The new trustbusters: Proposed legislation would rein in Big Tech

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The new trustbusters: Proposed legislation would rein in Big Tech

Over the last two weeks, the most significant set of antitrust laws since the early 1900s were proposed in Congress, but these aren’t your granddaddy’s antitrust laws — instead of targeting expansive Industrial Age monopolies like railroads and oil companies, these five separate bills all take aim at the largest online platforms of the Information Age.

“Foundational to the American dream is the idea of freedom. Our founders believed that not only should Americans have freedom of thought, but that they should also have freedom of choice in the market square,” said Rep. Madison Cawthorn, co-sponsor of all five bills. “Oligarchical corporate monopolies run counter to the principles of freedom and choice. I am proud to support legislation that empowers consumers to have real choice in the realm of big tech and social media. Multimillion dollar lobbyists should never hold more power than the American citizen.”

Designed to thwart anti-competitive business activities that can hurt consumers, antitrust laws are thought by some to actually stifle competition and innovation and can result in the breakup of large companies.

If passed, the bills proposed in the House would remake “Big Tech,” but would also represent the biggest federal intrusion on private businesses in generations.

Each of the bills has a Democratic sponsor and a slew of Republican co-sponsors, reflective of bi-partisan disdain for what simple social networking applications like Facebook and Twitter have grown to become, but now the real test is if Democrats and Republicans can work together to do something about it.

The five House bills introduced would apply to what are called “covered platforms.”

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These covered platforms would be defined by the Ending Platform Monopolies Act as online companies that have a market cap of at least $600 billion, or more than 50 million monthly active users in the U.S., or more than 100,000 active monthly business users in the U.S., and a large enough online footprint to interfere with other companies’ access to its customers.

The market capitalization stipulation alone would designate Apple ($2 trillion), Amazon ($1.76 trillion), Google ($1.6 trillion) and Facebook ($934 billion) as covered platforms. Twitter, with a market capitalization of just $48 billion, would also be a covered platform thanks to its estimated 70 million monthly active U.S. users.

The EPMA would prohibit covered platforms from owning, controlling or having an interest in a line of business that uses the platform for the sale of goods or services.

One obvious target of this bill is Amazon, which offers its own line of products called Amazon Basics, everything from staplers to yoga mats.

Sponsored by Seattle Democrat Rep. Pramila Jayapal, D-WA, whose district includes Amazon’s corporate headquarters, the EPMA outlines significant financial penalties for violations.

As with all five bills, Colorado Republican Rep. Ken Buck, Texas Republican Rep. Lance Gooden join Cawthorn as co-sponsors.

The American Innovation and Choice Online Act , which is similar to the EPMA, prohibits anything that “advantages the covered platform operator’s own products, services, or lines of business over those of another business user” or “excludes or disadvantages the products, services, or lines of business of another business user relative to the covered platform operator’s own products, services, or lines of business,” per the text of the bill.

In essence, the AICOA would outlaw so-called “self-preferencing,” which is what happens when an address search on Google results in a Google Maps link at the top of the list of search results. The bill was introduced on June 11 by Rep. David Cicilline, (D-RI).

Violations could result in divestiture, or the breaking up of the covered platform.

The Platform Competition and Opportunity Act , sponsored by Rep. Hakeem Jeffries, D-NY, would prohibit covered platforms from acquiring other companies that pose a threat to the covered platform’s products or services, like Facebook did when it purchased Instagram for $1 billion in 2012.

The ACCESS Act (Augmenting Compatibility and Competition by Enabling Service Switching Act) would enhance consumer data portability between platforms and was introduced by Rep. Mary Gay Scanlon, D-PA, on June 11. A companion bill was introduced in the Senate in 2019, sponsored by Virginia Democrat Mark Warner.

The final bill, sponsored by Colorado Democratic Rep. Joe Neguse, is called the Merger Filing Fee Modernization Act and simply updates the filing fee schedule for companies attempting to merge. A companion bill passed the Senate earlier this month, after its introduction by Amy Klobuchar, D-MN, and Chuck Grassley, R-IA.

Anti-trust laws are a relatively late development in the American legal system and trace their origin back to the Sherman Antitrust Act of 1890. In theory, they exist to ensure fair competition in the marketplace by prohibiting predatory business practices that ultimately hurt consumers.

