More evidence that there is a political war afoot on Big Tech: Former Vice President Joe Biden, a presidential candidate in 2020, entered the fray with a fresh jab at online retailer Amazon on Thursday.
I have nothing against Amazon, but no company pulling in billions of dollars of profits should pay a lower tax rate than firefighters and teachers. We need to reward work, not just wealth. https://t.co/R6xaN3vXGT— Joe Biden (@JoeBiden) June 13, 2019
The post linked to an April New York Times report that Amazon received a rebate on its corporate taxes in 2018.
The company quickly shot back.
We’ve paid $2.6B in corporate taxes since 2016. We pay every penny we owe. Congress designed tax laws to encourage companies to reinvest in the American economy. We have. $200B in investments since 2011 & 300K US jobs. Assume VP Biden’s complaint is w/ the tax code, not Amazon. https://t.co/uPUv1Tzlma— Amazon News (@amazonnews) June 13, 2019
In a vacuum, the exchange might seem a mere rehash on an old argument that corporate giants don’t pay their fair share of taxes. Now, however, it fits snugly within the context of calls to break up the so-called FAANG gang: Facebook, Amazon, Apple, Netflix, and Google (Netflix has thus far escaped scrutiny).
Warren got the tech antitrust ball rolling
The rhetoric may be escalating, but the seeds for the political strategy date back to a position staked by presidential candidate Elizabeth Warren in March. It has proven to be the template for efforts gaining strength by the day.
“Twenty-five years ago, Facebook, Google, and Amazon didn’t exist. Now they are among the most valuable and well-known companies in the world. It’s a great story—but also one that highlights why the government must break up monopolies and promote competitive markets,” Warren wrote in a March missive on the self-publishing Website Medium.
In the 1990s, Microsoft—the tech giant of its time—was trying to parlay its dominance in computer operating systems into dominance in the new area of Web browsing, she explained. The federal government sued Microsoft for violating anti-monopoly laws and eventually reached a settlement regarding the bundling of Internet Explorer with its operating system.
“The government’s antitrust case against Microsoft helped clear a path for Internet companies like Google and Facebook to emerge,” Warren wrote. “The story demonstrates why promoting competition is so important: It allows new, groundbreaking companies to grow and thrive—which pushes everyone in the marketplace to offer better products and services. Aren’t we all glad that now we have the option of using Google instead of being stuck with Bing?”
“We need to stop this generation of big tech companies from throwing around their political power to shape the rules in their favor and throwing around their economic power to snuff out or buy up every potential competitor,” she added, digging into her plan to split up Amazon, Facebook, and Google.
Among their sins, she wrote, these companies use mergers to limit competition. Facebook has purchased potential competitors Instagram and WhatsApp. Amazon has used its market power to force smaller competitors like Diapers.com to sell at a discounted rate. Google snapped up the mapping company Waze and the ad company DoubleClick.
“Rather than blocking these transactions for their negative long-term effects on competition and innovation, government regulators have waved them through,” Warren claimed. “Weak antitrust enforcement has led to a dramatic reduction in competition and innovation in the tech sector. Venture capitalists are now hesitant to fund new startups to compete with these big tech companies because it’s so easy for the big companies to either snap up growing competitors or drive them out of business. … With fewer competitors entering the market, the big tech companies do not have to compete as aggressively in key areas like protecting our privacy.”
Warren’s initiative calls upon Congress to pass legislation requiring that large tech platforms be designated as “Platform Utilities” and broken apart from any participant on that platform.
Companies with an annual global revenue of $25 billion or more and that offer to the public an online marketplace, an exchange, or a platform for connecting third parties would be designated as such.
Platform utilities would be required to meet a standard of “fair, reasonable, and nondiscriminatory dealing with users” and not be allowed to transfer or share data with third parties. For smaller companies (those with annual global revenue of between $90 million and $25 billion), their platform utilities would be required to meet the same standards but would not be required to structurally separate from any participant on the platform.
