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In this bonus episode of Building Local Power, ILSR Co-director Stacy Mitchell and Senior Researcher Ron Knox dig into the new report from the House Antitrust Subcommittee on monopoly power in digital markets. The report is the result of a more than a year-long investigation into the anticompetitive behavior of the four biggest tech companies: Amazon, Google, Facebook, and Apple.
Jess, Ron, and Stacy discuss:
- Highlights from the report’s findings.
- The most important recommendations from the report, including that these companies should be broken up along product lines.
- How this report and its recommendations fits into the history of antitrust action in the United States.
- What we can expect to happen next and how the impact of this report might go beyond these four companies.
“…we should recognize that the power that these companies have, and their ability to engage in those kinds of behaviors and to use those sort of predatory tactics, is a function of shifts in policy. I mean, had Amazon come along in an earlier era, things that it did to gain this incredible position would have invited criminal prosecution.”
Investigation of Competition in Digital Markets: Majority Staff Report and Recommendations
Don’t Let Amazon Get Any Bigger by Stacy Mitchell, New York Times
Why Antitrust History Is So Important by Ron Knox, Washington Post
| Jess Del Fiacco: | Hello, and welcome to Building Local Power. A podcast dedicated to thought-provoking conversations about how we can challenge corporate monopolies and expand the power of people to shape their own future. I’m Jess Del Fiacco, the host of Building Local Power and communications manager here at the Institute for Local Self-Reliance. For 45 years, ILSR has worked to build thriving, equitable communities where power, wealth and accountability remain in local hands. Today, I’m joined by ILSR co-director Stacy Mitchell and senior researcher, Ron Knox. And we’re going to talk about the house antitrust subcommittee’s new report, which focuses on competition in digital markets. What you’ve gotten a few updates from us along the way. It’s been a more than a year long investigation, I believe. They’ve produced 400 plus, 500 plus pages. So Stacy and Ron, what is in this report? |
| Ron Knox: | Thanks Jess. So yeah, 450 pages, like right on the dot I think was the final version of that. So well, that’s the report and you’re right. More than a year long investigation, 16 months, 15 months, 16 months, something like that. And the report is essentially the comprehensive findings of this more than a year long investigation into the monopoly power of the four big tech companies, as we think about them, Apple, Facebook, Google, and Amazon. So I think the report was really successful in showing the ways in which these four tech companies came to dominate and came to monopolize their respective markets. The report correctly connected the threads between these companies to show that the problem, that is the reason for their monopolization, are common among the companies. And in that way, they’re more systemic in their problems of policy that can ultimately be corrected with some changes to the law. |
| Ron Knox: | So the prime example identified in the report and identified in the investigation were mergers, right? The investigation found that the poor companies had collectively closed hundreds of mergers over the last decade. And that at least some of those mergers happened because the tech monopolies wanted to extinguish competition from smaller companies that they thought could challenge its dominance in some way and at some point down the line. So the evidence showed that this was for example, Facebook’s broad strategy when acquiring Instagram, when acquiring WhatsApp and other rivals. Now Facebook’s monopoly position is so strong that it mainly competes with its own apps. Rather than any other social media company out there. For Amazon these kinds of acquisitions included rivals like Zappos, the shoe seller, that was its primary competition until Amazon forced it into a merger by undercutting its prices. |
| Ron Knox: | And also diapers.com is a good example of that. The strategy and the tactics for Amazon and for all of these companies were much the same throughout this report as the report identified. So that’s kind of one piece of it. Then you have the conduct. And I’ll just note that a lot of the monopoly conduct that the investigation identified, had to do with data and the way these companies acquired and exploited data. So this is data as market power or as a tool to enforce market power. So Amazon’s reach into many various industries and its role as essential infrastructure and as a gatekeeper to the marketplace, allow it to have access to data that no other company can access. And it’s online marketplace, it knows what’s selling, it knows who it’s selling to. It knows when and why. And it can leverage that data to preference its own products and services. |
| Ron Knox: | And it can, and indeed has spied on and used data from the small businesses that rely on Amazon to reach their customers. So that’s just kind of part and parcel to a lot of the kinds of abuses that this report found up Google, Facebook, Apple, all use their positions as really critical infrastructure in their various markets to collect troves of data. And that data enhances their power. So those are just two monopoly tactics that the report uncovered mergers, infrastructure leveraging. I’ll point out that these are very high tech companies. Obviously we know that, but these are not high tech tactics. These are not like high-tech actions. These are the same old school monopoly tactics that really powerful companies have used over the years to try to gain unfair advantages in the economy. |