“The theory behind antitrust has always been that markets left to their own devices, can in certain areas, go against the public interest by harming consumers because there’s a strong incentive for the supply side, the firms, to grab profits,” said Dr. Ed Lopez, the BB&T Distinguished Professor of Capitalism and director of the Center for the Study of Free Enterprise at Western Carolina University. “An example would be price fixing arrangements, where two companies that compete against each other decide, ‘Let’s just both raise our prices and we’ll get rich off of consumers.’ Antitrust laws are intended to stop that, as well as other types of business practices that would have that effect.”

As large industrial concerns began to emerge after the Civil War, they began to coalesce into “trusts” — a collection of companies that interacted with each other in such ways as to hold undue influence over pricing.

“What companies do is, they get market share by creating value for consumers. It’s a well-functioning market when firms do well because they’re creating value for consumers and consumers want to pay them money. That’s when we know the market is working well,” said Lopez. “When firms get market share by, on the one hand, using the state to limit their competition, or on the other hand, conspiring with each other to monopolize markets and fix prices, either of those scenarios is not a well-functioning market.”

Ohio Sen. John Sherman — brother of Gen. William Tecumseh Sherman — had served in Congress from 1855 through the end of Reconstruction in 1877, and played a large role in acquiring financing for the Union effort. From there, Sherman was appointed Secretary of the U.S. Treasury but returned to the Senate in 1881. In 1889, he introduced his proposed antitrust act, stating that “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”

It passed the House unanimously, and with just one dissenting vote in the Senate became law with the signature of President Benjamin Harrison in 1890.

The first case decided under the new law went against the Jellico Mountain Coal Company, which in association with other coal dealers engaged in price fixing. Over the next 20 years, the U.S. Department of Justice used the Sherman antitrust act to break up the Great Northern Railroad, Standard Oil and American Tobacco.

Subsequent legislation in the form of the Clayton Antitrust Act of 1914 and the Robinson-Patman Act of 1936 expanded the Sherman Act. Perhaps the best-known use of antitrust legislation to living Americans is that in the case of the so-called “Baby Bells,” a collection of regional telephone companies that spun off upon the 1982 breakup of the old American Telephone and Telegraph (AT&T) Company.

More recently, Microsoft came under scrutiny in 1998, when it was accused of monopolizing the market on internet browsers at the expense of rival Netscape by including its own browser, Internet Explorer, for free. The initial ruling deemed this a violation of the Sherman Act and demanded the breakup of Microsoft, but the ruling was overturned on appeal.

“Historically, antitrust regulators bring cases because they see monopolies charging excessively high prices. What was interesting about the 1990s Microsoft case is that Microsoft was charging a price of zero for their browser,” Lopez said. “That’s what we have in the case of Facebook, as well as Google search now, but that’s only looking at the money price. I think that if you want to rationalize regulators becoming agitated towards these companies that look like they’re charging zero price, you might say that these companies actually are charging a real price — it’s in the form of people’s privacy.”

The debate over calling for further intervention in private businesses isn’t strictly a partisan one, according to Lopez.

“I think it’s true that conservatives and Libertarians tend to be more hands-off and liberals and populists tend to be more hands-on when it comes to antitrust bills,” he said. “An important line of division is also between big and small, which tends to coincide with incumbent versus challenger, the incumbent firm being the established one that’s been around for a while, and the challenger being the startup that wants a piece of the action. A lot of anti-trust comes down to attempting to give advantage to challengers by limiting incumbent firms.”

In fact, Cawthorn — a vehement advocate of small government — sees pending antitrust legislation as one of the ways the federal government can and should restrain the market’s free hand.

“No one has more access to the lives of private citizens than the big tech oligarchies that these bills seek to address,” he said. “Limited government principles do not run contrary to these bills, rather they support the notion that breaking up monopolies is one of the essential roles of government. Decades ago, Theodore Roosevelt saved our nation and our economy by breaking up oil and steel monopolies. Today, the greatest threat to our First Amendment resides in Silicone Valley. It is the duty of government, to address this threat, enable competition in the tech marketplace, and then withdraw from the free market.”

Although the bills will certainly change as they move in and out of committees and across chambers, the fact that all five have Democratic sponsors suggests that some of the key concepts mentioned in them will eventually become law.

“I certainly hope so,” said Cawthorn. “It says a lot that both Tucker Carlson and Biden’s newly appointed FTC Chair Lina Khan both agree on this issue. Our opponent in this fight is very clear: corporate greed, and the tasseled-loafer lobbyists that defend Silicone Valley’s chokehold on America’s digital privacy.”

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