• We Clearly Have a Market Problem: Talking to Representative David N. Cicilline

    How can US government help to create space for the next Amazon or Apple or Facebook or Google? How can we support small businesses and working families and local media at the same time? When I want to ask such questions, I pose them to Representative David N. Cicilline. This present conversation focuses on Cicilline’s work as Chairman of the House Antitrust Subcommittee, and on that Subcommittee’s Investigation of Competition in Digital Markets report. Representative Cicilline serves Rhode Island’s First Congressional District. He is a member of the House Democratic Leadership, as Chair of the Democratic Policy and Communications Committee (DPCC). He is also Co-Chair of the Congressional LGBT Equality Caucus, and Vice Chair of the Congressional Progressive Caucus.

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    ANDY FITCH: First, why does Congress stand out as the driver of antitrust reform? Why does proactive change seem unlikely to take place in our regulatory agencies, in our courts, in Big Tech firms themselves, unless the initial push comes from Congress? And how can these legislative efforts help bring concerns of monopoly back into everyday political conversations — as not just the exclusive domain of specialized bureaucrats and judges?

    DAVID CICILLINE: The United States Congress enacts our antitrust laws. As the most democratically accountable branch of government, Congress has the responsibility to respond to current concerns being expressed by the broader public — here with how market concentration and monopoly power impact the lives of hardworking American families. And Congress has the additional responsibility to ensure that these laws work effectively, producing the intended results. To the extent that these laws don’t achieve their intended objectives, Congress has the duty to review and update and modernize them.

    So I wouldn’t frame setting our antitrust polices as an agency responsibility. Agencies have the responsibility to execute laws enacted by Congress. And frankly, the court’s own actions have, in certain instances, produced just the opposite. The court has narrowed possibilities to do good antitrust enforcement, and to promote competition. One thing our investigation reveals is the need to correct for some of this improper narrowing of enforcement, which has made it more difficult to prevail in antitrust actions — with a lot of consequential decisions sort of spun out of whole cloth by the court.

    In terms of that judicial legacy, why does robust digital-age antitrust require a restored emphasis on competitive market processes, rather than just a continued focus on “consumer welfare” standards (as primarily determined by short-term financial-transaction costs)?

    Right. I mean, Congress has enacted antitrust laws protecting this competitive market process, because we as a society consider competition good. Competition provides more choices, prompts innovation, and produces higher quality. We need our antitrust policy to protect against the full spectrum of competitive harms — not merely of short-term price or output effects.

    That very narrow view of antitrust doesn’t hold up in digital markets, where you sometimes don’t pay with money for goods and services, where you also might pay with your attention and your data, and where reduced competition won’t always appear in prices, but maybe in the quality of a service — particularly when privacy gets diminished. So I do consider this a really important moment to restore emphasis on competitive market processes, to reaffirm that we see value in competition in and of itself, that direct harms come to consumers and workers and innovation and quality when competition decreases to the extent it has in our digital markets.

    So why might your own preferred antitrust approach prioritize industry- or sector-wide interventions, rather than the pursuit of remedies through individual cases? What makes, say, structural separations, and line of business restrictions, especially crucial in an era when a few platform firms have consolidated their dominance of essential digital functions (such as search, social-networking, e-commerce)?

    Well I’d start from the fact that we clearly have a market problem reaching beyond any one single company. So whereas antitrust agencies have the responsibility to do enforcement work on cases of misconduct by a particular company or actor, Congress has a different role. We set policy for the whole marketplace. And this investigation makes very clear that the marketplace isn’t functioning properly, that it displays a significant absence of competition, that it requires a system-wide view on how to better structure these markets.

    Also, enforcement actions can take a decade or more. If you look at the pharmaceutical sector, or at enforcement efforts Google faces in Europe, victims of anticompetitive behavior have gone out of business before antitrust litigation has finally been resolved. So that kind of delay can even cause its own additional harms.

    We need to design forward-looking laws responding to the unique nature of digital markets. Structural remedies have the benefit of actually addressing underlying problems, and of limiting the capacity of these top firms to stifle competitors. Structural remedies help create space for rival companies that can lower barriers and restore competition, by enhancing interoperability and data portability on our social networks. We need efforts on all of these levels. So of course, we will continue to expect that our agencies will robustly pursue actions against individual companies. But Congress has to figure out how to fix these laws and promote broader market competition.

