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Why aren’t America’s favorite tech giants being punished for killing the competition?

For the second time in as many weeks, senators leveled harsh criticism at the Federal Trade Commission for letting Facebook and Google get too big

Sen. Mike Lee
File - Senate Judiciary Committee member Sen. Mike Lee, R-Utah, questions Attorney General Jeff Sessions during a Senate Judiciary Committee hearing on Capitol Hill in Washington, Wednesday, Oct. 18, 2017.
Carolyn Kaster, Associated Press

WASHINGTON — For the second time in as many weeks, senators leveled harsh criticism at the Federal Trade Commission for allowing monopolistic conduct to go unpunished and for being too slow to rectify the trend of tech giants snuffing out small competitors.

Members of the Senate’s Antitrust, Competition Policy and Consumer Rights subcommittee took turns blasting Bruce Hoffman, director of the FTC’s Bureau of Competition, for the agency’s failure to examine hundreds of mergers and acquisitions by large players in several industries in the past 30 years, but they primarily took aim at the digital marketplace dominated by Facebook, Google, Amazon and Apple.

“Let me just put it in a nutshell: We’re here today because antitrust enforcement isn’t working. We see it in the pharmaceutical industry, we see it in the airline industry, we see it in big tech,” said Sen. Richard Blumenthal, D-Conn. “The danger really is that antitrust enforcement is becoming an empty suit. Whether it’s lack of wherewithal in resources or lack of authority, I think it’s as much a lack of will.”

The hearing is among several Senate and House members have held this year — and will likely continue to hold — calling out anticompetitive conduct by tech giants Google, Facebook, Amazon and Apple. The urgency to rein in Big Tech has been building after years of complaints about Silicon Valley companies abusing personal data, allowing foreign actors to disrupt elections and employing winner-take-all tactics to eliminate potential rivals. The pressure boiled over this summer with investigations launched by the FTC, Department of Justice, Congress and a joint probe by attorneys general from 48 states.

On Tuesday, the Wall Street Journal reported on a dossier called project Voldemort compiled by the startup Snap documenting how the company felt Facebook was trying to thwart competition. The article noted officials at Snap, which operates the Snapchat messaging app, are among the companies talking to the FTC as part of the agency’s antitrust probe into Facebook.

Apparently feeling the heat from Capitol Hill, Facebook CEO Mark Zuckerberg traveled to Washington last week, holding private meetings with President Donald Trump and select senators to discuss their concerns.

FILE- In this April 10, 2018, file photo Facebook CEO Mark Zuckerberg testifies before a joint hearing of the Commerce and Judiciary Committees on Capitol Hill in Washington.
Alex Brandon, Associated Press

Among those was one of the company’s harshest critics, Sen. Josh Hawley, R-Mo., who questioned Tuesday the FTC’s ability to crack down on Big Tech’s alleged anticompetitive tactics.

“I’m concerned about the agency’s ability to protect the public interest, to protect consumers’ interests and to protect competition and make sure that we’re getting good healthy competition that actually spurs innovation,” Hawley said.

Subcommittee Chairman Mike Lee, R-Utah, also reiterated his frustrations from last week’s hearing about how the FTC and Justice Department split up antitrust investigations rather than just one agency handling it. He also cautioned against overzealous regulators and lawmakers unintentionally crushing competition rather than creating it.

“There’s a bit of a feeding frenzy these days when it comes to antitrust and Big Tech. And while I’m encouraged that the FTC and DOJ are investigating whether the tech giants have violated the antitrust laws, I am also concerned that we might overshoot the mark in our efforts to rein in these firms,” Lee said in his opening remarks.

Because of the digital industry’s influence on nearly every aspect of daily life and the fact that many of the services companies provide are free to consumers, some of the traditional antitrust solutions — such as breaking up a big firm into several competitors or blocking acquisitions — aren’t as clear cut.

For example, social media users experience benefits when Facebook buys a smaller competitor, like Instagram, as it enlarges the network of people its users can connect with. The acquisition can also enlarge the database of consumer information, which Facebook can then sell to advertisers seeking to target certain consumers.

Overly aggressive antitrust enforcement could also scare away venture capitalists who provide most of the financing for digital startups and often rely on the sale of a startup to a larger company to provide the return on their investment.

Patricia Nakache, a general partner at Trinity Ventures, a venture capital firm that finances digital startups, explained to the panel that the small startups are often launched by former employees of the larger firms and more often complement the bigger players and offer products to their customers.

She said if the government makes it more difficult to provide financing to startups, it could have a “devastating” effect on innovation.

Bruce Hoffman, director of the FTC’s Bureau of Competition, calmly fielded the criticism, explaining his team of about 280 lawyers and investigators challenged 42 mergers and tried nine antitrust cases in the past two years.

“We work really hard. We do the best we can. But we have limits on what we can do,” Hoffman said, suggesting his team is sometimes outnumbered 10-to-1 by legal teams representing large corporations the government has taken to court.

But in the case of Big Tech, of the 700 mergers and acquisitions Google, Facebook, Amazon, Apply and Microsoft participated in since 1987, only one was investigated by the FTC, said Diana Moss, president of the American Antitrust Institute, a consumer and business advocacy group that promotes competition.

“This record may indicate that agencies are either not finding these transactions raise concerns or they are not comfortable challenging them,” Moss said.

While senators and witnesses agreed it’s difficult to predict whether a small startup being acquired by a larger player will stifle competition and innovation, Moss and others said the FTC has the ability to retroactively look at past transactions to determine if the players violated antitrust law.

“If there is evidence of post-merger harm, the agencies should use their authority to challenge consummated deals,” Moss said.