To enforce these new requirements, federal regulators, state attorneys general, or injured private parties would have the right to sue a platform utility. A company found to violate these requirements would also have to pay a fine of 5 percent of annual revenue.
Amazon Marketplace, Google’s ad exchange, and Google Search would be platform utilities under this law, Warren wrote. Regulators would also be urged to use existing tools to unwind “anti-competitive mergers,” including: Amazon (Whole Foods and Zappos); Facebook (WhatsApp and Instagram); and Google (Waze, Nest, and DoubleClick).
Press states its case against tech giants
While regulatory agencies have remained largely mum on their future plans, earlier this month, the House Judiciary Committee announced a bipartisan investigation into competition in digital markets. It will investigate “the adequacy of existing antitrust laws and current enforcement levels.” The investigation will include a series of hearings in the coming days. The first, this week, focused on the chilling effect Google and Facebook have on traditional media companies.
“The vast majority of Americans consume the news online,and online platforms have immense control over how Americans access these news sources,” said Kelly Armstrong (R-N.D.). “A single algorithm change by one of these private corporations can entirely distort what information the public shares and consumes and what revenue the publisher receives.”
In response, Congressman David Cicilline has co-sponsored the Journalism Competition and Preservation Act to give news publishers an “even playing field to collectively negotiate with dominant platforms to improve the quality, accuracy, attribution, and interoperability of news online.”
The bill, if passed, would establish a 48-month safe harbor for the free press to band together to negotiate with online platforms to improve the access and quality of news online.
Rep. Doug Collins (R-Ga.), Cicilline’s co-sponsor of the journalism bill, supported rethinking anti-trust efforts, but cautiously.
“If we do identify the needs for new legislation is important, we must keep two principles in mind,” he said at last week’s hearing. “First, like the existing antitrust laws, new legislation must be consistent in keeping the free market free.”
“The proposal to construct broad new regulatory regimes should be viewed with caution,” he added. “Experience shows that regulatory solutions often missed the mark by solving problems less efficiently than free markets and they can create new opportunities for anti-competitive companies. We have to make sure that we’re not looking for an immediate solution to this soreness in our foot and recognize that we got a problem with our leg.”
“Big is not necessarily bad,” Collins opined. “Companies that offer new innovations, better solutions, and more consumer benefit and lower process often become big to the benefit of society. Shockingly, proposals to break up big companies just because they are big risk throwing out the baby with the bathwater.”
Among his suggestions was rethinking the Communications Decency Act, legislation that, in its Section 230, has long protected tech companies that curate content from liability.
“If a technology platform is a neutral public platform, they enjoy certain liability protections that newspapers don’t enjoy,” he said. “Does it make the anti-competitive posture of technology platforms more pronounced, that they have access to this special liability protection? Absolutely, there’s a huge disparity. Frankly, when our contents delivered through these platforms, we get the liability and they get the money. Publishers can and do get sued. On the other hand, the platforms are allowed to deliver and monetize this content with complete lack of responsibility. I think that is a disparity that will have to be addressed. I think to Section 230 had a raison dêtre at the beginning. Regarding to the massive platforms, it’s time to rethink it.”
Is enforcement of current rules the answer?
Sally Hubbard, director of enforcement strategy for the antitrust advocacy group Open Markets Institute, urged Congress to take advantage of competition tools crafted over decades, among them the Public Utility Holding Company Act of 1935.
She asked the Department of Justice or Congress to recreate vertical merger guidelines to prohibit mergers that create anticompetitive market structures. These guidelines should establish “bright lines” for market share thresholds that make enforcement simple and market expectations clear. Also, policymakers should establish a new strengthened framework for vertical restraints and monopolization.
Also testifying was Matt Schruers, vice president for law and policy for the Computer & Communications Industry Association. He pushed back against the antitrust enforcement talk.
“Antitrust law is a specific tool for a specific goal: protecting consumer welfare through lower prices, higher quality, and greater innovation. Historically, attempts to exempt certain industries from complying with these protections have negatively affected consumers and the economy as a whole,” he said.