| Jess Del Fiacco: | So they had all these findings and they found these various abuses of power. So what does the report say we should do about it? Do they want us to create new laws, do they focus on existing legislation? Was there anything in particular you were excited to see included in their recommendations? |
| Stacy Mitchell: | Yeah. The report’s recommendations are really terrific and very comprehensive. They fall into three main buckets. So the first set of recommendations has to do with, “Okay, now that we have this, this incredibly concentrated markets power in the hands of just a few companies, what do we do to actually restructure those industries and markets so that they’re open and fair and competitive once again?” So the report in this case is really calling for congressional actions. It’s essentially saying things have gotten so far off track with monopoly power, that it’s time for Congress to step in and put in place some new legislation to attack this head-on. So that’s one set of recommendations. |
| Stacy Mitchell: | The second has to do with strengthening our existing antitrust laws. Not because the laws themselves aren’t strong, but the courts have issued a number of rulings and the enforcement agencies have taken a number of positions that have really weakened how we enforce these laws. |
| Stacy Mitchell: | And so that set of recommendations is basically calling for Congress to clarify predatory pricing is illegal. To actually put in place and bring the law back to just sort of its original strength. And then the last set of recommendations has to do with strengthening the enforcement agencies, making them more transparent and accountable to the public. Making sure they have the resources they need to go after monopoly power and that kind of thing. |
| Jess Del Fiacco: | So what exactly is Congress’s role? What do they need to do to make these markets more competitive? |
| Stacy Mitchell: | Actually the very first recommendation in the report and the one that we think is most important and is really essential for the other recommendations to actually work, is that Congress needs to split these companies up. And particularly to split them up along business lines. So in the case of Amazon, what we see is that Amazon uses its power in one area essentially exploits that power in order to move into adjacent industries with like kind of a built-in advantage. So one example of this that we’ve documented here at ILSR in our work is Amazon has this controlling power over third party sellers on its marketplace. And it basically forces them to use its shipping and package delivery service. So Amazon has become this dominant player and logistics. It’s now delivering as many packages almost as UPS and FedEx. And it’s done that basically by strong arming the companies that depend on its website. |
| Stacy Mitchell: | And it does that over and over again. It leverages power in one area to gain the upper hand in another. And so the way we need to address that is actually just to pass legislation that would require Amazon to spin itself off into multiple companies. So that’s the most important recommendation. |
| Stacy Mitchell: | And then another recommendation that I would highlight is one that has to do with requiring that dominant digital platforms operate with a duty of fair dealing and fair terms. So essentially what that’s saying is that Amazon as a marketplace, that all these other companies rely on, can’t exploit that position to favor some companies over others, to charge exorbitant fees. All the ways we see now that Amazon takes advantage of sellers and abuses them. And indeed in some cases takes advantage of customers too. Applying standards of non-discrimination. Basically saying you’re a kind of common carrier, as Ron said, your infrastructure and therefore you have an obligation to treat all comers fairly. So that’s another really key recommendation on the report. |
| Jess Del Fiacco: | I think that breaking up Amazon seems like a big new idea, but Ron recently you wrote in the Washington post about how this fits within historical precedent in America for dealing with monopolies. Would you say that the recommendations in this report breaking up these companies, does that fall in line with things we’ve done in the past? Or does this go further in any way? |
| Ron Knox: | I mean I think it falls right in line with a lot of, you know, the actions that we as a country have taken over the last century or so to reign in corporate power. As anyone here at ILSR internally will tell you I love the history of this stuff. And I think it’s really, really fascinating. And I think it’s really interesting to see and follow all of the parallels between these kind of past issues of monopoly power and then the congressional reaction to that, the very democratic reaction to that power. And also I’ll mention just real quickly that yeah, I mean, breakups, a lot of pro monopoly folks, a lot of folks who take the sides of these kind of corporate titans say that this is a radical action to break up these companies. |
| Ron Knox: | It’s not and in fact, it’s like part and parcel to the antitrust laws themselves. And it’s a crucial kind of tool in the toolbox both of Congress and of the antitrust enforcers that’s been used repeatedly over the years to good effect. I mean so just a couple of examples of the way that Congress has responded to these kind of peaks and spikes in monopoly power over the years. I don’t know how common knowledge this is, but the first thing [inaudible 00:10:29] more than a century ago, 1890, and it’s commonly called the Sherman act. And it’s a good law. And it’s a strong law. And that law after it was passed was used really successfully to break up some of the headline monopolies of those days. |
