The last time the U.S. Congress comprenhensively revisited the structure and operation of media and communications was in 1996. Just a few of the changes since that time include the introduction of broadband to the home, the iPhone, Facebook and social media, the creation of digital advertising and Google GOOG , the collapse of newspapers and magazines, the advent of Netflix NFLX and Connected TV, cyberbullying, Russian interference in U.S. elections and the spread of digital misinformation about a pandemic. Hmm…think it might be time to revisit the way we regulate this world? So does a growing chorus of key policymakers.
Last week the staff of the House Judiciary Committee issued its anodyne-in-name-only report Investigation of Competition in Digital Markets. The report’s conclusions and recommendations are a powerful indictment of systemic anticompetitive behavior from the most prominent exemplars of “Big Tech”: Facebook, Google, Amazon AMZN and Apple AAPL .
As a former Hill Counsel and staffer, I have nothing but admiration for the prodigious work underlying this report (in the staff’s words): “1,287,997 documents and communications; testimony from 38 witnesses; a hearing record that spans more than 1,800 pages; 38 submissions from 60 antitrust experts from across the political spectrum; and interviews with more than 240 market participants, former employees of the investigated platforms, and other individuals totaling thousands of hours.” Gene Kimmelman, Chief Counsel to the Department of Justice Antitrust Division in the Obama Administration and former Chief Counsel and Staff Director for the Senate Antitrust Subcommittee, told me that you can’t underestimate the enormous value the staff has provided in educating Members of Congress and laying the foundation for much of the hard work to come in solving these problems.
The bottom-line conclusion of the report is devasting: that “market dominance” by big tech has “diminished consumer choice, eroded innovation and entrepreneurship in the U.S. economy, weakened the vibrancy of the free and diverse press, and undermined Americans’ privacy.” Wow – remember when we liked these companies?
The Judiciary Committee staff identified four separate markets that are dominated by one of these digital giants: Facebook’s “monopoly power” in the “social network” market; Google’s dominance of “online search and search advertising”; Amazon’s “significant and durable market power in the U.S. online retail market”; and Apple’s market weight in “mobile operating system”. These four companies now comprise one-third of the entire market cap of the S&P 100. And the report concludes that each of these firms has obtained and solidified their market power through a combination of “anticompetitive” behavior and acquisitions designed specifically to squelch competition.
If you’ve consumed the products of these giants or competed with them, none of these conclusions should be a shock. But what can government do about it? The Judiciary Committee’s report makes clear our present laws and law enforcement are entirely inadequate to the task. As just one example of many, the report notes that despite over 100 separate Facebook acquisitions, the government only made as much as a follow-up document request in one – the Instagram acquisition in 2012.
Given this context, the Committee staff recommends strengthening antitrust laws to empower government and private litigants in halting unfair competitive behavior and acquisitions; a concurrent boost to enforcement resources of DOJ and the Federal Trade Commission; and a series of specific restrictions on the digital giants’ behavior and a restructuring of their business functions, separating “transmission” from competitive activities such as publishing and products sales.
As thoroughly as the staff at the Judiciary Committee has done its work, it is nevertheless limited in its focus by the jurisdictional limitations of the Committee and the antitrust enforcers at DOJ and the FTC. This is arcane stuff for all but Washington insiders, but it propels much of the legislative and oversight activity by Congress and makes grappling with new problems. As Gene Kimmelman emphasized to me, trying to reform and even restructure markets through the antitrust laws alone can take years if not decades. He pointed out that DOJ first filed suit to attack the old AT&T T telephone industry monopoly in 1974, but it wasn’t until 1984 that the actual breakup of “Ma Bell” went into effect. Can we wait so long to restructure the digital platforms?
According to Mark MacCarthy, a former staff colleague of mine on the House Energy and Commerce Committee and now part of the law faculty at Georgetown University, we have to solve the challenges posed by digital platforms at least partly through the historical lens provided by communications policy. After all, as MacCarthy points out, “social media is media”, meaning that the unique set of concerns about technology and market behavior in the creation and dissemination of free speech must be taken into account.
The FCC has certainly been tasked with oversight of the media business for the last 100 years, but as both MacCarthy and Kimmelman note, they have never had the authority or experience to regulate digital platforms.
The Shorenstein Center for Media, Politics and Public Policy at Harvard’s Kennedy School released a report in August with its own framework for reigning in the marketplace abuses of digital giants. The authors Kimmelman, former FCC Chairman Tom Wheeler and Phil Verveer, who spearheaded the original DOJ litigation against AT&T, align almost completely with the Judiciary Committee staff on the problems posed by digital giants in the marketplace. But their solution calls for a day-to-day overseer of these digital platforms, and argues that no one agency today possesses the background to take on that challenge. Consequently, they advocate a new “Digital Platform Agency.” The authors argue not for imposing old-style monopoly regulation (such as from the Ma Bell days) but a more agile regulatory apparatus newly constructed for the digital age and its platforms.
Can Congress actually act here? The 1992 Cable Act might be a bit of a historic guide as a host of aggrieved parties from broadcasters to new satellite operators to consumer activists aligned on a comprehensive reimagining of cable’s responsibilities in the television marketplace. That impressive lineup pales in comparison with the list of folks who have been bludgeoned by the power of the digital giants: news and book publishers; traditional media companies; retail establishments; advertisers and their agencies; privacy advocates; emerging tech companies; independent sellers of goods online; mobile gaming companies; and app developers. That is certainly a coalition of the willing to support congressional action. Is it ready and able? Stay tuned.