Antitrust Explainer

A package of five bills is set to be introduced by Democrats in the House Judiciary Committee. These bills seek to fundamentally change how the federal government approaches big tech and are being released at a time when Republicans and Democrats seek to reign in big tech and its influence. Rather than employing the consumer welfare standard, which prioritizes consumers, these bills would revert to an outdated “big is bad” mentality that automatically presumes large companies harm consumers and market competition. The bills discussed below would create the category of Covered Platforms that would subject tech platforms to significant restrictions if Congress passes these bills. A company would be classified as a Covered Platform if they have 500,000 monthly active users in the United States and/or are owned by a person, partnership, or cooperation with a market capitalization of $600,000,000,000.

The specific parameters used to designate a Covered Platform show that the bills are explicitly targeting the five big tech platforms, Apple, Facebook, Google, Amazon, and Twitter. The definition of a Covered Platform is written in a way that does not apply to other large companies that exist in similar market conditions.

Outlined below are short summaries of each bill and how their provisions could affect consumers and tech companies.

American Innovation and Choice Online Act

  • Prohibition on self-preferencing: Covered platforms would be banned from business practices that “advantages the covered platform operator’s own products, services, or lines of business over those of a competing business or potential competing business that utilizes the covered platform.” Amazon, for example, would not be able to prioritize its own products over the products of its competitors. For consumers, this likely means they will be denied easy access to the cheapest products available.
  • Prohibition on using certain data: Covered platforms would be prohibited from using data that is generated from its consumers’ activities or data “generated by the activities of the dependent business, or its customers.” Large tech platforms would be prohibited from using important data that allows them to provide the goods and services consumers demand. For consumers, this means reduced access to in demand products.
  • Prohibition on pre-installation: Tech platforms would be prohibited from pre-installing their own software on their products. Google, for example, would be prohibited from having its maps product preinstalled on android devices and Apple would be prohibited from having its news app installed. As a result, consumers will be forced to manually install these apps on their phones.
  • Affirmative Defense: Covered Platforms could be excluded from compliance if they can prove their conduct “would not result in harm to the competitive process.” Notably missing from this provision is a defense of enhancing consumer welfare. Without this clause, companies could be penalized even if they improve overall consumer benefits.
  • Penalty for violation: Individuals found to be in violation of the American Innovation and Choice Online Act would face a fine of up to “15 percent of the total United States revenue” in the previous year or “30 percent of the United States revenue” on profits generated “by the unlawful conduct.” The threat of steep financial penalties arising from a violation will likely disincentivize tech platforms from engaging in activities that enhance consumer benefits.
  • Bureau of Digital Markets: Creation of the Bureau of Digital Markets that would be responsible for enforcing Platform Anti-Monopoly Act. For consumers, a Bureau of Digital Markets could make it increasingly difficult for tech platforms to operate by imposing onerous regulatory burdens and increasing operating cost. This will likely result in price increases for consumers, particularly on low or no cost products and services.

Ending Platform Monopolies Act

  • Structural Separations: Covered platforms would be prohibited from owning “or controlling a line of business other than the covered platform.” The Department of Justice or Federal Trade Commission would be able to force break-ups once a company has been designated a covered platform. Apple, for instance, could see its phone manufacturing division forcibly separated from its finance division.

Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act

  • Interfaces: Covered platforms must “maintain a set of transparent, third-party-accessible interfaces” that allow interoperability between platforms. Covered platforms would be prohibited from making any changes to their platforms that reduce interoperability. Under this provision, consumers should easily be able to move their data to new platforms without having to create new accounts. Yet, creating an interoperable platform can be extremely costly for companies, potentially forcing them to raise the cost of service for consumers.
  • Data restrictions: Covered platforms would be prohibited from collecting “user data from a competing business” obtained by an “interoperability platform.” Data is vitally important for large tech companies who provide goods and services. Without access to this data, they will be unable to provide the customized goods and services consumers demand at low cost.
  • Penalty for violation: Individuals found to be in violation would face a fine of up to “15 percent of the total United States revenue” in the previous year or “30 percent of the United States revenue” on profits generated “by the unlawful conduct.” The threat of steep financial penalties arising from a violation will likely disincentivize tech platforms from engaging in activities that enhance consumer welfare.

Platform Competition and Opportunity Act

  • Prohibition on acquisitions: Covered platforms would be prohibited from acquiring more than a 50% stake in another company engaged or affecting commerce. Covered platforms would only be able to acquire other companies if the companies do not compete with each other. This prohibition is particularly problematic for consumers as large mergers and acquisitions have often benefited consumers. This provision would likely have prevented Facebook from purchasing WhatsApp, making it free, or Apple from acquiring small startups that have revolutionized data protection. This could severely distort the tech market as most startup companies seek to be acquired by larger incumbents.

Merger Filing Fee Modernization Act

  • Merger Filing Fees: For large companies seeking to merge, this bill would increase the required filing fee, disincentivizing large companies from merging. While not prohibiting mergers, the increased costs will certainly disincentivize large companies from growing and providing better services for consumers.
  • Appropriations: Increased appropriations for antitrust agencies are welcomed as antitrust enforcers have routinely been prevented from doing their job by chronic underfunding. With this additional capital, these agencies should be better placed to protect consumers from anti-consumer and anticompetitive business practices.

Conclusion

These bills provide further evidence that lawmakers in Washington are attempting to recklessly reign in the power of big tech by embracing an outdated and dangerous “big is bad” mentality to antitrust. In their current form, these bills specifically target big tech and punish them for providing demanded services. Rather than penalizing these companies, lawmakers should be embracing the consumer welfare standard as the basis for antitrust law and accept the fact that large companies can benefit consumers and competition.

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