House Judiciary Committee Continues Its Antitrust Inquiry Into the Internet Marketplace

The House Judiciary Committee’s Subcommittee on Antitrust held its second hearing on whether our antitrust laws and their enforcement are keeping up with the Internet marketplace. Notably, Amazon, Google, Facebook, and Apple were present as witnesses along with a range of experts to follow, giving Congress a lot to assess. EFF supports this inquiry by Congress and shares the concern that the lifecycle of competition has been on the decline, bringing serious risk of a small handful of gatekeepers having disproportionate power over user expression and privacy online.

Congress Asks the Wrong Question: “How Can We Make Big Tech Behave Better?”

A persistent theme from some in Congress is applying pressure to Google, Facebook, Apple, and Amazon to modify their practices to appease some constituency. This misses the point of an antitrust inquiry, which is to figure out if these companies are exerting market power in ways that foreclose competition, harm consumers, and suppress innovation, and then remedy the harm with thoughtful interventions. But not all industries share this objective—some would rather have the dominant Internet companies become regulated monopolies in order to further their own policy goals.

For example, major entertainment companies submitted a letter to the House Judiciary Committee claiming that Google and Facebook are not doing enough to stop copyright infringement, and attempted to shoehorn the copyright issue into an antitrust discussion. Echoing this theme, Congresswoman Mary Gay Scanlon asked the tech companies to explain their copyright enforcement practices. Google’s witness responded by discussing Content ID, their wildly expensive and poorly functioning system of copyright filters for YouTube.

The question struck a discordant note in this hearing on monopoly power. YouTube has the lion’s share of user-uploaded video on the Internet, and while Content ID causes endless difficulties for video creators and their viewers, YouTube’s vast scale makes its filtering system hard to avoid. What’s more, Content ID has cost at least $40 million to build. An aspiring competitor would find it next to impossible to build an equivalent system of filters. Making systems like Content ID the norm (or worse still, a legal requirement) cements Google’s dominance, reinforcing the exact problem the Antitrust Subcommittee has set out to fix.

Changing the subject to copyright may further the entertainment industry’s agenda, but it doesn’t address the monopoly problem. Major content companies consistently seek to narrow distribution channels for their content and then maximize control. It has no place in an antitrust inquiry, as the ultimate objective for Congress should be to open the door to more channels of distribution that can compete with YouTube. In fact, content creators would benefit from competition in distribution channels as alternatives to Google products. This would give content creators choices, and those distributors could compete for new video creations with better terms than what YouTube offers.

Congress’ Effort to Understand the Internet Marketplace Is Vital to the Internet’s Future

Chairman David Cicilline laid out the facts as to why his Subcommittee is engaging in this antitrust inquiry: a small handful of companies wield enormous influence over Internet activity and investors that are important in funding startups noted the “kill-zone” that exists when challenging the dominant tech companies. Rather than try to launch startups that were meant to displace the Internet giants, the market seems to have trended towards building companies that the tech giants will seek to acquire through vertical mergers. Professor Fiona Scott Morton testified that what may be needed is a rethinking of mergers and acquisitions. EFF agrees that this area of antitrust law is sorely in need of a reboot. Other witnesses noted that small businesses now see companies like Amazon as potentially hostile to their ability to use the Internet to grow, Stacey Mitchell of the Institute for Local Self-Reliance. This represents a dramatic shift in how Internet industries have worked historically, where the garage startup became the next billion-dollar corporation only to be replaced by the next garage startup, and no company could gatekeep others.

It’s a powerful indication that the Internet markets have changed when the giant corporations under scrutiny could only list each other as competitors, in response to requests from Congressman Hank Johnson. In a follow-up inquiry, Congressman Joe Neguse noted  4 of the 6 largest global social media companies are all owned by Facebook, which highlights how its series of mergers appeared to have gotten ahead of users who switched away from Facebook but were brought back into the fold in the end.

Lastly, an unfortunate outcome from this congressional inquiry was dismissiveness by some Members of Congress about the idea of structural separation. This is effectively saying these serious problems facing the Internet ecosystem should be approached with one hand tied behind our backs. It is quite possible that industry is opposing discussions of structural separation policies, which have a long history in antitrust law, because they might be the most effective solution. If the endgame is to avoid a regulated monopoly approach to Internet commerce, then all options have to be on the table with the purpose of empowering users to be the ultimate decision makers for the Internet’s future. It is critical that Congress get this right.  An extraordinarily valuable benefit of the Internet is how it has lowered the barriers to participation in commerce, politics, and other social activities that historically were often reserved to the powerful few.

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Author: Ernesto Falcon

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