House Antitrust Committee Holds Hearing on Market Power of Online Platforms

Printer-friendly versionPrinter-friendly version

On Tuesday, July 16, the U.S. House of Representatives Antitrust Subcommittee held a hearing to examine the impact of market power of online platforms on innovation and entrepreneurship. The subcommittee, led by Chairman David N. Cicilline (RI-01), heard from two panels of witnesses, including Stacy Mitchell, co-director of the Institute for Local Self-Reliance (ILSR), as well as representatives from Google, Amazon, Facebook, and Apple.

The hearing was broken up into two panels. Witnesses appearing at the first panel were Adam Cohen, director of economic policy, Google; Nate Sutton, associate general counsel, litigation and regulatory legal, Amazon; Matt Perault, head of global policy development, Facebook; and Kyle Andeer, vice president, corporate law and chief compliance officer, Apple.

Testifying during the second panel were ISLR’s Mitchell; Timothy Wu, Julius Silver Professor of Law, Science and Technology, Columbia Law School; Fiona Scott Morton, Theodore Nierenberg Professor of Economics, Yale University School of Management; and Maureen Ohlhausen, partner, Baker Botts.

“Thirty years ago, the first software for the World Wide Web was released,” said Cicilline in his opening statement. Since that time, the Internet has fostered the growth and “dynamism” of four companies: Google, Amazon, Facebook and Apple, he stated, and he acknowledged that these companies have contributed “technological breakthroughs and economic value to our country.”

That said, he noted, “in an effort to promote and continue this new economy, Congress and antitrust enforcers allowed these firms to regulate themselves with little oversight.” The result has been an Internet that is increasingly concentrated, less open, and hostile to innovation, Cicilline said.

In the first panel, Amazon’s Sutton defended the tech giant’s business model and claimed that it was good for its third-party sellers. “We have invested significantly in infrastructure and technical services that help support the growth and success of our selling partners,” Sutton noted in his testimony. “We continually launch new tools that make it easier for our seller partners to sell, and spend significant resources to root out bad actors and prevent fraud and abuse that harm both sellers and customers…. By offering small and medium-sized businesses another low-cost way to reach consumers … Amazon helps make retail even more vibrantly competitive and innovative.”

In her testimony, Mitchell discussed the growth of Amazon and how its market dominance has harmed innovation and local economies, among other factors. She said that changes in policy, particularly competition policy, have led to a sharp decline in independent businesses. This, in turn, has fueled growing concentration, and opened the way for a handful of technology giants to assume control over the basic infrastructure of commerce.

“Amazon doesn’t just dominate the online market — it controls access to it,” noted Mitchell. “Amazon has become essential infrastructure for the buying and selling of goods. This position gives it an unprecedented degree of structural power in the economy. Moreover, Amazon’s online shopping platform is only one piece of its digital infrastructure. It also controls other platforms that function as key intermediaries for competing companies.”

In her testimony, Mitchell noted that “when businesses join Amazon’s Marketplace, they hand over to Amazon their customer relationships, their product expertise, and a trove of data about how shoppers interact with their product offerings.” She continued by noting that Amazon exploits its platform power and view into the activities of rival firms to either advantage its own direct retail sales and products, or to fortify its market dominance in other ways.

“Studies have found that when third-party sellers post new products, Amazon starts selling many of their most popular items itself,” Mitchell said.