House Antitrust Subcommittee Releases Long-Awaited Big Tech Report
- By David Grogan
After 16 months of investigations, on Tuesday, October 6, the U.S. House of Representatives Judiciary Subcommittee on Antitrust, Commercial and Administrative Law released its highly anticipated report detailing the anticompetitive behavior of “Big Tech,” including Apple, Amazon, Facebook, and Google. The report also laid out suggested solutions to limit the scope and power of Big Tech.
In detailing Amazon’s anticompetitive practices in the bookselling and publishing markets, the 449-page report referenced a letter in which the American Booksellers Association, the Association of American Publishers, and the Authors Guild outlined Amazon’s abuse of its dominance. The report also referenced information garnered from a meeting the committee had with representatives from the three organizations.
“ABA would like to thank Judiciary Committee Chair Nadler, Antitrust Subcommittee Chair Cicilline, and the members of the antitrust subcommittee for their thorough and timely report,” said ABA CEO Allison K Hill. “The report clearly shows that Amazon’s business practices have one goal and that is to monopolize every market it enters. We appreciate the subcommittee’s recommendations to level the playing field. As ABA has been stressing for more than a decade now, Amazon’s dominance has a ripple effect in our economy and our lives. Amazon hurts not only its independent business competitors, but our communities. I appreciate the subcommittee’s argument that courts have significantly heightened the standard of what constitutes monopolization and that antitrust law needs to be rehabilitated — we completely agree. And we urge congress to act on this sooner rather than later.”
As reported by Axios and in the subcommittee’s press release, the subcommittee proposed changes to antitrust law to rein in Big Tech’s power, including:
- Limiting companies’ ability to compete unfairly against third parties on their own platforms by either requiring online marketplaces to be independently run businesses or establishing rules for how such marketplaces can be organized;
- Blocking online platforms from giving themselves preferential treatment or playing favorites with other content providers;
- Requiring social networks to be interoperable so that people can communicate across platforms and carry their data over from one platform to another;
- Directing antitrust enforcers to assume that an acquisition by a dominant tech firm is anticompetitive unless proven otherwise;
- Allowing news publishers to team up to negotiate against tech platforms looking to carry their content;
- Strengthening the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice; and
- Improvements to the Clayton Act, the Sherman Act, and the Federal Trade Commission Act to bring these laws into line with the challenges of the digital economy.
Among the subcommittee’s additional recommendations were ways to make it easier to go after dominant platforms for predatory pricing. In ABA’s white paper, sent to the FTC and the antitrust subcommittee in July 2019, as well as in ABA’s subsequent letters to the antitrust subcommittee, ABA reported on how Amazon would sell bestsellers and other titles at below cost in an effort to encourage consumers to go to Amazon to buy larger-ticket items.
In the report, the subcommittee noted that predatory pricing is notoriously hard to prove because courts introduced a “recoupment” requirement, necessitating that plaintiffs prove that the losses incurred through below-cost pricing subsequently were or could be recouped. The report explained, “Although dominant digital markets can recoup these losses through various means over the long term, recoupment is difficult for plaintiffs to prove in the short term.” Not surprisingly, since the recoupment requirement was introduced, successful predatory pricing cases have dropped dramatically, the subcommittee said.
The report also noted, “The subcommittee’s investigation identified several instances in which a dominant platform was pricing goods or services below-cost in order to drive out rivals and capture the market. For example, documents produced during the investigation revealed that Amazon had been willing to lose $200 million in a single quarter in order to pressure Diapers.com, a firm it had recognized as its most significant rival in the category. Amazon cut prices and introduced steep promotions, prompting a pricing war that eventually weakened Diapers.com. Amazon then purchased the company, eliminating its competitor and subsequently cutting back the discounts and promotions it had introduced.”
In the report, the subcommittee recommended clarifying that proof of recoupment is not necessary to prove predatory pricing or predatory buying.
One illuminating aspect of the report was how it detailed Amazon’s bullying behavior in the publishing industry. The subcommittee reported: “According to one publisher, ‘Amazon has used retaliation...to coerce publishers to accept contractual terms that impose substantial penalties for promoting competition’ with Amazon’s rivals. The publisher added that the platform’s retaliatory conduct shows ‘Amazon’s ability and willingness to leverage its market power to prevent publishers from working effectively with rival e-book retailers and, thereby, maintain and enhance its dominance in e-book distribution.’”
Additionally, the report detailed that Amazon’s retaliatory tactics against publishers include removing the “buy” button, which blocks a customer’s ability to purchase a publisher’s current titles, and removing the “pre-order” button, which eliminates the ability for a consumer to pre-order a publishers’ forthcoming titles. “Another form of retaliation that Amazon reportedly engaged in was showing publishers’ titles as out of stock or with delayed shipping times. According to credible reports, Amazon used these tactics in its public battle with Hachette Book Group in 2014 over e-book pricing, and has used them or threatened to use them in more recent negotiations,” the report reads.
Read the subcommittee’s press release and full report.