The political arguments against digital monopolies in the House Judiciary Report

Alina Utrata

         The House Judiciary Committee’s report on digital monopolies (all 449 pages) was a meticulously-researched dossier of why the Big Four tech companies—Google, Apple, Amazon and Facebook—should be considered monopolies. However, leaving the nitty-gritty details aside, it’s worth examining how the report frames the political arguments for why monopolies are bad. 

         It’s important to distinguish economic and political anti-monopoly arguments, although they are related. Economically, the report has very strong reasoning. No doubt this is in part because one of its authors is Lina Khan, the brilliant lawyer whose innovative and compelling case for why Amazon should be considered a monopoly went viral in 2017, and built the legal argument this report was based on. The authors reason that monopolies are fundamentally anti-competitive, not conducive to entrepreneurship and innovation, and inevitably lead to fewer choices for consumers and worse quality in products and services, including a lack of privacy protections. In particular, it draws on Khan’s theory that anti-competitive behavior should not just be defined merely as resulting in high consumer prices (a la Bork), but through firms’ ability to use predatory pricing and reliance on their market infrastructure to harm competitors. 

         However, as former FTC chairman Robert Pitofsky pointed out, “It is bad history, bad policy, and bad law to exclude certain political values in interpreting the antitrust laws.”[1] The report explicitly acknowledges that monopolies do not just threaten the economy, stating, “Our economy and democracy are at stake.”[2] So what, politically, does the report say is the problem?

         Firstly, the affect that these digital platforms have on journalism. The report noted that, “a free and diverse press is essential to a vibrant democracy . . . independent journalism sustains our democracy by facilitating public discourse.” In particular, it points out the death of local news, and the fact that many communities effectively no longer have a fourth estate to hold local government accountable. The report also notes the power imbalance between the platforms and news organizations—the shift to content-aggregation, and the fact that most online traffic to digital publications is meditated through the platforms, means that small tweaks in algorithms can have major consequences for newspapers’ readership. While the report frames this in terms of newspapers’ bargaining power, it stops short of articulating the fundamental political issue at stake: unaccountable, private corporations have the power to determine what content we see and don’t see online.

         The second argument is that monopoly corporations infringe on the “economic liberty” of citizens. The report, both implicitly and explicitly, references the 1890 Congressional debates on anti-trust, in which US Senator Sherman proclaimed, “If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade.”[3] This reasoning asserts that monopoly corporations exert a tyrannical power over individuals’ economic lives, directly analogous to the type of tyranny states exert over individuals’ political lives. Khan pointed out in a previous publication, in the 1890 debates, “what was at stake in keeping markets open—and keeping them free from industrial monarchs—was freedom.”[4]

         Repeatedly, the report notes that the committee had encountered a “prevalence of fear among market participants who depend on the dominant platforms.” It maintains that this was because of the economic dependence their monopoly power had created. For example, 37% of third-party sellers on Amazon—about 850,000 businesses—rely on Amazon as their sole source of income. Because of Amazon’s position as the gateway to e-commerce—Amazon controls about 65 to 70% of all U.S. online marketplace sales—it has the power to force sellers (or “internal competitors”) into arbitration. Amazon can kick sellers off the site, or lower the rankings of their products, or lengthen their shipping times—or, as happened to one third-party seller, refuse to release the products stored in Amazon warehouses, while still charging rent. Amazon forces sellers to give up their right to make a complaint in court as a condition for using its platform. Because of Amazon’s dominance, sellers cannot walk away. The report explicitly compares this marketplace power to the power of the state: 

“Because of the severe financial repercussions associated with suspension or delisting, many Amazon third-party sellers live in fear of the company. For sellers, Amazon functions as a “quasi-state,” and many “[s]ellers are more worried about a case being opened on Amazon than in actual court.” This is because Amazon’s internal dispute resolution system is characterized by uncertainty, unresponsiveness, and opaque decision-making processes.”[5]

          In this argument, monopolies are a threat to the economic liberty of individuals because they can use their dominance to subject those who depend on their markets to their own private law, as well as being able to pick “winners and losers.” The rise of this type of corporate law has been discussed before, specifically in reference to technology corporations. Frank Pasquale has predicted a shift from territorial to functional sovereignty, explaining, “in functional arenas from room-letting to transportation to commerce, persons will be increasingly subject to corporate, rather than democratic, control. For example: Who needs city housing regulators when AirBnB can use data-driven methods to effectively regulate room-letting, then house-letting, and eventually urban planning generally?”[6] Rory Van Loo wrote about the phenomenon more generally in Corporations as Courthousethe marketplace for dispute resolutions ranging from credit card companies to the Apple app store.[7]

