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The Department of Justice is throwing its weight behind an antitrust bill working its way through the Senate, with the department saying that it needs new tools to help police markets dominated by platforms such as Amazon, Meta (formerly Facebook), Apple, and Google.
“The Department views the rise of dominant platforms as presenting a threat to open markets and competition, with risks for consumers, businesses, innovation, resiliency, global competitiveness, and our democracy,” Peter Hyun, acting assistant attorney general, wrote in a letter to the Senate. “Discriminatory conduct by dominant platforms can sap the rewards from other innovators and entrepreneurs, reducing the incentives for entrepreneurship and innovation.” The letter was first obtained by The Wall Street Journal.
The American Innovation and Choice Online Act, cosponsored by Sen. Amy Klobuchar (D-Minn.) and Sen. Chuck Grassley (R-Iowa), would limit Big Tech firms’ ability to “unfairly preference” their own products and services. For example, under the proposed bill, Amazon couldn’t boost search rankings of its private-label products, and Apple and Google couldn’t do the same for their apps in their app stores.
The bill passed out of committee in January, and a similar bill in the House also cleared committee, but both bills are likely subject to amendments to improve their chances of passing. California’s Democratic delegation has raised concerns that the bills focus too much on Big Tech firms, many of which are headquartered in the state.
Not all platforms are tech companies, though. There are a few examples in the financial sector, including credit card companies like Visa and Mastercard, which are multisided platforms that serve both sellers and buyers. But platform business models are particularly tailored to tech companies, which can quickly expand and scale their offerings because of their focus on software.
For companies, few business models are as appealing as platforms. Not only do platforms let companies sell to other companies and consumers; they also create positive feedback loops that help the platform scale—the more people that are on the platform, the more companies want to use it, and the more companies that are on a platform, the more people will use it. Once a platform becomes large enough, it becomes too big to fail. Imagine if Microsoft were to go bankrupt and Windows were to disappear from the marketplace. Companies and consumers alike would panic.
But platforms have a dark side, too. By working both sides of a market, platform owners have unrivaled insights into both buyers and sellers, giving them an advantage when selling their own products and services. In some cases, that can harm consumers. In others, it can harm sellers. So far, antitrust law has struggled to address all the ways that dominant platforms skew markets.
That’s in part because existing antitrust law wasn’t written with today’s tech firms in mind. “We haven’t meaningfully updated our antitrust laws since the birth of the Internet,” Klobuchar said in a January hearing on the bill.
In the recent letter, the DOJ said it welcomes the legislation, especially the updates to antitrust law that would define which “discriminatory and self-preferencing conduct” should be considered anticompetitive and illegal. “Doing so would enhance the ability of the DOJ and FTC to challenge that conduct efficiently and effectively and better enable them to promote competition in digital markets,” the letter said.
“By confirming the illegality of behaviors that reduce incentives for smaller or newer firms to innovate and compete, the legislation would supplement the existing antitrust laws in preventing the largest digital companies from abusing and exploiting their dominant positions to the detriment of competition and the competitive process,” the DOJ said. “Even more importantly, the legislation may support the growth of new tech businesses adjacent to the platforms, which may ultimately pose a critically needed competitive check to the covered platforms themselves.”
