In a recent blog post, I wrote that July’s House Judiciary Committee hearing featuring Big Tech CEOs from Amazon, Apple, Facebook, and Google turned into two hearings: one for Democrats, who largely want to control the companies’ business models and finances, and another for Republicans, who mostly want a say in the companies’ content management.
In this post, I address the Democrats’ hearing. (Read my post discussing the Republicans’ hearing here.)
What did the Democrats want to demonstrate?
The committee’s Democratic members tried to show that the four tech companies are exploitive and destructive monopolists, bullies, and thieves. (The bullies and thieves parts had to be awkward: As of September, Big Tech employees had donated over $4.1 million to Democratic politicians for the 2020 election cycle — nearly four times what they had donated to Republicans. An argument could be made that the money should be returned if it was ill-gotten.)
To make their case, the Democrats sought to show that the
companies have monopoly power and engage in anticompetitive conduct. They
Do the companies have monopoly power?
The argument the Democrats used to infer that the companies have monopoly power was that the companies are big. They are big! But size doesn’t equate to having monopoly power. The companies are big because they create superior value for customers and users, which is what businesses are supposed to do. Every person choosing to search using Google chooses to do so instead of using Bing, Yahoo, Yelp, Facebook, Amazon, or other alternatives. And every customer who buys using Amazon chooses it over Walmart, Alibaba, eBay, or some other alternative.
Customers are always ready to go elsewhere. How do we know that? TikTok is growing faster than Facebook did when it started. Walmart’s US e-commerce business grew 41 percent in the third quarter of 2019.
And leading companies are always vulnerable: In 1998, Fortune declared that Yahoo had won the search wars. Then came Google. In 2000, Wired worried that AOL Instant Messenger was becoming a monopoly. It died years ago. In 2007, MySpace was considered by some to be a natural monopoly, but Facebook soon surpassed it.
A company has monopoly power if it can control its market.
These companies cannot do that.
Do the companies engage in anticompetitive conduct?
The Democrats were well-armed with examples of what they considered to be anticompetitive conduct. Economist Hal Singer summarizes them here. Singer identifies only a few as potentially violating antitrust. These include:
- Amazon requires third-party sellers to use Amazon’s fulfillment services (storing inventory, shipping, etc.) to qualify for being in Amazon’s Buy Box, which accounts for 82 percent of all Amazon sales. Singer says this might be illegal tying. But Amazon requires that products in the Buy Box be in inventory. How can Amazon reliably check inventory without holding it?
- House Judiciary Committee Chairman Rep. Jerrold Nadler (D-NY) disclosed an internal Facebook email stating that acquiring Instagram could “neutralize a potential competitor.” But the email clearly states that that would be a “bad reason” to acquire Instagram “since someone else will spring up immediately in their place.”
- Rep. Matt Gaetz (R-FL) cited a 2012 email from Facebook CEO Mark Zuckerberg in which he stated that Facebook could “always just buy any competitive startups.” Anticompetitive? Probably not, as startups have become the primary idea generators in tech and sell their ideas by being acquired.
- Apple removed non-Apple parental control apps from the App Store when Apple introduced Screen Time (an affiliated clone). But Apple CEO Tim Cook explained that this was done for privacy reasons and that there are over 30 parental control apps in the Apple Store.
Perhaps the companies do engage in anticompetitive conduct,
but the hearing didn’t reveal any.
The bottom line
The Democrats’ hearing didn’t make a case that Big Tech
needs more regulation. Perhaps the best strategy for Democrats would be to let
antitrust agencies do real research and determine whether the companies are
(Disclosure statement: Mark Jamison provided consulting for Google in 2012 regarding whether Google should be considered a public utility.)