- For the first time in a generation, Washington is questioning what it means to protect American Capitalism.
- Big tech companies like Google and Facebook, with their seemingly free products, are forcing lawmakers to consider whether monopoly power manifests itself in more than just higher prices for consumers.
- This is creating a bipartisan consensus that anti-trust regulation isn’t just about protecting consumers, it’s about protecting competition in general.
There was a rare glimpse of productivity in Washington last week during an anti-trust hearing held by the House Judiciary Committee. The hearing was about the impact tech giants like Google and Facebook have had on the American press and it went, most encouragingly, something like this:
- Members of Congress identified a problem: A struggling free press at the mercy of tech giants squeezing them for cash, which has contributed to the spread of disinformation on the internet.
- They then held a hearing to listen to witnesses involved in the space.
- And finally, after listening to the witnesses, those members of Congress then seemed to reach a bipartisan consensus on how to move forward.
Recognising the importance of a thriving free press to American democracy, both Both House Judiciary antitrust subcommittee Chairman David Cicilline (D-R.I.) and House Judiciary ranking member Doug Collins (R-Ga.) agreed to support a bill called the Journalism Competition and Preservation Act, which would allow publishers to circumvent anti-trust restrictions for 4 years and collectively negotiate with internet companies.
Much of the news industry – including the News Media Alliance, a consortium of about 2,000 other print and online news outlets including The New York Times – likes the idea too.
Consider this part of an evolution in Washington’s thinking on how to protect American capitalism and democracy. For years, politicians, legal scholars and technocrats have believed that there was really only one reason to rein in big, concentrated businesses – if they were forcing prices too high for consumers.
Now, in a digital era where it seems so many products we use on the internet are free, companies like Google and Facebook are challenging that notion. These companies are forcing politicians to ask a central question: “If these products are free, why do so many Americans still feel like they’re getting ripped off?”
American anti-trust legislation had been written around the turn of the century, to stop the encroachment of railroad robber barrons and to rip the tentacles off Standard Oil. It was written with the understanding that big companies naturally evolved into powerful actors who could bend the government to their will. So the legislation was crafted with the intention of preserving competition and making sure that no company became so large that it could prevent another company from competing with it.
Back in 1890, Sen. John Sherman, an author of the Sherman Anti-Trust Act, famously declared: “If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessaries of life.”
But starting around the late 1970s Americans stopped thinking that big alone was bad. Economists and legal scholars started pushing a new way to look at regulating companies with “consumer welfare” as the central tenant. In practice that meant that the government’s powers to do things like stop mergers were only used when it was clear that the merger would ultimately push prices up for consumers.
Enter the tech giants as we know them today. Because their services are free, they were, in many cases, allowed to grow without restraint. Activity that may have been seen as anti-competitive a generation ago was allowed to slide.
For example, back in 2012, Federal Trade Commission (FTC) researchers showed that Google used its power to make competitors harder to find on its search engine. The FTC, however, decided to do nothing about it, saying simply that their job was not to protect competitors.
Regulators didn’t do anything when Facebook crippled video app Vine by blocking Vine from its friend-finding feature. And they stood by and did nothing when Google acquired YouTube and changed its search algorithm, substituting its own subjective, “relevance” ranking in place of objective search criteria.
Watchdogs like the Electronic Privacy Information Center (EPIC) have been complaining about stuff like this on Capitol Hill for a while now. When it comes to mergers, EPIC argues that agencies like the FTC should be thinking about whether or not the merger may erode consumer privacy. This, it said, is what should have been under consideration when Facebook acquired Whatsapp back in 2014.
“The FTC ultimately approved the merger after Facebook and WhatsApp promised not to make any changes to WhatsApp users’ privacy settings,” EPIC pointed out in Congressional testimony in December of 2018.
“However Facebook announced in 2016 that it would begin acquiring the personal information of WhatsApp users, including phone numbers, directly contradicting their previous promises to honour user privacy. Following this, EPIC and CDD filed another complaint with the FTC in 2016, but the Commission has taken no further action. Meanwhile, antitrust authorities in the EU fined Facebook $US122 million for making deliberately false representations about the company’s ability to integrate the personal data of WhatsApp users.”
Indeed Germany has basically outlawed Facebook’s ad business reasoning that the way that it tracks users – not just on its own app but also across Instagram and WhatsApp – is too intrusive and gathers too much data.
An idea infection
And so tech companies, unwittingly, have forced all of Washington to consider whether or not price is really paramount when it comes to protecting American capitalism – or if there’s more to it than that.
“I think it’s been substantial, the shift on the GOP side,” said Matt Stoller, a fellow at the Open Markets Institute. It’s an organisation dedicated to exposing the corruption of monopolization in all kinds of sectors, from healthcare to food and agriculture.
Stoller pointed to Republican Senator Lindsey Graham’s interest in regulating the advertising technology space, to Collins’s work on the House Judiciary Committee, and to Attorneys General across the country banding together in an anti-trust lawsuit against generic drug manufacturers.
“There’s an increasingly powerful bipartisan view of anti-trust,” he said.
And then there are presidential candidates like Senator Elizabeth Warren (D-MA), whose stance on antitrust ensures that the topic will take center stage during the 2020 elections. Warren has been calling for anti-trust legislation to be updated and/or applied to big players in a variety of industries not just because they squeeze out other competitors, but also because of what they can squeeze out of Washington.
“The larger and more economically powerful these companies get, the more resources they can bring to bear on lobbying government to change the rules to benefit exactly the companies that are doing the lobbying,” she said in a speech back in 2016. “Over time, this means a closed, self-perpetuating, rigged system – a playing field that lavishes favours on the big guys, hammers the small guys, and fuels even more concentration.”
The push for Congress to take legislative action from Warren and others like her has, in turn, put pressure on government agencies tasked with anti-trust enforcement, according to Stoller.
“One of the things I’ve noticed talking to anti-trust people is there’s a conversation that’s starting to happen now about whether they’re still relevant,” he said. “They’re concerned they’re going to have their authority stripped from them by politicians because they haven’t brought cases… They don’t want politicians coming in the with a meat cleaver.”
But the cleaver, it seems, is coming – and it’s coming in a way America has not seen yet this century.
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