Held just before the House’s antitrust subcommittee is expected to release its long-anticipated report on digital platforms, Thursday’s hearing yielded clues as to which remedies will be embraced by the subcommittee, and, of those, which ones will garner bipartisan support.
On Thursday, the House Antitrust Subcommittee held a hearing titled Proposals to Strengthen the Antitrust Laws and Restore Competition Online. Because the subcommittee’s highly anticipated report is expected to be released next week, the practical impact of this hearing on the subcommittee’s recommendations is limited. The hearing was important, however, as it yielded clues as to what remedies will be embraced by the subcommittee, and, of those, which ones will garner bipartisan support.
Here are the four biggest takeaways:
4. The antimonopoly movement is increasingly bipartisan.
Before the 1970s, there was a rich tradition of antimonopoly among Democrats, and that tradition has been rekindled in recent years. So it was no surprise to see antitrust subcommittee chair Rep. David Cicilline (D-RI) and other Democrats pushing hard for reform.
Support among key Republican members of the subcommittee, however, was a pleasant surprise. Up until recently, the Grand Old Party had been overtaken by a laissez faire mentality, but that foundation seems to be cracking.
To be fair, Ranking Republican Member Sensenbrenner (R-WI) signaled that he has no appetite for bending the antitrust laws and opposes breakup ideas as well as a “public option” (whatever that means). This fits the old way of thinking.
But Reps. Ken Buck (R-CO) and Kelly Armstrong (R-ND), two other Republicans on the subcommittee, raised serious and traditional antitrust concerns over the power of Big Tech, indicating a willingness to shake up the status quo. In contrast, Rep. Jim Jordan (R-OH), who is not on the antitrust subcommittee but made an appearance, used the hearing to raise unserious and non-traditional antitrust concerns over the platforms’ alleged anti-conservative bias.
Buck explained that Congress never intended antitrust agencies to bring cases only when prices were inflated, but instead were supposed to challenge conduct that degrades quality or threatens innovation. He cited a McKinsey study showing excess returns in Big Pharma and Big Tech. He pointed out that federal courts have overstepped their boundaries, and that Congress needs to act to strengthen antitrust laws and agencies—if they don’t, he warned, the progressive left might try to put forward a new Dodd-Frank-style regulatory frame.
In a similar spirit, Armstrong also condemned the Federal Trade Commission’s failure to block Google’s acquisition spree in the ad tech industry, allowing Google to exert too much control over advertising. He correctly noted that incremental acquisitions are hard to condemn based on definitive proof of competitive effects, but we eventually reach a significant problem ex post when the acquisitions are complete. He pushed for more money for antitrust agencies, and more antitrust enforcement.
The reason why this support is so critical is that any proposal to rein in Big Tech that achieves bipartisan support (and potentially bipartisan sponsorship) has a much better chance of passing the House and gaining Senate support. The question is what kind of intervention will garner any Republican votes, which leads us to the third takeaway.
3. Any change to the status quo depends on the meaning of “tweak”.
The Republicans made clear that they would be more inclined to support moderate changes or “tweaks” to the status quo, compared to a more “oppressive regulatory regime” proposed by certain Democrats. But what constitutes a “tweak”? Shifting presumptions in certain merger reviews, so that a dominant platform bears the burden of proof, seems obvious. Indeed, Buck indicated support for precisely that intervention. But what about Senator Amy Klobuchar’s proposals, strongly backed by the Washington Center for Equitable Growth’s Michael Kades, to amend the antitrust laws governing exclusive dealing? Or proposals by other witnesses to overturn Supreme Court rulings concerning predatory pricing? Would these be considered tweaks, or would they be too radical for Republican temperament?
2. Not all reforms must be funneled through antitrust.
Judging by the title of the hearing, I was concerned that the subcommittee would be focused exclusively on reforms to antitrust law. Clearly, there are other competition tools in the regulators’ toolkit. Fortunately, several witnesses spelled this out in painstaking detail. Brooking’s Bill Baer, former head of the Department of Justice’s Antitrust Division, championed (twice) “prospective rules” like mobile number portability as ways to channel competition outside of antitrust. Applied here, portability would mean that users could take their data with them when they changed social media platforms. When coupled with an interoperability mandate, this reform might breathe life into rival platforms. (Fortunately, Baer did not peddle the notion of a voluntary code of conduct, designed in part by Big Tech, which has been floated by his Brookings colleague Tom Wheeler.)
Kades also stressed the need to focus on non-antitrust regulatory tools, including those that overcome network effects enjoyed by incumbent platforms. Open Markets Institute’s Sally Hubbard made the excellent point that Section 2 of the Sherman Act might not be up to the task of policing self-preferencing, given its rampant use, leaving enforcers to play a losing game of whack-a-mole. Zephyr Teachout, a professor at Fordham’s School of Law, explained that the FTC could engage in rule-making, that there are multiple levers of enforcement, and that the role of qui tam provisions and private rights of action to overcome capture and corruption of the enforcement agencies.
But perhaps the best non-antitrust intervention (tweak?) was offered by K. Sabeel Rahman, President of Demos, who likened the platforms to a public utilities and suggested utility-style regulations such as a nondiscrimination obligation were in order. Such a regime could be enforced by the FTC, or a new digital agency, or via independent edge providers (say, merchants on Amazon’s platforms) who avail themselves of a private right of action to challenge discriminatory conduct pursuant to a nondiscrimination standard.
Although it doesn’t fit this category, I would be remiss not to mention Rahman’s passionate explanation of how antitrust enforcement is an under-utilized tool in addressing income inequality across races, creating “economic opportunity for Black and Brown businesses”, as well as addressing the power imbalances in the workplace “critical to empowering Black and Brown workers”.
1. An antitrust star is born.
Teachout is well-known in antitrust circles. Indeed, she just published a new book about reinvigorating antitrust laws titled Break ‘Em Up, which has been reviewed in the New York Times. But Teachout gave a breakout performance during the hearing, which had this reviewer nearly standing in his basement during her opening remarks. If you have one minute and 11 seconds, you can see a clip here.
Teachout explained how antitrust law protects the country from tyrants, can reverse the trend in income inequality, and should be dictated by Congress and not the courts. She analogized Amazon’s 30 percent fee on every merchant sale to a “private tax.” Merchants operating at Amazon’s whims were rationally paranoid, and understand that they must purchase ancillary services like fulfillment to curry favor in Amazon’s search results.
It’s one thing to deliver a script passionately, which Teachout did to perfection. It’s quite another to inspire a nation with extemporaneous remarks. During one question-and-answer session, Teachout described the threat that Big Tech represent to democracy as a “feudal system”. The more feudal a system is, she explained, the less innovation you’re going to see, as “a feudal system is a closed and fearful system, a less innovative system”. With these words, Teachout took over the hearing, lit up Twitter, lifted the antimonopoly movement, and may have secured a high-ranking position in a Biden administration, if she hadn’t secured one already.