The House Judiciary Committee approved antitrust legislation that could prohibit platform operators like Amazon, Apple, Google, and Facebook from favoring their own products and services, and the legislation could even break up industry giants by forcing them to eliminate or sell certain divisions. Companies could also face fines of 15 percent of their annual revenue.
Bills introduced by Democrats were approved in a hearing that began Wednesday morning, recessed at 5 am EDT Thursday, reconvened late Thursday morning, and finished around 3 pm. The final and most controversial bill approved was the Ending Platform Monopolies Act, which “eliminates the ability of dominant platforms to leverage their control over across multiple business lines to self-preference and disadvantage competitors in ways that undermine free and fair competition,” a press release from Antitrust Subcommittee Chairman David Cicilline (D-R.I.) on June 11 said.
The 21-20 vote went mostly along party lines, but Republicans Ken Buck (R-Colo.) and Matt Gaetz (R-Fla.) supported the bill. Democrats who opposed it were Zoe Lofgren (D-Calif.); Eric Swalwell (D-Calif.); Lou Correa (D-Calif.); and Greg Stanton (D-Ariz.).
The bill text says it seeks to “eliminat[e] the conflicts of interest that arise from a dominant online platform’s concurrent ownership or control of an online platform and certain other businesses.” Under the bill text, large platform operators have conflicts of interest when they own or control a separate line of business that creates the incentive and ability to “advantage the covered platform operator’s own products, services, or lines of business on the covered platform over those of a competing business” or “exclude from, or disadvantage, the products, services, or lines of business on the covered platform of a competing business.”
That could describe Amazon’s online marketplace, Apple’s App Store, or Google search, as those companies use their platforms to pitch their own products in competition with third-party businesses that rely on the giants’ platforms to reach users. House Democrats last year issued a long report outlining their concerns with those companies and Facebook’s “monopoly power in the market for social networking.”
Conflicts of interest
The conflicts of interest as defined in the legislation approved today would be illegal if the bill becomes law. A large company would also violate the proposed law if it “offers a product or service that the covered platform requires a business user to purchase or utilize as a condition for access to the covered platform, or as a condition for preferred status or placement of a business user’s product or services on the covered platform.”
“By operating as both the platform and as a competitor on the platform, these firms often possess an irreconcilable conflict of interest enabling them to harm competition by preferencing their own products and harming rivals,” Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) said.
Companies that are found to violate the proposed law would have to terminate the offending service “as soon as is practicable.” They would get a long grace period before any punishment, though, as the amended version of the bill says that companies would face civil penalties and lawsuits from US antitrust regulators if they fail to comply “within two years of the [Federal Trade] Commission or Department of Justice designating a covered platform.”
Fines of up to 15% of annual revenue
The separate American Innovation and Choice Online Act was approved before the committee went into recess around 5 am. It passed in a 24-20 vote and would prohibit conduct that “advantages the covered platform operator’s own products, services, or lines of business over those of another business user; excludes or disadvantages the products, services, or lines of business of another business user relative to the covered platform operator’s own [offerings]; or discriminates among similarly situated business users.”
Of the 24 aye votes, 21 came from Democrats and three came from Republicans Buck, Gaetz, and Burgess Owens (R-Utah). Democrats Lofgren, Swalwell, Correa, and Stanton opposed the bill.
The bill “restores competition online and ensures that digital markets are fair and open… by preventing dominant online platforms from using their market power to pick winners and losers, favor their own products, or otherwise distort the marketplace through abusive conduct online,” Nadler said. He went on to say that “a small set of online platforms have become gatekeepers for much of the digital marketplace,” often leaving businesses and consumers with no “meaningful alternatives.” He said that “these dominant platforms often compete directly against the very businesses that rely on their platform” and that this conduct “eliminates incentives and opportunities for small businesses and entrepreneurs to compete in the digital economy.”
The bill provides for civil penalties of up to 15 percent of a company’s total revenue over the previous calendar year or up to 30 percent of the company’s US revenue in the offending line of business, whichever is higher. Companies could also face payments of restitution and refunds, “disgorgement of any unjust enrichment,” and injunctions preventing further violations.
That bill and others greenlighted by the committee must still be approved by the full House. They would also need approval from the Senate, where legislation can be blocked more easily because Democrats do not have a filibuster-proof majority and haven’t taken action to change or eliminate the filibuster. Though the bills passed through the Judiciary Committee, The Wall Street Journal wrote that “much of the effort faced intensive lobbying by affected firms that slowed the committee’s work and foreshadowed a pitched battle in the Senate.”
While these bills could benefit Internet users and businesses that need access to online platforms, there has been no similar push in Congress to regulate the regional broadband-access monopolies that leave users with high monthly bills and little to no choice.
Big Tech fights proposed laws
Google slammed the legislation, arguing that “American consumers and small businesses would be shocked at how these bills would break many of their favorite services.” Apple is hoping it won’t have to allow installation of iPhone and iPad apps outside of Apple’s App Store, citing security risks and claiming it would “eliminat[e] choice” because users who want “direct access to applications without any kind of review have sideloading today on other platforms. The iOS platform is the one where users understand that they can’t be tricked or duped into some dark alley or side road where they’re going to end up with a sideloaded app, even if they didn’t intend to.”
The committee yesterday also approved the Platform Competition and Opportunity Act. Cicilline’s press release said this proposed law “prohibits acquisitions of competitive threats by dominant platforms, as well [as] acquisitions that expand or entrench the market power of online platforms.” The House committee approved the Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act, which bill sponsors say “promotes competition online by lowering barriers to entry and switching costs for businesses and consumers through interoperability and data portability requirements.”
“Facebook would appear to be the target [of the ACCESS ACT], given that social media profiles are basically impossible to port from one network to another,” we wrote in previous coverage.
The Merger Filing Fee Modernization Act was approved and would raise filing fees to give the Department of Justice and Federal Trade Commission more resources “to aggressively enforce the antitrust laws.” The committee also approved the Republican-sponsored State Antitrust Enforcement Venue Act to ensure that “state attorneys general are able to remain in the court they select rather than having their cases moved to a court the defendant prefer.”
Microsoft’s status questioned by Republicans
One point of contention between the political parties is whether Microsoft would count as a “covered platform” and have to follow new antidiscrimination regulations. “Republicans questioned why the criteria for covered platforms in the legislation appeared tailored to exempt Microsoft,” Bloomberg wrote. Democrats denied that Microsoft would be exempt.
The American Choice and Innovation Online Act and other competition bills written by Democrats define “covered platform” as one that has at least 50 million US-based monthly active users and at least 100,000 US-based businesses using the platform, is owned or controlled by an entity with net annual sales or market capitalization greater than $600 billion, and “is a critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform.”
Rep. Pramila Jayapal (D-Wash.) said at the hearing “that she thinks Microsoft would count as a critical trading partner because of its cloud platform,” according to Bloomberg. “‘The assumption that Microsoft is not covered is incorrect,’ Jayapal said after several lawmakers questioned why the definition in the bills appeared tailored to exclude Microsoft,” the Bloomberg article stated.