David Cicilline, chairman of the House Antitrust Subcommittee, and Ken Buck introduced a big package of legislative measures with the objective of holding Big Tech monopolies accountable and also with the purpose of fighting discriminatory practices that have been conducted by some platforms. The legislative initiative includes five different bills and it’s called “A Stronger Online Economy: Opportunity, Innovation, Choice”.
As Mr. Cicilline became chairman of the Antitrust Subcommittee after the midterm election of 2018, he opened a deep investigation into whether Amazon, Apple, Facebook, and Google had too much power.
Initially, GOP Congressman Buck wasn’t sure if he supported the idea of investigating Amazon, he thought that they were competing fairly on America’s free market. But after he started listening to stories that came up during the investigation, he changed his mind.
During the investigation, it was revealed that Amazon was willing to lose over $200 million in a single quarter in order to pressure Diapers.com, its main competitor in the online market supplier sector. Amazon engaged in predatory pricing, then purchased the company and eliminated their biggest threat. This essentially ends up harming consumers. Competition always helps to drive prices down, increasing the quality of products or services related. If the four Big Tech held monopolies, the average American consumer was being impaired.
The results of the investigation were quite conclusive: the “big four” of the Big Tech needed to be controlled. The Committee recommended reforming antitrust laws and called for a European-style offense of abuse of dominance.
However, even if the initial intentions of the legislative package are to break up the biggest companies in the sector, increase competition and innovation, eventually benefiting the average consumer, the set of measures proposed in the House created big liabilities for American companies. Mainly there are two bills inside that could end up benefiting international actors:
- The American Choice & Innovation Online Act (or H.R. 3816): this bill makes it illegal for platforms that control digital markets to engage in any form of “discriminatory conduct”. In this new bill, discriminatory conduct would be conducted by companies that use their own digital markets to advantage their own products or services over those of another business user. This initiative promotes laissez faire (free market) with all its rules inside digital markets.
The problem with this is that under Section 6.B of the bill “Suits by Persons Injured” it’s allowed for any legal person, including foreign state-owned enterprises, to sue American companies that engage in these practices. For example, a Chinese state-owned enterprise may seek damage repairs against American companies, even if that company engages in the same type of practices in their own country.
Under this bill, Chinese companies will have a vast range of options to abuse these provisions and seek a competitive advantage over American companies, using American laws to harm their competition, but not fulfilling these regulations in their own country.
- The Platform Competition & Opportunity Act (or H.R. 3826): this bill would create a prohibition for covered platforms to make acquisitions, except under four circumstances:
- The Company being acquired does not compete with the covered platform (preventing, for example, the repetition of another Diapers.com situation);
- The Company does not represent potential or nascent competition to the covered platform;
- The Company does not enhance the covered platform’s market position; or
- The Company does not enhance the covered platform’s ability to maintain its market position.
With these new regulations, Facebook wouldn’t have been able to buy Instagram or WhatsApp, Amazon wouldn’t have been able to buy Diapers.com, more competition would still exist in these sectors. In December 2020, the Federal Trade Commission, alongside over 40 States, accused Facebook of buying up its rivals to squash competition and called for the deals to be unmade.
The problem for this measure, similar to the first bill mentioned, comes from the “Suits by Persons Injured” section. Legal persons are allowed to sue for damages and injunctive relief, opening the door to abusive lawsuits that could come from foreign state businesses solely with the purpose to harm rivals. Also, these bills allow private actors to bring litigation against America’s most innovative companies and interfere with their ordinary business activities, allowing international companies to stall American companies with infinite lawsuits, while they continue to enhance their power, innovate and grow.
The objective of the legislative package, as stated by Rep. Cicilline in an interview with The New York Times is to limit the power of big tech companies. The noble purpose and the urgent need for regulating Big Tech may rush legislators into passing these bills, but while doing so they may end up damaging American companies in favor of Chinese, Russian, or other international companies.
These nations have proved that they have no political will to regulate to avoid another case of Russian officials interfering in the 2016 election through Facebook.
Also, in China, the government uses social media to spread propaganda of a fake “amazing” life that people have in Xinjiang, where Uyghurs and other mostly Muslim ethnic minorities have been subjected to repressive practices by the Chinese Communist Party.
Additionally, it was only a couple of days ago that China shut down the last free pro-democracy newspaper in Hong Kong.
Facilitating legal methods in the United States to help these companies in these nations to abuse American laws against American companies could become a huge mistake.
Big Tech needs regulation. Americans would benefit enormously from new companies competing for digital markets and social media. But opening the door to lawsuits from Chinese state-owned companies is definitely not the correct approach.