Cicilline Opening Statement for Antitrust Hearing on Monopoly Power

Mar 18, 2021 Issues: Consumer Protection and Financial Reform

David N. Cicilline
Strengthening the Laws to Address Monopoly Power
March 18, 2021
Remarks as Prepared for Delivery

In 1950, Congress enacted the Celler-Kefauver Anti-Merger Act, one of the last major amendments to the antitrust laws.

This landmark statute expanded the Clayton Act’s prohibition on illegal mergers to include stock acquisitions and non-horizontal transactions, reflecting the sense of Congress that unchecked monopoly power poses a threat to our economy—as well as to our democracy.

Congress enacted the Anti-Merger Act in response to the extensive record created by the Temporary National Economic Committee and the Federal Trade Commission on the dangers of severe economic concentration, and recommendations to reign in dominant companies that had captured key sectors of the U.S. economy.

As the FTC warned in 1948, “if nothing is done to check the growth in concentration, either the giant corporations will ultimately take over the country, or the Government will be impelled to step in and impose some form of direct regulation in the public interest.”

Following its enactment, the Supreme Court broadly construed the Anti-Merger Act in a series of decisions that reasserted the primacy of competition and the law over the rise and abuse of monopoly power—decisions which included Brown Shoe and Philadelphia National Bank.

Indeed, as the Court observed in 1962, this law clearly reflected “the danger to the American economy in unchecked corporate expansions through mergers,” and that acquisitions with even a probable anti-competitive effect are illegal.

But in spite of clear legislative intent, courts have systematically weakened the antitrust laws, limiting the analysis of competitive harm to focus primarily on price and output rather than protecting the competitive process.

As Judge Diane Wood will testify today, the doctrine developed by the Supreme Court over the last 45 years has “doomed” many cases to failure, leading to underenforcement.

The antitrust agencies have also contributed to this problem by adopting a narrow view of their authorities, particularly in emerging areas of the law or in the face of litigation risk.

Bill Baer, the former head of the Justice Department’s Antitrust Division, testified before the Subcommittee last Congress that the simple “fear of getting it wrong has warped antitrust,” adding that the attitude that “uncertainty should result in inaction” has also caused courts to require “a level of proof that is often unattainable.” As a result of these trends, market power has risen dramatically on an economy-wide basis, resulting in numerous industries that are dominated by just one or two companies.

As my colleague and friend, Senator Amy Klobuchar, said last week in a seminal hearing before the Senate Antitrust Subcommittee, “America’s market power problem cuts across our entire economy . . . We see it in everything from cat food to caskets.”

Numerous studies show high levels of market power and concentration across the U.S. economy, causing “nearly everyone to question whether our competition laws and enforcement approaches are adequate to protect consumers from anticompetitive conduct and mergers,” as Acting Chairwoman Rebecca Kelly Slaughter will testify today.

Moreover, during our investigation last Congress, the Subcommittee documented how today’s monopolies have exploited these structural weaknesses in the law and lax enforcement to expand their dominance by buying or burying their competitive threats.

For example, ahead of Facebook’s acquisition of WhatsApp, top executives at the company plainly described its strategy as a “land grab” to “shore up” Facebook’s position. In 2012, Mark Zuckerberg went as far as saying that the company could “always just buy any competitive startups.” In the years since, Facebook has certainly done so without receiving more than a single second request from enforcers.

Google has similarly entrenched its dominance in the navigation app market—of which it controls an estimated 80% and has been referred to by investors as a “utility.” It protected its market power through a series of acquisitions that eliminated any meaningful competitive threat.

Prior to its acquisition by Google, the CEO of Waze, Noam Bardin, said that the company was “the only reasonable competition” to Google Maps. Since then, he has commented that Waze “could have probably grown faster and much more efficiently had we stayed independent,” renewing concerns that this acquisition killed a competitive threat to Google’s own mapping services while reinforcing its power in other markets.

Our investigation also showed that, once dominant, these firms engage in a similar playbook of anti-competitive conduct to protect and expand their power.

For example, according to its internal documents, Google recognized as early as 2005 that specialized search engines could pose a threat to Google’s long-term dominance, noting that these search verticals could hurt Google badly.

In response, Google deployed a series of tactics to advantage its own services and appropriate the content of other companies online.

One entrepreneur, Brian Warner, told us that his website was thriving until Google stole his content, which led to a drop in traffic to his website by 80%, forcing him to lay off half of his staff.

Simply put, this conduct is destroying opportunity and entrepreneurship while undermining the open, decentralized nature of the internet that made it a bastion for innovation.

As Mr. Warner told us, “If someone came to me with an idea for a website or a web service today, I would tell them to run. Run as far away from the web as possible.”

We heard similar stories from other executives at small- and medium-sized companies who have been forced to slash jobs and cut research and development budgets primarily because of anticompetitive conduct by the dominant technology firms.

Across the board, we are seeing less innovation, fewer jobs, and less choice while a handful of companies are growing larger and larger. As a result, the Internet has become highly concentrated, less open, and more hostile to innovation and entrepreneurship.

Although the Federal Trade Commission and Justice Department recently filed lawsuits against Facebook and Google challenging some of these practices as violations of the antitrust laws, this conduct has gone unchecked for far too long.

This abysmal record was underscored by recent reporting by Leah Nylen of Politico on the FTC’s investigation of Google’s dominance in search nearly a decade ago.

Hundreds of pages of internal memoranda by the Commission’s economists and lawyers obtained by Politico demonstrate that despite significant evidence the FTC was unwilling to challenge Google’s monopoly power.

As the documents made clear, Google sought to “own the U.S. market” through exclusive contracts with carriers and device manufacturers, which made Google the default choice for search on the vast majority of smartphones.

Google’s own employees acknowledged that these “humongous” payments—which totaled billions of dollars—were used to block rivals from the market.

As Jeremy Stoppelman, the CEO of Yelp has said, these documents “show how Google methodically destroyed the web.”

And despite recommendations by the Bureau of Competition to file an antitrust lawsuit, the FTC voted unanimously to close the investigation.

Over and over again, these examples provide case studies of why we need a massive overhaul of our antitrust laws and significant updates to our competition system.

Today’s hearing is an opportunity to take additional steps in that process by identifying reforms to develop and clarify the antitrust laws to confront America’s monopoly problem. I thank our extraordinary panel of witnesses for their testimony, and I look forward to today’s hearing.

With that, it is my pleasure to recognize the gentleman from Colorado, the Ranking Member of the Subcommittee, for purposes of making an opening statement.