SALT LAKE CITY — Representatives of Amazon, Apple, Facebook and Google roundly denied their respective companies are stifling competition and innovation through sheer size, market dominance or conduct at a U.S. House hearing.
Those assertions, however, were scoffed at by some industry experts who also appeared before the House Judiciary Subcommittee on Antitrust, Commercial and Administrative Law. Big tech is under fire and facing increasing scrutiny as state attorneys general — including Utah's Sean Reyes — line up behind federal agencies for potential actions while a new investigation opens in the European Union.
The three lawyers and one economist from the big four U.S. tech interests all claimed Tuesday that their employers are in industries where they face "fierce" competition and are forced to constantly innovate to stay viable.
But Columbia University legal scholar Tim Wu characterized that testimony as something that could have "come from a hearing in 2005 or a fantasy zone" and said big tech's control over markets is having an undeniable chilling effect on new innovation.
"I think we face a vitally important question here," Wu said. "Whether the United States will remain the place that new industries start … where inventors think they have a chance to challenge the dominant firms of their day, where innovation flourishes.
"I think that is something that has come into question. I think that we face, across the economy, an overconsolidation and overconcentration of many industries, and I think this is particularly evident, and in fact extreme, in the tech industries."
All four of the companies invited to testify before the panel have remarkable success arcs, though each began humbly in dorm rooms or garages, and have amassed enormous economic clout. As of the end of June, Amazon, Apple, Facebook and Google occupied four of the top five slots for U.S. businesses when ranked by market capitalization, and two of them, Amazon and Apple, have spent brief moments north of the $1 trillion mark in the last year.
Representatives of the companies touted their contributions to the U.S. economy in their testimony, with Adam Cohen, Google's director of economic policy, detailing some of his company's investments and noting tech companies collectively employ some 12 million, accounting for 8% of the total U.S. workforce.
"Google's products and services create signficant value, generating an estimated $335 billion in economic activity in 2018," Cohen said. "Last year we hired more than 10,000 people and invested over $9 billion in data centers and offices across the country."
Subcommittee Chairman Rep. David Cicilline, D-R.I., acknowledged the contributions made by the four companies called to testify but noted some of the mechanisms that helped pave the way for the growth of the digital economy, and big tech concerns, were now failing to address market issues.
"In an effort to promote and continue this new economy, Congress and antitrust enforcers allowed these firms to regulate themselves with little oversight," Cicilline said. "As a result, the internet has become increasingly concentrated, less open and grown hostile to innovation and entrepreneurship."
Reyes shares concerns about the impacts of big tech on the competitive landscape, as well as how dominant digital platforms are accruing and commodifying troves of personal data gathered on individuals who use their products.
Reyes and over 40 other state attorneys general co-signed a letter last month outlining issues they share with how big tech firms operate, following a conference on antitrust issues in Omaha, Nebraska. The 27-page document went to the Federal Trade Commission, which along with the U.S. Department of Justice, is tasked with antitrust oversight in the U.S.
It notes that companies like Google and Facebook, that give away their products, have created new challenges for enforcement and regulation under current statute.
"Recent antitrust enforcement in technology markets has often failed to meaningfully evaluate non-price aspects of competition such as innovation, consumer choice and privacy," the letter reads. "Recent comments by Makan Delrahim, antitrust chief at the United States Department of Justice, reaffirm the commitment of government antitrust enforcers to utilize current antitrust doctrine to address consumer harm in zero-price markets."
The letter also notes that mega-platforms can leverage power acquired via so-called "network effects," wherein the more users who engage the product/platform the more useful, and valuable and influential it becomes. One of the potential outgrowths of that power of scale is being able to identify which new companies may represent competitive threats before they get big enough to actually compete.
"Because network effects tend to produce a winner-take-all market, winners tend to monitor the landscape for startups with the potential to unseat them," the letter reads. "Competition concerns arise when dominant platforms can leverage their unique access to data to identify these nascent competitors and acquire or exclude them."
When asked about the current status of any actions aimed at big tech companies and possible anti-competitive conduct, Reyes said he could not "confirm or deny the existence of any specific investigations at this time," but did say that it's typical for investigations to stay under wraps in complex cases.
"As conversations about these issues develop, Utah will continue to actively participate," Reyes said in a prepared response. "It is also worth noting that antitrust investigations into complex industries frequently take a year or longer before they become public or result in a lawsuit being filed."
Reyes noted that Utah, which has an explicit free market clause within its state constitution, has a more robust statutory mandate to enforce on antitrust issues than some other states.
"The existence of a constitutional provision makes antitrust enforcement a clearer priority in Utah than it may be in some states, particularly the few that lack specific antitrust laws," Reyes said. "Utah has a history of vigorous antitrust enforcement that benefits both consumers and innovative small businesses."
Some industry watchers say congressional action to revamp both the regulatory realm and standing antitrust laws is necessary to take any meaningful action against perceived antitrust activity in the tech realm.
But Wu and others, including University of Utah S.J. Quinney School of Law professor Jorge Contreras, believe there is sufficient basis in a 130-year-old piece of federal legislation.
"The 1890 Sherman Antitrust Act is fine," Contreras said. "It conceivably covers any of this conduct. Where we’ve drifted away is with the court’s interpretation of the Sherman Act."
That drift, which many attribute to legal scholar and former U.S. Solicitor General Robert Bork, was fomented by the idea that antitrust enforcement should be focused on consumer harm rather than competitive issues.
Contreras said even acknowledging the Bork-influenced shift toward a consumer-centric interpretation of antitrust statute, he and other legal experts where taken aback by the lack of a federal response to Facebook's $1 billion acquisition of image sharing app Instagram in 2012. The move was seen by many as a case of Facebook simply buying up a potential competitor before it grew big enough to pose a business risk.
"I think the Facebook-Instagram merger, with almost no opposition from the government, really sent off alarm bells, at least among academics and observers," Contreras said. "The collective response was, 'What is going on here? We expected at least a good fight about this.'"
While U.S. law enforcement and regulatory agencies ponder which fights they're willing to wage, European regulators are stepping into the ring.
On Wednesday, the European Union announced it is investigating whether Amazon uses data from independent retailers to gain an unfair advantage, a decision that could lead to changes in how the internet's biggest marketplace works.
The move echoes similar antitrust actions against Google and Microsoft that have led to billions in fines.
The EU's antitrust chief, Margrethe Vestager, said she's taking a "very close look at Amazon's business practices and its dual role as marketplace and retailer."
In addition to selling its own products, Amazon allows third-party retailers to sell their goods through its site. Last year, more than half of the items sold on Amazon worldwide were from third-party sellers.
In doing so, Amazon collects data about activity on its platform that, the EU says, it might be able to use to favor its own products for sale. In particular, the EU will look at how Amazon determines which trader is selected as the default seller of an item that a customer wants to buy.
Contributing: Associated Press