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Politics

What critics say House Democrats got wrong about Big Tech

The bickering has begun.

The CEOs being sworn in via Webex

Depending on who you ask, the report is either "remarkable and historic," or it's a "sloppy" and overzealous political project by progressives with a vendetta.

Screenshot: Shakeel Hashim/Protocol

On Tuesday, the House Judiciary antitrust subcommittee released its long-awaited 449-page report, the culmination of a 15-month investigation into whether Amazon, Apple, Facebook and Google are violating antitrust laws.

Depending on who you ask, the report is either "remarkable and historic," marking the first time in over 50 years that Congress has seriously held corporate power to account, or it's a "sloppy" and overzealous political project by progressives with a vendetta against the successful tech industry.

Here's what critics say the House Democrats got wrong about Big Tech.

It's too one-sided

Even experts who have closely watched the investigation were surprised by how sweeping, dramatic and partisan the report wound up being.

Ultimately, the staff who authored the report concluded that each of the tech companies functions as a monopoly, abusing dominant market positions to crush rivals, harm small businesses and exploit consumers. It offered criticisms of a huge swath of their products, including Amazon Web Services, Google Cloud, Amazon Echo, Facebook Messenger and more.

It was a surprisingly detailed, extensive indictment of nearly every business practice at the heart of the tech industry. Typically, even reports that diagnose issues within the tech industry gesture toward good that the largest tech companies have done for consumers, said Sam Bowman, the director of competition policy with the International Center for Law and Economics, which has received funding from Google.

"I'm not sure if there's a single line in there that acknowledges the good things tech has done," Bowman said. "This [report] begins with about 350 pages where every single product that these companies offer is described as anticompetitive."

But the most aggressive recommendation in the report is the call for "structural separations," a legislative proposal that would force the largest tech companies to break up their businesses, also known as the "Glass-Steagall of the internet." That proposal proved to be a nonstarter for even the most sympathetic Republicans, like Rep. Ken Buck, who put out his own, narrower set of proposals.

"Despite the protestations of Chairman [David] Cicilline for the past three months that this is a bipartisan report, the result and policies were so extreme they could not find a single Republican to sign on," said Berin Szóka, the president and founder of Big Tech-funded think tank TechFreedom.

Asheesh Agarwal, deputy counsel with TechFreedom, added that some of the reforms would "unilaterally disarm our biggest tech companies."

The definition of markets

The first step in an antitrust case is defining the market that a company is monopolizing. And critics throughout the day took issue with how the report's authors defined the markets that Google, Amazon, Apple and Facebook dominate.

"Of course, market definition is going to be one of the big points of contention in this because oftentimes, these companies are competing in diverse and ever-changing markets," said Jennifer Huddleston, the director of technology and innovation policy at the American Action Forum, a right-leaning think tank that has received funding from Google and Facebook.

"When you define the markets super-narrowly, it's going to look different versus when you take that step back and take a look at what consumers may actually be experiencing," she said.

For example, the report estimates that Amazon's share of U.S. ecommerce is about 50% or higher and claims that Amazon controls about 65 to 70% of all U.S. online marketplace sales — both numbers that experts do not agree on and often take issue with. One analysis by eMarketer estimated that Amazon has a 38.7% share of the U.S. online retail market, which the report's authors dispute. And Amazon has claimed that its sales only account for a small fraction of total marketplace sales in the U.S., if you include brick-and-mortar stores. In a blog post on Tuesday night, Amazon argued that it accounts for less than 1% of the $25 trillion global retail market and less than 4% of retail in the U.S.

The report also claims that Google captures the market for general online search, accounting for 87% of searches. But even the significance of that market definition is under dispute, considering Google does not make money off of the majority of searches. The more important market in economic terms might be the search for products, which would make Amazon a more serious competitor.

The report argues that Apple exerts monopoly power within the "mobile app store market," a novel market definition that could be tested by the ongoing court case Epic Games v. Apple.

Factual inaccuracies, misrepresentations

Throughout the day, critics of the report posted examples of factual inaccuracies and misrepresentations in the report.

Alec Stapp, the director of technology policy at the Progressive Policy Institute, listed them in a Twitter thread. The Progressive Policy Institute receives funding from Facebook, Google, and Amazon.

He noted that the report claims that 10 years from now, "30% of the world GDP may lie with [Amazon, Apple, Facebook, Google] and just a handful of others" — but the linked study makes it clear that it is referring to the tech industry as a whole, not just the Big Four.

The report claims there are "100 million iPhone users worldwide," when that number only accounts for iPhone users in the U.S. At one point, the report's authors use a global sales statistic to calculate a U.S. market share number for Amazon. It says that Amazon uses the profits froM AWS to subsidize its retail operation, though that no longer appears to be true.

"It endorses a lot of things that have been long debunked in the tech sector," Stapp said.

There is also some dishonesty by omission: The 449-page report has 17 mentions of TikTok, four mentions of Zoom, and one mention of Shopfiy, some of the platforms' most serious competitors.

"Although there are several competitors, such as LinkedIn, and fast-growing new entrants, such as TikTok, most or all employ niche strategies to varying degrees, and most have far less user engagement, attention and data and a smaller share of advertising revenue than Facebook," the report says in its section about Facebook.

Potential harm to startups

A number of the report's proposals would make it much harder for tech companies to engage in mergers and acquisitions, a fundamental dynamic of the tech industry.

The report suggests making acquisitions by the top tech platforms "presumptively" illegal, forcing them to prove to the government that they should happen. That proposal, which has gained some support among Republicans, would make it much easier for the government to intervene as the tech companies gobble up hundreds of smaller firms.

Carl Szabo, the vice president and general counsel with tech trade group Netchoice, said the proposed changes to merger policy could disincentivize investors from giving money to new startups. "[Investors] want to have an escape valve where if [a startup] is failing, it can be bought, it can sell," Szabo said. "You're not going to see … investment in a future competitor to dominant players."

Many startups are founded with the explicit intention of being sold to larger companies further down the line. But these proposals would likely drag out the process of merging and acquiring new companies, and potentially limit the amount of money that large tech companies are willing to invest in smaller players.

Changing the consumer welfare standard

For the past 50 years, antitrust law has operated under the narrow "consumer welfare" standard, which makes it impossible to sue any companies for antitrust violations unless they are actively raising prices for consumers. Of course, that standard makes it difficult to make antitrust claims against tech companies because many of them offer their core services for free.

The report revolves around a much broader interpretation of antitrust law harkening back to the early 1900s, which defends small businesses and potential rivals who say they are being crushed by the largest tech companies.

"The subcommittee recommends that Congress consider reasserting the original intent and broad goals of the antitrust laws, by clarifying that they are designed to protect not just consumers, but also workers, entrepreneurs, independent businesses, open markets, a fair economy and democratic ideals," the report says.

Most critics of the report are believers in the "consumer welfare" standard and resist the notion that it should be expanded, claiming it has enabled innovation in the market.

"When you move away from an objective standard, which is what we have with consumer welfare standard, to a subjective standard — 'I know it when I see it, or I dub you too big' — then you are essentially opening antitrust to crony capitalism," said Szabo, whose group represents Google, Facebook, Amazon and Apple.

The debate over the future of the "consumer welfare" standard is certain to rage on over the next few months. But critics near-unanimously agreed that the report is important because it could lay the groundwork for any antitrust efforts in a potential Biden administration, especially if Democrats win the Senate.

"So much depends on November," TechFreedom's Agarwal said.

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