agency’s total annual budget to $590 million.

“You seem to be squandering away the resources that we currently give you in favor of pursuing unprecedented progressive legal theories,” said Subcommittee Chair Gus Bilirakis, R-Fla.

“What is clearly needed — before Congress considers any new authorities or funding — are reforms, more guardrails and increased transparency to ensure you are accountable to the American people,” said Rep. Cathy McMorris Rodgers, R-Wash., chair of the Energy and Commerce Committee.

Rep. Frank Pallone, D-N.J., ranking member of the full committee, defended the funding request by saying the FTC has “one of the broadest purviews of any federal agency: fighting deceptive and unfair business practices and anti-competitive conduct across the entire economy.”

“Managing this portfolio with less than fourteen hundred employees is no small feat,” Pallone said, noting that the FTC currently has fewer employees than it did 45 years ago.

FTC highlights potential AI threats, other tech developments

FTC staff and Democratic lawmakers have been flagging concerns about understaffing at the agency for years, arguing that rapid technological and market changes have increased the scope and complexity of the agency’s role.

“The same lawyers who ensure that social media companies have robust privacy and data security programs are making sure labels on bed linens are correct,” testified former Chief Technologist Ashkan Soltani at a Senate hearing in 2021.

In their written testimony, commissioners detailed several emerging priorities related to technological developments — such as combatting online harms to children and protecting sensitive consumer data shared with health websites — and emphasized the corresponding need for increased resources.

The agency is also preparing to pursue violations related to artificial intelligence technologies, Khan said, as the “turbocharging of fraud and scams that could be enabled by these tools are a serious concern.”

But several tech-focused trade groups, including the Computer & Communications Industry Association, have signaled opposition to FTC expansion.

“The FTC can best carry out its mission if it heeds the committee’s call to return its focus to consumer needs and consumer fraud — rather than pursuing cases rooted in novel theories against American companies,” CCIA President Matt Schruers said after the hearing.

The Consumer Technology Association urged lawmakers to reject the requested budget increase in a letter sent Friday.

“In 2022, agency data shows consumers reported losing almost $8.8 billion to scams… Despite this mounting caseload of fraud, identity theft and related cases, the FTC appears more interested in attacking U.S. tech companies, to the detriment of consumers who have benefitted from an unparalleled explosion of innovative, online-based products and services,” CTA President Gary Shapiro wrote.

“The pace at which we can think and adapt as societal institutions compared to the pace at which the technology’s evolving — there seems to be a mismatch,” Pichai said in an interview with CBS News.

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Widespread AI applications could lead to a dramatic uptick in online disinformation, as it becomes increasingly easy to create and spread fake news, images and videos, Pichai warned.

Google recently released a series of recommendations for regulating AI, advocating for “a sectoral approach that builds on existing regulation” and cautioning against “over-reliance on human oversight as a solution to AI issues.”

But the directive also noted that “while self-regulation is vital, it is not enough.”

Pichai emphasized this point, calling for broad multisector collaboration to best determine the shape of AI regulation.

“The development of this needs to include not just engineers, but social scientists, ethicists, philosophers and so on,” he said. “And I think these are all things society needs to figure out as we move along — it’s not for a company to decide.”

Republicans call to ban members of Congress from personal TikTok use

A group of Republican lawmakers on Monday urged the House and Senate rules committees to ban members of Congress from using TikTok, citing national security risks and the need to “lead by example.”

Congress banned use of the app on government devices in late 2022, but several elected officials have maintained accounts on their personal devices.

In Monday’s letter, Republican lawmakers argued that the recent hearing featuring TikTok CEO Shou Zi Chew made it “blatantly clear to the public that the China-based app is mining data and potentially spying on American citizens.”

“It is troublesome that some members continue to disregard these clear warnings and are even encouraging their constituents to use TikTok to interface with their elected representatives – especially since some of these users are minors,” the letter continued.

TikTok is facing hostility from the other side of the aisle as well. On Thursday, Rep. Frank Pallone, D-N.J., sent Chew a list of questions about the app’s privacy and safety practices that House Democrats claimed were left unanswered at the March hearing.

Meanwhile, Montana lawmakers voted Friday to ban TikTok on all personal devices, becoming the first state to pass such legislation. The bill now awaits the signature of Gov. Greg Gianforte — who was one of several state leaders last year to mimic Congress in banning TikTok from government devices.

Nine additional states join DOJ’s antitrust lawsuit against Google

The Justice Department announced on Monday that nine additional states joined its antitrust lawsuit over Google’s alleged abuse of the digital advertising market.

The Attorneys General of Arizona, Illinois, Michigan, Minnesota, Nebraska, New Hampshire, North Carolina, Washington and West Virginia joined the existing coalition of California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee and Virginia.

“We look forward to litigating this important case alongside our state law enforcement partners to end Google’s long-running monopoly in digital advertising technology markets,” said Doha Mekki, principal deputy assistant attorney general of the Justice Department’s Antitrust Division.

The lawsuit alleges that Google monopolizes digital advertising technologies used for both buying and selling ads, said Jonathan Kanter, assistant attorney general of the Justice Department’s Antitrust Division, when the suit was filed in January.

“Our complaint sets forth detailed allegations explaining how Google engaged in 15 years of sustained conduct that had — and continues to have — the effect of driving out rivals, diminishing competition, inflating advertising costs, reducing revenues for news publishers and content creators, snuffing out innovation, and harming the exchange of information and ideas in the public sphere,” Kanter said.

One such innovation is new artificial intelligence technology being designed to pull everything a user searches for into a single page, said Cheyenne Hunt-Majer, big tech accountability advocate with Public Citizen. It is built to keep users on the site and will drastically change competition in the search engine space, she said, touting the advancement of two bills currently awaiting Senate vote.  

Photo of Adam Kovacevich of Chamber of Progress, Berin Szoka of TechFreedom, Cheyenne Hunt-Majer of Public Citizen, Sacha Haworth of Tech Oversight Project, Christine Bannan of Proton (left to right)

The first, the American Innovation and Choice Online Act, would prohibit tech companies from self-preferencing their own products on their platforms over third-party competition. The second, the Open App Markets Act, would prevent app stores from requiring private app developers to use the app stores’ in-app payment system. 

Hunt-Majer said she believes that the bills would benefit consumers by kindling more innovation in big tech. “Perfect should not be the enemy of change,” she said, claiming that Congress must start somewhere, even if the bills are not perfect. 

“We are seeing a jump ahead in a woefully unprepared system to face these issues and the issues it is going to pose for a healthy market of competition and innovation,” said Hunt-Majer. 

It is good for consumers to be able to find other ways to search that Google isn’t currently providing, agreed Christine Bannan, U.S. public policy manager at privacy-focused email service Proton. The fundamental goal of these bills is directly at odds with big companies, which suggests its importance to curb anti-competitive behavior, she said. 

No need to rewrite or draft new laws for competition

But while Berin Szoka, president of non-profit technology organization TechFreedom, said competition concerns are valid, the Federal Trade Commission is best equipped to deal with disputes without the need to rewrite or draft new laws. Congress must legislate carefully to avoid unintended consequences that fundamentally harm businesses and no legislation has done so to date, he said. 

Both bills have broad anti-discrimination provisions which will affect Big Tech partnerships, Szoka continued. 

Not all experts believe that AI will replace search engines, however. Google has already adopted specialized search results that directly answer search queries, such as math problems, instead of resulting in several links to related webpages, said Adam Kovacevich, CEO of Chamber of Progress, a center-left tech policy coalition.  

Kovacevich said he believes that some search queries demand direct answers while others demand a wide range of sources, answers, and opinions. He predicts that there will be a market for both AI and traditional search engines like Google. 

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“I’m a free market person — I apply that principle to just about everywhere — but if you don’t have a market, you can’t have a free market,” Buck said at a Heritage Foundation event. “And when Google controls 94 percent of the online searches in this country, you don’t have a free market.”

Buck said that it was the responsibility of Congress to actively shape antitrust law, rather than “leaving it up to the courts to create something over the next 30 years.”

Among the several anti-Big Tech bills that have been proposed, Buck highlighted as his priority legislation that would prevent certain companies from acting as both buyers and sellers in digital advertising markets.

The bill applies to companies that generate more than $20 billion in digital ad revenues — specifically targeting Google and Facebook — and has so far received bipartisan support in both the House and the Senate.

Tech companies have spent millions of dollars lobbying against proposed antitrust bills, making it politically precarious for some members of Congress to support them, Buck said. Still, he urged his colleagues to consider the harms allegedly caused by social media platforms.

“We know that Instagram recognized that there was body shaming going on, there was depression among teenage girls, there was a higher suicide rate among teenage girls, and they doubled down,” Buck said. “They didn’t just say, ‘We’ve got to deal with this issue’ — they decided they were going to start marketing to a younger group.”

More competition in the market could give teens and parents access to better alternatives, Buck said, but the power held by the largest platforms makes it nearly impossible for competitors to emerge.

Rep. Buck linked free speech issues for tech industry to antitrust

“How do you have free speech, how do you have competition in the marketplace when you’ve got four companies that are so big that they can wipe out any kind of competitor?” he asked.

Buck has long been a critic of Big Tech, and introduced legislation to ban the TikTok app from U.S. government devices more than a year before similar legislation was passed as part of the bipartisan spending bill in December. This decision had nothing to do with fear of TikTok as a competitor to U.S. companies, he said.

“TikTok is dangerous, not because of its competition in the marketplace — I think it’s healthy in that sense; if Microsoft or some company had bought it, I’d be all in favor of that kind of competition for Facebook — but the bottom line is [that] how it’s being used by an adversary is dangerous and concerning.”

Although the TikTok ban won broad Republican support, alongside a variety of proposals to target tech companies’ privacy or content moderation practices, many antitrust bills have been less popular.

Buck has been open about his struggles in convincing other Republicans to pursue antitrust action, telling The Washington Post in March that “the antitrust bills that we are currently considering will not move forward under Republican leadership, and that’s been a very clear signal that has been sent.”

And now that the House is under Republican control, several experts have predicted that antitrust legislation is unlikely to move forward any time soon.

In an op-ed published Wednesday, President Joe Biden called on members of Congress to overcome partisan disagreements and keep tech companies in check by passing digital privacy, antitrust and content moderation legislation.

Rep. Cathy McMorris Rodgers, R-Wash., who chairs the House Energy and Commerce Committee, responded to Biden’s comments in a statement that agreed with the need for privacy and content moderation action but did not mention antitrust.

“We need to recognize that absolutely the time is now. It is neither too soon nor too late,” said Harold Feld, senior vice president at Public Knowledge.

The DPCA, introduced by Senator Michael Bennet, D-CO., and Representative Peter Welch, D-VT., would, if adopted, create a new federal agency designed to “provide comprehensive, sector-specific regulation of digital platforms to protect consumers, promote competition, and defend the public interest.”

The independent body would conduct hearings, research and investigations all while promoting competition and establishing rules with appropriate penalties.

Public Knowledge primarily focuses on competition in the digital marketplace. It champions for open internet and has openly advocated for antitrust legislation that would limit Big Tech action in favor of fair competition in the digital marketspace.

Feld published a book in 2019 titled, “The Case for the Digital Platform Act: Breakups, Starfish Problems and Tech Regulation.” In it, Feld explains the need for a separate government agency to regulate digital platforms.

Digital regulation is new but has rapidly become critical to the economy, continued Feld. As such, it is necessary for the government to create a completely new agency in order to provide the proper oversight.

In the past, Congress empowered independent bodies with effective tools and expert teams when it lacked expertise to oversee complex sectors of the economy but there is no such body for digital platforms, said Feld.

