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House Anti Monopoly Proposals Seek to Radically Reshape the Tech Sector

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House Anti-Monopoly Proposals Seek to Radically Reshape the Tech Sector

June 17, 2021

Following the House Judiciary Committee’s year-long investigation into digital market competition in the 116th Congress, a group of House lawmakers are advancing a bipartisan package of bills aimed at reining in big tech firms—namely, Google, Apple, Facebook, Amazon, and Microsoft.

What the bills do

If enacted, this package would dramatically reshape the US innovation ecosystem, venture capital, and technology sector, and substantially reorient the activities of the two primary federal competition enforcement agencies, the Department of Justice Antitrust Division, and the Federal Trade Commission. The proposals include severe new restrictions on behaviors like tying, discrimination against competitors, and mergers and acquisitions. Violations could mean penalties of up to 30% of US gross revenues. As Big Technology's Alex Kantrowitz summed it up, "if this stuff passes... it's the end of big tech as we know it."

Bill nameWhat it doesReferralBill #ACCESS Act Empowers FTC to set and enforce broad interoperability and data portability requirements for big online platforms.JudiciaryH.R.3849 Platform Competition and Opportunity ActEffectively bans new acquisitions by big online platforms.JudiciaryH.R.3826American Innovation and Choice Online ActBans big online platforms from engaging in a range of self-preferencing and steering behaviors.JudiciaryH.R.3816Merger Filing Fee Modernization ActUpdates merger fees and indexes them to inflation. Authorizes more resources for FTC and DOJ antitrust.Judiciary; E&CH.R.3843; S.228Ending Platforms Monopolies ActBans big online platforms from self-preferencing across multiple lines of business.JudiciaryH.R.3825

Which companies do these apply to?

With the exception of the Merger Filing Fee Modernization Act, the bills are limited in applicability to “covered platforms.” This is constructed to unambiguously target the big tech firms: Google, Amazon, Facebook, Apple, and (probably) Microsoft. But it’s unclear whether other large firms like Visa or Tesla would ultimately get caught up in it too.

Specifically, "covered firms" are defined as ones that meet the following criteria:

  1. “at least 50,000,000 United States-based monthly active users on the online platform;” or “at least 100,000 United States-based monthly active business users on the platform;”
  2. “net annual sales, or a market capitalization, greater than $600,000,000,000;”
  3. “is a critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform.”

Which draws upon a few key definitions from the legislation:

BUSINESS USER.—The term ‘‘business user’’ means a person that utilizes or plans to utilize the covered platform for the sale or provision of products or services.

ONLINE PLATFORM.—The term ‘‘online platform’’ means a website, online or mobile application, operating system, digital assistant, or online service that—(A) enables a user to generate content that can be viewed by other users on the platform or to interact with other content on the platform; (B) facilitates the offering, sale, purchase, payment, or shipping of goods or services, including software applications, between and among consumers or businesses not controlled by the platform; or (C) enables user searches or queries that access or display a large volume of information

CRITICAL TRADING PARTNER.—a trading partner that has the ability to restrict or impede—(A) the access of a business user to its users or customers; or (B) the access of a business user to a tool or service that it needs to effectively serve its users or customers.

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The political landscape

All of the bills have Republican cosponsors, led by Rep. Ken Buck (R-CO), ranking member on the subcommittee on Antitrust, Commercial, and Administrative Law. But noticeably absent is Rep. Jim Jordan (R-OH), ranking member of the full House Judiciary Committee. Minority leader Kevin McCarthy (R-CA) also opposes the package. This schism on the right is likely to be a major roadblock for much of this package to move forward, particularly if it comes to the Senate.

Despite a majority of Republicans now favoring increased regulation of the tech sector, they typically don’t have the same underlying grievances as Democrats, making viable bipartisan compromise much harder than it looks. While some conservatives will find things they like in the bills, most will find this approach radically out of step with their ideological view of government and political positioning. (The exception is Merger Filing Fee Modernization Act, which has already passed in the Senate, and is much less controversial.)

Republicans, even if they hate big tech, will find granting sweeping new powers to executive agencies and massive new interventions in the market extremely alarming—particularly under a Democrat-controlled government with Lina Khan as incoming FTC chair. The prevailing conservative view has long been that issues of such national concern fall under Congress’s Article I duties, and the onus is on our elected representatives to work through at least some of the hard tradeoffs and technical details rather than delegating it to agencies like the FTC and DOJ.

