“Monopolies like in the era of the oil barons” – Antitrust report suggests the break-up of Facebook, Google, Amazon and Apple

According to an official committee of inquiry in the USA, Amazon, Apple, Facebook and Google have abused their market power. Their influence is too great and must now be actively restricted, according to the report.

In a 449-page report, the US Subcommittee on Antitrust, Commercial and Administrative Law of the Committee on the Judiciary declares that the tech giants Amazon, Apple, Facebook and Google have exploited their market power as gatekeepers – also to gain potential competition identify and possibly buy up. The committee came to the conclusion after an investigation that lasted more than a year, during which more than 1.3 million documents and seven hearings, also with the company’s CEOs Jeff Bezos (Amazon), Tim Cook (Apple), Mark Zuckerberg (Facebook) and Sundar Pichai (Google). As a result of the findings, the Committee of Inquiry states that the power of companies should be restricted and that companies should be better monitored. A few days ago, leaked information from the report led to a possible break-up of the big tech companies in the media.

Economy and democracy under threat: Incredible assessment of the digital world in the report of the committee of inquiry

In its extremely detailed report, the subcommittee mentions positive effects of the companies concerned, saying that they have “created clear advantages for society”. But for this you have to pay a price. It can already be read in the introduction that the tech giants could choose winners and losers among companies in the digital market due to their barely limited market power. Amazon, Apple, Facebook and Google are also accused of dominating the infrastructure of the digital market so much that they were able to monitor competing companies to the point where they could either buy them out, copy their features or avert any threats posed by them. Examples such as Facebook’s takeover of Instagram or the denial of access to the Friends API for short video providers Vine come to mind as well as Google’s takeover of YouTube or the massive copying of the Snapchat feature stories by Facebook, Google and Co. A power like that of four tech giants – also known as GAFA – last existed in a completely different time:

To put it simply, companies that once were scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons […] These firms typically run the marketplace while also competing in it — a position that enables them to write one set of rules for others, while they play by another, or to engage in a form of their own private quasi regulation that is unaccountable to anyone but themselves.

Therefore, a restriction of this market power must now be pushed. Otherwise, the report suggests, not only the (digital) economy but also democracy in the USA would be threatened:

These firms have too much power, and that power must be reined in and subject to appropriate oversight and enforcement. Our economy and democracy are at stake.

Take Facebook, for example: This is how market power is abused

For all tech companies, the report details how market power has been achieved and can be justified. Examples of the abuse of this power are also given. Amazon, for example, is using its growing market power – not least due to the corona pandemic – to put pressure on suppliers and give preference to its own first-party products on the platform over those of third parties. Another well-known example is the takeover of Instagram by Facebook.

Facebook has monopoly power in the market for social networking. Internal communications among the company’s Chief Executive Officer, Mark Zuckerberg, and other senior executives indicate that Facebook acquired its competitive threats to maintain and expand its dominance. For example, a senior executive at the company described its acquisition strategy as a ‘land grab’ to ‘shore up’ Facebook’s position, while Facebook’s CEO said that Facebook ‘can likely always just buy any competitive startups,’ and agreed with one of the company’s senior engineers that Instagram was a threat to Facebook,

it says in the report. There is also talk of more recent documents that reveal that Facebook now regards competition within its own corporate cosmos as more important than competition from third-party companies. A former Facebook employee even explains that in the power struggle with Instagram after the takeover of the company, Facebook CEO Mark Zuckerberg told then Instagram CEO Kevin Systrom that the platform should not compete with Facebook. Anti-competitive behavior based on its own data power is also accused to the point that it comes to the takeover, copying or destruction of competitors.

The committee wants to change that

As a measure to restrict the market power of the tech giants, the subcommittee of the committee presents the following options, among others:

  • The tech giants should not be able to acquire companies that do not correspond to their core business. This would mean that corporate branches such as YouTube or WhatsApp would have to be separated from Google’s or Facebook’s main business.
  • New acquisitions by the tech giants should be viewed as anti-competitive by default. Then a company would have the burden of proof to explain why a takeover is not anti-competitive and only means an expansion of market power.
  • New regulations on the possibility of transferring data could make it easier for users and companies to transfer their data from different apps or platforms to others without having to fear “penalties” from the tech giants.
  • New legislation could prevent large tech companies from giving preference to their own products so that all market participants have the same opportunities.

The committee’s proposals may now lead to major upheavals in the tech scene. But only if the US Congress shares the findings and follows the suggestions. The composition of the US House of Representatives could change with the US presidential election on November 3rd. This could also clash the various views on new antitrust laws in the US. Whether there will be new laws or the Federal Trade Commission (FTC) and the US Department of Justice will be empowered to pursue tech players more closely under the current legislation remains to be determined. It is already clear that the companies concerned – the abstinence from Microsoft in this study had surprised many observers – defend themselves in their statements against the statements of the report and any restrictions on market power. Google, for example, formulates very vehemently:

Americans simply don’t want Congress to break Google’s products or harm the free services they use every day. The goal of antitrust law is to protect consumers, not help commercial rivals. 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.

Amazon, on the other hand, complains:

In short, these ill-conceived ideas would revive, via regulation, the failed two-store model that Amazon tried two decades ago; the model that both small sellers and customers rejected. They would segregate sellers into separate, less visible stores, make it harder for customers to compare prices of products and, ultimately, reduce competition – all leading to higher prices and less selection.

While Apple asserts that it does not have a dominant market share in any business area, Facebook gives its own success and points out that takeovers like those of Instagram and WhatsApp were examined by the authorities at the time.

Facebook is an American success story. We compete with a wide variety of services with millions, even billions, of people using them. Acquisitions are part of every industry, and just one way we innovate new technologies to deliver more value to people. Instagram and WhatsApp have reached new heights of success because Facebook has invested billions in those businesses. A strongly competitive landscape existed at the time of both acquisitions and exists today. Regulators thoroughly reviewed each deal and rightly did not see any reason to stop them at the time.

The report by the committee of inquiry has now sent a tremor through the digital world. How long it resonates is now up to the highest US authorities and possibly also to the political orientation of the country after November 3rd.

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