“The reality is that [Congress] can’t keep up,” said Welch. This comes at a time when antitrust action continues to pile up in Congress, sparking debate across all sides of the issue.

When considering laws, “the important thing is what impact it has on the consumer,” said Phillips. “We need to continue to guard like a hawk against conduct and against laws that have the effect of raising prices for consumers.”

Current record highs in the inflation rate, which means money is becoming less valuable as products become more expensive, has meant Washington must become sensitive to further price increases that could come out of such antitrust legislation, the commissioner said.

Phillips did not comment on how such movies would mean higher prices, but that signals, such as theHouse Judiciary Committee’s antitrust report two years ago, that reign in Big Tech companies and bring back enforcement of laws could mean higher prices. He raised concerns that recent policies are prohibiting competition rather than facilitating it.

This follows recent concerns that the American Innovation and Choice Online Act, currently awaiting Senate floor consideration, will inhibit America’s global competitiveness by weakening major American companies, thus impairing the American economy. That legislation would prohibit platform owners from giving preference to their products against third-party products.

This act is one of many currently under consideration at Congress, including Ending Platform Monopolies Act and Platform Competition and Opportunity Act.

Small businesses have worried that by enacting some legislation targeting Big Tech, they would be impacted because they rely on such platforms for success.

Small businesses “want Congress not to do anything that will screw up or weaken the services that they rely on for their business,” said Michael Petricone, senior vice present of the Consumer Technology Association, at a Protocol Live event on Thursday.

Petricone said that antitrust bill would encourage tech companies to relocate to other countries, harming the American economy. He said small businesses would be affected the most.

Instead, Petricone called for  a “smarter immigration policy” to allow foreign innovators access to American tech market, as well as the defeat of the antitrust legislation.

But other said that small businesses suffer from predatory behavior by big tech companies. “Companies can’t get their foot in the door when there is already self-preferencing,” said Awesta Sarkash, representative for Small Business Majority, an advocacy organization, adding that 80% of small businesses say they want antitrust laws to protect them.

Self-preferencing on online platforms is detrimental to the success of small businesses who rely on social media advertising for business, she said. The new antitrust proposals would ensure an level playing field and promote fair competition, she said.

The American Innovation and Choice Online Act would prohibit certain online platforms from unfairly preferencing products, limiting another business’ ability to operate on a platform, or discriminating against competing products and services.

The bill sponsored by Sen. Amy Klobuchar, D-Minn, was introduced to the Senate on May 2 and is awaiting Senate floor consideration.

The debate follows concerns raised by both democrats and republicans about America’s global competitiveness as the bill would weaken major American companies.

If passed, the bill will follow the European Union’s Digital Services Act which similarly sets accountability standards for online platforms, preventing potentially harmful content and behavior.

“I would say that one thing that we have accumulated a great deal of evidence on is that we are missing problematic mergers – that we are not [stopping] mergers that turn out to be harmful,” said Fiona Scott Morton, the Theodore Nierenberg Professor of Economics at Yale University School of Management, at the April 28 event, referring to the FTC’s failure to stop the Sprint/T Mobile merger and accused it of not appropriately protecting consumers.

“We are under enforcing as a general matter and we should therefore use this review of the merger guidelines to plug those holes,” she said, adding, “Are we catching nascent competitors that are going to prove to be important competitors in the future? It turns out we are not doing that,” she said.

She also responded to critics asserting that the FTC simply needs more money to effectively enforce their guidelines.

“Here is where I am going to play fiscal conservative,” she said. “How about we change the rules to make it easier for the government to bring these cases and then we do not need to spend $2 billion more, we could spend half a billion dollars more because there would be a significant deterrent effect and the government would have less work to do.”

Merger guidelines will give industry more certainty

In January, the FTC under Chair Lina Khan and the Justice Department’s antitrust division launched a public inquiry into modernizing merger guidelines established under previous leadership, on which Khan said was an attempt to “accurately reflect modern market realities and equip us to forcefully enforce the law against unlawful deals.” Public comments were due on April 21.

Howard Shelanski, a partner at law firm Davis Polk, said at the ITIF event that FTC guidelines serve several purposes.

“One thing is certainly, just to let parties considering mergers to have an idea of what kind of scrutiny they are in for at the agencies,” he said.

He explained that the guidelines serve to inform stakeholders at which levels of industry concentration presumptions of harm will be triggered and what theories of harm the FTC will pursue.

“I think [guidelines] also let parties know how agencies will consider different kinds of defenses that [will] likely be raised,” Shelanski added. “So, the guidelines certainly serve a public purpose, but they also signal to courts about what lies behind the [FTC’s] thinking when it chooses to investigate and ultimately challenge a merger.”

Wilson pointed to recently administered surveys of FTC staff on satisfaction in their jobs which showed historically poor results for the commission, saying attitudes towards the commission and its work peddled by its Chair Lina Khan, former commissioner and current director of the Consumer Financial Protection Bureau Rohit Chopra and Biden’s special assistant for technology and competition policy Tim Wu are largely to blame for low staff morale.

“We saw Chair Khan’s arrival and a complete disregard for the rule of law and due process, not to mention complete disregard for staff,” said Wilson.

“We saw Commissioner Rohit Chopra arrive at the FTC and begin excoriating the agency and the commission and the staff as being lax and feckless for the last 40 years.”

Speaking at the Free State Foundation’s Annual Policy Conference with fellow Republican Commissioner Noah Phillips and former Republican chairwoman of the commission Maureen Ohlhausen, Wilson cast the commission as an entity in disarray.

She revealed a workplace where commissioners have often been given very little notice on items they will be considering on the agenda of the commission.

Ohlhausen noted a decrease in bipartisan activity from the commission that she felt was present as a long-lasting legacy of commissions past during her tenure as chair, and Wilson described “disdain and marginalization of staff by current leadership” as harmful to the environment at the commission.

Drawing on her recent remarks, Wilson hypothesized that new leadership’s economic worldview draws heavily on concepts from academic Marxism and critical legal studies, a school of thought of which the Republican-maligned critical race theory is an offshoot.

She states that these theories largely play into the view of new leadership that the FTC in the past has not brought nearly enough action to protect consumers.

Also on Friday, Wilson emphasized the need for federal privacy legislation and said she has heard of a “concerted push” in Congress for such legislation to pass soon.

“We have an antitrust regime in the US that has never ever considered international competitors. It is a very narrow framework that both the FTC and DOJ use. They don’t think about the implications of their actions on US competitiveness. Their only goal is to think about whether it is going to lead to more competition,” Robert Atkinson, president of the Information Technology and Innovation Foundation, said at the 2022 LeadershIP conference.

The Tuesday event was the first in-person meeting the intellectual property and innovation think tank has held since the pandemic began in March of 2020.

The comment comes at a time when the DOJ and FTC are working together to enforce antitrust laws in response to President Joe Biden’s executive order tasking officials to “adopt a whole of government approach to competition policy.” There have been complaints about the Biden administration’s actions in the past, including criticism from former FTC Chairman William Kovacic, who said that Biden’s direction of the FTC raises unfair expectations for the agency.

Atkinson also criticized the Democratic party’s view of antitrust enforcement as a whole. “We have this view, particularly from the anti-corporate progressive left, that says all profits should be at the cost of capital and no higher, and the way you get there is you weaken intellectual property. And the reason they think that, fundamentally, is that in their minds; in their worldview, the tension is not between the US and China, it is between capital and labor.”

Atkinson’s fellow panelist, Ellen Lord, former U.S. under secretary of defense for acquisition and sustainment, echoed his opinions.

“Sometimes this thought of equalizing things – everything for everybody so everybody gets a chance – kind of prevails because there’s a bit of a feeling that that strengthens us as a nation, whereas I have the exact opposite opinion, that if you do not incentivize companies by allowing them the benefits of what they do and then have that virtuous cycle, we as an economy, we as a global power, will begin to atrophy,” Lord said.

The DoJ has already supported legislation, including for example, the American Innovation and Choice Online Act, which seeks to prevent big technology companies like Apple, Amazon and Google from using their platforms to give a preference for their products over third-party products.

Earlier this year, the FTC and the DoJ announced the launch of a review of merger guidelines, holding a press conference on the matter on the same day Microsoft announced its proposed $70-billion acquisition of video games publisher Activision-Blizzard.

During an Information Technology and Innovation Foundation event hosted on Friday, Gibson Dunn law firm partner Kristen Limarzi voiced criticism over the phrase “killer acquisition.”

Companies accused of engaging in killer acquisitions – or acquisitions designed to stifle potential competition in its infancy – were placed squarely in the federal government’s crosshairs when President Joe Biden signed the executive order on Promoting Competition in the American Economy.

“It is also the policy of my Administration to enforce the antitrust laws to meet the challenges posed by new industries and technologies, including the rise of the dominant Internet platforms, especially as they stem from serial mergers, the acquisition of nascent competitors, the aggregation of data, unfair competition in attention markets, the surveillance of users, and the presence of network effects,” the order reads.

Bills with similar intent – to target killer acquisitions – have been supported by myriad legislators. Despite this effort, Limarzi pushed back against the rhetoric. “The term ‘killer acquisition’ is sufficiently evocative that a lot of people have adopted it to apply to any merger that they think ought to be blocked, which is not a not a very useful definition.”

Current antitrust framework doesn’t need changes

To address the question whether an acquisition should be considered anticompetitive or “killer,” Limarzi argued that regulators should ask, “what does the world look like with and without the merger and are [the outcomes] substantially different from a competition perspective?”

In Limarzi’s view, the FTC’s current framework to determine whether to pursue an acquisition is sufficient and not in need of change.

“Where the facts establish that there is actual nascent potential competition that is being eliminated [the FTC] succeeds and where the facts are not there, they do not – but that is not a deficiency in the legal framework,” she said.

Koren Wong-Ervin, an antitrust partner with Axinn, Veltrop and Harkrider, stated that as it stands now, there is no systemic failure in merger enforcement.

“I do not think we have any evidence [of systemic failure],” Wong-Ervin said. “I think a lot of this debate comes down to different beliefs – faith in market versus faith in governments to intervene.”

Wong-Ervin said it is better to under-regulate rather than over-regulate mergers. “Markets can self-correct over time, if you don’t intervene when you should, whereas if you do intervene when you should not, it has a chilling effect,” she explained. “The debate is really about whether you believe that markets can self-correct.”

“If there was rampant under-enforcement and a concentration and monopoly problem and our markets were suffering – you would expect to see this more systematically – [it] would show up in our merger retrospective studies, and were a just now [seeing that],” she said.

Commentators on an Institute for Policy Innovation panel last year made similar pleadings for Washington to avoid hardline antitrust regulation that they said will put a damper on start-up businesses.

The Biden administration has generally taken a harder line against mergers when compared to the Trump administration, as evidenced by big tech critic Lina Khan’s appointment to the FTC, Google critic Jonathan Kanter’s nomination to the DoJ’s antitrust division, and net neutrality advocate Tim Wu’s appointment to the National Economic Council.

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.'”

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.

See also:

• Broadband Breakfast Explainer 1 (Net Neutrality): On the Cusp of Sea Change, Broadband Breakfast Examines the Net Neutrality Debate
• Broadband Breakfast Explainer 2 (Spectrum): Is Spectrum Sharing a Key to Broader Connectivity Goals?
• Broadband Breakfast Explainer 3 (Section 230): With Florida Social Media Law, Section 230 Now Positioned In Legal Spotlight 
• Broadband Breakfast Explainer 4 (Antitrust): Antitrust Heats Up as Biden Selects Tech Critic Jonathan Kanter for Top Enforcement Spot

“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.”

ILSR’s Stacey Mitchell and Tim Wu.

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.

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.

