By Jon Swartz
Big Tech’s first big showdown for antitrust legislation is about to reach Capitol Hill.
A Senate bill that squarely aims at reining in the power of vast digital platforms from Apple Inc. /zigman2/quotes/202934861/composite AAPL -2.85% and Google parent Alphabet Inc. /zigman2/quotes/202490156/composite GOOGL -5.81% /zigman2/quotes/205453964/composite GOOG -6.02% will be debated by the Senate Judiciary Committee in a public hearing Thursday. A second bill, likely to be considered next week, has similar goals.
The so-called self-preferencing American Innovation and Choice Online Act from Sens. Amy Klobuchar, D-Minn., and Chuck Grassley, R-Iowa, prevents the likes of Apple, Google and Amazon.com /zigman2/quotes/210331248/composite AMZN -3.96% from favoring their services over others. The other bill, the Open App Markets Act from Sens. Richard Blumenthal, D-Conn., and Marsha Blackburn, R-Tenn., promotes competition on app stores such as Apple Store and Google Play.
In-depth: What is a platform, and what should one do? The answer could determine the future of Apple and the rest of Big Tech
The first measure is designed to keep Big Tech from leveraging power in one arena to benefit products in another, such as Google favoring its own shopping results — which can be paid for by advertisers — in search results.
“The narrowly tailored legislation would go a long way in preventing the most egregious self-dealing by companies like Google,” Yelp Inc. Chief Executive Jeremy Stoppelman said in a statement late Wednesday.
The Open App Markets bill, scheduled for markup before the same committee publicly on Jan. 27 or Feb. 3, would prohibit Apple and Google from forcing developers to exclusively use their app payment systems as well as bar the two companies from favorably pricing and ranking their apps against competing brands. Developers would be allowed to sue for injunctive relief.
Tech’s heaviest hitters are aiming most of their animus at the first bill, antitrust advocates told MarketWatch.
“They hate it because it affects bottom line by boosting themselves over competing products,” Sacha Haworth, executive director of the Tech Oversight Project, an advocate of antitrust legislation targeting Big Tech. “Addressing Big Tech platforms’ dominance through antitrust is the way to rein in their behavior, and this s the moment to make things happen.”
The Tech Oversight Project, which launched Tuesday, is funded by the Omidyar Network, a philanthropic venture started by eBay Inc. /zigman2/quotes/204653455/composite EBAY -3.08% founder Pierre Omidyar, as well as the advocacy arm of the Economic Security Project, a nonprofit organization led by Facebook /zigman2/quotes/205064656/composite FB -8.72% co-founder Chris Hughes. Hughes has called for the breakup of the company, which is now called Meta Platforms Inc.
“For too long, dominant technology companies have made it difficult for other businesses to compete in the digital marketplace by abusing their gatekeeper status to give themselves and their partners preferential treatment and access on their platforms,” a group of more than 40 companies including Yelp Inc. /zigman2/quotes/201334325/composite YELP -6.99% and Sonos Inc. /zigman2/quotes/200589226/composite SONO -7.82% said in a letter to the committee supporting the American Innovation and Choice Online Act.
Read: These are the antitrust efforts that could make Big Tech bleed in 2022
Apple and Google vigorously pushed back at the bills, with dire warnings that their passage would endanger consumers and unduly damage their ability to do business.
“These bills will reward those who have been irresponsible with users’ data and empower bad actors who would target consumers with malware, ransomware, and scams,” Timothy Powderly, senior director of government affairs, Americas, for Apple said in a letter to committee members Klobuchar, Grassley and Mike Lee, R-Utah. “The most glaring problem with these bills is the risk they pose to the privacy and security of Americans’ personal devices.”
Alphabet went even further, arguing in a blog post that the bills would “impose one set of rules on American companies while giving a pass to foreign companies.”
“Americans might get worse, less relevant, and less helpful versions of products like Google Search and Maps,” wrote Kent Walker, president of global affairs and chief legal officer at Google and Alphabet.
The battle over the Senate bills come at a time when the largest tech companies encounter an increasingly hostile political landscape. The heads of the Federal Trade Commission and Justice Department on Tuesday called for a review of existing merger guidelines that reflect realities of the modern digital economy. [The announcement came just hours after Microsoft Corp. /zigman2/quotes/207732364/composite MSFT -0.79% announced its intention to acquire gaming company Activision Blizzard Inc. /zigman2/quotes/200717283/composite ATVI -0.45% for $69 billion in what would be the industry’s biggest deal ever.]
For more: Microsoft faces antitrust battle for Activision deal, especially if ‘Call of Duty’ is destined for Xbox exclusivity
“Too many industries have become too consolidated,” said Jonathan Kanter, who leads Justice’s antitrust division. “The digital revolution has impacted not just tech but other interconnected industries and markets.”
A broader assessment comes amid what FTC chair Lina Khan called a “merger surge” that resulted in a record $5.8 trillion in global deals last year. “The merger wave is threatening to deny Americans of lower prices, choice and innovation,” she said.
Through a review process this year, the two federal agencies intend to look closer at the impact of mergers and acquisitions on labor markets, market power and competition — and do so with input from consumers, federal and state lawmakers, and competitors of Big Tech.
“We share with the FTC concerns over vertical mergers,” Kanter said.
Attorneys for the Justice Department and FTC declined to comment on Microsoft’s deal. Khan and Kanter did not take questions in a brief Q&A following their merger review announcement.
“We applaud the agencies for launching an open, clear-eyed look at gathering input from diverse stakeholders who are impacted by merger policy, yet have historically been shut out of agency discussions,” Sarah Miller, executive director of the American Economic Liberties Project, told MarketWatch.