Congress should consider forcing the breakup of Apple, Amazon, Facebook and Google into smaller companies that can’t enter into adjacent lines of business (via NBC News). That’s the main recommendation of a 449-page report (PDF) the Democrats on the House Judiciary subcommittee on antitrust published on Tuesday following the panel’s 16-month investigation into big tech that saw the CEOs from all four companies testify before Congress. They say all four companies enjoy monopolies in at least one of the verticals in which they operate.
“During the investigation, Subcommittee staff found evidence of monopolization and monopoly power,” the report says. It goes on to argue the dominance of Apple, Amazon, Facebook and Google has “diminished consumer choice, eroded innovation and entrepreneurship in the U.S. economy, weakened the vibrancy of the free and diverse press and undermined Americans’ privacy.”
First, to restore competition in the digital economy, among other options, we should consider structural separations and prohibitions on certain dominant platforms from operating in adjacent lines of business.
— David Cicilline (@davidcicilline) October 6, 2020
Perhaps most notably, the report concludes Apple enjoys a monopoly in app distribution on iOS devices. “Apple leverages its control of iOS and the App Store to create and enforce barriers to competition and discriminate against and exclude rivals while preferencing its own offerings,” the report says. “Apple also uses its power to exploit app developers through misappropriation of competitively sensitive information and to charge app developers supra-competitive prices within the App Store.”
Apple’s control of the App Store is at the heart of the company’s ongoing legal feud with Fortnite developer Epic Games. In August, Epic bypassed the App Store with its Mega Drop promotion, giving mobile players the option to pay for the title’s in-game currency directly. When Apple removed Fortnite from the App Store, Epic launched a lawsuit against the company.
Among other recommendations, the report also suggests strengthening antitrust laws and requiring dominant tech companies to make their platforms compatible with the services of their competitors.
“The totality of the evidence produced during this investigation demonstrates the pressing need for legislative action and reform,” the report says. “These firms have too much power, and that power must be reined in and subject to appropriate oversight and enforcement.”
So far, only Amazon has responded to the report. In a lengthy blog post, the company says the report’s recommendations “would segregate sellers into separate, less visible stores, make it harder for customers to compare prices of products and, ultimately, reduce competition — all leading to higher prices and less selection.”
We’ve reached out to Apple, Facebook and Google for comment, and we’ll update this article with their responses.
If enacted, the changes recommended by the report would dramatically reshape the tech industry, but Democrats and Republicans aren’t in agreement on the broader points of the report. Representative Ken Buck (R-CO) told The New York Times, “I agree with about 330 pages of the majority’s report,” but said he was against the breakup of Apple, Amazon, Facebook and Google, calling it “the nuclear option.” Other Republican members of the antitrust subcommittee say they won’t endorse any of the report’s findings.
Update (6:58 PM ET): Google has commented on the antitrust subcommittee’s report. Unsurprisingly, it disagrees with many of the panel’s findings. “We compete fairly in a fast-moving and highly competitive industry,” a spokesperson for the company said. “We disagree with today’s reports, which feature outdated and inaccurate allegations from commercial rivals about Search and other services.”
“Americans simply don’t want Congress to break Google’s products or harm the free services they use every day. The goal of antitrust law is to protect consumers, not help commercial rivals,” the spokesperson went on to say. “Many of the proposals bandied about in today’s reports — whether breaking up companies or undercutting Section 230 — would cause real harm to consumers, America’s technology leadership and the U.S. economy — all for no clear gain.”
However, the company isn’t against all the recommendations put forward by the report:
“We support Congress focusing on areas where clearer laws would help consumers, a few of which are mentioned in today’s reports: Google has long championed the importance of data portability and open mobile platforms; we are arguing a case before the Supreme Court tomorrow for the important principle of software interoperability; and we have urged Congress to pass comprehensive federal privacy legislation. We look forward to engaging with Congress on these and other issues moving forward.”
Update 2 (7:50 PM ET): Apple has also responded in an effort to refute the report’s findings. Its statement follows.
“We have always said that scrutiny is reasonable and appropriate but we vehemently disagree with the conclusions reached in this staff report with respect to Apple. Our company does not have a dominant market share in any category where we do business.
From its beginnings 12 years ago with just 500 apps, we’ve built the App Store to be a safe and trusted place for users to discover and download apps and a supportive way for developers to create and sell apps globally. Hosting close to two million apps today, the App Store has delivered on that promise and met the highest standards for privacy, security and quality. The App Store has enabled new markets, new services and new products that were unimaginable a dozen years ago, and developers have been primary beneficiaries of this ecosystem.
Last year in the United States alone, the App Store facilitated $138 billion in commerce with over 85% of that amount accruing solely to third-party developers. Apple’s commission rates are firmly in the mainstream of those charged by other app stores and gaming marketplaces. Competition drives innovation, and innovation has always defined us at Apple. We work tirelessly to deliver the best products to our customers, with safety and privacy at their core, and we will continue to do so.”