During a Thursday markup, the Senate Judiciary Committee voted 16-6 to send the American Innovation and Choice Online Act, S. 2992, to the Senate floor. The bill would prohibit certain companies with online platforms from engaging in behavior that discriminates against their competitors.

There is a laundry list of violations and unlawful behaviors enumerated in the bill, including unfairly preferencing products, limiting another business’ ability to operate on a platform, or discriminating against competing products and services.

This bill would only apply to companies with online platforms that meet one of the following criteria:

• Has at least 50,000,000 United States-based monthly active users on the online platform or 100,000 United States-based monthly active business users on the online platform
• Is owned or controlled by a person with United States net annual sales or a market capitalization greater than $550,000,000,000, adjusted for inflation on the basis of the Consumer Price Index and is a critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform

Sen. Amy Klobuchar, D-Minn., the sponsor of the bill, referred to the bipartisan effort as “the Ocean’s 11 of co-sponsors,” featuring a diverse line-up of legislators, from Sen. Josh Hawley, R-Miss., and Sen. John Kennedy, R-La., to Sen. Dick Durban, D-Ill., and Sen. Richard Blumenthal, D-Conn.

Senators embrace specific and direct targeting of Big Tech

Klobuchar spoke directly about the need to target large companies, “We have to look at this differently that just startup in a garage – that is not what they are anymore. They may have started small, but they are [now] dominant platforms,” she said. “For the first time, the monopoly power is going to be challenged in what I consider to be a smart way.”

At the outset of the meeting, there were more than 100 amendments proposed by members of the committee, but by its conclusion, more than 80 of them had been withdrawn.

One of the amendments that worked its way into the bill was a markup that exempted subscription-based services from complying with the legislation, allowing services like Amazon Prime and Netflix to promote their own content above others’.

“The bill strikes the right balance between preventing the conduct that hurts competition, while also ensuring that platforms can continue to provide privacy and data security features to their users, compete against rivals in the United States and abroad, and maintain services that benefit consumers,” Klobuchar said.

A fragile alliance between read-meat Republicans and progressive Democrats

Though there were big names on both sides of the aisle supporting the bill, the alliance seemed fraught. Despite being supportive of the bill, Kennedy made it clear that his support was conditional. “I am a co-sponsor of this bill, but this bill is going to change – it is going to change dramatically,” he said. “I hope to be in the room when those changes are made, otherwise I will be off this bill faster than you can say ‘Big Tech.’”

Some of Kennedy’s criticisms harkened back to Section 230 issues raised by former President Donald Trump – calling some of the targeted companies “killing fields for the truth,” and stating that “their censorship is a threat to the first amendment.”

Despite his criticisms, Kennedy echoed other senators, both Republican and Democrat, who emphasized that they did not want the perfect to become the enemy of the good. “All we have done [for five years] is strut around, issue press releases, hold hearings, and do nothing. So, this is a start.”

Klobuchar also received push-back from members of her own party, with Sen. Dianne Feinstein, D-Calif., stating that she was critical of the bill because it is designed to specifically target large tech companies, many of which are based out of California (though she ultimately voted to advance the bill to the Senate floor).

Hawley rebuffed Feinstein in his comments, stating that he supports the bill for the same reason Feinstein refuses to. “[Feinstein] pointed out – I think rightly – that this bill is very specific and does target specific behavior – anti-competitive behavior – in a specific set of markets. I think that that’s a virtue and not a vice.”

The measure must be passed by the full Senate, as well as the House, before it goes to the president for his signature.

Laurent Crenshaw told CES 2022 participants Friday that Congress should provide tools for agencies like the Federal Trade Commission to enforce consumer protection standards.

“I’m not going to say that big tech needs to be broken up, but there should be appropriate resources for federal regulators to understand the digital marketplace,” he said. “We’re are still living in a world that is dominated by big actors, and we’re debating about whether to even give federal regulators the power to understand how the marketplace is moving toward digital.”

Crenshaw of Patreon said that more resources were necessary at the FTC in order to understand the digital marketplace. Patreon is a membership platform that provides a subscription service for creators to offer their followers.

Such resources would empower the agency to place appropriate safeguards for smaller technology innovators. “So in 10 [or] 20 years, it’s not just the replacements of the current Google, Apple, or Facebook, but something entirely new,” he said.

Panelists echoed Crenshaw’s point that consumer welfare should guide competition policy. Tyler Grimm, chief counsel for policy and strategy in the House Judiciary Committee, said that antitrust should bend to the consumer welfare standard. “Antitrust should leave in its wake a better economy,” he said.

“It is an honor to lead this great organization and advocate for the local television and radio broadcasters that inform, entertain and serve their communities every day,” said LeGeyt in a statement. “I am grateful to our Board of Directors for placing its trust in me and look forward to working alongside them, the entire NAB team and our members to ensure a vibrant future for broadcasting.”

LeGeyt was previously the executive vice president of government relations and chief operating officer of NAB. He holds a JD from Cornell Law School.

“We are excited to now have Curtis at the helm to guide the organization into its next chapter. He is a proven leader and skilled fighter on behalf of broadcasters, and we are thrilled to have him serve as our voice in Washington and around the world,” said David Santrella, NAB joint board of directors chairman and CEO of Salem Media Group.

The previous president and CEO, Gordon Smith, served in this role for 12 years. Smith will remain with the NAB, albeit in an “advisory and advocacy” capacity. During his tenure, NAB took a hardline on big technology companies, condemning them as a threat to small TV and radio stations that make up local media, and called for citizens to voice their concerns to legislators.

But while Amazon’s public change of heart seemingly paves the way for the eventual passage of the bill, known as the INFORM Consumers Act, lawmakers must ensure that the retail giant and other tech companies do not work behind the scenes to water down the legislation and render it toothless. Counterfeits pose great harm to consumers and small third-party sellers, and Congress must pass strong, comprehensive enforcement mechanisms to adequately protect both groups.

Amazon’s decision to endorse INFORM was certainly a surprise. Just this summer, Amazon launched an aggressive lobbying campaign to kill a more robust version of the legislation. But while Amazon ostensibly supports the current bill, it has reportedly unleashed its lobbyists in the Beltway to weaken it. While lawmakers such as Sen. Dick Durbin, D-Ill., one of the bill’s co-sponsors, say they refuse to let this happen, they should remain on high alert.

This is because we have seen Amazon’s playbook for publicly supporting legislation while simultaneously working to weaken it behind the scenes. For instance, Amazon CEO Jeff Bezos won praise earlier this year when he embraced President Joe Biden’s plan to raise the corporate tax rate. But behind the scenes, the company enlisted an army of lobbyists to maintain the research and development tax credit, which has been estimated to save the company hundreds of millions of dollars a year. As I have said before, Bezos’s support for a corporate tax hike is meaningless if the company can continue to engage in egregious tax avoidance schemes.

And it is not just Amazon; other Big Tech companies have resorted to similar “two-faced” tactics to weaken legislation. In April, an investigation by The Markup uncovered how some of the country’s most powerful technology companies, including Facebook and Google, advocated for mostly toothless privacy protection legislation in statehouses across the country — all with the intention of preempting state lawmakers from taking stronger action in the future.

Now with the prospect of a comprehensive consumer protection measure being signed into law, Congress must resist Amazon’s arm twisting. Counterfeits are far too serious of a threat, and watered-down legislation will fall short of creating the bold transparency measures that are desperately needed. Online counterfeiters have been known to peddle toys and children’s products, putting those most vulnerable in grave danger. These products fail to go through robust safety testing, meaning there is potential for serious health consequences.

But what many may not realize is the impact that counterfeits have on third-party sellers. As someone who works with Amazon sellers every day, I know exactly how legitimate businesses suffer when criminals sell fakes at below the market value. Small businesses are doing everything they can to fight these criminals — even if it means spending hundreds of thousands of dollars to do so.

Many of those selling fakes from the comfort of their own homes and hurting American businesses are overseas. According to the Department of Homeland Security, a staggering 85 percent of contraband items seized by U.S. Customs and Border Protection came from Hong Kong and China. Nonetheless, Amazon’s marketplace has become a hub for China-based sellers.

Amazon has no problem touting all of the measures it has taken to clean up its third-party marketplace. But, as I have explained, it is a common tactic of Amazon’s PR department to just share the numerator — and not the denominator. Thus, the $700 million it invests to fight fraud is pennies in the bucket when you consider that Amazon’s worldwide gross merchandise volume is estimated to be $490 billion.

It is critical that Congress advances the INFORM Consumers Act as it stands today. While I welcome Amazon’s endorsement of the common-sense measure — along with the other third-party marketplaces that recognize the benefits it would bring to e-commerce shopping — I can only hope it is sincere. Working behind the scenes to weaken this bill will be devastating to the millions of shoppers and sellers who have come to depend on Amazon’s third-party marketplace.

Jason Boyce is the author of “The Amazon Jungle” and founder of Amazon managed services agency, Avenue7Media. Previously, Boyce was an 18-year Top-200 Amazon seller. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

Ohlhausen was joined by Massachusetts Institute of Technology economist Nancy Rose, who said the lack of agency resources is holding back FTC enforcement. Ohlhausen noted increased funding for enforcement agencies would allow them to perform studies, which could effectively determine whether anti-competitive action is currently taking place.

Both Rose and Ohlhausen, who were panelists at an American Enterprise Institute event late last month, said increasing resources would be a better approach to antitrust than many of the extensive antitrust bills that are currently before Congress.

The panel largely condemned current congressional efforts that take such steps as placing an intense focus on the activities of the largest tech companies.

This summer, the House Judiciary Committee pushed through six antitrust bills designed to target the biggest tech companies and limiting what they can do in relation to their marketplaces and with respect to mergers and acquisitions. The most controversial of the bills 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 there’s a conflict of interest.

In May, Sens. Amy Klobuchar, D-Minnesota, and Chuck Grassley, R-Iowa, introduced antitrust legislation that would “ensure that antitrust authorities have the resources they need to protect consumers.” In September, at a virtual conference hosted by Politico, Klobuchar reiterated the need to better equip federal agencies with adequate resources.

“These companies know how many resources they [agencies] have,” Klobuchar said, alluding to Big Tech accelerating merger activity.

The Democrats also introduced funding avenues in their reconciliation bill for the FTC to tackle the myriad of issues related to Big Tech, including data privacy concerns and big mergers.

Recently formed conservative majorities on the Supreme Court and other panels have expressed opposition to the idea that the FTC possesses such rulemaking authority, these panelists said.

Hence, unlike past supreme courts, they current bench is likely to strike down FTC-issued binding rules.

Panelists highlighted former President Donald Trump appointees Brett Kavanaugh and Neil Gorsuch as justices who have opposed legal reasoning often used to permit FTC rulemaking.

Indeed, some panelists said early 20th Century legislation governing the FTC makes the case that the agency was created as an investigative body rather than a regulatory one.

Peter Wallison, senior fellow emeritus at the American Enterprise Institute, said that between five and six Supreme Court justices would ultimately vote to weaken precedents that allow for FTC rulemaking.

The Judiciary Committee of the House of Representatives recently advanced six antitrust bills that attempt to regulate the tech industry and foster greater competition, including the Ending Platform Monopolies Act and the Platform Competition and Opportunity Act.

FTC rules have taken on increased importance in terms of economic regulation due to the frequent inability of Congress to pass major legislation due to partisan gridlock. The FTC has proposed new procedures to ensure competition since Lina Khan was appointed as chair.

However, NERA Economic Consulting on Wednesday concluded that legislative proposals to regulate competition would impose costs of around $300 billion while impacting 13 additional American companies in the near term and more than 100 companies in the next decade.

Study author Christian Dippon contends that the legislation would limit American startup growth and international competitiveness while at the same time increasing costs for Americans.

