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Antitrust reform was supposed to be one of the best chances for bipartisan compromise during the current Congress. But critics of monopoly power will likely have to rely on independent agencies for any federal government action against Big Tech next year, experts tell MarketWatch.
“There is still pervasive angst toward Big Tech, but we are no closer to a coordinated bipartisan response,” even after a year of hearings and scandals that has created the perception of a united political front against powerful tech platforms, Robert Kaminski, policy analyst at Capital Alpha Partners, said in an interview.
The chances for a bipartisan push to strengthen antitrust enforcement was likely highest in June, when Democratic Rep. David Cicilline of Rhode Island and Republican Rep. Ken Buck of Colorado led the passage of seven new antitrust bills through the House Judiciary Committee.
If the bills were to become law, they would make it more difficult for large tech platforms to acquire smaller companies, ban large tech firms from using their platforms to promote their own products at the expense of rivals, and force social media companies to make it easier for users to switch to a rival service.
The most sweeping bill of the six is the Ending Platform Monopolies Act, which would end “the ability for dominant platforms to leverage their control over multiple business lines to self-preference and disadvantage competitors,” and could potentially deal a serious blow to the business models of companies like Amazon.com Inc.
AMZN,
and Google parent Alphabet
GOOG,
That these were able to pass the House Judiciary Committee in a bipartisan fashion was seen at the time as evidence of broad support for these strict measures, but the unique composition of the panel means that those results cannot be extrapolated to Congress at large, according to a recent analysis of antitrust dynamics published by Beacon Policy Advisors.
“While this package of bills was voted out of committee in a relatively contentious markup, they have completely stalled on the House floor,” Beacon analysts wrote. “This is not too surprising given the resistance that they face from much of the House Republican caucus and lack of unified Democratic support.”
Sen. Amy Klobuchar, a Minnesota Democrat, has taken up the cause of these bills, putting forth bipartisan legislation in the Senate that scales back the Cicilline-Buck legislation in an effort to get broader support. While she has gotten support from high-profile Republicans like Sen. Chuck Grassley of Iowa, the lack of public support for these measures from Republican Sen. Mike Lee of Utah illustrates the difficulty any tough antitrust legislation will have getting 60 votes in the Senate and a majority in the House.
Lee, as the ranking Republican on the Senate antitrust subcommittee, is “one of the more influential members of the Republican caucus on antitrust policy,” the Beacon analysts argue, and GOP senators, most of whom are skeptical of government oversight of the private sector, will take his lead on the issue.
The Beacon analysis also points to the importance of the 42 Democrats representing California in the House after the state’s moderates — including Reps. Zoe Lofgren, Lou Correa, Ted Lieu and Eric Swalwell — voted against the measures in the judiciary committee, arguing that they went too far. “It should also be said that without the support from House Speaker Nancy Pelosi [also a California Democrat], these bills would be effectively dead on arrival,” they wrote.
Ed Mills, a Washington policy analyst at Raymond James, said in an interview that Democrats have political reasons as well as geographical ones to be wary of entering into a grand bargain with their rivals across the aisle on this issue.
“There’s always an election around the corner, and the question quickly becomes, ‘Would Democrats want to give Republicans a victory?’ and vice versa,” he said. “Some of the Republicans, especially on the Senate side, who are most vocal are all eyeing the White House.” Missouri Republican Sen. Josh Hawley and Arkansas Sen. Tom Cotton are both members of the Senate antitrust subcommittee who are thought of as potential candidates for the Republican nomination for president in 2024.
Investors should remain focused on the Federal Trade Commission and the Department of Justice’s antitrust division as the main drivers of competition policy in 2022, according to Capital Alpha’s Kaminski.
“In the absence of new laws, the FTC will act and act aggressively,” Kaminski said. “The current FTC believes that prior ones haven’t done enough. They are not worried about doing too much,” adding that investors should expect the FTC to “challenge more mergers and file more lawsuits,” not just in the technology sector but across the U.S. economy.
The FTC and DOJ have already launched lawsuits against Facebook parent Meta Platforms Inc.
FB,
and Google parent Alphabet Inc., but the most important impact that these agencies may have in the coming year is in the mergers that they sue to block or that companies don’t attempt to merge at all, Mills of Raymond James said.
“I’m interested to see how much or how frequently the FTC or DOJ will sue companies that are seeking to merge,” he said. “In the past what these agencies fought for most was to get a resolution. They didn’t want to lose and set a bad precedent. That’s not as much of a concern as it used to be,” he added, noting that this dynamic is likely to weigh on multiples of small cap stocks,
RUT,
SML,
given that large companies are less likely to acquire them.
Mills suggested that investors pay attention to a broader effort to regulate big tech — including efforts to reform Section 230 immunity from libel lawsuits enjoyed by tech platforms, that could be pursued in the name of fighting monopoly power — as another factor that could hurt smaller companies without doing much to curb profits at large tech platforms.
“Most investors are concerned about the impact of new regulations on small and medium sized companies, and whether they further build a moat around the larger companies,” he said. “With banks we talk about too big too fail, but with tech the question is are you too small to comply.”
