Hearing of the House Antitrust Subcommittee of the House Judiciary Committee - Cicilline Chairs Antitrust Field Hearing on Role of Competitors in the Digital Economy

Hearing

It is a pleasure to be at the University of Colorado Law School for today's hearing, the fifth in the Subcommittee's series on "Online Platforms and Market Power," and the Subcommittee's first field hearing in more than a decade.

In July, the Subcommittee received testimony from executives representing the four dominant online platforms--Google, Amazon, Facebook, and Apple--along with a panel of leading experts about the effect of market power in the digital economy on innovation and entrepreneurship.

Through both that hearing and other parts of the Subcommittee's investigation, it has become clear that these firms have tremendous power as gatekeepers to shape and control commerce online.

As Stacy Mitchell, the Director of the Institute for Local Self Reliance, testified, "A growing share of our commerce now flows through a handful of digital platforms. These powerful gatekeepers not only control market access, but also directly compete with the businesses that depend on them."

It is apparent that the dominant platforms are increasingly using their gatekeeper power in abusive and coercive ways.

Because these platforms function as bottlenecks for online commerce, they are able to set the terms and conditions of competition, giving them immense power to pick winners and losers in the online economy.

It is far too common to hear horror stories from startups and other small businesses about how a dominant platform's abrupt changes have destroyed their business.

A single sudden change to an algorithm, a software update, or new product design can be disastrous for the millions of companies that depend on these platforms to get to market.

And because these platforms actively compete with the very businesses that rely on them, what may be portrayed as an innocent change could very well be a deliberate strategy to crush any existing or potential competition. Companies across the online ecosystem, both large and small, have found themselves dependent on the arbitrary whim of these platform giants, one algorithm tweak away from ruin.

In many cases, there is little notice or any real recourse for the companies that are disadvantaged by the platforms' conduct. Because their decisions are largely unaccountable, opaque, and result in sweeping consequences, the dominant platforms effectively serve as private regulators.

The dominant platforms can also use their gatekeeper power to dictate anti-competitive, take-it-or-leave it contract terms. Startups and small businesses have had to sign away certain basic rights or hand over valuable data to a competitor as the price of accessing their customers through the platform. Such coercive terms of doing business would undoubtedly be absent in a competitive marketplace.

For locally-owned businesses that are the economic lifeblood of their communities as both job creators and engines of prosperity, this gatekeeper power--and how the platforms are exercising it--is of tremendous concern.

Many small businesses are forced to rely on dominant platforms to advertise or sell their products and services online. In many cases, they do not have an alternative.

Earlier this week, my staff spoke with an online seller whose entire economic livelihood and his family's health has been jeopardized by one of the dominant platform's sudden, arbitrary, and reckless decision to suspend his business and block access to his inventory.

Not only does this dynamic threaten ongoing competition, but it also has lasting effects as a powerful disincentive for new entrants to try and compete with powerful incumbents.

As Patrick Spence, the CEO of Sonos, will testify today, this shuttering of competition online "dries up the venture capital new companies need to develop the next great inventions and bring them to market. Venture capital firms are well aware of the kill zone that surrounds start ups that pass within striking distance of the dominant platforms--they stay away from those investments."

Today, we will hear from the CEOs, founders, and senior executives of several dynamic and innovative companies that must confront this economic nightmare.

Each of the innovative companies represented here today--Sonos, PopSockets, Tile, and Basecamp--are American success stories. I applaud them for their courage to share their testimony in the face of potential retaliation by the dominant platforms. We have been in touch with a number of companies with similar perspectives that, understandably, will not testify due to this very real concern.

With that, I thank our esteemed panel of witnesses for appearing today.

I also want to thank Subcommittee Vice Chairman Neguse--who represents Boulder, Colorado--Dean Jim Anaya, and all of the hardworking professors and professional staff at Colorado Law for hosting today's field hearing.

It's now my pleasure to recognize the Gentleman from Colorado, Congressman Ken Buck, an esteemed member of the Subcommittee and the Representative of Colorado's fourth congressional district, for the purposes of making an opening statement.

Source