Few small businesses can survive in 2021 without relying on Big Tech. Unfortunately, all it takes is a small algorithm tweak by Google or shipping policy change from Amazon to shut down your company almost overnight.
Now, however, there are signs that the government could upend the large tech companies’ hold on their smaller partners and competitors. The changes may come all the way from the top: The Biden administration is expected to pursue challenges to problematic mergers, and take a fresh look at existing antitrust laws. And the president himself has said that breaking up Facebook is “something that we should take a really hard look at.” But exactly what will antitrust reform look like, and how will it impact small businesses?
Some of the problems with antitrust law are deep-seated, according to Nidhi Hegde, director of strategy and programs at the American Economics Liberties Project, an anti-monopoly group whose founder is working with the Biden transition team on antitrust issues.
“For the past 40 years, our antitrust laws and the way they’ve been enforced has really increased corporate power at the expense of small businesses,” Hegde says. For example, the FTC may approve a merger because it will lower prices for consumers, despite the fact that it shuts out competitors.
There appears to be a big appetite for antitrust reform from both Republicans and Democrats in Congress. In the last two years, antitrust reform bills have begun proliferating at a level not seen since the 1990s. This includes bills that target new acquisitions or impose penalties on companies for anti-competitive behavior.
“Big Tech companies are wildly unpopular among Democrats and Republicans, albeit for different reasons, and antitrust is viewed as the proper tool to attack them,” says John Lopatka, an antitrust expert at Penn State Law.
Whether efforts to curb the behavior of large tech platforms will play out in Congress or through federal agencies still remains to be seen. Even if the legislative branch doesn’t take action, a bevy of legal and regulatory challenges could curb Big Tech’s acquisition strategy. The Federal Trade Commission last year announced it was examining every acquisition that Facebook, Apple, Microsoft, Amazon, and Google parent Alphabet made over the past decade. Alphabet has already cut back on new acquisitions in light of a Justice Department lawsuit alleging that Google created a search monopoly.
“The antitrust enforcement agencies should, and I expect that they will, think creatively and boldly about how to use existing antitrust laws to address new challenges posed by increasing industry concentration and the tech platforms,” says Doug Melamed, a professor at Stanford Law School.
Here’s a breakdown of what antitrust reform could look like in the year ahead.
Congress
Senator Amy Klobuchar (D-MN), the new chair of Senate Judiciary Committee’s subcommittee on antitrust, unveiled an ambitious bill this month to overhaul antitrust laws. Known as the Competition and Antitrust Law Enforcement Reform Act, the measure would shift the burden from the government to companies to prove that their actions don’t harm competition.
Klobuchar’s bill, which includes some older policy proposals backed by Democrats, would bar mergers that “create an appreciable risk of materially lessening competition,” a more stringent standard than the current law. It would also require companies that hold 50 percent or more of their market to prove that new acquisitions don’t hurt competition. And companies involved in mergers that would significantly increase market concentration, or “mega-mergers” that are valued at more than $5 billion, must prove that their actions won’t create a monopoly.
Critics of the bill say it’s overly restrictive to ask companies to prove that their behavior isn’t anti-competitive. “Whether conduct injures ‘competition,’ a term that is not self-defining, can be difficult to determine in the real world,” Lopatka says. “And shifting the burden of persuasion to the defendant may result in certain practices being condemned that do not in fact injure competition.”
The measure also would beef up the enforcement budgets of the FTC and the DOJ’s antitrust division, allowing them to pursue companies that engage in anti-competitive behavior. And it would raise penalties for such behavior from a maximum of $100 million to a maximum of 15 percent of a company’s annual revenue.
Republicans have expressed support for reining in Big Tech through antitrust reform as well. Earlier this month, Senator Josh Hawley (R-MO) offered an amendment to the budget that would preemptively bar all mergers and acquisitions by Big Tech companies, but it didn’t reach the Senate floor for a vote.
Representative Ken Buck (R-CO), the top Republican on the House Judiciary subcommittee on antitrust, has released a set of policy recommendations. Many of the findings were in agreement with a Democrat-authored report the subcommittee released last year, but some, like removing limits for class-action lawsuits, are considered non-starters for Republicans.
In general, the GOP is against breaking up Facebook or any other company for antitrust reasons. Also of concern to Republicans are so-called “line of business restrictions,” which would keep a platform from using its dominance in one market (such as cloud services or e-commerce) to compete in another (such as facial recognition or online advertising).
“We are concerned that sweeping changes could lead to overregulation and carry unintended consequences for the entire economy,” Buck wrote.
The executive branch and courts
A recent wave of antitrust litigation against Big Tech could have a more immediate impact than legislation in Congress. A lawsuit from the DOJ and 11 state attorneys general alleges that Alphabet uses anticompetitive tactics to maintain its monopoly in both search and online advertising. If the DOJ wins the case, the judge could require Alphabet to sell off a portion of its business, such as its search or ad operations. A separate antitrust lawsuit, led by Texas and a group of other Republican states, specifically targets Google’s ad business.
If Alphabet loses its antitrust lawsuits, businesses that advertise with Google may soon see major changes in its ad tech business. The upshot could be lower ad rates or more consistent, transparent policies about placement in search results.
Meanwhile, the FTC and a coalition of 48 state attorneys general filed two separate lawsuits against Facebook that target its acquisitions of Instagram and WhatsApp. If successful, the suits could force Facebook to sell those businesses. The courts also could stop Facebook from asking third-party software developers to refrain from advertising on other social networks or creating features that could compete with Facebook.
The DOJ is also considering an antitrust probe against Apple and its app store. And Amazon is facing an FTC probe regarding its treatment of third-party sellers on its marketplace platform. If the agency finds evidence of anticompetitive behavior, it could fine Amazon and force it to make changes to its policies — or to spin off its Marketplace platform into an entirely separate business that focuses on third-party sellers. Further, the company may be forced to adopt additional rights for third-party sellers or more transparent policies.
Already, recent victories for Amazon Flex drivers and Apple app developers have signaled that Big Tech can be held accountable for its actions. And a surge of employee strikes, government investigations, and courtroom battles shows a change to the industry’s power dynamic.
“Congress is finally sort of serious about tackling monopoly power and wants to address the harms, both to small businesses and its workers,” says the American Economics Liberties Project’s Hegde. “It’s a shift away from this narrow ideology around consumer welfare that has been adopted for decades. I think one sort of immediate impact is that these independent businesses may feel like they have a path to fight back.”