    It also stands out that, for the hundreds of mergers and acquisitions Amazon, Apple, Facebook, and Google have pursued over the past couple decades, antitrust enforcers have blocked precisely zero. What logic and decision-making processes led to those stark outcomes? What logic and decision-making processes should play out going forward in terms of merger presumptions?

    Some of those megamergers should, in Bill Baer’s phrase, never have made it out of the boardroom. These deals were presumptively illegal, because they increased concentration in already highly concentrated markets, such as with Sprint and T-Mobile’s merger. But we’ve also seen of course a flurry of deals involving nascent or potential competitors, such as with Facebook’s acquisition of Instagram or Google’s acquisition of Waze. Those transactions significantly expanded the dominance of Facebook or Google, while obviously taking out a competitive threat that could have helped to constrain this dominance. Those are big enforcement failures, plain and simple. Antitrust agencies clearly should have challenged these acquisitions. They didn’t. And to the extent that our current potential-competition doctrine has made antitrust enforcement more difficult, the burden for now is on those agencies to bring novel cases where they can — and to call on Congress to address where the courts have curtailed legislative intent and proper agency enforcement.

    Presumptions offer one pretty straightforward way to start addressing these problems. If a merger will benefit consumers, and if a dominant firm has access to all the data and has vast economic resources at its disposal, then it should face the burden of making a persuasive case before a judge. That’s only reasonable. And that doesn’t mean agencies will want to block every merger. We’re talking about less than five percent of transactions, with really about one percent subject to settlements or divestiture. So using the leverage of presumption to shift the burden of this argument onto already dominant companies seems only fair and sensible.

    For another boost to agency enforcement, what kinds of increased transparency regarding the algorithmic operations of today’s tech platforms would best help re-strengthen rules around self-preferencing, related forms of strategic favoritism or demotion, and discriminatory pricing? And how to bring this expanded accountability into the public sphere while accommodating tech firms’ reasonable IP concerns?

    Algorithmic transparency and accountability is really, really important. So much of this business model gets based on algorithms. We absolutely need accountability for how these algorithms get designed and get used.

    A couple of obvious approaches stand out here. You could implement a kind of regular auditing requirement, to confirm that these algorithms produce the outcomes that these companies intend and claim to produce. You could have regulators conducting their own analysis and weighing the scales — as they do in financial markets. In addition, you could legislate a remedy that lowers the threshold for showing competitive harm associated with self-preferencing. That would create a stronger disincentive.

    You’ve also hinted at the broader point that digital media in fact distinctly lend themselves to interoperability and data portability and open access. So what kinds of government intervention would best help cultivate conditions in which successful firms can’t just moat themselves off, and in which new entrants can “take advantage of existing network effects ‘at the level of the market, not the level of the company’” — basically because users face much lower switching costs?

    You do that by requiring it. I mean, we all have to recognize that these switching costs, and this inability to move from platform to platform, impose significant impediments to a competitive and dynamic marketplace. If someone says: “I dislike Facebook’s model, because I don’t think it respects my privacy enough, or does enough to prevent disinformation from spreading, yet I don’t have any choice but to use it,” then we have a real competition problem. And even if an equivalent social-networking competitor platform did exist, but you’d lose your entire social graph if you switched, those switching costs and those barriers would be too high.

    Still in terms of broader societal thriving, here specifically a robust free press, how should a “narrowly tailored… temporary safe harbor to collectively negotiate with dominant online platforms” play out for news publishers and broadcasters? And what might effective coordination look like especially when it comes to countless (acutely threatened) local news providers?

    One piece of legislation I’ve recently introduced, the Journalism Competition and Preservation Act, really seeks to protect local journalism in these ways. I mean, if you think about the importance of the news — and of local journalism in particular — to our democracy, to holding power to account, to exposing corruption, you recognize that we absolutely need to get our local news back off life support. Right now, the large social-media platforms and search engines essentially gobble up all news content and all of the ad revenues. Our newspapers and online publishers keep cutting and cutting and cutting, because they just can’t sustain themselves. Two-thirds of Americans get their news from either Facebook or Google, who then get all of the advertisers.

