As the first country in the world to pass anti-monopoly laws, US regulators have always been more vigilant about "corporate giants" with market dominance. Beginning with the commercialization of computers, the information technology industry's successive leaders have been the focus of antitrust action: in 1969-1982, the U.S. Department of Justice worked to spin off IBM through litigation; in 1998-2004, the U.S. Department of Justice conducted litigation to spin off Microsoft. Both lawsuits ended in out-of-court settlements, but it's probably no coincidence that both IBM and Microsoft's market dominance has plummeted over the course of the litigation.
Since 2017, the us public opinion circles have been calling for anti-monopoly actions against a new generation of technology giants. In 2010-21, the U.S. House Judiciary Committee conducted an antitrust investigation into the "Big Four" other than Microsoft, and in June 2021, six antitrust bills against tech giants were introduced. In July of the same year, President Biden signed Executive Order 14036, directing the executive branch to impose closer surveillance on tech giants' mergers and acquisitions, data collection, and more. During the same period, the U.S. federal court system also received prosecutions against multiple tech giants. Most of the above news has been reported by the domestic media in a timely, intensive (but not necessarily comprehensive) manner.
However, entering 2022, we are surprised to find that the anti-monopoly action of the United States against technology giants, whether at the legislative or judicial level, has shown a situation of "thunder and small rain", and the attention of US public opinion to anti-monopoly has also been greatly reduced. While U.S. regulators won't give up, it's going to be hard to strike tech giants effectively in the short term.
Legislative Action: Of the eight antitrust bills, only two have a high probability of passing
In June 2021, as a result of a two-year investigation into tech giants, the U.S. House Judiciary Committee released six draft antitrust legislation. Their common feature is that they are aimed at the "dominant platform", and the coverage needs to meet the following conditions:
- Meet more than 50 million MAU (monthly active users) in the United States, or more than 100,000 local commercial monthly active users;
- The holder or controller has annual net sales or market capitalization of more than $600 billion;
- It is a key market player in the business operated by the platform.
It can be seen that the "six bills" are only for consumer Internet companies, because enterprise service companies are difficult to meet the threshold of MAU; only for companies with the United States as the base camp or important market, because the number of users is based on the United States; only for companies that are very successful in business, because the requirements for sales and market value are extremely high; only for companies that are very successful in the consumer Internet business, and do not cover those companies that test the waters or play tickets across borders and are not considered "key participants". There is no doubt that at that time, the only "dominant platform operators" that met the above conditions at the same time were Apple, Amazon, Alphabet, and Meta; Microsoft did not necessarily meet them.
In addition, members of both houses of Congress have introduced two other bills in 2021, which apply differently from the previous six but are also geared toward tech giants: one to regulate app store operators, and one to limit mergers and acquisitions by large companies. Together, we can refer to them collectively as the "Eight Bills." There are a large number of other antitrust bills in this Congress, but they are not serious, receive less attention, and are unlikely to pass. The main thing we need to discuss is the "eight bills."
The text of the "Eight Bills" is very complex, and the versions considered by the House and Senate are often different, but the legislative purpose is relatively consistent, that is, to prevent technology giants from abusing their dominant market positions and protecting their competitors and customers. The specific measures are as follows:
- American Choice and Innovation Online Act: Dominant platforms may not preferentially treat proprietary products and services; may not restrict their users' ability to operate businesses that compete with them; may not discriminate against business users to harm competition; and may not impose "other discriminatory practices." The bill provides an in-depth description of the technical details of "other acts of discrimination."
- Ending Platform Monopolies Act: Operators of the dominant platforms must not operate business lines other than the platform business to avoid conflicts of interest. In short, platforms must be decoupled from non-platform businesses, with companies like Amazon having both third-party and proprietary businesses bearing the brunt.
- The ACCESS Act: The dominant platform must maintain transparency in the format of the data interface technology, allowing users to transfer and use their own data between different platforms, achieving "interoperability" between different platforms. Platforms can charge a reasonable fee for this "interoperability." In other words, platforms can no longer monopolize data and hinder users from moving to competitors.