The goal of the six bills is to rein in the power of Big Tech through new antirust liability provisions, including new merger and acquisition review, measures to prevent anticompetitive activity, and providing government enforcers more power to break-up or separate big businesses. They include American Choice and Innovation Online Act, H.R. 3816, Platform Competition and Opportunity Act, H.R. 3826, Ending Platform Monopolies Act, H.R. 3825, Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act, H.R. 3849, Merger Filing Fee Modernization Act, H.R. 3843, and State Antitrust Enforcement Venue Act, H.R. 3460.

The letter, which was directed at House Speaker Nancy Pelosi, D-California, and House Minority Leader Kevin McCarthy, R-California, were promoting a package of six bills that were the result of a two-year bipartisan investigation that included 10 hearings, featuring the testimony of the CEOs of the major tech companies, 240 interviews, 1.3 million documents and a 450-page report, the letter notes.

“We believe that these bills will bring urgently needed change and accountability to these companies and an industry that most Americans agree is already doing great harm to our democracy,” the letter said. Public Citizen was the first of the 58 groups on the letter.

America has a monopoly problem. Monopoly power lowers wages, reduces innovation and entrepreneurship, exacerbates income and regional inequality, undermines the free press and access to information, and perpetuates toxic systems of racial, gender, and class dominance,” the letter alleged.

“Big Tech monopolies are at the center of many of these problems,” it continued. “Reining in these companies is an essential first step to reverse the damage of concentrated corporate power throughout our economy. The bills that passed out of the House Judiciary Committee, with bipartisan support, do just that and it is imperative that they move forward in the House.”

List of signatories:

• Public Citizen
• Accountable Tech
• Action Center on Race & the Economy
• ALIGN: The Alliance for a Greater New York
• Alliance for Pharmacy Compounding
• American Booksellers Association
• American Family Voices
• American Independent Business Alliance
• American Specialty Toy Retailing Association
• Artist Rights Alliance
• Athena
• Cambridge Local First
• Center for American Progress
• Center for Digital Democracy
• Center for Popular Democracy
• Committee to Support the Antitrust Laws
• Decode Democracy
• Demos
• Electronic Frontier Foundation
• Friends of the Earth
• Future of Music Coalition
• Gig Workers Rising
• Global Exchange
• Indivisible Georgia Coalition
• Indivisible Hawaii
• Indivisible Ulster/NY19
• Institute for Local Self-Reliance
• International Brotherhood of Teamsters
• Jobs With Justice
• Kairos Action
• Local First Arizona
• Louisville Independent Business Alliance
• Main Street Alliance
• Mainers for Accountable Leadership
• Media Alliance
• Metropolitan Washington Council, AFL-CIO
• National Employment Law Project
• New York Communities For Change
• New York Communities for Change
• North American Hardware and Paint Association
• Open Markets Institute
• Our Revolution
• PowerSwitch Action
• Public Knowledge
• Running Industry Association
• Secure Elections Network
• Service Employees International Union
• Shop Local Raleigh/Greater Raleigh Merchants Association
• SIMBA (Spokane Independent Metro Business Alliance)
• Small Business Rising
• Stand Up Nashville
• StayLocal, an initiative of Urban Conservancy
• Strategic Organizing Center
• SumOfUs
• The Democratic Coalition
• UltraViolet
• Venice Resistance
• Warehouse workers for justice

Phillips said the left-leaning voices in Washington and the appointment of Lina Khan to chair the agency has left him wondering about the legacy of the last 40 years of competition regulation in America – which have been hallmarked by the Hart-Scott-Rodino Antitrust Improvements Act of 1976. That legislation effectively gave the FTC the ability to review mergers and acquisitions before they were finalized, rather than afterward, which governed pre-legislation.

Under Biden-appointee Lina Khan, Phillips described how the FTC has done away with the process of early termination. In the past, this process made it unnecessary for every single company to provide advanced notice and advanced approval for mergers. “Historically, parties have been able to come to the agencies and say, ‘You’re not interested in this, can we just go ahead and finish our deal,’ and the agencies have said ‘yes.’”

He said this is no longer the case, and that every single merger must provide advanced notice and approval. “What we’re introducing is an inefficiency in the market for transactions that we have no interest in pursuing, just for the sake of it. I think that’s a problem,” he continued. “My concern is that it is making merger enforcement less effective, less efficient, and less fair.”

Phillips pointed to left-of-center and leftist voices in Congress, such as Rep. David Cicilline, D-New York, Sen. Elizabeth Warren, D-Massachusetts, and Rep. Alexandria Ocasio-Cortez, D-New York, who, at the outset of the pandemic, wanted to ban all acquisitions and mergers—regardless of their merit. He described this view as falling outside of mainstream perspectives, but noteworthy nonetheless.

“I don’t think that is what most people believe,” Phillips remarked. “I don’t think that is what Hart-Scott-Rodino envisions.”

This webinar took place only a couple of weeks after Phillips spoke at the Technology Policy Institute’s 2021 Aspen Forum, where he voiced similar concerns, stating that he feared that this new direction would make it more difficult for the FTC to hear cases that it should, and defended the commission’s record against critics who said it was lax under the Trump Administration.

But the antitrust and competition economists making these assessments at the Technology Policy Institute conference here on Monday disagreed sharply about whether antitrust law should move beyond that consumer welfare standard.

Some these experts – including sitting Federal Trade Commissioner Noah Phillips – disagreed with stances taken by Biden’s hand-picked FTC Chairwoman Lina Khan.

Others, including Harvard Business School Professor Shane Greenstein, said that it was absolutely necessary for the FTC and the Justice Department antitrust division to investigate the gargantuan sums of money exchanged between big tech titans Google and Apple.

Speaking on a spirited panel session in the morning, “How is the U.S. Reshaping Antitrust,” Greenstein said Google pays Apple approximately $8 billion a year to make the Google search engine the default internet browser on all Apple devices.

Though this may not have historically fallen under the purview of antitrust, Greenstein was accusatory in his evaluation of the situation: “I’m sorry, no.” As to whether the antitrust division should investigate the matter, he said, “Go for it, guys.”

For a session on “Antitrust, the Consumer Welfare Standard and Big Tech Platforms,” see Broadband Breakfast Live Online on Wednesday, February 24, 2021. 

‘Deconcentration’ is not the goal of antitrust policy

But Carl Shapiro, professor of business strategy emeritus at University of California at Berkeley, dissented from Greenstein’s broader antitrust perspective.

“The goals of antitrust should be to promote competition—full stop,” said Shapiro. Deconcentration is not the goal of the FTC. The agency will have to determine whether it would depart from this long-held view, he said, and decide whether it would opt instead to consider concentration itself as evil.

“That’s not a version of capitalism that I want,” said Shapiro.

The primary issue is how one chooses to define competition, said Howard Shelanski, professor of law at Georgetown University. The dominant perspective has viewed competition through the lens of price effects. Other schools of thought borrow a wider aperture, considering this like privacy, wealth distribution, political power, product quality, and product variety when determining whether something improves or diminishes competition.

The more metrics that are accounted for, the more issues present themselves.

To this, FTC Commissioner Phillips responded, “If you are trying to solve everything at once, you will solve nothing at all.”

While polite, Phillips disagreed with FTC Chairwoman Lina Khan

At the beginning of the panel discussion, TPI President Emeritus Tom Lenard opened the session by asking Phillips for his impression of Khan.

Phillips responded diplomatically, joking that this question had not been on the list he had been sent. Because Khan has only been on the job for two months, it is too early for him to give a fully fleshed out appraisal of her time as chairwoman. “It’s always exciting to get new blood,” he said.

While he said he was supportive of Khan’s efforts to improve transparency by holding public meetings, he was critical of the direction in which the FTC is heading.

Proposed rule changes would create “needless friction” by delaying mergers that do not present a danger to consumers. This will make the agency less effective and less efficient.

“I worry that we are needlessly impeding our ability” to hear cases, he said.

Successes by big tech firms are ‘not a failure of antitrust’

Shapiro added that, in his view, concentration within an industry should not be viewed as a negative thing and that it is merely indicative of the fact that bigger companies are often simply more efficient and can compete more effectively in their industry. “That is not a failure of antitrust,” he said.

Shelanski said that he harbored serious reservations about expanding the consideration of antitrust. He noted that as it stands now, it is basically left to the FTC to decide how to pursue antitrust cases.

If the agency were to include considerations of value judgments, public health, environmentalism and wealth distribution, the country would need stronger democratic institutions to pursue this approach.

Former FTC Acting Chairwoman Maureen Ohlhausen, now with Baker Botts’s Antitrust and Competition Law Practice Group, shared Shelanski’s concerns about the ability of the FTC to make big, sweeping considerations on its own.

The public should not view the careful and deliberate approach to FTC decisions as lax. Indeed, she said, the commission has “done a pretty good job.”

Phillips agreed, stating that under the Trump Administration, the FTC had blocked more than 20 mergers—the most since 2001.

When asked if he felt whether antitrust guidelines should be revisited, he responded with skepticism, “There is a lot of promise of revisitation without much discussion of where [the FTC] is going.”

With prepaid service, consumers pay for a set amount of cellular usage upfront rather than receive a bill at the end of the month. While such a service may seem like a relic of the 1990s, more than 74 million Americans rely on the service as a low-cost and accessible alternative to traditional cellular plans provided by Verizon, AT&T, and T-Mobile.

Verizon is one of the most dominant telecommunications companies in the U.S., occupying 30% of the entire cellular market. Up until now, the company has focused on its traditional postpaid service and almost entirely ignored the prepaid cellular market. Verizon now sees an opportunity to use its financial firepower to acquire an important competitor with its attempted acquisition of TracFone.

A staggering potential windfall for Verizon

The potential windfall for Verizon is staggering. If this deal were to be approved, the FCC would anoint Verizon as the largest wireless prepaid service operator in the United States and the company would obtain an additional 21 million customers. The merger would also allow Verizon to acquire the fourth-largest wireless company by subscribership in the U.S. The acquisition of TracFone by Verizon will also add $8.1 billion in revenue for Verizon and an additional 90,000 retail locations. Such a position will only continue the wave of consolidation in the cellular service sector and fortify Verizon’s market power as one of the largest wireless communications providers in the country.

The Federal Trade Commission and the Department of Justice review almost all mergers in the United States. However, the communications industry is so important that Congress also gave the FCC the authority to review and deny mergers and acquisitions in the sector. Unlike the legal standard set in the Clayton Act, which structures the merger litigation of the DOJ and the FTC, the FCC reviews mergers in the communications field under a “public interest standard.” The public interest standard is highly deferential to the FCC’s interpretation. As such, the FCC has broad discretion and can consider a range of factors when analyzing a merger under its jurisdiction. The Supreme Court has stated that the standard “no doubt leaves wide discretion and calls for imaginative interpretation” and that the agency has “comprehensive powers to promote and realize the vast potentialities” of communications technologies.

A merger of this magnitude will undoubtedly cause the traditional litany of harms derived from mergers, such as an increase in the barriers to entry for the communications sector and increased potential collusion between firms as a result of increased concentration. However, even a moderate review of the facts would show that Verizon’s acquisition of TracFone is not in the public interest and that the FCC should block the merger.

The FCC should not allow Verizon to acquire a critical competitor

First, as with most mergers by corporate monopolies, Verizon does not need to acquire TracFone to accomplish its operational goals. The FCC should not allow Verizon to use its dominant financial position to acquire (and subsequently neutralize) a critical competitor and market participant and forgo operational investments and other necessary market research to expand its network. Instead, the FCC can force the corporation to use its vast finances to develop its own rival prepaid network by blocking the merger.

