What can we expect at the tech antitrust hearing, an FAQ

Why is the Antitrust Subcommittee hauling in these tech CEOs?

In a joint statement, House Judiciary Committee Chairman Jerrold Nadler and Antitrust Subcommittee Chairman David Cicilline explained the purpose of this hearing,

What are the worries about Facebook’s mergers?

When Mark Zuckerberg last faced congressional scrutiny, the toughest questions came from Senator Lindsey Graham, who wondered, “Car companies face a lot of competition: they make a defective car, it gets out in the world, they stop buying that car and buy another one. Is there an alternative to Facebook in the private sector?” Implicit in the Senator’s line of questioning was the 2012 acquisition of Instagram by Facebook, as well as the company’s buyout of WhatsApp in 2014 that seemed to have taken out two competitors.

Should Facebook be broken up?

To remedy a perceived lack of competition in social media, some have suggested breaking up Facebook, but this would be the wrong move. In one of the few papers that modeled a breakup of Facebook, consumer surplus dropped by 44 percent. For regulators, a breakup would be a logistical nightmare. As I explained in another context,

What are the concerns with Google’s ad business?

Spurred by ongoing investigations by state attorneys general and the DOJ, Google CEO Sundar Pichai will be in the hot seat today for his company’s advertising business. But, by a number of common measures, online advertising actually looks quite competitive. Ad prices have seen a dramatic drop in the past decade, according to the Bureau of Labor Statistics, and are now nearly half their 2009 level. Amazon is eating into the online ad shares of both Google and Facebook and is projected to be about 10 percent of the total market next year. Additionally, just this month, TikTok opened up advertising to the United States. On its face, then, the market doesn’t show clear signs of a problem.

Should Google’s mergers be reversed?

Some have suggested that Google should be forced to spin off its acquisition of DoubleClick and AdMob. Policymakers should be careful when trying to translate lessons from a previous era of antitrust onto digital markets because information exhibits unique qualities. Concentration in the ad market, for example, gives ad buyers better information, allowing for more efficient targeting of keywords. In other words, concentration seems to have a negative effect on the search engine’s revenues, which would be reversed if ad tech deals were undone.

Is Amazon a dominant retail platform?

In April, the Wall Street Journal broke the news that executives of the retail company had violated company rules regarding data usage. According to the report, executives allowed teams to access private data from third-party sellers on the site to build competing products. What is less clear is how extensive the practice is, since company representatives told Congress that safeguards were in place to prevent such a thing from happening.

Should Amazon be regulated like a public utility?

Last year, Senator Elizabeth Warren laid out a plan to regulate Amazon through platform utility regulation. If this policy were enacted, companies with annual global revenue of $25 billion or higher that provide an online marketplace, an exchange, or a platform would be broken up. At the same time, all similar businesses, regardless of size, would be subject to a new series of regulations.

Is Apple’s pricing on the App Store of concern?

While Apple is nominally a tech company, the Antitrust Subcommittee seems to be interested in understanding if the current pricing model, which assesses a 30 percent commission for specific kinds of apps, is harming competition. Confusion abounds over this system because countless apps are simply not included in the commission schedule. Free apps and apps that use advertising aren’t included, which includes Google, Facebook, Instagram, and Twitter, as well as some users of Pandora and Spotify. Apps that are considered “readers” are also not subject to the pricing scheme. Readers are defined as those apps where users purchase or subscribe to content through a source outside of the app, but consume it through an Apple product. This category includes many users of Spotify in addition to Netflix and Kindle.

  • free apps with in-app purchases;
  • free apps with digital subscriptions like Pandora, Hulu, and some select Spotify users; and
  • cross-platform apps, such as Dropbox, Hulu, and Minecraft, which allow for digital goods and services to be purchased in-app, although the commission is limited to Apple products.

Should Apple be forced to change its commission rate?

While Spotify has been particularly outspoken in its opposition to Apple’s pricing practices, the 30 percent cut is an industry standard. Amazon’s Appstore, Google’s PlayStore, and the Microsoft Store all take 30 percent. Most of the large gaming platforms follow this breakdown as well. The Playstation Store, XBox Games Store, Nintendo eShop, Steam, and Epic Games Store all split the revenue 70–30. In other words, Apple’s inclusion in this subcommittee hearing, given what has been reported thus far, seems misplaced.

What’s next for the Antitrust Subcommittee?

Today’s hearing will surely include much more than the intended topic of platform competition. But representatives should stay the course and keep themselves from straying into privacy issues and speech concerns. While tech companies need to be held accountable when they harm consumers, this hearing should be used for its intended purpose, to answer lingering questions that would help close the investigation and issue the committee report.

CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.