Congress this week released a new blockbuster antitrust report that details the numerous ways modern tech giants behave anti-competitively.
From Amazon’s quest to dominate shipping and internet infrastructure to Google’s attempts to create a “ecosystem of interlocking monopolies” in search and advertising, the 400-plus page report, crafted by the Democratic members of the House Judiciary Subcommittee on Antitrust, details how yesterday’s pesky upstarts have become today’s anti-competitive giants.
The report also notes how tech giants like Facebook and Google frequently buy innovative new companies to stifle their potential threat to their business empires. It cites a former senior Instagram employee who suggests Facebook’s 2012 acquisition of Instagram should not have been legal.
“It was collusion, but within an internal monopoly,” the insider said. “If you own two social media utilities, they should not be allowed to shore each other up. It’s unclear to me why this should not be illegal. You can collude by acquiring a company.”
The report goes on to note how Facebook’s “copy, acquire, kill” strategy was used to “neutralize nascent competitive threats” to the giant’s existing platforms.
Facebook, as you might expect, denied any wrongdoing.
“Facebook is an American success story,” the company said in a statement. “Acquisitions are part of every industry, and just one way we innovate new technologies to deliver more value to people.”
But economists and experts say Facebook’s behavior was illegal all the same, made possible by a cash-compromised Congress, steadily-weakened antitrust enforcement, and “captured” regulators—resulting in a U.S. business environment where accountability is hard to come by.
“It’s illegal because merger law, in theory, is meant to stop anticompetitive mergers,” economist Hal Singer said of Facebook’s Instagram acquisition. “However, it is exceedingly difficult to stop mergers of nascent competitors that don’t quite do exactly what the acquirer does.”
The report recommends that Congress strengthen the Clayton Act to counter problematic older Supreme Court decisions that paved the way for modern antitrust apathy. It also recommends shifting the burden of proof in merger reviews, so that dominant platforms have to more clearly demonstrate why an acquisition does not harm competition.
Singer said the FTC could also sue to reverse the Facebook Instagram merger, but added that such a case would be a steep uphill climb.
“A quicker fix, and something also contemplated in the report, is to compel Facebook to spin off Instagram via legislative fiat,” Singer said.
Of course hearings and recommendations are not the same as action. And as sectors like telecom or the airline industry make repeatedly clear, monopolization isn’t exclusive to the tech sector. Experts say that tackling the problem will require looking beyond Amazon’s low prices to the broader, multi-pronged impact these companies have on the internet ecosystem.
“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,” the report said. “By controlling access to markets, these giants can pick winners and losers throughout our economy. They not only wield tremendous power, but they also abuse it by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them.”
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