Such a circumstance would increase competition in the industry and benefit consumers. Additionally, such a course of action would facilitate the kind of business conduct and investments in internal expansion the antitrust laws and other antimonopoly policies actively encourage, while increasing market competition and firm rivalry. The Supreme Court has consistently praised and encouraged growth from internal operations rather than acquisition. In Philadelphia National Bank, the Supreme Court stated, “[S]urely one premise of an antimerger statute…is that corporate growth by internal expansion is socially preferable to growth by acquisition.”

Second, prepaid providers like TracFone provide critical competitive pressure to larger carriers like Verizon. Prepaid carriers like TracFone often rent the communications infrastructure from postpaid carriers like Verizon to provide their service. Thus, rather than focusing on expanding and maintaining network infrastructure, renting it provides prepaid carriers the ability to provide lower-cost service, more tailored service, and a better customer experience overall.

Third, mergers like Verizon’s acquisition of TracFone are harmful to consumers. In this case, potential price increases are not only likely, but they would also be exceptionally harmful. Concerning TracFone specifically, the company provides a critical service to vulnerable sectors of the population that are extremely sensitive to price increases – particularly low-income consumers and people of color who live within the geographic area which TracFone serves.

Importantly, TracFone participates in the federal Lifeline Program, a crucial government program that provides low-income individuals subsidies to afford phone service. If Verizon were allowed to acquire TracFone, Verizon would obtain full control of TracFone’s 21 million customers consisting of a population it has historically ignored. Moreover, because of the increased market concentration, which would thus deprive customers of one less carrier to switch to, Verizon would face significantly fewer incentives to keep its prices low for such a vulnerable population.

Additionally, cell phones are a critical and vital tool for the public, particularly during the pandemic. Indeed, 37% of Americans use the internet only via a mobile device. Low-income students as well are now heavily reliant on cell phones for online education during the COVID-19 pandemic. In a 2020 survey, between 29 and 43 percent of parents said their children will have to do their schoolwork and engage in online learning from a cell phone. Access to low-cost cell phones is thus imperative for a large fraction of children to remote learning, which some states are considering for the fall 2021 semester.

History does not bode for Verizon’s claims of consumer benefit

Verizon has asserted that “when TracFone’s customers become part of Verizon, they will benefit from the enhanced choices, better services, and new features that follow from Verizon’s investment while still enjoying the flexibility and control that they have come to value with TracFone’s prepaid plans” and that it “will not require any TracFone customers to move to a more expensive plan when the transaction closes.”

However, history does not bode well for Verizon and its claims that its acquisition will benefit consumers. The economist John Kwoka found that 80% of studied mergers led to higher prices and even reduced output. Other comprehensive studies have found that acquisitions cause “significantly increase[d] markups on average” and reveal “no evidence for efficiency gains.” As New York University business professor Melissa Schilling has stated, most mergers “do not create value for anyone, except perhaps the investment bankers that negotiated the deal.”

Concerning the communications industry specifically, when telecommunications giant AT&T was acquiring Time Warner, the corporation stated that “the evidence overwhelmingly showed that this merger is likely to enhance competition substantially, because it will enable the merged company to “reduce prices, offer innovative video products.” Judge Richard Leon, who oversaw the litigation challenging the merger, was ultimately persuaded by AT&T’s statements holding that AT&T’s acquisition of Time Warner would “lead to lower prices for consumers.” Despite these claims, subsequent evidence revealed that AT&T did raise prices on consumers.

Although Verizon has committed to supporting TracFone’s presence in the Lifeline program for three years, the company has made no concrete promises to keep their prices at current levels for TracFone customers or to increase customer incentives to move to a higher-cost plan after the transaction closes. Like most mergers, Verizon’s asserted efficiencies and promises to improve competition as a results of the merger are likely theoretical and dubious.

A worrisome wave of acquisitions by telecom giants

Lastly, due to certain aspects of the market, such as the high infrastructure costs of cell towers, prepaid phone carriers tend to reduce to one or two carriers in a geographic area. Even more worrisome is that there has been a wave of acquisitions by the telecommunications giants over the past decade. In the prepaid industry, AT&T acquired Cricket Wireless and T-Mobile acquired MetroPCS in 2013.

Other blockbuster mergers among the group are the acquisition of Sprint by T-Mobile and the acquisition of Time Warner by AT&T. All these mergers went unchallenged by the FCC. Moreover, since AT&T and T-Mobile have already acquired firms to enter the prepaid industry, Verizon is the last remaining national carrier that could enter this market and likely the only wireless carrier with the finances to do so meaningfully.

The FCC has clear discretion to block this merger. Given the harmful effects of similar mergers, the sheer number of acquisitions that have already taken place in the communications industry that the agency has previously failed to stop, and the potential harms that could result directly from this merger, the FCC should review Verizon’s acquisition of TracFone with extreme suspicion and block it outright. The agency has the authority and must use it.

Daniel A. Hanley is a policy analyst at the Open Markets Institute. You can follow him on Twitter @danielahanley. This piece is exclusive to Broadband Breakfast.

BroadbandBreakfast.com accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

The commissioners appeared at a hearing of the Subcommittee on Consumer Protection and Commerce, which is studying 16 proposed bills facing Congress that aim to alter the FTC’s jurisdiction.

“The American people deserve a twenty-first century consumer protection agency that meets twenty-first century threats,” said Rep. Jan Schakowsky, D-Illinois.

The 16 bills, targeted at increasing the FTC’s ability to regulate technology companies, expands its jurisdiction over what and how it is allowed to enforce the law.

Advocates of Increased FTC Authority

FTC Chairwoman Lina Khan said that reports of fraud increased by 20 percent last year, alleging certain business models have promoted this and for which businesses are able to claim immunity under the law. She did not mention which businesses she was referring, or which laws provided immunity, but commissioner Rohit Chopra said Section 230 of the Communications Decency Act was an impediment to the FTC’s mission of protecting consumers online.

Section 230 provides online platforms immunity for third-party content posted on their website, which means companies like Facebook, Instagram, and Twitter cannot be held accountable for fraudulent activity that takes place on their platforms.

Commissioner Rebecca Slaughter alleges that Section 230 protects online firms’ illegal conduct. Democratic commissioners prodded Congress to pass legislation that would increase the FTC’s jurisdiction to better police activity that harms consumers, such as online fraudulent activity.

“Bills that would end special protections for select industries would also strengthen our law enforcement,” Khan said. “For example, the Online Consumer Protection Act would clarify that platforms cannot claim special privileges when facing an FTC enforcement action. Meanwhile, the Protecting Consumers and Commerce Act and Removing Nonprofit Exemption Act would allow the FTC to challenge abuses by common carriers and nonprofit entities.”

Critics of Expanding FTC Authority

Earlier this month, the FTC held an open meeting of which Commissioner Noah Phillips was a critic. The FTC voted on several measures, including rescinding a rule that limited the agency’s enforcement powers, and allowed time for public comment after the vote had been taken. Phillips said he believes that allowing the public to comment after the vote has signaled a departure from public accountability.

“On July 1, without input from the public, we adopted rules to enable us to promulgate regulations with less objectivity, less oversight, and less public input,” Phillips said. “The Commission majority is reducing what it calls red-tape on the commission to impose more red-tape on American businesses—large and small.”

He added that regulating big technology companies, such as Facebook and Google, is work best suited for Congress, not an independent government agency with less democratic accountability.

“Well-crafted regulation can help consumers and businesses, but poor regulatory design can raise prices, stifle innovation, and reduce consumer choice,” Phillips said.

Phillips’ Republican counterpart on the Commission, Christine Wilson, joined in his critique, fearing that increasing the FTC’s jurisdiction could lead to FTC overreach in the future.

Kanter is known for his criticism of the “consumer welfare standard” that has come to dominate antitrust enforcement. As reported by Broadband Breakfast, at a 2019 event Kanter hosted by the Capitol Forum, Kanter said that antitrust involves both keeping prices low and protecting the competitive process.

Then an attorney in private practice with Paul Weiss, Kanter – who has also had experience investigating mergers for the Federal Trade Commission’s Bureau of Competition – said that it was unclear that Congress intended for the scope of antitrust laws to be so narrow.

Kanter is the latest in a number of high-profile selections made by Biden that definitively manifest an intent to put big tech under a microscope.

Within the space of four months, Biden will have placed three such critics into major positions, including net neutrality advocate Tim Wu to the National Economic Council and the appointment in June of Lina Khan to chair the Federal Trade Commission, which will investigate big technology companies.

The nomination of Kanter comes after Biden, on July 9, signed an executive order to crack down on the increasing market power of big technology companies and promote competition. The order targets “killer acquisitions,” in which technology companies have purchased “hundreds” of nascent competitors in the past decade. The order says that federal agencies have not done enough to examine or condition these mergers.

Before that, on July 2, the FTC passed a measure in a party-line vote to rescind a 2015 policy statement that limited the scope of antitrust regulation to the framework established by the Sherman Act of 1890. Section 5 of the FTC act permits the FTC to enforce unfair business practices that are not necessarily explicitly outlined by the Sherman Act. By rescinding the statement, the agency will be able to more aggressively crack down on anticompetitive business practices.

Antirust policy and law have a long history in the United States. When antitrust comes to mind, some instantaneously think the United States taking Microsoft to court in 1998 over its alleged monopolization of the personal computer market.

But it’s much older and richer than that. And with quickly emerging developments in antitrust policy on the hill, Broadband Breakfast has selected this topic for a deep dive for our latest explainer.

• Broadband Breakfast Explainer 1 (Net Neutrality): On the Cusp of Sea Change, Broadband Breakfast Examines the Net Neutrality Debate
• Broadband Breakfast Explainer 2 (Spectrum): Is Spectrum Sharing a Key to Broader Connectivity Goals?
• Broadband Breakfast Explainer 3 (Section 230): With Florida Social Media Law, Section 230 Now Positioned In Legal Spotlight 
• Broadband Breakfast Explainer 4 (Antitrust): Antitrust Heats Up as Biden Selects Tech Critic Jonathan Kanter for Top Enforcement Spot

The original guiding principle behind ‘consumer welfare’

In his 1978 book, The Antitrust Paradox, Robert Bork, former Solicitor General of the U.S., coined the term “consumer welfare” in his attempt to articulate the historical standard of antitrust, dating back to the passing of the Sherman Antitrust Act of 1890.

Archival photo of Robert Bork by Jose R. Lopez from The New York Times

While consumer welfare has been the metric of measuring the need for antitrust enforcement since the 1970s, with the rise of the Chicago schools of thought regarding economic policy, the standard has many frustrated today and pushing for a change in thought.

Consumer welfare refers to the collective benefit derived from all consumed goods and services in a market. It’s measured by assessing an individual’s welfare defined by their own assessment of the satisfaction of a good, given the good’s price and their income. Their assessment is added to the collective’s assessment of that same good, and the sum of all assessed value is considered the consumer welfare in that market.

In general, higher prices mean less consumer welfare and lower prices mean more consumer welfare. Similarly, however, less consumer welfare translates to more revenue and better profit margins for firms.

The problem, according to the critics of Big Tech, is that online platforms such as Google, Facebook, and Twitter present virtually no cost to consumers. Consumer welfare, they argue, cannot measure how these firms are treating their consumer base and whether consumer interests are being harmed or helped.

Challenges to the consumer welfare standard

While antitrust enforcement has historically been measured against this metric, recent happenings in Washington dating the past nine months is challenging this standard as policy makers and legal experts alike have found themselves increasingly dissatisfied with the state of the private sector.

Last year, in October, the Department of Justice opened an antitrust lawsuit against Google, claiming foul play in Google’s competition practices. The FTC followed suit two months later in December, claiming Facebook has violated federal law in illegally maintaining a monopoly in the personal networking market.