         Finally, the report repeats Supreme Court Justice Louis Brandeis’s famous quote that, “We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.” (Funnily enough, there is no documentation that Brandeis ever actually said that, although he certainly would have agreed with the sentiment.) It points out that “the growth in the platforms’ market power has coincided with an increase in their influence over the policymaking process.” The authors explicitly noted the corporations’ use of political lobbyists and their investments in think-tanks and non-profit advocacy groups to steer policy discussions. (Notably, Mohamed Abdalla and Moustafa Abdalla have just published a new paper entitled “The Grey Hoodie Project” about how Big Tech uses the strategies of Big Tobacco in order to influence academic research.) However, it’s not clear why monopolists’ power to influence the political process is any different from the ability of any wealthy individual or corporation. In fact, political theorist Rob Reich wrote a book Just Giving, arguing that philanthropy can subvert democratic processes. (An interesting real world example is when Facebook has donated $11 million dollars to the city of Menlo Park with the understanding that it would be used to establish and maintain a new police unit near Facebook’s headquarters.)

         A final political argument, not included in the report, comes from an unlikely source: Mark Zuckerberg (and, given his new role at Facebook, possibly former UK deputy prime minister Nick Clegg too).[8]  Zuckerberg argued during the committee hearings that breaking up companies like Facebook would allow other competitors, especially companies from China, to dominate the market in Facebook’s place. These companies, Zuckerberg claimed, don’t have the same values as the US—including democracy, competition, inclusion and free expression. Along with a dose of protectionism, the implicit argument is that it is better for private American corporations like Facebook to make decisions about who is allowed to say what online—and how to prioritize distributing that content—than it is to cede that power to authoritarian states. 

         The interesting thing is that Zuckerberg’s argument taps into a second strain of anti-monopoly political reasoning: that the state is scarier than corporations. Take the discourse around monopolies in 1950 during the debate on the Celler–Kefauver Act. As journalist Marquis Childs wrote, big corporations are “in reality collectivism—a kind of private socialism. . . [and] private socialism will sooner or later in a democracy become public socialism.”[9] In the shadow of the Cold War, the argument went that Big Firms will inevitably create a Big Government to regulate them, and Big Government will inevitably become fascism, communism, or other authoritarian forms of centralized state control. As Robert Pitofsky summed up, the argument asserts that “monopolies create economic conditions conducive to totalitarianism.”[10]  It’s the all-dominant state that citizens should be worried about, not necessarily the all-dominant corporation. (Tim Wu has written about this in the history of anti-monopoly in the US in his book, The Curse of Bigness: Antitrust in the New Gilded Age.

         To me, the most interesting thing to note is that the report did not mention the state’s reliance on these Big Tech corporations—particularly in new areas, like cloud computing. As the report documents, Amazon Web Services (AWS) dominates the cloud computing market, making up about half of global spending on cloud infrastructure services (and three times the market share of its closest competitor, Microsoft). An estimated 6,500 government agencies use AWS—including NASA and the CIA. If Target and Netflix are worried about using AWS, should the US government be worried about their dependency on Amazon Web Services? Does this type of consolidated infrastructure risk creating fragility in the system by becoming too big to fail?

         This question will continue to have relevance, especially as AWS and Microsoft’s Azure continue their battle for the Pentagon’s $10 billion cloud computing contract. Notably, US President Elect Joe Biden has appointed Mark Schwartz, an Enterprise Strategist at Amazon Web Services, to the Agency Review team for the critical and important Office of Management and Budget (along with a number of other individuals connected to Big Tech). Anti-trust and digital monopolies will certainly be a major issue for the future Biden Administration.

[1] Pitofsky, Robert. “Political Content of Antitrust.” University of Pennsylvania Law Review 127, no. 4 (January 1, 1979): 1051. 

[2] Emphasis added.

[3] 21 CONG. REC. 2459. Pitofsky, Robert. “Political Content of Antitrust.” University of Pennsylvania Law Review 127, no. 4 (January 1, 1979): 1051. 

[4] Khan, Lina. “Amazon’s Antitrust Paradox.” Yale Law Journal 126, no. 3 (January 1, 2016).

[5] Subcommittee on Antitrust, Commercial and Administrative Law of the Committee on the Judiciary. “Investigation of Competition in Digital Markets: Majority Staff Report and Recommendations.” US House of Representatives, October 6, 2020. Emphasis added.

[6] Pasquale, Frank. “From Territorial to Functional Sovereignty: The Case of Amazon.” Open Democracy. January 5, 2018.

[7] Loo, Rory Van. “The Corporation as Courthouse.” Yale Journal on Regulation 33 (2016): 56.

[8] Many thanks to John Naughton for pointing this out to me.

[10] Pitofsky, Robert. “Political Content of Antitrust.” University of Pennsylvania Law Review 127, no. 4 (January 1, 1979): 1051.