- Platform Competition and Opportunity Act: Operators of the dominant platform must prove in advance that such conduct will not harm market competition before engaging in commercial mergers or investments. This undoubtedly reverses the burden of proof for mergers and acquisitions of antitrust, and even purely financial investments will be affected.
- Merger Filing Fee Modernization Act: Significantly increased review fees charged by law enforcement agencies for corporate M&A activity and required annual adjustments to the CPI. However, the adjusted review fee is still very low for the technology giants, and the symbolic significance of the bill is far greater than the actual significance.
- State Antitrust Enforcement Venue Act: Gives state attorneys general broad powers to decide in which federal district court to file an antitrust lawsuit, preventing tech giants from moving the lawsuit to their own advantage. However, given that important antitrust lawsuits in the United States are generally initiated by the federal government, the practical effect of the bill is also limited.
- The Prohibiting Anticompetitive Merges Act: Prohibits all mergers and acquisitions that result in excessive concentration of market share, or are valued at more than $5 billion. The U.S. Department of Justice or the Federal Trade Commission (FTC) has the power to reject the merger outright without waiting for a court decision. For past mergers and acquisitions, retrospective reviews can be conducted and splits ordered. As you can see, this bill is quite stringent, almost fundamentally prohibiting large-scale mergers and acquisitions. However, precisely because it is too harsh, its approval rating in Congress is very low.
- Open Apps Market Act: App stores with more than 50 million users in the United States must not impose exclusive terms on developers, must not prevent developers from contacting users directly, and should allow users to select and install third-party app stores on the platform. The bill is, of course, directed at Apple, though Alphabet will also be affected by some.
This series of legislation makes people look at the blood veins, but how likely is it to pass in reality? Unfortunately, I'm afraid only 2-3 have any hope of passing. The federal legislative process in the United States is first deliberated by the relevant committees of the two chambers (and their subordinate subcommittees), for example, the above eight bills are deliberated by the Committee of judiciary of both houses; if passed, they are submitted to the whole house for consideration; in the case of both houses voting, if there is a conflict between the texts of the bill, a two-chamber consultative group is established, and the result of the consultation is passed by the two chambers again; and finally submitted to the president and signed into law. The absence of any of these links could lead to the death of the bill.
Federal Legislative Process in the United States
Source: Friends Committee on National Legislation
What stage of the legislative process is the Eight Bills currently in? Only three of them have been adopted by the Judiciary Committees of both Houses, but neither has so far been submitted to the Whole House for consideration; three have been adopted by the Judiciary Committee of the House of Representatives and not before the Whole House; one has been adopted by the Senate Judiciary Committee and has not been submitted to the Whole House for consideration; and one has not yet been adopted by the Judiciary Committee of either Chamber. Judging from the number of co-signatories, whether they were signed by members of both parties, and the results of the committee's vote, we believe that only two of the bills have a high probability of passing, and they are precisely less important;
Given that the "eight pieces of legislation" are mainly driven by the Democratic Party, and the situation of the Democratic Party in the 2022 midterm election is not optimistic, once the Republican Party wins the election, I am afraid that it means that the "eight pieces of legislation" are indefinitely shelved. President Biden has also not yet made a public statement on the "eight pieces of legislation," and while he is generally considered to support antitrust, it does not appear to be his priority. According to the official timetable of the National Assembly, the current Congress will enter a recess in August 2022, and the adjournment will be followed by fierce midterm elections. This means that if the "eight pieces of legislation" are not included in the full-house agenda of both chambers by July, it is unlikely to be considered within this year.
"Eight legislative" status: blue is favorable, green is medium, orange is unfavorable
The reason why the antitrust legislation of the US Congress is loud and rainy is not only because of the strong opposition of the Republican Party, the deeper reason is that the focus of attention of the American people is no longer antitrust. Hot topics in this midterm election include inflation, a potential recession, the international situation, illegal immigration and gun control issues, rather than restricting or breaking up tech giants. Unless public opinion changes drastically, congressional lawmakers who rely on the ballot box will certainly not seriously push ahead with an agenda that is not valued by voters.