Following a 16-month investigation completed last year by the House Judiciary’s Antitrust Subcommittee scrutinizing the business practices of Amazon, Apple, Google, and Facebook, a package of six antitrust bills awaits vote on the House floor after successfully passing a grueling markup in the House Judiciary Committee.

If passed, the six bills would mark the greatest change in antitrust legislation since the passing of the Clayton Act in 1914 and represent a marked shift in antitrust enforcement.

The July 1 rescinding of the 2015 policy statement that limited the scope of antitrust regulation will mean “greater scrutiny of mergers,” with special attention to the “acquisition of nascent competitors,” as well as, “competition by ‘free’ products, and the effect on user privacy.”

The language used there is particularly interesting because it signals a shift away from the school of thought historically based on prices and consumer welfare, to an embrace of newer theories of competition regulation and antitrust enforcement.

Evolving antitrust: From the Sherman Act to the Chicago school

In the later 19^th Century, business collusion and monopoly power posed a threat to America’s burgeoning economic frontier. Monopoly powers stifle innovation in markets when they purchase all other competing firms, and by controlling their supply of a good, they in turn control its price pushing higher prices onto consumers.

To combat this, the Sherman Act of 1890 was passed to regulate domestic business practices that were unfair and harmed consumers by making it illegal to monopolize the trade of any single market or area of commerce in the United States. It also makes it illegal for firms to collude in ways that manipulate or fix prices.

The Sherman Act had a rough start, however. Its language was vague, and prosecutors consistently failed to employ the act in ways that sufficiently regulated business in its intended ways. This led, 24 years later, to the creation of the Clayton Act, which clarified the language of the Sherman Act.

For example, while the Sherman Act made the formation of monopolies illegal, which was difficult to define, prove, and enforce, the Clayton Act made certain business practices that are conducive to monopolization illegal. If the Sherman Act is the dog of antitrust, the Clayton Act is the teeth that gives it its bite.

Referred to by some as the death of antitrust, in the 1970s and 1980s the Chicago school of economic thought caught wind and became the prevailing philosophy of economic doctrine in the United States. The school argues that markets operate most efficiently on their own, without government intervention.

While traditional antitrust approaches aimed at limiting extreme concentrations of power, the Chicago school of thought argued that government intervention makes markets operate inefficiently, which pushes higher prices onto consumers. It argues that consumer interests are best protected by competition, even if that only comes from a few large firms in an industry.

The Lina Khan essay on Amazon

A 2017 essay by now acting FTC Chairwoman Lina Khan while she was a student at Yale law school challenged the Chicago imperative and revived the dying discussion of antitrust enforcement.

Khan’s essay, Amazon’s Antitrust Paradox, examined Amazon’s business structure, taking note that while the company’s profit margins are and always have been meager, they have operated with an enormous capital expenditure, which has allowed them to seize a controlling stake in not just online retail, but expand and become “a marketing platform, a delivery and logistics network, a payment service, a credit lender, an auction house, a major book publisher, a producer of television and films, a fashion designer, a hardware manufacturer, and a leading host of cloud server space.”

FTC Chair Lina Khan

Khan argued that prices are too narrow a standard to measure the need for antitrust enforcement, and regulators should take a broader approach at measuring competition. Her essay gained traction with legal scholars and has led to a new, emerging pattern of economic thought known as the Brandeisian school of thought, which argues that measuring prices is too narrow—that observing and scrutinizing business structures is an essential element of antitrust enforcement.

Congress’ package of antitrust bills in the House integrate elements of Brandeisian thought by concerning itself directly with market concentration and making explicit the illegality of certain business practices, such as favoring one’s own product on marketplaces they operate and mandating data transparency for online platforms.

The package of proposed bills would only apply to firms with a market cap exceeding $600 billion, signaling a distinction between how massive firms will be regulated comparedd to their competitors. Domestically, only six firms exist with such a market cap, and only one of those is not a Big Tech firm (Tesla Inc). The other five are Apple, Microsoft, Amazon, Alphabet Inc (the parent company of Google), and Facebook.

Online platforms and the consumer welfare standard

Last year, cases were opened by the Justice Department antitrust division and FTC against Google and Facebook, respectively, over antitrust and competition concerns. These cases are both being prosecuted with the original legislation written in the Sherman and Clayton Acts and fought under the lens of consumer welfare.

Google was accused by the antitrust division of illegally maintaining a monopoly power through anticompetitive and exclusionary practices. Facebook was accused by the FTC for similar reasons—specifically for anticompetitive practices in acquiring nascent competitors Instagram and WhatsApp in the early 2010s. The main question facing these trials is whether the consumer welfare standard is enough to tackle these firms and substantiate the government’s claims against them.

The answer: It probably won’t be, primarily because Google and Facebook don’t charge consumers to use their products. They are free to anybody with internet access. And since the consumer welfare standard deals with price, and how those prices are affecting consumers, there is no way of applying the consumer welfare standard to these firms.

Without this standard, lawyers will have little basis of empirically measuring the harm Google and Facebook may be imposing on the market, which will likely make convicting them extremely difficult.

In fact, though the FTC has until the end of July to rework and resubmit their case, U.S. District Judge James Boasberg threw the FTC’s case against Facebook out of court, claiming that it was “legally insufficient.”

Photo of Judge James Boasberg by Diego Radzinschi in Law.com

Recently resolved and ongoing cases, including: FTC v. Facebook

Facebook was accused by the FTC of illegally maintaining a monopoly in the personal networking market largely because of its acquisition of Instagram in 2012 and WhatsApp two years later.

The agency wrote in a report that those acquisitions, which came at a time when both competitors were growing into massive communications platforms, made it more difficult for other social networking platforms to compete at scale. It also accused the company of forcing third-party developers interfacing with the platform to refrain from promoting other social services.

In Judge Boasberg’s opinion, throwing out the FTC case, he wrote that the FTC had failed to offer adequate evidence that Facebook had monopolized the market for social networking.

Looking forward, however, the FTC’s recent decision to rescind the 2015 statement that directed them to enforce antitrust within the framework of the Sherman Act will allow them more leeway in prosecuting Facebook when they resubmit the case later this month.

United States v. Google

The Justice Department, alongside eleven state attorneys general, sued Google in October, accusing it of illegally maintaining a monopoly through anticompetitive and exclusionary practices. Google does not share its user statistics, but the DoJ claims that around 90% of online searches are routed through Google.

The antitrust division’s complaint alleged that Google entered into a series of exclusionary agreements with firms that promoted their services over competitors, barring the consumer’s choice in the matter.

The division argues in its complaint that these practices damage competition and harm consumers through reducing the ability of innovative competitors to compete at scale with Google. However, alongside the difficulty of empirically demonstrating that harm has been pushed onto consumers, the division must also battle the notion that, generally, most consumers may be happy with Google’s products, and there exists little friction between the company and the public.

Google Play Store lawsuit

On July 7, a group of 36 state attorney general, alongside Washington, D.C., launched a new antitrust case against Google, accusing the search engine of exploiting its control of the Android app store. The lawsuit challenges a policy that forces Google Play app developers to pay a 30 percent commission fee on sales made through the app.

According to reports, the Google Play app store for Android devices is responsible for more than 90 percent of Android app downloads in the United States. No other Android app store has hold of more than a 5 percent market share, according to the plaintiffs.

Essentially, the complaint alleges that, because of Google’s dominant hold in the Android app market, there exists little competition and app developers therefore have no choice but to go through Google wo market their apps and pay the 30 percent commission fee.

Prosecutors will need to, as with the other antitrust cases, prove that Google’s actions have limited competition in the private sphere and damaged consumer welfare in the public.

District of Columbia v. Amazon

On May 25, 2021, Karl Racine, attorney general of Washington, D.C., sued Amazon, alleging that the company’s policies have led to fixed prices, raising prices for Washington, D.C. residents.

The case was filed specifically through the District of Columbia, and is not being prosecuted by federal agencies, the same way the Facebook and Google cases are. However, if Racine successfully establishes liability by Amazon, the ruling could have far-reaching consequences and impact the states.

Photo of Karl Racine by Lexey Swall in the Washingtonian

The Office of the Attorney General alleges that Amazon fixed online retail prices through a policy that applies to third-party sellers on its platform, which prevents third-party sellers from offering their products at lower prices on any other online platform, including their own. The problem with the policy, D.C. argues, is that Amazon charges high fees to sellers using their platform, upwards of 40% in certain cases.

That fee is worked into the price of the good a seller is providing on Amazon, and because they cannot offer that product for a cheaper price anywhere else, Amazon’s commission fee is in turn worked into the price of the good being sold elsewhere. If retailers try to work around this, they risk losing the sales they get from selling their product on Amazon.

Washington, D.C.’s Assistant Attorney General, in its report, said that Amazon accounts for 50-70 percent of all online commerce. Allegedly, Amazon is using this market dominance to manipulate prices throughout the rest of the market. The higher prices are pushed onto consumers, and such business practices are prohibited under the Sherman and Clayton Acts.

The future of antitrust

The package of proposed antitrust bills successfully passed through the House Judiciary Committee and will likely pass in the House of Representatives. However, save a few Republican dissenters who helped draft the bills, the voting turned out to be partisan and the vote followed party lines with few exceptions.

At the risk of Democrats defecting, and with a slim majority in the Senate, the Democrats may need to recruit more GOP support for the bills if the they stand a chance of being passed into law.

On July 9, the FTC opened an official investigation into the legality of Amazon’s acquisition of major entertainment studio, MGM. Amazon filed a recusal motion against Khan, claiming that her special interest in Amazon marks her involvement as a conflict of interest, asking that she remove herself from any proceedings involving Amazon.

Whether the recusal stands or not, it is likely that aggressive antitrust enforcement will be applied under Khan’s leadership throughout the duration of the Biden Administration.

• Broadband Breakfast Explainer 1 (Net Neutrality): On the Cusp of Sea Change, Broadband Breakfast Examines the Net Neutrality Debate
• Broadband Breakfast Explainer 2 (Spectrum): Is Spectrum Sharing a Key to Broader Connectivity Goals?
• Broadband Breakfast Explainer 3 (Section 230): With Florida Social Media Law, Section 230 Now Positioned In Legal Spotlight 
• Broadband Breakfast Explainer 4 (Antitrust): Antitrust Heats Up as Biden Selects Tech Critic Jonathan Kanter for Top Enforcement Spot

In a 3-2 party-line vote, the agency rescinded a 2015 statement that limited the scope of antitrust regulation to the framework established by the Sherman Act of 1890. Without that policy, the agency will be able to more aggressively crack down on anticompetitive business practices under Section 5 of the FTC act.

“Lawmakers created the FTC to police unlawful business practices with greater expertise and democratic accountability than courts provided,” said Khan, a longstanding critic of big technology companies, including Amazon.

“The 2015 statement is at odds with this institutional design because it declares that the Commission’s authority under Section 5 is largely coterminous with the Sherman Act,” she continued. “In effect, the statement surrenders the FTC’s unique advantages as an expert body with the power to adjudicate cases, issue rules and guidance.”

The FTC’s two Republican commissioners both objected to the decision. Commissioner Christine Wilson questioned the wisdom of rescinding the 2015 statement, claiming that it was made with broad consensus from legal experts and bipartisan support.

Commissioner Noah Phillips said that rescinding the statement convolutes how the FTC will enforce antitrust and competition policy, leaving the agency without clear direction. He also criticized the FTC for not allowing for public comment on the matter until after the vote had been taken.