Traditional conservatives are also deeply uncomfortable with moving away from the Consumer Welfare Standard, and the implications beyond tech for upending antitrust. Sen. Mike Lee (R-UT)—Ranking Member of the House Judiciary Committee's Subcommittee on Competition Policy, Antitrust, and Consumer Rights—is perhaps the most prominent advocate for this view. Along with other Republicans, Lee has become increasingly critical of big tech:

We have much to address. The actions of Big Tech continue to divide the nation, undermine fundamental liberties, and distort the market. The Silicon Valley fairytale of innovation and technological progress sold to Americans has turned into a corporatist nightmare of censorship and hypocrisy

At the same time, he has maintained that we don't need to throw out our current legal framework to address competition challenges in the tech sector, and that an enforcement-first approach is best:

Any legislative attempt to replace or undermine the consumer welfare standard is a non-starter. It’s also unnecessary. Our current laws are more than up to the task of policing the anticompetitive conduct that has left so many markets bereft of competition. Make no mistake: the consumer welfare standard is not a get-out-of-jail-free card for any business if properly enforced. Our time and resources will be much better spent ensuring that we are adequately enforcing existing laws, rather than pursuing drastic changes with unintended consequences that could wreak havoc on the economy.

Proponents of the House bills will no doubt try to paint some of their free-market critics as arguing in bad faith, as obstructionist proxies funded by big tech (and in return they might call out proponents as proxies for other interests like legacy media). Mud slinging aside, proponents of the House package will have to face that they're swimming upstream against strong ideological currents on the right, which exist irrespective of whats going on in the PR-industrial-complex or pro-business think tanks. To illustrate this point, take note that the Conservative Partnership Institute's Rachel Bovard, a preeminent big tech critic on the right, has raised concerns with the House approach:

If Congress intends this legislation to have certain outcomes, those should be stated clearly. Vague deference to a faceless and changing bureaucracy leads to ideological weaponization, capture, and mission creep.

"5 New Big Tech Antitrust Bills Are A ‘Put Up Or Shut Up’ Moment For Republicans," The Federalist

Another key challenge is that the right mostly cares about free expression, while the left mostly cares about economic power and societal harms. Of the bills, the ACCESS Act is the only one that plausibly gets at Republicans' speech concerns. But it does so indirectly, and they'd have to trust Lina Khan's FTC to implement it.

There are also some major problems with the House version of ACCESS Act, such as hardline pre-approval for API changes, reliance on civil action for enforcement, and reliance on an agency with no real competence for technical standard setting. It'll be worth watching where the Senate goes with its version, given differences between the House version and the 2019 Senate version of ACCESS Act from Sens. Josh Hawley (R-MO), Richard Blumenthal (D-CT), and Mark Warner (D-VA).

Despite these issues, interoperability and data portability could still emerge as the one policy approach that could satisfy both camps' interests without shooting the US economy in the foot. But there's a big learning curve to overcome on the technical challenges and tradeoffs of robust forms of interoperability. And it's unlikely to satisfy the progressive wing of the Democratic side, which is wary of softer forms of interoperability as something that undermines more radical reforms, and could be vulnerable to industry capture.

Given the inherent risks with interoperability mandates and the limited state capacity of our institutions, I'd rather see a more incremental approach. I'd also prefer something that's narrowly-scoped but sector-wide, rather than open-ended and targeted at a few companies. Interoperability also makes more sense for social media and communications platforms than it does for retailers or other types of businesses (another problem with the House's approach is it's premised on punishing bigness rather than coherent sector-specific regulation).

What comes next

The House Judiciary Committee is set to move forward with a full committee markup for their bills next week. While the Committee should be commended for undertaking an expansive bipartisan process with its digital markets investigation, many of the policy ideas that made it into this legislative package aren't properly vetted, and will likely prove too radical to earn broad support without substantial changes. For now, that's probably a good thing.

But as the debate over regulating tech moves forward, we should recognize that there are real issues that Congress is right to attempt to address, including novel competition policy questions, issues around consumer privacy, and modernization challenges to bring our 19th and 20th century institutions into the 21st.

If Congress fails to address these challenges, we'll end up with de facto rule by the extra-territorial reach of EU bureaucrats (who are hostile to US tech sector for protectionist reasons) along with a patchwork of poorly-constructed state regulations. The clock is ticking, and Congress will eventually need to step up to update our legal frameworks and institutions (for privacy, speech, competition, and more) to ensure America has a strong and open innovation ecosystem.

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