Fact Sheet: Why the “Ending Platform Monopolies Act” is Essential Reform

Date: 21 Jun 2021 | posted in: Retail | 0 Facebooktwitterredditmail

Lawmakers cannot achieve their aim of restoring competition to our online markets without passing the structural separation bill.

 

Structural separation is essential to stopping Amazon’s rampant anti-competitive abuse of small businesses:

  • Amazon’s business model creates a fundamental conflict of interest. For small businesses, Amazon is both a gatekeeper that they must rely on to reach online shoppers and an aggressive competitor selling its own goods and services to those same shoppers.
  • Unless lawmakers eliminate this conflict of interest through structural separation, Amazon will continue to have an overwhelming incentive and ample opportunity to use its gatekeeper power to preference its own interests while exploiting and undermining smaller competitors.
  • While the nondiscrimination bill will reduce some of the most obvious forms of self-preferencing, Amazon will still have the incentive and many opportunities to use its platform power to stifle competition and harm small businesses. Amazon’s website hosts hundreds of thousands of small businesses, handles millions of transactions a day, and is run by opaque algorithms that Amazon controls. Enforcers cannot effectively monitor Amazon’s behavior across this vast platform. Even with nondiscrimination legislation in place, Amazon could engage in many anti-competitive tactics with little or no risk of detection or prosecution.

 

Structural separation is essential to stopping Amazon from leveraging its monopoly power in e-commerce to take over one industry after another:

  • Without passage of the structural separation bill, Amazon will continue to leverage the market power and data gleaned from its dominant platforms to take over other industries. Amazon has already used its platform power to make major inroads into pivotal sectors such as consumer products, logistics, healthcare, and finance.
  • Passing the structural separation bill would force the companies created by a breakup of Amazon to actually compete on price and quality. Absent a breakup, Amazon can continue to use its gatekeeper power to leapfrog competition and dominant new industries without having to work for it.

 

Structural separation is a proven solution and a common occurrence:

  • Policymakers have used structural separation many times in the past. The National Bank Act of 1864, for example, recognized that banks provided critical inputs (loans) for other businesses and therefore should be barred from owning or operating commercial firms that might compete with business borrowers. The Hepburn Act of 1906 similarly blocked railroad companies from carrying “any article or commodity” that it had “manufactured, mined, or produced,” or in which it “may have any interest[,] direct or indirect.” Structural separation rules were also adopted in the 20th century for both the telecommunications and television industries.
  • Corporations regularly break themselves up. Today, one-third of mergers and acquisitions, also known as “reorganizations,” are the result of divestitures – a company wanting to sell off a piece of itself.

 

Fact vs. Fiction

What the Tech lobbyists are saying: This bill “creates competition-killing market division…the bill presumes in all cases that a ‘conflict of interest’ exists.”

Fact: When a corporation controls market access, as Google does with search and Amazon does with online shopping, it inevitably creates major anti-competitive conflicts of interest when those companies also compete with users of their platforms. These dominant online platforms have an overwhelming incentive and ability to self-deal.  The well-documented self-preferencing of the Big Tech monopolies has stifled competition and suffocated innovation. Rather than being able to compete on the quality, price, and innovation of their products, smaller businesses and start-ups have been sidelined in favor of the tech giants’ own products and services. That’s not only unfair; it weakens the U.S. economy and harms consumers by leading to less choice and innovation, while allowing the Big Tech corporations to further entrench their market dominance.

 

What the Tech lobbyists are saying: This bill “gives the government central-planning-style authority to restructure the economy.”

Fact: Amazon and Google are effectively private regulators of the online market — they decide who wins and loses, which businesses are allowed to reach customers, and the hefty tolls they must pay to do so. They are in fact the “central-planning-style authority” that threatens to destroy our free and open markets. That’s why Congress must stand up for an open online market in which businesses and producers can compete without having to follow the dictates of a giant tech monopoly.

 

What the Tech lobbyists are saying: This bill “gives unelected agency personnel vast new powers… with little oversight from the courts.”

Fact: This bill creates clear rules that prescribe breakups only in cases where an inherently anti-competitive integration warrants a split to restore competition. The bill applies to the major platforms of the Big Tech companies. The bill requires the agencies to demonstrate in the courts that they have met the thresholds and standards in the bill.

 

What the Tech lobbyists are saying: “Creates uncertainty… it will be nearly impossible for platforms to discern which ancillary businesses create ‘conflicts.’”

Fact: These bills add clarity and certainty to the law where none exists today. This bill establishes bright-line rules that will allow the big tech companies to operate their core businesses without unfairly abusing their monopoly power to favor their products and services at the expense of small businesses and entrepreneurs. The law also empowers the antitrust agencies to issue guidance, as they often do, to add even more clarity to the statute.

 

What the Tech lobbyists are saying: The bill “runs headlong against efforts to ensure the U.S. remains competitive against China.”

Fact: Americans have always known that the way to win is through competition. Big Tech is stifling the startup economy and shutting down America’s innovation engine in order to maintain their dominance and monopoly profits. This legislation restores competition to the tech sector and online markets, which will jumpstart innovation and ensure that the American economy can  thrive and excel against foreign rivals.


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Follow Stacy Mitchell:
Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.

Follow Ron Knox:
Ron Knox

Senior Researcher

Ron Knox is the senior researcher and writer for the Independent Business Initiative. He has studied and written about antitrust and monopoly power for more than a decade. Before joining ILSR, he worked in various senior editorial roles at Global Competition Review, and his antimonopoly writing has appeared in The Washington Post, Slate, The American Prospect and elsewhere. He is based in Kansas City.