Remember that House Antitrust Subcommittee that I mentioned in the story about library ebooks the other day? That mention may have been fortuitous timing, because that subcommittee has just released a whopper of a 449-page exhaustive report (PDF) on its findings.
I haven’t had time to do more than read the executive summary and proposed solutions and do a little skimming here and there (mainly by searching on “e-book” to see where ebooks rate a mention). Still, if this report addresses the direction in which Congress intends to move, especially if the next election tosses out more business-friendly Republicans and brings in more socially minded Democrats to make the reforms easier to push through, then the tech industry could be in for a pretty big shake-up.
As I’ve mentioned before, the antitrust philosophy of antitrust enforcement held by the justice department since the 1970s focuses on “consumer welfare” rather than restricting businesses’ structures. (This view derives from an oft-cited 1978 book by former Solicitor General of the United States Robert Bork, The Antitrust Paradox.) Under this permissive philosophy, corporations were encouraged to grow as big as they wanted as long as they made their customers happy. This is responsible for the growth of many major corporations—including the biggest behemoths of the dot-com era: Amazon, Apple, Facebook, and Google.
And so, we’ve seen the lines between movie production and distribution start to blur, as streaming services start production studios and production studios start streaming services. We’ve also seen market power consolidate into just a few major players in the ebook, publishing, and distribution industries. We’ve even seen the Justice Department move to discard the landmark 1948 consent decree that prohibited movie studios from owning movie theater chains.
We’ve seen publishers, angry at Amazon’s power to discount their books, conspire illegally to impose ebook price controls—and we’ve seen the Justice Department investigate Amazon’s practices as part of the complaint against Apple and the publishers and determine that, by the measure of that “consumer welfare” yardstick, Amazon was okay with them. The Justice Department held that Amazon’s ebook business was “consistently profitable” overall—not a hallmark of a predatory pricer by their definition.
But we’ve also seen big tech companies start to face antitrust scrutiny abroad, and sooner or later those chickens were going to come home to roost. And roost, they have. After requesting many documents and hearing much testimony, the committee has determined that these big companies—particularly those four I mentioned earlier—are abusing their market position and dominance to forward their own business interests. The report examines these practices in detail, including using data they gather from competitors who have to use their platform to make products that can then outcompete those competitors, or buying up competitors via mergers that went almost entirely unchallenged by the FTC.
Those who have long complained that Amazon is effectively a monopoly with far too much power over how publishers and other “partners” can sell their goods will probably be happy to note that a good deal of attention is given to Amazon’s “Most Favored Nation” and “Fair Price Policy” practices, which restrict the prices under which Amazon merchants can offer things elsewhere. Unlike the Department of Justice, the report does contend that Amazon uses below-cost predatory pricing to lock consumers into buying from Amazon—as with the $119 per year Amazon Prime program, which offers consumers about $860 per year in value, or its hardware devices such as the Echo which are often sale-priced below the total cost of their parts.
Apple also comes in for scrutiny over its mandatory in-app purchase commission practices, such as those that led to game publisher Epic getting the boot from its app store. The report also included some cases where Apple was demanding its 30% from apps that allowed students to book virtual classes during the COVID-19 outbreak, which led to charges Apple was taking advantage of small businesses during a health crisis. Google, meanwhile, is called out for forcing bundling of its apps on Android manufacturers’ devices, thus extending its search engine monopoly through its mobile operating system.
While some Republicans disagree on the sweeping reforms proposed by the Democrat-majority committee, the report recommends revising current antitrust law to make the market fairer for everyone, and to forbid the kind of discrimination these companies habitually practice. That could include forcing divestitures of lines of business that compete directly with customers of a firm’s platform, restricting acquisitions by market leaders, and cracking down on vertical mergers. If Congress is persuaded to follow this reform path, it could return the antitrust standard to what it was before that change in the 1970s.
The report didn’t directly address many ebook-related matters, but among the proposed solutions was one that is near and dear to ebook users’ hearts—recommending that Congress pass new legislation mandating interoperability and data portability between services. While the report used the example of requiring social media networks to allow users to communicate with users of competitors’ networks, it could also require Amazon to let you move your entire Kindle library to your Nook if you wanted, or import competitors’ DRM-laden formats to your Kindle.
Of course, anyone with sufficient tech savvy can do that now, using the DRM cracking and format conversion tools that are easy to find on the Internet, but most people who use Kindles or Nooks aren’t that tech savvy. If interoperability and data portability were required by law, it would make it a lot easier for new competitors to enter the ebook and reader device market, and for average consumers to switch reader devices without losing all the ebooks they’d bought.
Needless to say, to a certain extent this is very much pie in the sky right now. The report offers potential solutions, but whether those solutions will find their way into laws acceptable to everyone is an open question. As noted, a number of the minority Republicans on the committee think the Democrats’ solutions go too far, and prefer less drastic measures. Even so, the fact that this report puts down in black and white all the various ways that Amazon, Apple, Facebook, and Google are wielding monopoly power is pretty remarkable all by itself, and will undoubtedly prompt a lot more anti-monopoly lobbying on Capitol Hill.
But will it have the power to overturn the 50-year “consumer welfare” antitrust enforcement regime that has somehow managed to survive in the Justice Department across multiple Republican and Democratic Presidential administrations? I look forward to finding out.
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