    And as you suggested, some big, well-branded folks like The New York Times or Wall Street Journal still possess enough bargaining power to negotiate more acceptable terms with these platforms — but the Providence Journal does not. It has no real negotiating power. If Facebook or Google dislike the terms, they can just exclude you. They can just say: “Go fly a kite.” So this idea of allowing smaller newspapers and online publishers to collectively come together to negotiate (for purposes of branding and attribution and revenue and the like) again just means restoring a more level playing field, evening out the bargaining power temporarily, preserving our local media, and giving them some space to address this problem. If we don’t move fast, we’ll have no local media at all.

    Here again, this investigation goes out of its way to articulate a bipartisan breadth of concerns, of assembled expertise, of shared commitments to keeping our national markets vibrant and open. Where do you see this report highlighting some most promising points of overlap between congressional Democrats and Republicans? And where do you envision the most friction or resistance regarding some of your subcommittee’s recommendations?

    From the very first day we launched this investigation, we’ve been bipartisan. I’ve worked closely with my Republican colleagues on the subcommittee. Ken Buck has publicly described this investigation as the most bipartisan effort he’s seen during his five-and-a-half years in Congress. I do consider that essential, because our entire country faces this serious challenge, and these real threats to our long-term prosperity and to American consumers and workers. This report reflects a strong consensus on our committee’s findings. We’re now working together on a series of bills to address these shortcomings of current antitrust laws — as well as on more focused legislation to restore digital competition.

    So I do see broad interest in making sure our antitrust agencies have the resources they need to prosecute cases and properly enforce. I see tremendous consensus that we need these agencies run by talented, creative, committed officials. I see lots of interest in prohibiting self-preferencing on goods and services, and prohibiting anticompetitive behavior. I see significant interest in shifting presumptions.

    In terms of where I see less consensus, I’d probably point to structural separation — and that’s not surprising. Look, this is a complicated area of the law. We hopefully will reach consensus on the facts, on the serious need for congressional action, on the ultimate desired outcomes. But it shouldn’t surprise anybody if we don’t agree on every single solution along the way. In the early days of the next Congress, you’ll see legislation introduced reflecting our committee’s recommendations. I expect that legislation to be bipartisan.

    Finally then, it’s hard to read this persuasive report and not embrace its foundational challenge to the long-held view that antitrust under-enforcement has less damaging impact on our broader economic prosperity than antitrust over-enforcement. Under-enforcement undoubtedly has caused serious, serious harm. But where do you see historical examples of over-enforcement bringing its own problematic consequences, and how to fend off those tendencies going forward?

    Right, I mean, the reason we initiated this 16-month investigation, which provides this exhaustive top-to-bottom review of the digital marketplace, is because we wanted to avoid exactly that. We wanted to make sure we do this right. With these complex market dynamics, we want to be certain that our proposals won’t have unintended consequences. This 16-month review has given us a very full and robust understanding of the digital marketplace. We’ve tailored every recommendation here to effectively restore competition in that marketplace, and to prevent the kinds of anticompetitive behavior currently harming innovation and consumers and workers. But we’ve also learned the important lesson that you can’t just get this finished in the next Congress, and then sit back for 50 years. We’ll need to maintain active oversight, and keep monitoring how these reforms play out, and keep producing dynamic market competition.

    I like to remind people: “I’m not anti-tech — I’m pro-competition.” This is about making space in a competitive marketplace for the next Amazon or Google or Apple, for the next new great company to come in and compete and push everybody to improve. There’s a reason American public policy long has supported and promoted competition. We as a society have determined that competition produces better companies, and stimulates innovation, and offers more choice. It benefits consumers and enhances quality and strengthens our position in the world.

    We also know that monopolies and deep concentrations of economic power do not fit well within a thriving democracy. Concentrated economic power often brings concentrated political power. So a failure to address the monopoly power of digital platforms really means a failure to protect our democracy, plain and simple. We have to do this work. We have to go about it in a bipartisan way. But we also have to be thoughtful, and make sure we get the details right, especially for these important 21st-century marketplaces. We have to ensure that we create more opportunities, not less. We have to maintain and to advance the long-term health of our economy, and promote the best interests of American consumers and workers and entrepreneurs and innovators.

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