| Ron Knox: | Which was like Standard Oil, American Tobacco and so on. A few other companies. But the law was quite narrow. So it didn’t capture all of the various kinds of conduct that can lead to monopoly power, including mergers and so on. So there is still this kind of monopoly problem coursing through the economy that was not addressed by the first law. |
| Ron Knox: | And a part of that was the power of Wall Street financers. So the public call this the money trust and what they meant by the money trust was these like four or five really powerful financers led by JP Morgan and some others who used both their wealth and their political kind of power to build and prop up these monopolies throughout the economy. So JP Morgan himself and his money helped create US Steel and then helped to create some of the companies that we’re really familiar with today, AT&T, General Electric and so on. |
| Ron Knox: | And there was really no way to address, using that first law, there was no way to address the way that he used his power and the way that he built these monopolies. So what happened? So Congress convened a group of lawmakers and that committee’s findings and report led to major legal reforms. It led to the passage of a law called the Clayton act, which really has become the bedrock of antitrust enforcement in America. That stopped mergers, stopped what are known as interlocking directorates, which a lot of these kinds of Wall Street financers use to control these companies and so on. And it also led to the creation of the Federal Trade Commission, which is now our primary anti-monopoly enforcement agency in America. So the democratic intervention there worked and by 1914, JP Morgan had essentially gotten his hand out of a lot of these companies, including AT&T and the railroads and so on. |
| Ron Knox: | So that’s just one example, but we can see this pattern throughout history. In the new deal, a lot of the congressional investigations led by the temporary national economic committee, which is more commonly called the monopoly committee. It revealed problematic corporate power throughout the economy. And, and a lot of those findings led to much more stringent and dedicated antitrust enforcement and led to some very important legal changes as well. So essentially we’re just… This isn’t new, this isn’t radical, these are things that have happened kind of over and over over the course of the last century or so. And this is Congress using it’s democratic kind of power to terrain in this very undemocratic kind of corporate power that now really dominates the economy. |
| Jess Del Fiacco: | Yeah. So you’ve gotten close to touching on this, but I just want to dig in a little bit deeper. Another argument from the pro monopolist side is this is America where if a man’s on track to become the world’s first trillionaire, we should just give him a pat on the back. No matter how he did that. But really what you’re saying is that monopoly power is fundamentally a threat to democracy. Could you just expand on that a little bit more? |
| Ron Knox: | Sure, absolutely. So, the things we see with monopoly power have been… The problems of monopoly power, I should say, have been a concern in America since the very dawn of the country. I mean, Thomas Jefferson wanted to include an amendment to the constitution that would essentially ban monopolies or restrict monopolies. The Boston Tea Party was an anti-monopoly uprising basically. So these things are kind of ingrained in the fabric of America and for good reason. Because in a body like Congress, you have real democracy. The members of that body are elected by people and they’re elected to represent the will of the people. You don’t have that same kind of thing with corporate power. There’s no democratic checks and balances internally to a monopoly, it just wields power. |
| Ron Knox: | And it doesn’t matter what anyone thinks about it, it wheels power for the sake of profit and its shareholders and so on. And it’s not just economic power that those monopoly companies wield. It’s real political power as well. You can see that in the way that monopoly has been policy to favor bigness and to favor themselves the amount of money and manpower at [inaudible 00:15:17], for example, to make sure that the laws favor them. So it has this very undemocratic kind of nature to it. And Congress has always been the counterbalance to that undemocratic power. |
| Jess Del Fiacco: | Before I go onto my next question, let’s take a short break. |
| Jess Del Fiacco: | Thank you for tuning into this episode of building local power. If you’ve appreciated our coverage of the investigation into the power of big tech, I hope you’ll consider heading over to ilsr.org/donate to help support our work. Beyond making this podcast possible, your donation support all of our work at ILSR, help us produce the research and resources necessary to push back against concentrated corporate power and build strong local communities. Go to ilsr.org/donate. Any amount is sincerely appreciated. And now back to my conversation with ILSR Stacy Mitchell and Ron Knox. |
| Jess Del Fiacco: | Stacy, do you know what should we expect to happen next? What steps might Congress take now that they have this report? |