Judicial action: Only two proceedings have made some progress
The United States is a country that applies common law, and court decisions are universally binding (following the principle of precedent) in its jurisdiction, hence the term "judge-made law". In terms of anti-monopoly, the influence of judicial litigation is often not inferior to that of legislation, and the actual effect of legislation depends on the judiciary to achieve. Since 2019, U.S. federal regulators, states, and ordinary parties have launched a series of lawsuits against tech giants. At present, it seems that not much progress has been made:
- United States vs. for Alphabet Google is still in the evidentiary stage, the trial is far away, and it seems that the US Department of Justice is difficult to produce strong evidence; Epic Games v. Google has confirmed a trial in January 2023, but from Epic Games v. In Apple's case, Epic has little hope of winning.
- Two lawsuits against Amazon (Fremgen et al v. Amazon, D.C. v. Amazon), the former of which are still in the evidentiary stage, have been unconditionally dismissed. In fact, even as the previous lawsuit continues to evolve, the impact is limited because it's mostly about e-book pricing issues, and the business accounts for a low percentage of Amazon's revenue.
- FTC v. for Meta Facebook, which was previously partially dismissed, has since been updated by the FTC indictment. Next, the lawsuit will focus on whether Facebook's acquisitions of Instagram and WhatsApp years ago hurt market competition, which may have some guiding significance.
- Some progress has been made in two lawsuits against Apple (Camera et al v. Apple, Epic Games v. Apple), the former having settled out of court and Epic v. Apple. Apple's plaintiffs' claim was partially supported by the judge, leading to a certain loosening of the closure of the iOS App Store. Both parties have now decided to appeal.
The above case name is dazzling enough, and we can divide it into four types according to the plaintiff's main claims: package resolution; mergers and acquisitions; app stores; other vertical market categories; and diminishing importance.
The first is a package resolution class, which is intended to accuse tech giants of abusing their market dominance in a huge and important area and trying to impose comprehensive restrictions on them (including splitting, business termination, huge fines, etc.), and once accepted by the court, the impact will be very serious. For example, United States v. Google is a total attack on Alphabet's Internet information services and advertising business, D.C. v. Amazon is also launching a general attack on the latter's e-commerce platform business. However, judicial proceedings are all about asking for money and paying back money, and in most cases it is still possible to reach a moderate out-of-court settlement.
The second is mergers and acquisitions, which aim to correct past M&A practices by technology giants that have harmed market competition, seek business splits and stop similar behaviors in the future. FTC v. Facebook was originally a "package resolution" lawsuit, but after being partially rejected by a judge, it turned to Facebook's historical acquisitions. If the case yields a satisfactory outcome for the plaintiffs, U.S. federal law enforcement could launch more similar lawsuits.
The third is the app store category, which is mainly aimed at the closure of the app store, the excessive charging, and the prohibition of third-party channel behavior, which may affect the interests of the app developer. The first to bear the brunt of it, of course, is Apple's App Store, but Google Play has also been affected. Cameron et al v. Apple, Epic Games v. Apple and Epic Games v. Google falls into this category. Under pressure, Apple has made proactive concessions, allowing developers to reach users through email and other means, providing users with a channel to bypass App Store payments. At Epic Games v. In Apple's ruling, the judge dismissed the vast majority of the plaintiffs' claims, asking only that Apple allow developers to propose other payment options to users, which Apple has already taken the initiative to do.
The fourth is other vertical market types, mainly for some small markets that do not contribute much to the revenue of technology giants, such as Flemgen et al v. Amazon, accusing the latter of abusing pricing power in the e-book space. The impact of such litigation is limited and the attention of the outside world is low.
Of the seven major proceedings listed in the table above, two have been terminated; the remaining five are still at the level of federal district courts. The judicial system in the United States is divided into two parts: federal courts and state courts; antitrust law is a federal law, generally filed in the federal court, and the federal court is divided into three levels: the district court, the appeal court and the supreme court. The only person who could make it to the Court of Appeal is Epic Games v. Apple, both sides have appealed. As for other cases, it is likely that the entire process of trial, judgment, appeal, and court of appeal in the district court will be delayed until 2030.
