(Bloomberg) -- Makan Delrahim, the chief of the Justice Department’s antitrust division, gave a speech on Tuesday arguing that his department had everything it needed to pursue legal action against technology companies who wield their market power in nefarious ways. “Those who say we need new or amended antitrust laws to address monopoly concerns should look to history and take heart,” he said.
Several hours later, Representative David Cicilline, a Democrat from Rhode Island, seemed to brush Delrahim back. “Congress — not the courts, agencies, or private companies — enacted the antitrust laws,” said Cicilline, at a hearing of the House Judiciary subcommittee focused on competitive issues in the digital economy. "And Congress must be responsible for determining whether they are equipped for the competition problems of our modern economy.”
The jostling for position shows how much the politics of antitrust, which have basically been a non-issue throughout the digital age, have shifted. Anger at Silicon Valley may now be the only significant area of bipartisan agreement in Washington. Federal regulators recently divided responsibility for antitrust investigations into technology companies, and state attorneys general have been laying the groundwork for their own investigations. Democratic presidential hopefuls, most prominently Senator Elizabeth Warren, have been taking an increasingly hard line on Silicon Valley. President Donald Trump’s continued attacks on the industry, meanwhile, create political space for Republican lawmakers to do the same.
Cicilline, chair of the House Judiciary’s subcommittee on antitrust, is emerging as a key player in the fight against big tech. Now 57, Cicilline was elected to Congress in 2011 after serving as the mayor of Providence, his hometown. He became the ranking member of the antitrust subcommittee in 2017, and began pushing for stronger action on the issue. He gained little traction at first; he couldn't convince Congress to hold hearings on Amazon's $14 billion of Whole Foods later that year. But he kept at it. In March, he wrote an essay in the New York Times calling on the Federal Trade Commission to investigate Facebook for antitrust violations. He wrote that Facebook has already “repeatedly shown contempt for its legal commitments,” and that the commission should consider forcing the company to replace executives or board members, and to make changes to its business model. In an interview this week with CNN, Cicilline disputed the suggestion that he had called to break up the company.
Cicilline doesn’t seem inclined to wait and see what happens. On Tuesday, he told a group of reporters that he hadn’t heard Delrahim’s speech, but added he hadn’t been impressed so far with what he described as the “enthusiasm of the antitrust agencies.” Cicilline says he hasn’t formed a clear idea of what changes should be made to the law, but he doesn’t share Delrahim’s sanguine view of the rules as they currently stand. “It’s hard for me to believe there won’t be some ways to improve an antitrust statute that was written more than 100 years ago,” he said.
One way that a congressional antitrust inquiry will be distinct will be in its volume. Cicilline says he plans to pull together a record of the damage wrought by anti-competitive behavior, by gathering documentary evidence and holding numerous public hearings through next year. While he hasn’t yet requested that any company executives appear, he says he’s leaving the option open. Facebook Inc. and Google both worry that Cicilline’s hearings will be embarrassing in a way regulatory proceedings will not be, according to three people familiar with the thinking at those companies. This could build momentum for new policies forcing real changes to their business models. Neither Facebook nor Alphabet Inc.’s Google responded to a request for comment.
Groups that want aggressive action against tech companies basically agree. “This investigation provides a channel for uncovering so much material that makes clear those kinds of solutions are necessary,” said Sarah Miller of the Open Markets Institute, a group pushing for a wholesale reconsideration of antitrust enforcement.
As he ramped up his criticism of the tech industry, Cicilline hired Lina Khan, a recent graduate of Yale Law School who has become an unlikely darling in antitrust circles. (She also worked at the Open Markets Institute for a time.) In 2017 Khan published an article in the Yale Law Journal called “Amazon’s Antitrust Paradox.” The name was a play on the title of a 1978 book by Robert Bork that became the foundational text for a looser approach to antitrust enforcement that has continued until today. Khan used Amazon to argue that this approach had failed.
It was a compelling idea that came at just the right time. Khan became a near-instant celebrity — at least by the standards of antitrust lawyers. At the same time, detractors questioned the rigor or novelty of her theories. The term “hipster antitrust” quickly emerged as a shorthand way to signal disapproval with Khan’s ideas.
The hearing this week focused on tech’s relationships with the news industry. The subject also featured in a paper Khan published recently in the Columbia Law Review, where she used Google and Facebook’s sway over news publishers to illustrate what she sees as a key problem of monopoly power in the digital economy: the way that tech companies have created platforms for other businesses, while also competing on those platforms.
Publishers rely on Google and Facebook as a key way to distribute their content. But they also compete with the technology companies for advertising dollars. It’s been a pretty one-sided battle, largely because tech companies have such granular information about customers they can use to help target ads. The tech companies have visibility into practically all news consumption online, even on news publications’ own websites, through the code publishers place there to allow readers to share articles and videos on social media.
Matt Schruers, vice president of law and policy for the Computer & Communications Industry Association, a trade group whose members include Facebook and Google, said in Tuesday’s hearing that the collapse of local news businesses was an unfortunate but organic result of technological changes, not the result of explicit action by technology companies. News consumption has never been higher, and revenues began declining long before Google and Facebook became their primary concerns.
In Khan’s view, publishers relying on Google and Facebook don’t have a chance. She doesn’t make a specific argument about how best to address this imbalance of power in the news industry. But she does draw a distinction between behavioral remedies (where government forbids companies from using power in one market for leverage in another) and structural remedies (where businesses aren’t allowed to operate in markets where the potential to act abusively). She says trying to install behavioral remedies will inevitably push enforcement agencies into conflicts in which they are vastly outgunned. “Targeting the firm’s incentives, rather than attempting to police its behavior, may make more sense,” wrote Khan, who declined an interview request. “It’s not clear that anything short of a full structural separation would be sufficient.”
Just before Cicilline began questioning witnesses on Tuesday, Khan walked up to him and spent a minute or two whispering in his ear, while he nodded along. Then she returned to her seat, while Cicilline peppered Schruers with questions. Cicilline wanted an acknowledgement that Google dominated the search market, asked Schruers to assess the potential for abuse when a company that distributes products for other businesses also made products to compete with those partners. Schruers declined to oblige. “I would be concerned about a rule that says, for example, a grocery store can’t put its own grocery store brand products at eye level in the store — ” he said.
Cicilline cut him off. “I don’t think anyone is contemplating a rule that does that,” he said. He added that he wasn’t sure what actions made sense, but that Congress wasn’t just going to continue doing nothing.
“You encouraged caution when enforcing antitrust against big tech platforms,” he told Schruers. “But in many ways our caution is what we’ve had for the last decade, which has resulted in the emergence of advertising monopolies. I think many of us think it’s time to try something different.”
--With assistance from Kurt Wagner, Naomi Nix and Ben Brody.
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