| Stacy Mitchell: | Well, the Congressman who chairs this committee and really led this whole investigation, David Cicilline has said that we can expect legislation to be introduced maybe as soon as the end of this year, like before the year is out. And we’ll see what happens with the election. I do think one thing that’s interesting to note on that front is that the report is a report of the majority on the committee, which are Democrats. But there was a set of several Republicans on the committee who issued simultaneously their own report, which agrees with many of the conclusions of the majority. And in fact says that Amazon is its business model is quote inherently anti-competitive, which is a pretty strong conclusion to draw. So there is some level of bipartisan support for this, but I think what happens with the election, we’ll see where we land and how that sets the stage potentially for legislation next year. |
| Stacy Mitchell: | And I think it’s really interesting. I mean, part of what this committee has done, that’s been so heartening is that they have not only done this incredible investigation of the tech companies and really in great detail, kind of comprehensively laid out the problem. They’ve also done it in a way that’s been very accessible to people as we’ve talked about before. I mean, there’s a section on the report that has the subtitle Bullying, so they’re not using arcane antitrust. I mean it’s a very juicy report if you are an antitrust scholar, there’s a lot for you to really like about this report. But anybody can pick it up and read it, which I think is pretty remarkable. |
| Stacy Mitchell: | Well, what’s also been really critical about this whole process is that by doing this, the committee has illustrated the power of investigation and the importance of congressional investigation. And given us kind of a glimpse of what would it be like if Congress actually worked on problems. Like delved into the hard stuff and came to a shared set of facts and then tried to figure out what are the right solutions. And so within this, you can start to see not only how do we solve the problem of monopoly power and that kind of dominance of these tech companies, but also how do we solve the problem and what’s gone wrong with Congress. |
| Stacy Mitchell: | So I think we’re likely to see legislation. I think there’s growing consensus that something very substantial, including breakups, needs to be done. And I think what is really important is that this committee has said, “This is Congress’s job.” And it’s been a long time. I mean, as Ron kind of talked about, it’s been a long time since Congress has stepped up to the plate on antitrust, but historically Congress has always had a role. Congress has stepped in every so often looked at this problem, added new legislation, clarify the meaning of laws, gotten the courts back on track. And we’re at a moment where the courts have gone wildly off track. The enforcement agencies wildly off track and it’s time for Congress to step back up. And so it’s pretty exciting. And I think there’s some real momentum heading into the next session. |
| Ron Knox: | I think that folks can make this argument that there’s nothing wrong with being big in America. There’s nothing wrong with having a big powerful company and you have the right to be a monopoly in America. And I think it’s good to have the argument about whether or not that is true and whether or not that’s the intent of the law and the intent of Congress when they passed the law. But I think what this report really makes clear is that that’s not the issue here. Because it’s not just that these companies are big, it’s that these companies have used their size and their market power to crush competition, to exploit rivals. To really control the pathway to market for a lot of other companies in the economy. And that’s different. |
| Ron Knox: | We’re not just talking about bigness, we’re talking about what the report identifies as bad actors and bad actions and all of those things can and should be reached by our anti-monopoly laws. So just going back to your comment for a second, that I should have mentioned in the first place, but I think that’s an important distinction to make. |
| Stacy Mitchell: | Yeah, that’s totally right. And we should recognize that the power that these companies have and their ability to engage in those kinds of behaviors and to use those sort of predatory tactics, is a function of shifts in policy. I mean had Amazon come along in an earlier era, things that it did to gain this incredible position would have invited criminal prosecution. Like we used to prosecute these things. And we used to have more dynamic economy and economy that had more business startups where there was a fair distribution of income. Where working people had an easier time forming unions. I mean we used to have an economy that worked better in a lot of ways. Save of course for the fact that people of color were often excluded from those protections. |
| Stacy Mitchell: | But in a lot of ways, in the mid 20th century, we had more… We had a much better distribution of income, distribution of power. And we have really gone to these extreme levels of inequality. I was on a panel this morning and someone said that Jeff Bezos has now become worth $200 billion. And what that means is that he could write a check for a $100000 dollars to every single one of Amazon’s 800 and some thousand employees. He could write a check for a hundred thousand dollars, every one of them. And he would still have as much money as he had in February of this year. I mean if that’s not an illustration of monopoly power, I don’t know what it is. And it’s like we have to tackle that if we want to restore democracy and some sense of liberty and equality and what this country is supposed to be about. |
