Google, Facebook and Amazon face tough questioning over potential monopolies

Midway through a congressional antitrust hearing Tuesday afternoon, Colorado Rep. Joe Neguse asked a Facebook representative if his company was a monopoly.

"No, congressman, it is not," Matt Perault, Facebook's head of global policy development, quickly responded.

Neguse, a Democrat, then proceeded to list some of the biggest social-media companies worldwide by active users. There was Facebook at No. 1, then WhatsApp at No. 3 and Facebook Messenger at No. 4. Instagram was No. 6. All four are owned by Facebook.

"When a company owns four of the largest six entities, measured by active users, in the world in that industry, we have a word for that," the congressman said, "and it's monopoly, or at least monopoly power."

That exchange, during a House Judiciary hearing, may offer a clue for US tech giants on how they'll be viewed in Washington, DC, as Congress and regulators start reviewing the competitive practices and acquisitions of Facebook, Google , Amazon and Apple . But, with the government just starting its investigations into these companies, there's no clear sign yet if this work will result in any major changes, such as the break up of Facebook from Instagram and WhatsApp, or significantly more regulations to rein in these tech titans.

The hearing occurred amid heightened scrutiny of tech giants, with the Federal Trade Commission reviewing competition in the industry, including past mergers and potentially anticompetitive practices. State attorneys general are gearing up to investigate big tech, too. Sen. Elizabeth Warren, a Democratic presidential candidate, is calling for a breakup of Apple, Amazon, Google and Facebook, arguing that they've become too powerful.

The hearing included representatives from Google, Amazon and Apple, though Apple received the fewest questions. That could be because the company isn't seen as much of a monopoly threat or because its representative just lucked out Tuesday. Apple has faced questions over its App Store, with worries that it favors its own services over competing apps.

All four representatives claimed they faced intense competition in their industries and their customers had many choices for rival services. However, in some cases, those claims of competition referenced far smaller rivals, such as Yelp, Travelocity and Snapchat. They also pointed out their work to invest in the US economy and American jobs.

While Congress members in the hearing sounded mostly concerned about the vast power of these companies, Congressman Jim Sensenbrenner, a Wisconsin Republican, offered words of caution for his fellow representatives. He called on Judiciary members to look at these companies' actions, not just their size, and warned that breaking them up could end up harming smaller businesses and fail to solve ongoing problems, like privacy issues.

"Just because a business is big doesn't mean that it's bad," he said, later adding, "Antitrust laws don't exist to punish success."

Nate Sutton, Amazon's associate general counsel for competition, faced a series of questions about how his company may be stifling competition in online retail and harming smaller sellers on its site. Sutton, a former lawyer for the Justice Department's antitrust division, batted back questions that his company may be identifying some of the most popular products on its site and copying them.

"We use data to serve our customers," Sutton said, while being reminded several times he was answering under oath. "We don't use individual seller data to directly compete with them."

Google, too, was questioned over claims that it was keeping more of the traffic on its site and directing it to its own services, instead of competitors. Rep. David Cicilline, a Rhode Island Democrat, argued that if Google's search is "rigged" in favor of Google, "then the internet as we know it ceases to be an engine of economic opportunity."

Google's Adam Cohen said his company sends a lot of its traffic to rivals.

Like Neguse, Rep. Hank Johnson of Georgia sounded particularly concerned about Facebook's market power.

"Each one of you occupy a unique and dominant position," he said, "but Facebook stands alone in terms of social media."

'Dream of being bought, not of building something of their own'

The tech giants were slammed during the second panel Tuesday afternoon, with the congressional hearing heard from professors and antitrust experts.

Timothy Wu, a law professor at Columbia Law School, said the consolidation of tech companies is threatening the US' position as the place where new industries are pioneered.

"I fear ... we will become a country where inventors and entrepreneurs dream of being bought, not of building something of their own," Wu's opening statement said. He pointed to Facebook's acquisition of Instagram back in 2012, saying it showed the power of buying out threats to eliminate competition, as well as the "willingness of government" to go along with it.

Stacy Mitchell of the Institute for Local Self-Reliance agreed, saying there has been a steep decline in independent companies that has resulted in the control of commerce by just a few tech giants.

Mitchell said the rise of Amazon has harmed American entrepreneurship, local economies, innovation and competition. Amazon fulfillment center fees have doubled, local businesses are disappearing, producers are struggling to invest in new products and business formation down to historic lows, she told the congressional hearing. The Amazon worker strike this week during Amazon Prime Day also showed how work environments have become "increasingly exploitative" due to the lack of competitor employers, she said.

Watch this: What's going on at Google?

05:47

Digital platforms have a high barrier of entry, making it difficult for new companies to enter the market, argued Fiona Scott Morton, an economics professor from Yale. And while the existing companies do spend money on R&D, this doesn't achieve the same level of innovation that having multiple competitors in the market would.

On the other side of the fence was Carl Szabo, VP and general counsel of trade association NetChoice, who argued that large platforms help small retailers. He listed off Etsy, YouTube, eBay and Facebook Marketplace as opening up this access.

"Competition is robust," he told the hearing, claiming that this was shown when Google took over search dominance from Yahoo , when Facebook overtook MySpace in social networking and how TikTok is bringing competition to Facebook now -- "and all that in the last couple of years."

Morgan Reed, executive director of the App Association, also argued that innovation and competition are "happening everywhere."

"The app economy is thriving," he said, adding it is worth $1.3 trillion today and has created 5.7 million jobs in the US.

But of those pushing to fix the situation, Morton recommended better antitrust enforcement to stop big companies from buying their competitors. She also suggested a digital regular to break barrier of entry by establishing open standards for data portability and micropayments, and regulations so consumers can control their own data. 

While Wu recommended more antitrust measures including retroactively reviewing mergers, Maureen Ohlhausen, an antitrust practitioner and partner at Baker Botts, said "trying to unscramble the eggs" long after a merger has occurred, or even breaking up the tech giants, carries a serious risk of harm to consumers.

First published at 3:56 p.m. PT on July 16.
Updated at 4:51 p.m. PT: adds detail on second panel.