Congresswoman grills Facebook CEO on copying competitors

(CNN)The biggest finding from this week’s House antitrust report on Big Tech isn’t that Amazon, Apple, Google and Facebook are monopolies. Believe it or not, monopolies are actually legal under current US law.

What’s not allowed is corporate malfeasance designed to preserve monopoly power, at the expense of competition. And it’s here that the House report makes its most significant claim — one that experts say may underpin future efforts by Congress to crack down on Big Tech.
Tech giants have maintained their monopoly position, the report finds, by using the vast amounts of data they’ve gathered on consumers and other businesses in order to muscle out rivals, gain an advantage in new product markets and reduce innovation by others. That conduct, the report alleges, is anti-competitive.

    “Through using market power in one area to advantage a separate line of business, dominant firms undermine competition on the merits,” the report concludes, adding that due to their practical omniscience, the companies are now “threatening greater and greater portions of the digital economy.”
    Congress' Big Tech investigation finds companies wield 'monopoly power'
    In other words, the report argues, tech platforms have used data to perpetuate a cycle of dominance that accrues to them more and more power. Experts say it’s a bold and creative legal theory that could revolutionize how antitrust scholars think about competition in a digital world. But it bumps up against decades of judicial inertia around antitrust thinking, raising questions about whether the rest of the government is ready to go where the House antitrust panel’s majority wants to lead.

    Follow the data

    The report — published Tuesday by Democrats leading the House Judiciary Committee’s antitrust panel after a 16-month investigation into Big Tech — catalogs several cases of tech companies wielding an advantage in data against their rivals, along with legislative recommendations to address the industry’s “monopoly power.”
    For example, the report cites internal memos and presentations that allegedly show Facebook used user data from Onavo, a Facebook-owned virtual private networking app, to identify WhatsApp as a massively popular service — and an emerging threat. Facebook acquired WhatsApp in 2014 for $19 billion.
    The report also alleges that Google was able to figure out, based on how people used Gmail and search, what web browsers were the most successful, which gave Google a leg up when it launched Chrome, now the world’s most popular browser, which feeds its own stream of user data to Google.
    Amazon, the report says, uses an “information asymmetry” in various ways to gain leverage over independent sellers on its marketplace, for example by using sellers’ sales data to figure out what products were popular and that Amazon should begin to sell.
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    And Apple uses its control over the iOS App Store to gain “competitively sensitive information” about successful apps that Apple then mimics in its own services to gain market share, according to the report. Citing testimony from the CEO of Tile — an app and Bluetooth device that helps users locate missing objects — the report says: “Apple knows who Tile’s customers are, the types of apps those customers preferred, and the demographics of iOS users that look at Tile’s app or search for similar apps.” Apple has allegedly used this type of information to develop competing apps of its own, the report said, citing developer testimony.
    In response to the report, the companies have denied any wrongdoing and said they compete vigorously within the rules. Amazon said in a statement that the report advances “fringe notions.” Apple said in a statement it disagreed “vehemently” with the report’s findings. Google said in a statement that the report contains “outdated and inaccurate allegations from commercial rivals.” And Facebook said regulators “thoroughly reviewed” its acquisition of WhatsApp and “did not see any reason” to block it at the time. Google declined to comment for this story. Amazon, Apple and Facebook did not immediately responded to a request for comment.
    Facebook CEO Mark Zuckerberg previously defended his company’s data practices as nothing more than simple market research.
    Carl Szabo, vice president at the tech advocacy group NetChoice, said the type of data analysis tech companies engage in is a sign of competition, not evidence that competition is being harmed.
    “Every business is always looking at what its competitors are doing and looking to see what type of new expansions can and should be made,” he said.
    Neil Chilson, a senior research fellow at the Charles Koch Institute and a former acting chief technologist at the Federal Trade Commission, agreed.
    “We’re not talking about corporate espionage, here,” he said.
    But other experts say that, in a world awash in data, there is — or should be — a line between market research and conduct that society deems beyond the pale.
    “There’s got to be some difference between doing your homework like everyone does, and having this extraordinary advantage of owning the platform, knowing everything about your competitors, and who’s buying their products and why,” said Columbia University law professor Tim Wu. “To call that fair competition is just an insult to the phrase.”

    “‘Novel’ is a dirty word in antitrust”

    In some places, the House report compares Big Tech to the railroad and telephone tycoons of yore. But Silicon Valley’s access to data makes the industry different in some important ways, an attorney for the antitrust subcommittee told reporters this week on a conference call.
    “It’s the fact that they’re able to develop near-perfect market intelligence that does make it feel like we’re living in a new world,” the attorney said.
    This dynamic might feel obvious to an average consumer who relies on these companies daily, but antitrust law doesn’t operate based on simple appearances — it’s based on judicial interpretation. And that’s where this line of argument could run into challenges, experts say.
    Antitrust in the United States is enforced by lawsuits and the court system, not Congress. That means that for the legal theory laid out in the House report to be used against Facebook or Google right this moment, it would take lawyers at the Justice Department or the FTC arguing for it in court.
    A long line of precedents has trained judges to view antitrust cases through the lenses of price, choice and corporate collusion. And the House report tries to describe Big Tech’s data practices as another example of the type of illegal behavior courts have ruled against for decades.
    But legal theories about the use of data are still relatively new in the antitrust world, and don’t fit neatly into the way judges have historically thought about competition, said Hal Singer, an economist and senior fellow at George Washington University’s School of Public Policy. As a result, he said, the House report asks jurists steeped in years of tradition to step outside their usual comfort zone.
    “‘Novel’ is a dirty word in antitrust,” Singer said. “It doesn’t matter if it’s a Democratic-appointed judge or a Republican-appointed judge — they’re all conservative in the sense that they’re worried about their opinions being appealed.”
    That may be why, in addition to calling for more resources for the antitrust agencies that bring these types of cases, the House report lays out several other proposals that don’t rely on the judicial system for change. Those include new proposed laws that would make it illegal for tech companies to own the platforms they compete on, or to discriminate against rivals that rely on their services.
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    Though they endorsed the subcommittee’s factual findings as “undeniable,” the panel’s Republicans have indicated that some of these ideas would be “non-starters.” That raises doubts about how far any legislative proposals might get.
    But this is where the election could play a pivotal role, said Wu. If former Vice President Joe Biden wins the White House and Democrats retake control of Congress, the House report could serve as a blueprint for sweeping changes to the law led by the House Judiciary Committee’s Democratic majority.
    On Friday, Rep. David Cicilline said as much. The chair of the antitrust subcommittee described the report as “just the beginning” at a conference held by Public Knowledge, a consumer advocacy group.
    “Now we have to begin the difficult work of implementing the recommendations,” he said. “I think you’re going to see some legislation introduced in the late days of this Congress.”

      That could have enormous implications for the tech industry.
      “If Congress does flip, you could end up with some kind of new scheme for the big digital marketplaces,” said Wu. “It’d be like the Radio Act of 1927, a different paradigm for thinking of online platforms.”
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