The House Judiciary Committee lawmakers who had spent the last 16 months investigating into the practices of the world’s largest technology companies Amazon, Apple, Facebook, and Google observed on Tuesday that the companies had exercised and abused their monopoly power and called for the most sweeping changes to antitrust laws in half a century.
A 449-page report was released on 6th October 2020 by the House Judiciary Committee’s Democratic leadership. The Committee members said the four companies had turned from “scrappy” start-ups into “the kinds of monopolies we last saw in the era of oil barons and railroad tycoons.” The congressmen said that the companies had abused their powerful positions in setting and often dictating prices and rules for commerce, search, advertising, social networking, and publishing.
To amend the inequities, the congressmen recommended restoring competition by effectively breaking up the companies, emboldening the bureaus that monitor market concentration, and make it difficult for the companies to acquire start-ups. They also proposed reforming antitrust laws, in the biggest potential shift since the Hart-Scott-Rodino Act of 1976 created stronger reviews of big mergers.
Jerrold Nadler, Democrat of New York and Chairman of the Judiciary Committee, along with David Cicilline, Democrat of Rhode Island and Chairman of the Antitrust Subcommittee, in a joint statement said that “Our investigation leaves no doubt that there is a clear and compelling need for Congress and the antitrust enforcement agencies to take action that restores competition, improves innovation and safeguards our democracy,”
Since the government sued Microsoft for antitrust violations in the 1990s, this is the most significant effort of the government to check the world’s largest tech companies It offers congressmen a deeply researched road map for turning criticism of Silicon Valley’s influence into concrete actions.
One of the major criticism on Amazon is that they charge sellers ever-increasing fees because of its dominant position and most sellers, brands have almost no negotiating power because they relied on the Amazon sales channel. Amazon also penalizes sellers for selling their merchandise for lower prices on other retail sites.
Facebook has increased its monopolistic power in the social media industry by practicing a “copy, acquire, kill” strategy against its competitors and hurting rival companies like Instagram (which the company purchased in 2012). One major criticism in the report explains that Facebook’s acquisition of Instagram was a clear attempt to “neutralize a nascent competitive threat.” The report alleges that after Facebook bought Instagram, it intentionally stymied the photo-sharing app’s success so that it wouldn’t compete with Facebook internally.
The report argues that Google has demonstrated anti-competitive behaviour by “a series of anti-competitive contracts” that pushed people to rely on its search engine when using Android operated phones(Google purchased Android in 2005). The report further states that “Documents show that Google required smartphone manufacturers to pre-install and give default status to Google’s apps.”
About Apple, the subcommittee’s report says that the company has exploited its dominance to exclude some competitors from its store, unfairly favour its applications, and charge fees that some application developers told to the subcommittee are “exorbitantly high.”
The House antitrust subcommittee were split along party lines on how to remedy and corral the power of the tech companies, pointing to an uphill battle for Congress to reduce them.
Democrats proposed legal changes that could substantially restructure Facebook, Google, Amazon and Apple. They said Congress should consider making it illegal for the tech giants to provide preferential treatment to their products, such as Google does in search results. They suggested breaking up the companies in structural separations and preventing them from operating in similar businesses in areas which they are dominant. They also recommended adding clearer rules that could block the tech giants’ attempts to buy other companies in the antitrust laws.
Some Republicans agreed with proposals to support funding for antitrust enforcement agencies but balked at calls for Congress to reconcile in restructuring the companies and their business models. Others have refused to endorse any of the Democrats’ findings. For now, the report’s recommendations are only high-level guidance to Congress for potential future legislation; it won’t lead to immediate action against these companies.
Competiton Commission of India (CCI)
This is a wake-up call for the companies in India, who are already in the turmoil with the Competition laws for the past few years. There has been a probe ordered by the Competition Commission of India (CCI), early this year for alleged violations of competition laws by Amazon and Flipkart in regard to deep discounts to preferred sellers, entering exclusive partnerships, and thereby abusing their dominant position in the Indian market.
The Competition Commission of India (CCI) order stated, there needs to be an investigation whether the alleged exclusive arrangements, deep-discounting and preferential listing by the OPs (opposite parties) are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition contravening the provisions of Section 3 (1) read with Section 3(4) of the Act.
Explanation under Section 4(2), which speaks on the “Prohibition of abuse of a Dominant Position” of the CCI Act, is on the similar lines of what the Amazon was accused in the report by the House Committee. In a way, the report also gives new ways to look into for the CCI, India for addressing the underlying dominance by the big companies.
Along with Amazon and Flipkart, Google who had earlier faced multiple inquiries is also facing an inquiry from the CCI for its practices in the smart TV market. While Google doesn’t make any smart TVs, it supplies Android OS which is the core operating system in almost all smart TVs sold in the Indian market. Reuters, citing one source and two lawyers who are involved in the case, wrote that Google’s had received a fourth major antitrust challenge in India, one of its key markets, is currently facing public criticism from local startups for enforcing certain policies and company charges which would hurt their growth. This aligns with the point which is stressed in the House committee report regarding Google’s influence in android smartphones.
The US Senate has a reputation historically to control the monopolies in the market. The classic example of John D. Rockefeller’s Standard Oil in 1911, which was broken into 34 separate entities. Although this might be an extreme measure in this case, compared to the earlier times. But even recently, Microsoft in 1998 for the violations in 1994 had received a lot of scrutinises.
Based on the outcomes of the upcoming election in the United States in November, if the democrats form the government, there are high chances for further action into these matters.
However, in the domestic context, it is very unlikely for the CCI to enter into the shoes of prosecution and hold these companies accountable because of the inherent weakness it possesses due to the powers are given to it by the Parliament.
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