House Democrats are on the warpath — Facebook, Amazon, Apple and Google (FAAG) are the targets.
The House Subcommittee on Antitrust recently completed an exhaustive review of competitor allegations that these behemoths abuse monopoly power.
Just as the Washington political class lives in a bubble, Big Tech CEOs live and work in palaces. So does Walmart’s leader, but Congress isn’t out to bar it from selling store brands or acquiring delivery companies as it would FAAG.
FAAG have accomplished monopolies because of the network effect. The more folks that use Facebook, for example, the more valuable to users it becomes. Hence, consumers bunch to one service.
Nothing is or should be illegal about accomplishing a monopoly through superior commercial acumen. Apple’s phone designs are elegant beyond comparison, and anyone observing Amazon’s capacity to select and develop new businesses quickly realizes it does things you can’t learn at business school.
However, Amazon bullies suppliers, mines their data, prioritizes its own products in searches and sometimes denies competitors equal access on its platform. Those are or should be illegal abuses of monopoly power.
Similarly, the Justice Department is suing Google for using hardball tactics to maintain the dominance of its search engine and Chrome browser — and using that dominance to maintain its grip and profit at the expense of competitors in the online advertising business.
The House committee appears ready to single out FAAG. Democrats on the committee would prohibit Amazon, for example, from selling store brands or creating businesses in everything from apparel to shoes that compete with third-party suppliers. That’s absurd, unless the same goes for Wegman’s store brand of strawberry preserves.
Would Amazon subsidiary Whole Foods only be permitted to sell 365 Everyday Value products at its physical locations but not on the Prime website?
If Congress imposed the same conditions on Walmart, Target and the like, it would handicap their web-driven curbside pickup and delivery businesses. It might no longer be possible to purchase the lowest-priced milk for delivery, because it’s usually the store brand.
Perhaps House Democrats would let a protege of Elizabeth Warren decide which good union suppliers can sell online and which cannot.
Their report particularly targets Amazon for using data it gleans from consumer purchases to select products to create store brands, and The Wall Street Journal recently targeted it for entering merger talks with vendors, quitting those and then launching its own products with information gleaned from those talks.
The House majority report excoriated Facebook for competing hard, and then acquiring competitors like Instagram and WhatsApp and structuring those to not directly compete with its eponymous service.
Fine, but would the committee also write laws to keep General Motors from purchasing an interest in Nikola — or dissolve its joint venture in hydrogen-electric pickup trucks? Would it force Buick to start selling limos to compete with Cadillac? That Warren protege would be very busy deciding what businesses can’t and must do.
Some FAAG practices warrant regulation. Amazon, Google and Facebook mine too much personal and business data, and we need an American equivalent of the EU General Data Privacy Regulation. That requires users to know, understand and consent to data collected about them, and that should be applied to vendors and suppliers on these platforms, too.
Tough, quick and neutral arbitration should be available for complaints that provide consumers and businesses the wherewithal to stand up to the legal teams of the behemoths.
Thanks to the networking effect, all plus Apple have a large enough lock on digital markets that they should be treated as essential facilities, as the concept is known in antitrust law, and be required to provide fair access to all potential consumers and suppliers who abide by reasonable standards. Again, fair arbitration should be available for prompt resolution of complaints — Amazon can’t be let to decide how and who competes with its store brands without neutral recourse.
The Democrats would go further and deny most mergers with suppliers — we don’t keep Ford from making steel if it chooses or Exxon from acquiring a windshield wiper manufacturer.
I doubt we want to keep Facebook from developing an American answer to WeChat. That app permits Chinese to do just about everything in one place — buy theater tickets, pay utility bills, purchase computers and pay for them and so forth. For our Big Tech to answer that competitive challenge or Alipay in the Fintech space, they need a much freer hand than the anti-business bias the House Subcommittee on Antitrust would prescribe.
Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.