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Congress Tries to Cut Big Tech Down to Size

Yesterday’s House Judiciary Committee hearing with Attorney General Barr was a wild ride.  It was full of Congressman grandstanding, bloviating, and fishing for a soundbite to use in the upcoming elections.

Today’s hearing will be no different except instead of Bill Barr in the hot seat, it will be the CEO’s of America’s top tech companies.  Amazon, Apple, Facebook, Google will be remotely testifying before the House Judiciary committee’s antitrust panel.

Although the particulars of each case differ, the broad picture suggests that each of these companies compete unfairly with smaller companies and harm user experience.  Each of these CEO’s released their opening statements to the public early.

Let’s get into a few specifics.

Amazon is being accused of using data collected from third party sellers on its website to create and sell competing products on the company’s online store.  Additionally, Amazon is gaining quite a reputation for invading and then dominating other industries through acquisitions and launching competitive brands.  Examples of this include taking over delivery of its own products (it is estimated that by 2023 Amazon will deliver more packages than UPS and FedEx combined) and the acquisition of the companies Whole Foods and the autonomous driving start-up Zoox.

As indicated by his opening statement, Jeff Bezos (CEO of Amazon) will likely point out that the third parties that sell on Amazon often outsell the similar Amazon products they’re in competition with.  Further, there is no product or service offered by Amazon that does not face stiff competition in the market.  In many cases, this competition comes from the other companies that Congress is looking at in this matter.   

Apple’s CEO, Tim Cook, is no stranger to congressional hearings as he has represented his company before the jackals several times before.  In today’s case, Apple is being accused of abusing its app store by overcharging and by limiting 3rd parties on it. 

Cook is expected to argue, as part of his defense, that consumers have the option to purchase devices from competitors that don’t have the same requirements as Apple.  Additionally, Apple’s app store has been a big source for jobs and revenue in America.

Mark Zuckerberg will be representing Facebook.  The issue here is that many view Facebook as misusing user information.   With 4 out of 10 of the most popular Social Media platforms globally being owned by Facebook, they are accused of unfairly sharing user search information between its various platforms and advertisers.

The main beef against Google is its advertising program.  Through a complex network of connected systems, Google is accused of having leveraged an unfair edge over others in the advertising market.  About 1/3 of all online ad spending goes to Google.  A ruling went against the company in the European Union for similar issues.  Additionally, you can expect lawmakers to look toward Google’s near monopoly in the search engine area as well.

In its opening statement, Google defended itself by pointing out that, while it has been successful as a company, it is not a monopoly.  It then gave a list of well-known and successful tech companies that it competes with.

The issue of big tech monopolies is not a new one.  In the Democratic primary Elizabeth Warren campaigned on breaking up these big companies.  She said a lack of choices allowed these companies to neglect privacy and user experience.  She even went far enough to offer a plan on how she would go about this.  This involved actually splitting these big companies from the smaller companies that they had acquired (i.e. taking Instagram away from Facebook and taking Whole Foods away from Amazon).  Her plan would have also involved forbidding companies from offering their own products to compete side-by-side with third party products on their platforms (i.e. Amazon couldn’t sell its own products alongside competitors on its website and Apple couldn’t offer their own apps alongside third-party apps in the Apple app store).

On the other side of the aisle, Republicans are split on the issue.  Siding with Elizabeth Warren against big tech are the likes of Marsha Blackburn of Tennessee and Ted Cruz of Texas.   Opposing them are such names as Lindsey Graham of South Carolina and Mike Lee of Utah.

In addition to the issue about monopoly, some Republicans may have other concerns.  That is a bias against conservatives from these companies and their ability to use that bias to influence voters.  A year ago, Ted Cruz stated that “Big Tech’s power, bias, and censorship is profoundly dangerous and it is a growing threat to our democracy.”

Out of all of this tumult, the Competitive Enterprise Institute has come out on the side of these tech companies.  According to them, there is “a lack of evidence for an orthodox anti-trust case to be made.”  In other words, there simply is no evidence that these companies control a monopoly in their respective fields.  In many cases, these four companies compete not only with smaller companies, but with each other.  Additionally, Microsoft, a company similar to these in size and value but is not in the hot seat today, is a direct competitor with these companies in many areas.

Additionally, the Competitive Enterprise Institute points out that the consumer welfare standard is not being violated by these companies.  That is to say, consumers are not being hurt.  In fact, just the opposite is the case in some instances as many of the products and services offered by these companies are free to the individuals who use them.  It is free to use Facebook to connect with old friends.  It is free to use Google’s search engine, or their maps, or their e-mail service, or many of their other services.  Apple, in an effort to stay ahead of its many competitors, has been at the forefront in advancing the handheld technology that consumers enjoy today.

At the end of these hearings today, the American people can expect no definitive action to be taken one way or another against these tech companies.  Today’s hearings are for the committee members to put on a big show before the election.  But that doesn’t mean this isn’t a legitimate issue and it doesn’t mean it will go away.  American regulators are looking at these companies for these same reasons and will be the real decision makers in the coming months and years.  Today’s hearings while noisy, and probably nauseating, may provide a glimpse of things to come.

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