President of the Computer & Communications Industry Association Matt Schruers raised a similar concern, saying in a press release, “While the CCIA appreciates the FTC’s efforts to enhance transparency by holding an open meeting, the agency should have engaged in more constructive discussions before rescinding the Section 5 bipartisan Policy Statement that brought legal certainty to antitrust enforcement. The FTC’s mandate to protect consumers will not be served by rescinding the Section 5 Policy Statement.”

The FTC’s decision could have a significant impact on issues such as its ongoing antitrust lawsuit against Facebook. While a judge recently threw out the initial case, the agency’s expanded scope could allow it to handle the case internally.

The open meeting resulted in two additional party-line decisions —simplifying the rulemaking process and streamlining investigations — that will similarly bolster antitrust enforcement.

Aurelien Portuese, the director of antitrust and innovation policy at the ITIF, said some countries use antitrust enforcement as a means of economic warfare, punishing foreign industries to boost their domestic competitors. He said all governments ought to play by the same “rules” of competition.

If some governments “try to not play by the rules of fair competition, then it’s the overall global welfare that will be undermined,” Portuese said on a panel hosted by the Information Technology and Innovation Foundation on Wednesday, which was discussing a “vision for international antitrust at the WTO.”

“All too often antitrust agencies make decisions in isolation, without considering other nations’ actions. With increased global economic integration, more antitrust decision regarding mergers have extraterritorial implications,” a report released by the ITIF in June said. “It is time for a global framework with enforceable principles to discipline nations that use antitrust for protectionist means.”

In early June, leaders from seven developed nations convened at the G7 summit and committed to find a “coherent way to encourage competition and support innovation in digital markets,” according to a report by the National Law Review.

Defending national sovereignty

Frederic Jenny, economist and chairman of the Organization for Economic Co-operation and Development (OECD), an intergovernmental economic organization that aims to stimulate economic progress and world trade, said developed nations such as the United States, the United Kingdom, and Japan already cooperate on competition policy, especially in the technology industry.

Jenny said smaller countries that are less apt employ antitrust measures in the same way because their goals may differ from that of larger, more developed countries. He said that enticing these smaller countries to play by the same rules would be an exceptionally difficult challenge.

“I think that going for hard rules at the world level is going to be particularly complicated, because I actually believe that we must accept the modicum of differences between competition laws,” Jenny said.

“We are talking about countries,” Jenny added, “that have different levels of development, different history, different legal systems, and you can’t have complete convergence in those areas.”

The case, filed in December of 2020, claimed that Facebook had suppressed market competition through their acquisition of up-and-coming rivals Instagram in 2012 and WhatsApp in 2014.

The case was thrown out by U.S. District Judge James Boasberg, claiming the FTC’s case against facebook was “legally insufficient.”

“The FTC has failed to plead enough facts to plausibly establish a necessary element of all of its Section 2 claims—namely, that Facebook has monopoly power in the market for Personal Social Networking (PSN) Services,” Boasberg said in his opinion.

“The Complaint contains nothing on that score save the naked allegation that the company has had and still has a ‘dominant share of th[at] market (in excess of 60%).’”

Boasberg threw out the FTC’s case, as well as the case filed by Attorneys General from 46 states on the same matter.

Boasberg gave the FTC until July 29 to revise the case and file a new complaint, Reuters reports.

“Although the Court does not agree with all of Facebook’s contentions here, it ultimately concurs that the agency’s Complaint is legally insufficient and must therefore be dismissed,” Boasberg said.

Earlier this year, Facebook had appealed to the Court asking the lawsuit to be thrown out. The FTC “utterly ignores the reality of the dynamic, intensely competitive high-tech industry in which Facebook operates,” the Wall Street Journal reported Facebook as saying.

Facebook has said the states’ case “does not and cannot assert that their citizens paid higher prices, that output was reduced, or that any objective measures of quality declined as a result of Facebook’s challenged actions.”

And because Republicans don’t have a unified stance one way or the other, Democrats aren’t likely to pay a political price for their stance.

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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.

The comments, by Aurelien Portuese, director of antitrust and innovation policy at the Information Technology and Innovation Foundation in an interview with Broadband Breakfast, represent a sharp critiques of the bills by legal experts and tech industry executives.

The bills would not achieve their stated goals, Portuese said. He says that they would stifle competition and lead to less, not more innovation.

Portuese said that, because the bills target companies above a certain market cap and would only apply to those companies, they would lead to “a two-level playing field” in which the laws would apply to certain companies and not to others.

“These bills allow practices for some companies while prohibiting the very same practices to their rivals, and conversely, would prohibit some practices to some companies while allowing them for rivals.”

Because the measures were drafted to target a specific companies such as Apple, Amazon, Facebook and Google, they were a form of “overt discrimination.”

Apple will be regulated by the new laws, but their competitor in the music streaming industry, Spotify, will not. This would give Spotify a competitive advantage over Apple.

Antitrust law should be used to foster innovation

Antitrust policy should be employed to foster as much innovation as possible, and not simply break up large firms into smaller ones, said David Teece, executive chairman of the Berkeley Research Group, to an online panel hosted by ITIF.

For his part, Portuese said that antitrust law is a “question of leadership, not of law.” Currently, there are three active legal cases employing antitrust philosophy involving Google, Facebook, and Apple, all of which, he said, are being prosecuted under the current antitrust law.

These current antitrust tools are sufficient, he said, and the lack of antitrust actions taken by past administrations is a problem of enforcement, and not the legal framework itself.

Lina Khan, a longstanding critic of Big Tech, was appointed chairwomen of the FTC on Tuesday. As chairwoman, she will have considerable leeway in directing how and what the FTC regulates. That could mean a major shift in the commission’s enforcement on antitrust.

Portuese also made the point that tech innovation requires large capital expenditures. By specifically targeting the U.S.’s top firms and breaking them up, the overall amount of innovation that occurs in the technology industry will diminished, he said.

Enforcement for political gain

Samuel Palmisano, the former CEO of technology company IBM, said that he sees the new antitrust legislative proposals as less about competition policy and more about politics.

“We see both the right and the left wanting to break up media and social platforms because they don’t like what’s being published, or not published,” Palmisano said at the ITIF event. “There can be a legitimate debate about media fairness or Section 230, but antitrust isn’t the tool for that debate.”

Editor’s Note: A previous version of this story incorrectly spelled the last name of Federal Trade Commission Chair Lina Khan, as “Kahn.” The story has been corrected, and Broadband Breakfast apologizes for the error.

The five proposed bills follow an investigation concluded last year by the House Antitrust Subcommittee which accused Big Tech firms of harming consumer welfare and employing anti-competitive practices.

The bills aim to prevent companies from manipulating marketplaces to promote their own products. They make it harder for media platforms to buy and kill competitors. They mandate that platforms and firms collecting consumer data make it easier to leave and take the data to competitors. And they give the Department of Justice and the Federal Trade Commission extra resources to police monopoly power.

However, the bills have already drawn sharp criticism from technological executives, arguing that the bills would carry with them unintended consequences and damage American interest and harm consumer experience.

The bills’ unintended consequences

“As currently drafted, the package of antitrust bills introduced in the House Judiciary Committee would be a disaster for America innovators and consumers,” Gary Shapiro, CEO and president of Consumer Technology Association, said in a press release. “If signed into law, the bills would cause irreparable harm to small businesses and startups and put the US at a competitive disadvantage against China.”

Shapiro also claims the bills would restrict popular features currently enjoyed by millions of Americans. He says they would put an end to Amazon Prime free shipping, YouTube videos in Google search results, preinstalled iPhone apps, and many more.

The Consumer Technology Association is a trade organization that conducts research and lobbies for policy reform, representing technology companies such as Facebook, Amazon, Apple, and Microsoft.

Law360 reported last Friday that Adam Kovacevich, CEO of Chamber of Progress, a tech policy group sponsored by some large tech companies, said that the bills would ban things like Amazon Basics batteries, Apple’s Find my Phone feature, and Google Maps appearing in Google searches, which he said would “spark a consumer backlash.”

“And strangely, these bills could make it harder, not easier, for platforms to remove hate speech and disinformation,” Kovacevich said. “Instead of focusing on helping families, these proposals inexplicably target a bunch of technological conveniences that most people really like.”

Jessica Melugin, director of the Competitive Enterprise Institute’s Center for Technology and Innovation, called the proposals “regulation at its most economically depressing.”

“[The bills] reflect fundamental misunderstanding of how platforms create value for consumers, how market leaders compete with each other and the incentives necessary to keep innovative companies churning out useful new products and service for customers,” Melugin said.

“Taken together, these proposed regulations would compromise the U.S. as a global tech leader, strain an already struggling U.S. economy, and hurt American consumers.

Proponents of the bill maintain their position

Rep. David Cicilline, D-Rhode Island, chairman of the Subcommittee on Antitrust, Commercial and Administrative Law, said in a statement “unregulated tech monopolies have too much power over our economy.

“They are in a unique position to pick winners and losers, destroy small businesses, raise prices on consumers, and put folks out of work,” Cicilline said. “Our agenda will level the playing field and ensure the wealthiest, most powerful tech monopolies play by the same rules as the rest of us.”

In a letter sent to the leadership of the House Judiciary Committee, the Consumer Federation of America’s director of research, Mark Cooper, said, “The industry has taken the position that any constraint on its actions will end the digital revolution and dramatically increase costs for consumers. The Consumer Federation of America emphatically disagrees.

“The House Judiciary Committee and Antitrust Subcommittee is doing exactly what Congress should do to reboot needed oversight of the dominant incumbent digital platforms,” Cooper added in a press release. “The committees have identified general practices that must be reformed, given concrete recommendations, and provided increased resources for implementing these needed actions.”

Klobuchar’s proposed bill would modify the laws regulating mergers and acquisitions to block certain anticompetitive conduct by larger firms, shift the burden of proof from investigators to the businesses themselves to prove anticompetitive practices have not been undertaken, and authorizes an increase in funding for federal antitrust enforcement.

Some of the panelists called Klobuchar’s bill an “all out mistake.” Others endorsed it, while also arguing that antitrust legislation would not be the only tool necessary to check Big Tech’s power.

Charlotte Slaiman, the competition policy director at Public Knowledge, believes that the danger of Big Tech is not just in the power they can accumulate through unregulated business practices, but in the power tech firms hold by virtue of the industry’s ability. She endorses Klobuchar’s bill, but believes that antitrust legislation is not the only tool that should be employed to reign in Big Tech’s power.

Bilal Sayyed, director of the Office of Policy Planning at the Federal Trade Commission under the Trump Administration, says that Klobuchar’s bill targets specific companies, and primarily takes issue merely at the companies’ size, without focusing on the harmful practices they may or may not be employing.

Big Tech’s uniqueness calls for unique regulation

Slaiman says consumers usually help keep business practices in check because businesses are dependent on keeping their consumers happy in order to attract their business. She says that technology firms are similar in this way at their genesis, but this changes as the firms become more powerful. Eventually, “the customers need you [the tech firm] more than you need the customers,” she says. “The calculus completely changes.”

She said she believes the unique relationship of firms to customers in the big technology industry allows firms to employ practices that harm consumers, but in ways that antitrust laws won’t necessarily address.

In an interview with Harvard Kennedy School, Jason Furman, former chairman of the Council of Economic Advisers under the Obama administration, said “pro-competition regulation is not, however, the way to solve all of the social problems of Big Tech, of which the biggest is the contribution many believe they are making to spreading fake news and reinforcing politization. Additional approaches are needed to address those issues.”

Slaiman said, “We’re really concerned about the power itself. These companies should not be this powerful. And so it’s not just about relying on antitrust to address our problem. We need additional laws and rules on top of antitrust for Bit Tech.”

