US Congress urges tech giant breakup plan
A House panel proposed far-reaching antitrust reforms to curb the power of U.S. technology giants including Amazon.com Inc. and Alphabet Inc.'s Google, culminating a 16month investigation with a damning 449-page report that Republicans largely shunned.
The recommendations from the House antitrust subcommittee represent the most dramatic proposal to overhaul competition law in decades, and could lead to the breakup of tech companies if approved by Congress. The findings target four of the biggest U.S. tech companies - Amazon, Google, Facebook Inc., and Apple Inc. - describing them as gatekeepers of the digital economy that can use their control over markets to pick winners and losers. The companies have abused their power to snuff out competitive threats, leading to less innovation, fewer choices for consumers and a hobbled democracy, the report said.
"Companies that once were scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons," the panel's Democratic leaders said. "These firms have too much power, and that power must be reined in and subject to appropriate oversight and enforcement. Our economy and democracy are at stake." Facebook fell more than 1% in late trading after the report's release. Amazon and Apple slipped less than 1% and Google was unchanged.
The staff report's most consequential recommendation is for Congress to consider legislation that would prevent tech companies from owning different lines of businesses, which could lead to a mandate to break them up. "Their ability both to use their dominance in one market as negotiating leverage in another, and to subsidize entry to capture unrelated markets, have the effect of spreading concentration from one market into others, threatening greater and greater portions of the digital economy," the report said.
To address this, the report recommends structural separation - prohibiting a dominant platform from operating in competition with the firms dependent on it - much like the Bank Holding Company Act of 1956 barred large banks from acquiring insurers, real estate firms, and other nonbanking companies. It also calls for line-of-business restrictions, or limiting the markets in which a dominant firm can engage, similar to bans on television networks' entering production and syndication markets.
Under congressional power, the breakups would target types of business, rather than particular companies, committee counsel told reporters on Tuesday. "These ill-conceived ideas demonstrate a misunderstanding of the size and shape of the retail industry," Amazon said in a blog post. "Amazon accounts for less than 1% of the $25 trillion global retail market and less than 4% of retail in the U.S. Unlike industries that are winner-take-all, retail has ample space for many winners."
Facebook defended its acquisitions of WhatsApp and Instagram, which were criticized in the report as moves to eliminate nascent competitors and are under investigation by federal antitrust authorities. "Instagram and WhatsApp have reached new heights of success because Facebook has invested billions in those businesses," said a Facebook spokesperson.