A Closer Look at the Congressional Big Tech Market Power Report
Abby is PMG’s senior managing editor, where she leads the company’s editorial program and manages the PMG Blog and Insights Hub. As a writer, editor, and marketing communications strategist with nearly a decade of experience, Abby's work in showcasing PMG’s unique expertise through POVs, research reports, and thought leadership regularly informs business strategy and media investments for some of the most iconic brands in the world. Named among the AAF Dallas 32 Under 32, her expertise in advertising, media strategy, and consumer trends has been featured in Ad Age, Business Insider, and Digiday.
The U.S. House Judiciary antitrust subcommittee wrapped up its nearly 16-month bipartisan inquiry into the market power of some of the tech industry’s largest companies earlier this month. We’ve created a simplified overview of the staff report, the conclusions reached, and what is likely to happen next.
After several high-profile congressional hearings, expert testimonies and the review of millions of internal records, the House Judiciary Committee on antitrust completed its investigation on the market power and business practices of Amazon, Apple, Facebook, and Google. The investigation’s findings were released in a 449-page staff report early this week, referencing countless internal documents and investigative reporting, and outlining detailed recommendations for how Congress should act moving forward.
Given the level of access (and the amount of documentation) provided to the subcommittee, the 449-page report also revealed key internal operations during historic moments and business decisions made inside these tech companies, including how the Instagram acquisition was regarded internally at Facebook, and how Amazon utilizes internal data about individual sellers.
Ultimately, the investigation alleged that Facebook and Google have monopoly power, while Amazon and Apple “enjoy significant and durable market power.”
After reviewing the coverage and critical aspects of the report, the following findings were most relevant for advertisers:
Concerning Facebook, the investigation claimed that Facebook’s monopoly power is held within online advertising and social networking markets, with a sharp focus on its acquisition of Instagram and other smaller platforms.
The committee claimed that Apple’s monopoly power exists via “software app distribution on iOS devices,” or in other words, the Apple App Store.
With Amazon, committee members alleged that Amazon has monopoly power over “most of its third-party sellers and many of its suppliers.” According to CNBC, the report claims that “Amazon’s market share of U.S. online retail sales is ‘likely understated’ at 40 percent, [with] ‘more credible’ estimates placing it around 50 percent or more.” Later, the report revealed that internal documents show that … the company refers to [third-party sellers] as ‘internal competitors.’
Regarding Google, the staff report alleges that Google has a “monopoly of the online general search and search advertising markets.” The report described Google’s market position as functioning as “an ecosystem of interlocking monopolies,” linking together various services that utilize user data to provide “near-perfect market intelligence.” Google is also alleged to have used “anticompetitive contracts” to maintain its monopoly power in search. This was primarily observed in the default status and pre-installed Google apps contracts with smartphone manufacturers.
In reaching these conclusions, the authors of the report outlined a sweeping collection of recommendations for how the issues may be addressed.
Override “problematic precedents” in antitrust case law. This would essentially give legislators the opportunity to update antitrust law for the digital age, a dominant concern seen in modern antitrust enforcement.
Hinder dominant platforms from giving their own services preferential treatment, requiring dominant platforms to offer “equal terms for equal products and services.”
The staff report asserted criticisms regarding U.S. antitrust enforcement agencies, including the FTC and the Department of Justice Antitrust Division, for “failing” to curb market dominance. New funding measures, investigative procedures, and staffing requests were proposed in the text. Alongside these changes, the report proposed that antitrust investigations would, in the future, require dominant platforms to prove how M&A activity would not harm competition rather than the onus being left to enforcers to prove how a merger or acquisition would harm competition. In other words, restrict “killer acquisitions” as was alleged to have taken place with Facebook’s 2012 acquisition of Instagram.
To require the FTC to “regularly collect data on concentration.”
Mandate improved interoperability and for dominant companies to make services compatible with competitors.
“Impose structural separations and prohibit dominant platforms from entering adjacent lines of business.” In fewer words, functionally separate lines of business from the parent company, such as requiring Google to divest YouTube. During committee hearings, this tactic was referenced as “a type of ‘Glass-Steagall’ law,” in reference to the 1930s when commercial banking was separated from investment banking.
Each company involved in the investigation released statements disputing the report’s findings, though certain aspects, such as interoperability, are industry initiatives still largely supported by these companies.
Related: Download the full report via CNBC here.
Despite the investigation being a bipartisan effort, the proposals laid out in the report reportedly do not have full bipartisan support, with some suggested legislative changes only having Democrat backing at this time. The report’s release was allegedly delayed as last-minute objections from committee members and ranking officials contrasted with the report’s findings.
In the end, the report was published on Tuesday but with some committee members sharing conflicting reports of their own, while calling some of the proposals in the majority staff report “nonstarters.”
According to Paul Gallant, an analyst for Cowen to The Wall Street Journal, “this report could end up being a turning point in antitrust and tech. It creates momentum for legislation next year, and it also might nudge regulators to bring cases even under existing law knowing they’ve got congressional backup.”
On the other hand, Ben Thompson of Stratechery provided a highly-referenced lesson on the roots of antitrust as well as his interpretation of the report. In speaking about America’s “disregard for monopolies,” he said the “report is simply a new expression of an old idea.” Casey Newton of The Platformer described his favor for some of the proposed changes saying, “if implemented, our biggest tech companies would stay big… but Big Tech would also be easier to compete with, [enabling] new challengers [to] arise.”
Whether or not any legislation (or the other recommended changes) could be enacted or acted upon in the next session largely depends on the results of the 2020 U.S. election. In the meantime, these findings will almost certainly serve as supporting evidence and the first of many reports that are expected to be released in the coming months. As we mentioned earlier this week, this particular subcommittee investigation was just one of the many government probes currently in motion.
At PMG, we found this chart by Axios to be particularly helpful in distinguishing between the various, ongoing investigations.
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As always, PMG is keeping a close eye on regulatory developments related to the tech and advertising industry and will continue to update you as these investigations play out.
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5 MINUTES READ | October 28, 2021