Big Tech’s size not the problem

Adam Kovacevich, founder and CEO of the Chamber of Progress, notes that while many take issue with the size of Big Tech, a company’s size is not enough to file antitrust complaints against them. He says that there can also be virtues associated with Big Tech’s size.

“There’s also an argument that their bigness allows them to do things that are pro-social, that are beneficial to consumers,” he says. “What you see is that everyone can agree—‘I have anxiety about their bigness’—but I think there’s not as much agreement as to whether they’re using their bigness to disadvantage people.”

Kovacevich says that while many people are concerned with the size of Amazon, many people relied on it as a “lifeline” for their groceries and other essential living utilities during the pandemic.

Kovacevich counters the argument that the massive quantity of data Big Tech has collected makes them a monopoly power by saying that innovation on the side of smaller firms would lead a collection of higher quality data, which would allow them to compete with Big Tech in new ways.

The future of antitrust

On Friday, a package of five new bills were introduced in Congress that aim to limit the power of Big Tech. The bills come as a response to the completion of a 16-month long investigation by the Antitrust Subcommittee completed last year, which scrutinized the business practices of Amazon, Apple, Google, and Facebook, which led to a report that accused the tech giants of harming consumer welfare and employing anti-competitive practices.

In October, the Department of Justice sued Google over anticompetitive practices used to preserve their alleged monopoly power, and in December, the Federal Trade Commission sued Facebook for similar reasons.

On a panel hosted Friday by the Information Technology and Innovation Foundation, three experts defended large tech companies against those who would use antitrust law against them.

“The fundamental problem of antitrust is how to encourage innovation but not necessarily punish the winners,” said Ioana Marinescu, professor at the University of Pennsylvania.

She and the other panelists said that larger companies are not always monopolies: Sometimes they are simply punished for being successful.

The public looks at major corporations and thinks they all exercise monopoly power, even though that is not true, said David Teece, professor at University of California, Berkeley.

“Big tech is profitable, but it’s not because of restraints on competition,” he said. “It is because of the very successful innovation driven competition.”

Still, the experts said that a balance must be struck between encouraging enough competition that there is innovation, but not too much competition that it is not profitable for any one company to be in the marketspace.

“The problem with regulation is that if you get it wrong initially, I don’t think that’s a fix that’s easy to unravel,” said John Yun, professor at George Mason University.

“These markets have a great deal of innovation,” he continued. “The question is: Are they engaging in conduct that’s hampering that innovative process?”

When discussing whether tech markets are “broken” or not, there was general agreement that remains much room in which the digital market may grow, so long as big tech companies continue to operate by legal means.

Marinescu did say that the network and data aspects of digital platforms do act as utilities at times, which can make them harder to regulate.

All of the panelists agreed that there is much to be learned from the antitrust cases being filed.

Jason Boyce is the co-author of the book “The Amazon Jungle: The Truth About Amazon, The Seller’s Survival Guide for Thriving on the World’s Most Perilous E-Commerce Marketplace,”  that dives into the size of Amazon and its alleged privacy issues.

“Amazon is protected by Section 230” and not in a good way, Boyce said in an interview with Broadband Breakfast.

“These White entitled hoodie wearing billionaires aren’t going to do the right thing for the U.S. citizens,” said Jason Boyce, co-author with Rick Cesari of the book. It attempts to explain just how big the company really is and the privacy issues it poses.

In an interview with Broadband Breakfast, Boyce discussed how and why it needs to be held accountable for its alleged dominance in ecommerce and other markets is vying to own.

Boyce singled out CEOs of other big tech companies, calling Mark Zuckerberg “poison,” and the “bearded wonder,” referring to Jack Dorsey at Twitter. Not even Jeff Bezos’ blazer exempts him from his responsibility, he said.

“These white entitled hoodie wearing billionaires aren’t going to do the right thing for the U.S. citizens,” he said.  Boyce said that these “libertarian” idols are no longer trustworthy in part due to their lack of respect for intellectual property and privacy invasion with no means of remuneration to the consumer.

Amazon was contacted multiple times for comment on this interview before publication, and while it said a response would be given, the company did not follow-up.

Amazon’s role in the Section 230 debate

Section 230 from the Communications Decency Act of 1996 says that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

In other words, online intermediaries are protected against a range of laws that might otherwise be used to hold them legally responsible for what others say and do—which can extend to the sale of products from third parties in Amazon’s case.

If a third party from a factory in China decides to sell a retractable dog leash on Amazon, Amazon is not responsible for the safety of that Chinese-based retractable leash. If the leash snaps and takes an eye out, the consumer who bought it cannot sue Amazon since it is protected by Section 230. Unfortunately, this has already happened.

Heather Oberdorf, a Pennsylvania woman, bought an $18.48 retractable leash from a Chinese company selling on Amazon. One day while walking her dog, the leash suddenly snapped and sprang back, hitting her left eye and resulted in partial blindness.

MarketWatch reported on this story and said that “Amazon contended that Oberdorf could not hold it liable for posting [the retractable leash] because a section of the 1996 Communications Decency Act (CDA) shields companies from liability for publishing what third parties say on their sites.”

The Chinese factory that produced the leash will also be free from legal responsibility as “no U.S. citizen is going to have any success suing a factory in China,” as there is no incentive to offer the sale of safe products to consumers on Amazon, said Boyce.

Waiving rights to sue

When signing up for an Amazon account, all rights to sue the company, even if a third party’s product use results in serious harm, is waived upon account creation. Amazon should be required to force its third party sellers to publish safety information about their products so consumers can be informed.

Amazon is a once-in-a-generation company that was won ecommerce, offering half a billion items online, while the biggest Walmart store can only stock 500,000 items, said Boyce. He raised alarm over Amazon’s dominance in the book industry and its Amazon Web Services, calling them monopolies that at the present time, prevent the “next Amazon” from being born.

Boyce cited the historical case of Microsoft, where it was sued by the U.S. government for “tying,” since it prevented other browsers from existing, among other things. The government was successful in breaking up Microsoft in one of the largest anti-trust cases, which allowed Google to be born under the “do no evil” mantra.

With free market competition as a backdrop, the participants discussed antitrust legislation and regulation, data privacy, and funding for journalism.

Sen. Amy Klobuchar, D-Minnesota, who chairs the Senate judiciary’s subcommittee on antitrust, spoke on the recent tussle between Facebook and Australia over news feeds on the social media platform. “That is the very definition of a monopoly — when you can hold a country hostage simply because they want to make sure the content is paid for from the news,” she said.

Both Google and Facebook face several anti-competitive lawsuits from the Department of Justice, states attorneys general, federal agencies and several news publications that claim the big tech’s behavior has led to a monopoly in the digital space.

Google controls over 90 percent of the search engine market and Facebook has eaten up all of their competitors including Instagram and WhatsApp to maintain a social media monopoly, Klobuchar said. She also looked beyond just the tech industry: “America’s competition problem as well, as you all know, isn’t just limited to digital markets. It’s part of a broader problem that affects our entire economy from cat food to caskets,” she said.

“The consequences of the collapse of local news are catastrophic; it’s hard to overstate how severe a threat this is to democracy,” said Steve Waldman, president at Report for America, a national organization dedicated to supporting local journalism.

“We have two dominant platforms who sit between us and our readers, who extract the value of our content, and then they systematically deliver it to the users—our readers—in a highly predictive way so that the users stay within their walled gardens,” said Danielle Coffey, senior vice president at News Media Alliance.

The platforms continue extracting user data that they use as a currency, then when we do get readers, we only get a small percentage of ad revenue, she said. We get hit on the distribution side and the ad revenue side, she added.

Minnesota’s Attorney General Keith Ellison focused on the importance of information for democracy. People need to have access to information, which primarily comes from news sources, and those news sources need funding, he said. Without funding, news publications will close or change, and it will challenge the very foundation of our society, because we need informed people who can make decisions, he said.

No leverage on big tech

“We see our bargaining power with Google and Facebook as zero,” said Randy Lebedoff, senior vice president at the Minneapolis’ Morning Star publication. The digital advertising we get from the online platforms doesn’t make up for the drop in print advertising, because “someone else is getting paid for marketing our articles,” she said.

Although Klobuchar focused mainly on competition in tech industry, she also expressed concern over misinformation on social media. America needs to use free market capitalism that will foster new companies with “privacy bells and whistles” and better policies to control misinformation, she said.

Social media has impacted consumer readership through “the rise of what people call fake news, which is just really low-quality, click-bait propaganda,” said Julia Angwin, editor-in-chief at the Markup, a news organization that investigates big tech.

Propaganda used to be expensive to produce, but we’ve decentralized that and now it’s cheap and possible to make money from, she said. The tech companies elevate misinformation through news feeds with their algorithms and then take no responsibility for it, she said.

Legislation to address concerns

“It is high time for privacy legislation in the United States to protect consumers, we’re going to need something at the federal level. It’s going to be a patchwork mess if we approach it only at a state level,” Yale University fellow Dina Srinivasan said.

In February, Klobuchar introduced the Competition and Antitrust Law Enforcement Reform Act, S.225, legislation that would target anti-competitive behavior. The bill would increase funding for regulators at the Justice Department’s Antitrust Division and the Federal Trade Commission, and shift the burden of proof in mergers to the company to prove their acquisition does not harm a competitive market, among other things.

Rep. David Cicilline, D-Rhode Island, along with several other members of Congress, introduced the bipartisan Journalism Competition and Preservation Act in March, intended to allow small news publishers to collectively negotiate with online platforms to “protect Americans’ access to trustworthy sources of news online,” read the press release.

The bill would allow coordination by news publishers if it “(1) directly relates to the quality, accuracy, attribution or branding, or interoperability of news; (2) benefits the entire industry, rather than just a few publishers, and is non-discriminatory to other news publishers; and (3) is directly related to and reasonably necessary for these negotiations, instead of being used for other purposes,” said the statement.

But Waldman said the Klobuchar and Cicilline bills would likely not help save local news. America needs to look at other policy steps to help local news, he said. He suggested donations toward local journalism efforts.

If there was a slight shift toward viewing journalism as an important part of a community’s health, it would be transformative, he said. It would take $1 to $2 billion of well-targeted money in local news that would double the number of local reporters, which would only be about half of one percent of philanthropic giving, he said.

“I think we could use more money still,” Noah Phillips, commissioner on the FTC, said at the Information Technology and Innovation Foundation conference on Tuesday. “The agencies could do more with more resources, and that goes without saying. There are hard decisions that we have to make with the limited resources that we have.”

William Kovacic, former FTC chairman, reacted to the bill by noting that the debate has effectively shifted from what agency should do the work to how they do it.

“The neglected questions of implementation are starting to receive the attention they deserve, and one of them is resources,” Kovacic said. “When I look at competition authorities around the world, there is an epidemic failure to match commitments with the means necessary to carry out the task in question.”

The FTC in the last year has brought more cases than it ever has since 2001, Phillips said.

“This is a bit of delusion that all of our countries engage in,” Kovacic said. “We have the highest aspirations, the boldest goals, but when it comes to paying for it, we don’t want to do that; we want to drive and take off the lot.”

He related antitrust enforcement’s strength to the net amount of resources that have to be increased to perform existing functions capably. “It is not simply competition,” Kovacic added. “If you benchmark the FTC resources devoted to data protection privacy, we have a decidedly inadequate allocation,” and that is not the FTC’s doing but those are legislative choices, he said.

Screenshot from ITIF event on Tuesday

For the FTC to be a genuinely full-fledged national data protection regulator for privacy, it would have to be double-to-three times the agency’s resources right now, he said.

More resources will enable the agency to carry out its mandate in a more capable way, he said. The essence of success in so many matters is maintaining continuity of staff at a high-level with high-quality.

Phillips, for his part, said part of the funding will go to hiring economists, experts and increasing salaries.