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Politics

What the antitrust proposals would actually mean for tech

Here's a rundown of how the reforms suggested at the House Judiciary Committee's hearing would affect tech companies — and how likely they are to happen.

David Cicilline

"To put it simply, these once-scrappy, underdog startups have grown into the kinds of monopolies we last saw more than a century ago, during the time of oil barons and railroad tycoons," says Rep. David Cicilline, the chairman of the House Judiciary antitrust subcommittee.

Photo: Tom Williams/CQ Roll Call via Getty Images

Academics, lawyers and experts proposed an array of sweeping antitrust reforms during a congressional hearing on Thursday, capping off the House Judiciary Committee's antitrust investigation into the tech industry with a roadmap forward that is certain to scare tech executives.

Their proposals ranged from mild reforms, like giving more resources to the Federal Trade Commission and Department of Justice, to expansive new regulatory regimes, like treating the Big Tech firms as public utilities similar to telecommunications companies or railroads.

"To put it simply, these once-scrappy, underdog startups have grown into the kinds of monopolies we last saw more than a century ago, during the time of oil barons and railroad tycoons," said Rep. David Cicilline, the chairman of the House Judiciary antitrust subcommittee.

"We stand at a crossroads," he said. "There is no doubt about that."

Here's a rundown of how the suggested antitrust reforms would affect tech companies and how likely they are to happen.

Structural separation

"Structural separation," which was promoted by multiple progressive academics as the most straightforward antitrust remedy, would require large data companies to pursue a "single line of business" rather than leveraging their power to forge into new markets. For instance, a "structural separation" law would prevent Amazon from both operating its ecommerce platform and selling products on that platform.

It's similar to the Glass-Steagall law for technology platforms that Cicilline has endorsed.

"Structurally separating platforms from commerce would give everyone a fair shot at innovating, at getting their fair rewards," said Sally Hubbard, the director of enforcement strategy at the Open Markets Institute, an anti-monopoly think tank.

Fordham University School of Law professor Zephyr Teachout described Facebook, Amazon, Apple and Google as "riven with conflicts of interest."

"They own platforms and compete on the platforms, so Congress should pass a law delineating single-minded business rules for the very biggest tech companies," she said.

This rule would bulldoze the business models of all the major tech companies in one fell swoop. It would prevent Facebook from offering messaging services and Google from owning YouTube.

Such an expansive proposal would certainly meet tough roadblocks even if the Democrats take back the Senate and the White House, as moderate Democrats are likely to eschew such an extreme incursion into private businesses. But the framework came up continually throughout the hearing, indicating it could potentially wind up in the committee's final report.

Make acquisitions harder

Some of the moderate experts suggested a legal tweak that would require large companies to work harder to justify their acquisitions of smaller companies. Right now, the burden is on the government to prove that mergers are anti-competitive.

But Brookings Institution fellow William Baer suggested a legislative change that would require dominant firms to justify why proposed mergers aren't problematic.

"By incorporating presumptions that certain behaviors are likely to reduce competition, by making it clearer that showing a risk of a reduction in competition is sufficient, and by emphasizing that anticompetitive effects are not limited to price effects and include quality and innovation competition, Congress can make a meaningful difference," Baer wrote in his testimony.

This kind of incremental change might be easier to get through Congress, but it has the potential to make life significantly harder for Big Tech. It would have made it harder for Facebook to push through its acquisition of Instagram or Google to buy DoubleClick, for instance.

Rep. Kelly Armstrong, a Republican, said he liked Baer's talk about "tweaks rather than large-scale change" but had qualms with this proposal.

"My only concern with that is a lot of these companies build themselves solely for the purpose of getting bought out," Armstrong said.

Public-utility-style regulation

All proposals to treat Google, Facebook, Amazon and Apple as "public utilities" have always riled up tech lobbyists and free-market advocates, who say it would amount to government overreach. But Sabeel Rahman, the president of liberal think tank Demos, said public-utility-style regulation could be a key tool for taking on the companies' dominance.

"A century ago, the rise of industrial monopolies in railroads, telecommunications, finance and other sectors sparked a wave of policy innovation leading to vital legislative and regulatory interventions like the Sherman Antitrust Act and the rise of public utility commissions at the state and federal level," Rahman said. "These innovations were designed to address the problem of private control over infrastructure — the same kinds of problems that today's tech giants pose."

Rahman and Teachout laid out their case for treating the companies and public goods earlier this year, arguing it could "restrain the dangers of private power over critical shared infrastructure."

The progressive scholars suggested Congress could impose public obligations — like nondiscrimination and price regulations — on the companies.

Any of these proposals would place tech companies under a vast new regulatory framework similar to that of AT&T or Verizon.

It would be hard to draw up any Republican support for such a proposal. Rep. Ken Buck, who has consistently been the most sympathetic Republican on the panel to antitrust issues around the platforms, expressed concern about going too far with an "oppressive regulatory regime."

More resources for FTC, DOJ

Getting more resources to the FTC and DOJ for antitrust enforcement is likely the easiest reform for Congress to pass. Most of the experts said the agencies need far more money, staff and time to bring serious antitrust cases against the companies. The combined value of Apple, Amazon, Microsoft, Facebook and Google stands at about $7 trillion. The FTC and DOJ antitrust division's combined enforcement budget stands at about $510 million, Buck said.

"Conducting effective oversight and launching antitrust reviews is difficult when your budget is only a minor fraction of Big Tech's … unfailingly deep pockets," Buck said.

Rachel Bovard, a conservative anti-monopoly activist, underlined his point, saying, "We do expect law enforcement agencies to parry with billion-dollar companies, the biggest the world has ever seen, and we give them miniscule budgets to do it."

Beyond funneling more funding toward the agencies, several experts and lawmakers suggested it's time for the FTC to act more aggressively.

This option would create new challenges for the legal teams at Facebook, Google, Amazon and Apple, which are already being examined by the agencies, but it falls short of the structural change that Cicilline is likely seeking.

Interoperability

Michael Kades, the director of markets and competition policy at the Washington Center for Equitable Growth, said interoperability can "allow competition to occur," although it's not a solution to the antitrust concerns in and of itself.

Interoperability, which requires tech companies to build connections between their products, would make it easier for users to jump from one platform to another. "Interoperability causes network effects to occur at the market level — where they are available to nascent and potential competitors — instead of the firm level, where they only advantage the incumbent," Kades wrote in his testimony.

Interoperability could help smaller competitors take advantage of Facebook and Google's built-out infrastructure to attract larger audiences. But it's a very technical endeavor with many open questions about privacy and security. So far, a Senate proposal to require interoperability has stalled.

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