The judicial system of the United States
Source: Judiciary Learning Center
Litigation against tech giants has not made much progress, partly due to difficulties in investigating and collecting evidence and unclear application of legal concepts; for example, in the partial rejection of FTC v. In Facebook's indictment, the judge pointed out that the FTC failed to prove that Facebook had a dominant position in the personal social networking market. On the other hand, due to the lack of attention of the U.S. antitrust enforcement agencies, such as United States v. Google is far less than the United States v. Microsoft is so fast that it has not released any heavyweight evidence so far. At the end of the day, U.S. law enforcement may not be professionally prepared to attack tech giants, and the lawsuits launched at this stage are probably mostly statements. From a judicial perspective, many federal judges may not believe that tech giants pose a serious threat to the U.S. market economy, and do not believe in how high the social significance of such litigation is.
The U.S. federal law enforcement's antitrust measures against technology giants can be described as "a crab is not as good as a crab": when confronting IBM more than fifty years ago, the U.S. Department of Justice conducted a tenacious lawsuit for eleven years; when confronting Microsoft more than two decades ago, the U.S. Department of Justice conducted a four-year lawsuit and forced the latter to accept a less harmful and humiliating settlement plan; and now when confronting the "big four technology giants", the U.S. Department of Justice and the FTC cannot even come up with a decent indictment. Maybe they didn't really want to do it in the first place?
"It is important that technology can benefit society"
On the fourth-quarter 2021 earnings call, Alphabet CEO Sundar Pichai was asked a sensitive question by analysts: "We've seen a whole bunch of bills in the U.S. Congress that look like they're all about you big tech companies." What do you think are desirable and what are not? Sundar Pichai's direct and frank answer provides a very important perspective, which we think should be excerpted below:
"It's important that technology can benefit society. So in many places we are in favor of regulatory initiatives. For example, we have called for privacy legislation, especially at the federal level to protect children's privacy. However, many of the current proposals put forward by Congress are not intended to solve the problems that should be solved. We sincerely fear that certain legislative initiatives will undermine the range of popular services we provide to our users and render our long-standing efforts in product security, privacy, and other aspects meaningless. ”
"In some cases, these legislations put U.S. companies at a disadvantage, thereby undermining U.S. competitiveness." Overall, when we add a lot of features to a product — you know, we add 3,000 features to our search business every year — how can we guarantee that every feature complies with those regulations? Do we need to make an unsolicited application pending approval? Regulation has the potential to lead to unplanned negative consequences. We are very concerned about the impact of these regulations on small businesses and local retailers, as well as the impact on their customers. ”
"I said we promised to do things in a constructive way. We always want to be actively involved in regulation so that we can do things that are good for society. So we've urged Congress to take more time to consider the unplanned negative consequences of these legislative scenarios. I think we should continue to focus on creating great products for our customers. ”
Earlier, Amazon opened a website called "Support for Small Sellers" to oppose legislation that Congress was planning. On the site, there are two wonderful statements:
Amazon believes that the "Eight Bills" will undermine the interests of small sellers
"Congress recently introduced a number of regulatory legislative proposals that target big tech companies, including Amazon. If these bills are implemented, Amazon's ability to open marketplaces for third-party sellers will be severely impaired, potentially resulting in hundreds of thousands of U.S. smBs losing their ability to acquire customers through Amazon's platform. This will obviously hurt the ability of small businesses to earn income and the ability of hundreds of millions of consumers to obtain a wide variety of low-priced goods from our partners. ”
"We are committed to continuing to contribute to the success of our third-party sellers. As long as we are united, we can provide consumers with a good experience that no one can provide alone. We want to tell you what this legislation means, and we want your voice to be heard. Let's work together to make Amazon a paradise for third-party sellers. ”
We would have liked to add something, but Alphabet and Amazon have fully stated everything we want to say at this moment.
This article is excerpted from the in-depth research report of the Internet Monster Gang "Myths and Realities about American Technology Giants", readers can click to read the original article (about 50,000 words in total length)