WASHINGTON — Amid the nationwide bipartisan uprising against tech giants Google, Facebook and Amazon, Sen. Mike Lee has been conspicuously circumspect about how the federal government should respond.
He says Congress is ill-equipped to tackle complex antitrust issues. He’s skeptical federal antitrust laws can fix the bad behavior big tech is accused of. On Tuesday he called out the Federal Trade Commission and Department of Justice for squabbling over who should investigate Facebook.
“In the past, the agencies have avoided too much mischief because they have generally played well with each other. This appears to have, regrettably, changed,” the Utah Republican said to agency heads who appeared before the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights. “None of this makes for effective or efficient antitrust enforcement.”
Lee, who chairs the panel, wasn’t the only senator to go after FTC Chairman Joseph Simons and Makan Delrahim, assistant attorney general over the Justice Department’s Antitrust Division.
“We are entering a gilded age in the tech industry,” Sen. Amy Klobuchar, D-Minn., a Democratic presidential candidate, said during a break in the hearing, referring to a time in U.S. history that led to the first antitrust laws. “We can’t affectively enforce antitrust laws when we have someone in the White House throwing fire bombs” that undermine antitrust enforcement.
“We can’t affectively enforce antitrust laws when we have someone in the White House throwing fire bombs.”
She and other Democrats on the panel accused the agencies of caving into White House pressure by approving the Sprint-T-Mobile merger and investigating whether talks between automakers and California officials over that state’s auto emission standards violated antitrust laws.
The hearing comes amid a movement pushing back on a trend of increased corporate concentration and declining antitrust enforcement. While the concentration has occurred in several industries, the concern has primarily focused on big tech, which politicians, academics and activists say has an outsized influence over Americans’ economic, political and private lives. In addition to the Justice Department and FTC investigations into Google and Facebook, attorneys general from 48 states, including Utah, announced coordinated probes into into possible anticompetitive conduct by Google. A smaller scale investigation by nine states will look into Facebook’s dominance. Congress has also jumped in, grilling representatives of Google, Facebook, Apple and Amazon in ongoing hearings and introducing legislation in a rare bipartisan backlash against Silicon Valley.
The avalanche of inquiries into big technology was years in the making and will take years to sort out and litigate. But opinions vary on the eventual remedies: Can regulators impose fines big enough to change the behavior of multi-billion dollar corporations? Or, will they mandate the restructuring of an entire tech industry, like the government did in its breaking up of the oil industry more than a century ago and the phone business in the 1980s?
“That’s what these digital platforms are afraid of,” says Jorge Contreras, a University of Utah law professor. “They aren’t afraid of another billion-dollar fine, they can afford that. But a structural remedy would be identity altering for these companies.”
‘Hipster antitrust’
While Lee invites oversight into anti-competitive conduct in the digital technology industry, he’s skeptical of what he calls “hipster antitrust” theory. He described it as enforcement too focused on price gouging and overlooking anticompetitive conduct in markets where consumers receive services for free.
Since Congress passed the 1890 Sherman Antitrust Act, outlawing monopolistic control of a market, the prevailing theory was “big is bad” in business. That changed, however, in the 1970s, when economic stagnation prompted a rethinking of antitrust enforcement.
What gradually took hold among legal scholars, economists, judges and government regulators was an antitrust orthodoxy that big wasn’t inherently bad if it didn’t harm consumers. A more relaxed approach to antitrust ensued as regulators and the courts preferred to let the market sort out tensions among competing firms as long as consumers were held harmless.
That’s the antitrust world Lee is accustomed to.
But the Wall Street Journal cited data that showed that Justice Department antitrust complaints in 2017 were 61% below 1981 levels, while the number of reported mergers per year are more than seven times the pace of 40 years ago.
It’s been during this era of lax enforcement that tech giants like Google, Facebook, Amazon, Apple and Microsoft flourished. While Microsoft ran afoul of antitrust regulators for using its operating system to lord over competitors in the personal computer market, other companies involved in search engines, social media, mobile phone apps and retailing were largely left alone.
“If you think about doing a little bit less enforcement every year for 40 years you get past the sweet spot and eventually you are under enforcing,” says Fiona Scott Morton, an economics professor at the Yale School of Management who also worked in the antitrust division of the Justice Department in the Obama administration.
“If you think about doing a little bit less enforcement every year for 40 years you get past the sweet spot and eventually you are under enforcing.”
In this past decade, however, academics like Scott Morton and activists have argued the pendulum has swung too far in favor of corporate concentration. They contend that the digital business model that provides its services for free can still engage in anticompetitive behavior that harms consumers by misusing private data and stifling innovation by competing firms.
Luigi Zingales, a finance professor and director of the University of Chicago’s Stigler Center, explained that digital platforms are unique to other industries because they are at once complex in how they do business, strategically necessary in society and government functions and able to mobilize large groups of people on a grass roots level.
“That combination is unprecedented and honestly, pretty scary,” he said.
Some committee members shared that same concern and urged Simons and Delrahim to focus their investigation on restructuring tech giants — and to do it quickly.
“Facebook has acquired more than 70 companies over the past decade and a half, they are moving forward,” said Sen. Richard Blumenthal, D-Conn. “They are structuring their companies so that you can’t unscramble the egg.”
A split investigation
Lee questioned Simons and Delrahim if current antitrust laws can address problems such as dominant digital media platforms silencing competing viewpoints.
They said if a monopolist uses its market power to prevent a competitor with a different political viewpoint from entering the market that conduct could impact the consumer and fall within antitrust rules.
“My sense is this would be better suited for another set of tools” other than antitrust rules, Simons said.
Neither regulator would discuss details of their respective investigations into Facebook or Google, nor did they go into detail on their current dispute, other than to say it happens, but it’s rare.
But Lee pressed that even if they could pursue broad antitrust claims against a digital platform, the current setup of two agencies charged with the same task is a confusing and inefficient method of enforcement.
“Former FTC Chairman Bill Kovacic has called this ‘nuts,’ and I agree,” Lee said.
He asked if either Simons or Delrahim would recommend a similar arrangement to a foreign country setting up an antitrust oversight system.
“It’s not the best model of efficiency,” Delrahim said, noting that in addition to federal oversight, state attorneys general also have authority to investigate antitrust violations under federal and state laws.
“I’d rather have a split investigation than no investigation.”
But Delrahim, Simons and other senators, several of whom are former state attorneys general, also defended the system that’s been in place for decades — although several senators complained the federal agencies are not doing enough.
“I’d rather have a split investigation than no investigation,” Klobuchar said. “And I assume part of the reason why you split this is you don’t have enough resources individually, to take this on yourselves while you’re doing your other work.”