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Congressional antitrust report rips tech firms for stifling competition

Congressional antitrust report rips tech firms for stifling competition
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The House Judiciary panel on antitrust released its long-awaited report on competition in digital marketplaces Tuesday after multiple delays and a rocky effort to secure bipartisan support for its proposals.

The Democratic report — which was crafted over 15 months using more than a million documents, testimony gathered in and out of hearings and interviews with hundreds in the industry — paints the country’s biggest tech companies as gatekeepers that stifle competition.

It focuses on Amazon, Apple, Facebook and Google, which were worth a combined $5 trillion in September and made up a third of the S&P 500.

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The report includes a series of recommendations on how to address the concentration of market power in those firms, including revamping existing antitrust laws and strengthening the Federal Trade Commission and Department of Justice antitrust team.

The challenge for Democrats now turns to getting bipartisan support for those proposals.

While the investigation launched last June was always billed as a cooperative effort between the parties, support for the recommendations appears to have frayed on party lines.

The release was reportedly delayed Monday in an effort to get Republican support while Rep. Jim JordanJames (Jim) Daniel JordanThe tale of the last bipartisan unicorns Sunday shows preview: Biden foreign policy in focus as Dem tensions boil up back home House Judiciary releases McGahn testimony on Trump MORE (R-Ohio), ranking member of the full Judiciary committee, asked that his colleagues not sign on.

Rep. Ken BuckKenneth (Ken) Robert BuckHouse unveils antitrust package to rein in tech giants Roy introduces bill blocking Chinese Communist Party members from buying US land Conservative group pressuring lawmakers with financial ties to tech giants MORE (R-Colo.), considered the key swing vote on the committee, circulated a draft memo earlier this week obtained by Politico saying that some of the report’s recommendations "are non-starters for conservatives."

The report acknowledges that not every lawmaker will endorse its entirety, but stresses the findings show a need for reform.

“Although we do not expect that all of our Members will agree on every finding and recommendation identified in this Report, we firmly believe that the totality of the evidence produced during this investigation demonstrates the pressing need for legislative action and reform,” it reads. “These firms have too much power, and that power must be reined in and subject to appropriate oversight and enforcement.”

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The report describes Amazon as the dominant market for online shopping that has monopoly power over many small- and medium-sized businesses.

It points to several acquisitions of competitors and collection of customer data as having been crucial to Amazon’s growth.

Amazon’s dual role as the operator of the market and a seller in the same marketplace causes an “inherent conflict of interest” that incentivizes Amazon to exploit access to third-party seller data, the report claims.

The report’s findings on Apple focus on the company’s app store.

After acknowledging that it lowered the entry barrier for many developers, the report claims Apple now uses the store to discriminate against rivals and gives preference its own products.

The company pushed back on Tuesday night, saying in a statement that “we vehemently disagree with the conclusions reached in this staff report with respect to Apple.”

Apple argued that the App Store has helped boost other companies, facilitating a vibrant economy. It also said the 30 percent commission it charges is “firmly in the mainstream of those charged by other app stores and gaming marketplaces.”

The Facebook section of the House report zeroes in on the company's acquisitions in the social media space, especially Instagram, as a way to maintain monopoly power.

The report unearthed emails — shared earlier this summer — showing senior employees, including CEO Mark ZuckerbergMark Elliot ZuckerbergFacebook's Zuckerberg lets more employees work remotely Hillicon Valley: Advocacy groups target Facebook employees in push to keep Trump off platform | Senior Biden cyber nominees sail through Senate hearing | State Dept. urges Nigeria to reverse Twitter ban Advocacy groups target Facebook employees in push to keep Trump off platform MORE, describing acquiring Instagram in 2012 as a way to neutralize a competitive threat.

It also uncovered an internal memo from October 2018 claiming that Facebook faced more competition within its own products — Facebook, Instagram, WhatsApp and Messenger — than externally.

The report claims Google has a monopoly in both online search and advertising.

In terms of search, the report says the company used its existing dominance to weaken vertical search competitors and made a series of uncompetitive contracts. In advertising, the acquisitions of DoubleClick and AdMob gave Google a dominant position, the report states.

The recommendations in the report would amount to massive overhaul of U.S. antitrust laws.

Among them is structural separation, which would require large companies to pursue a single line of business. That could, for example, bar Amazon from operating the platform and selling goods on it.

Another is implementing nondiscrimination requirements and prohibiting platforms from self-preferencing.

It also suggests a presumptive freeze on mergers and acquisitions by already dominant companies.

The report says that antitrust laws must be strengthened and that agencies tasked with enforcing them need more funding and congressional oversight.

It notably does not recommend that big tech companies be broken up, a proposal that gained some popularity during the Democratic primary.

Amazon pushed back on the report in a blog post Tuesday, saying that “large companies are not dominant by definition.”

“[T]he presumption that success can only be the result of anti-competitive behavior is simply wrong,” the company continued. “And yet, despite overwhelming evidence to the contrary, those fallacies are at the core of this regulatory spit-balling on antitrust.”

A Google spokesperson said in a statement to The Hill that "the goal of antitrust law is to protect consumers, not help commercial rivals."

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"Many of the proposals bandied about in today’s reports -- whether breaking up companies or undercutting Section 230 -- would cause real harm to consumers, America’s technology leadership and the U.S. economy — all for no clear gain," they added.

Facebook did not immediately respond to a request for comment on the report.

Shortly after the report was published, Buck released his own version, calling it a "third way." The document was backed by Republican Reps. Doug CollinsDouglas (Doug) Allen CollinsGeorgia agriculture commissioner launches Senate campaign against Warnock Poll shows tight GOP primary for Georgia governor The Hill's Morning Report - Census winners and losers; House GOP huddles MORE (Ga.), Matt GaetzMatthew (Matt) GaetzGaetz, under investigative cloud, questions FBI director House Judiciary releases McGahn testimony on Trump Newsmax says network turned Gaetz down for a job MORE (Fla.) and Andy Biggs (Ariz.).

While agreeing with the majority staff's views on the effects of big tech’s market dominance, it also calls some of the proposed changes “dramatic” and instead pushes for smaller reforms.

Buck's report opposes structural separation, the elimination of arbitration clauses and opening up companies to class action lawsuits. It also argues that Democrats failed to “address how Big Tech has used its monopolistic position in the marketplace to censor speech,” revisiting an unsubstantiated claim that major tech companies censor conservative speech on their social media platforms.

Updated on Oct. 7 at 10:28 a.m.