| Jess Del Fiacco: | Say we see new legislation, if not before the end of the year coming soon out of Congress, will that have affects throughout the economy or throughout society beyond just these four companies? Will that shape, the future of our economy in some way? |
| Stacy Mitchell: | That’s a great question, because I think you’re absolutely right that the kind of legislation that’s being contemplated will restore a lot of the anti-monopoly checks and balances to our policy. And that will affect lots of different industries. I think because of the nature of the tech companies power, because of the kinds of surveillance that Ron talked about, because their role is essential infrastructure because of the very evident threat to democracy that that poses, they have gotten lawmakers’ attention. In a different kind of way that the monopolistic companies that came before them haven’t. |
| Stacy Mitchell: | And so what’s great about that is that it then is now causing them to really look deeper at this whole problem and to propose legislation that would address monopoly power broadly. We’ll see what bills actually come out of the recommendations, but in terms of the recommendations in the report, there are things like easier standards around proving predatory pricing. Which is something that lots of big companies and predatory companies have engaged in across the economy. We’ve seen it with Walmart, for example. |
| Stacy Mitchell: | So there are provisions around merger guidelines and standards. There are provisions around how the antitrust agencies operate and being more accountable to the public. So all of these things will affect not just the tech companies, if they become law, but they’ll effect powerful corporations across the economy and really enable farmers and small business people and working people to actually get a fair share. |
| Ron Knox: | I think all of that is exactly right. And the thing I’ll highlight when I think about what the effect will be, if were all of the recommendations in this report to happen, obviously the structural separation is important and there are lots of important recommendations. But a part of the recommendations would restrict mergers of a certain size. And basically, a new law would say a merger that creates a company in the industry over excise, it just can’t happen. There’s a structural presumption against it. Imagine the effect that that kind of law would have on the economy, both from a small business perspective and from a you and me, regular person on the street perspective. For small businesses you would have all of these other options of places to sell your goods into. |
| Ron Knox: | So imagine you’re a small farmer, you’re a family farmer. And instead of having two or three massive meat packing plants to buy your goods, you have five, six, seven meat packing plants in your region to sell your goods into. You’re going to get better prices for your goods, for your livestock, for your products. And that’s going to have rippling effects throughout your community because you’re doing better. You’ll have the ability to hire, to grow, to do all these things that we should all, that a small business in America should be able to do. But now cannot do because of this kind of heightened monopoly power that really creates these bottlenecks. |
| Ron Knox: | And then from a consumer perspective, I mean imagine if you’re… I always go back to airlines and I know that airlines they’re for business travelers or whatever, but honestly, imagine instead of having three national airlines or four national airlines that we have now, you had seven, you had eight, your life is going to be better if you have to fly. Your tickets are going to be less expensive. You’re not going to have baggage fees. You’re going to have more room. You’re going to have all these other things, all these other ancillary benefits. And so I think the merger law recommendations in the report themselves can have these massive rippling effects throughout the economy. That will be better for all of the various actors that have to interact with monopoly power. |
| Jess Del Fiacco: | Wow! An economy that works for everybody. What a concept. Sounds pretty good. Okay. Well, thank you guys for joining me today. Just so everyone listening knows, keep an eye out on our website on the independent business section of our website in particular. We’ll have resources, explainers, a petition, so you can help make sure that your representatives are paying attention to this report and taking its recommendations to heart. That’ll be all up on ilsr.org. Yeah, thank you Ron and Stacy for joining me. |
| Ron Knox: | Thank you, Jess. |
| Stacy Mitchell: | Thanks, Jess. |
| Jess Del Fiacco: | Thank you for tuning into this episode of the Building Local Power Podcast from the Institute for Local Self-Reliance. You can find links to what we discussed today by going to ilsr.org and clicking on the show page for this episode. That’s ilsr.org. While you’re there, you can sign up for one of our many newsletters and connect with us on social media. We hope you’ll also take the opportunity to help us out with a gift that helps produce this very podcast and supports the research and resources we make available for free on our website. |
| Jess Del Fiacco: | Finally, we ask that you let us know how we’re doing with a rating or review on Apple podcasts or wherever you find your podcasts. The show is produced by me, Jess Del Fiacco, and edited by Drew Birschbach. Our theme music is Funk Interlude by Dysfunction Al. We’re the Institute for Local Self-Reliance. I’m Jess Del Fiacco and I hope you’ll join us again in two weeks for the next episode of Building Local Power. |
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