The Vergecast - Rep. David Cicilline on regulating big tech monopolies

Episode Date: January 23, 2020

After a congressional hearing with executives from Sonos, Tile, Basecamp, and PopSockets, the chairman of the House Subcommittee on Antitrust, Commercial and Administrative Law, Rep. David Cicilline (D-RI), speaks to The Verge’s Nilay Patel and Adi Robertson about leading an investigation into how big tech platforms like Google, Amazon, and Apple are affecting competition for other tech companies. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hey, Rudy Day, it's tonight from the Vergecast. We have a special extra interview episode for you this week. Verge senior reporter Addie Robertson and I sat down with Congressman David Cicillini. He's a Democrat from Rhode Island. He's also importantly the chairman of the House Subcommittee on Antitrust Commercial and Administrative Law. Obviously, the key word there is antitrust. His subcommittee has been leading an investigation into the big tech platforms and how they affect competition. Last week on Friday, they held a hearing with executives from Sonos, Popsocket, Base Camp, and Tile. in which those executives, on the record, under oath, talks about how the big platforms bully them. Congressman Cicillini's investigation is coming to a close.

You'll hear him talk about that. They're going to produce a report and then recommended legislation about how to regulate and manage the big platforms, how to enforce the antitrust law, potentially how to change antitrust law. One thing I want to call out, you're going to hear us talk about consumer harm and consumer welfare. It's a little bit of a complicated concept,

but here's a simple version. Right now, in order to be liable for antitrust violations, you have to meet something called the consumer welfare standard, which basically means prices go up. But so many of these platforms, Google, Amazon, are always bringing prices down or keeping things free, which means it's pretty hard to enforce the law against them. So one big question is, are you going to change a standard or are you going to find another way around it? We asked about it. I wanted to make sure we didn't get you caught up in jargon. It's there. You'll hear it. It's a really interesting answer from the congressman.

And you're also going to hear about how he's thinking broadly about competition in these markets and what it means. Check it out. It's Congressman David Cicillini on the Vergecast. Congressman David Cicillini, you're from Rhode Island. You're the chairman of the House subcommittee on antitrust commercial and administrative law. Welcome to the Vergecast. Thank you for having me. And I've got Addie Robertson here with me as well. Hi. Great to be here.

So last week you were in Colorado. You held a hearing. Your committee has an ongoing investigation into digital competition, which is something really interesting in that we're really interested in. To me, it felt like a turning point in the conversation about platforms because companies like Senos and Tile and Popsockets were going on the record and talking about the problems they have with platforms. Did it feel that way for you, too? Yes. I mean, I thought the hearing was a huge success for that reason. I mean, this is part of an ongoing major anti-dress investigation, the first of its kind in about 50 years in Congress. And we've heard a number of stories like the stories that were shared during that hearing.

but I think this was the first time that a group of CEOs and entrepreneurs provided sworn testimony under oath before Congress and before the American people about the implications of these large dominant platforms and the market power that they have. And so I think it helped people understand what the implications are of this tremendous concentration of power in these very large technology platforms and what it means to innovation and entrepreneurship and competition and, I really admire the witnesses who came forward because it required a tremendous amount of courage. When you hear about the stories about the bullying and the abuse of the power of these dominant platforms, it takes a lot of courage to come forward and share that in public the way they did. It was great that the public got to hear it. It was great that we got to hear it. You got to hear it too, and you're obviously chairman of the subcommittee. What were your takeaways?

You know, my reaction in hearing it was these are just some really good examples of large, you know, monopoly-like platforms that have tremendous market power that act as gatekeepers very often for competitors and who use their market dominance to make it more difficult for people to enter the market and compete on a level playing field. And the kind of size of these allows them to engage in bullying behavior, and I think the examples that Popsocket CEO described where they essentially offered their products that he was selling at a lower price. and then told the company,

we expect you to make up the difference, and when the CEO said, well, that's not in our agreement. Why would you expect that? And they essentially said, well, if you don't do it, we're not going to continue to have a business relationship. And thereafter, when they ended that business relationship,

Amazon continued to populate its website with fraudulent items being sold under the not in fact manufactured by Bobsocket and with very little interest in policing that. So that's very concerning, and it cost his business $10 million. So I think we saw examples in Tile with respect to Apple's kind of using their settings and their own kind of product that they develop,

you know, find my, and by creating this friction and creating difficulties for people to sign up for Tile because you have to go deep into the software, creating friction that will cause consumers not to use it. They're essentially putting, you know, Kyle had an incredible disadvantage, and they're using their market power to do that. And so I think, you know, these are examples of excluding competitors, blocking their entry

into the market or acting as gatekeepers, creating friction. All of those things are reducing the presence of competition and represent, you know, discriminatory behavior, which I think ought not be permitted and is having real implications for consumers and for companies and for entrepreneurs. So it really struck me listening to the struggles of these CEOs that are incredibly talented, innovative people that are developing companies, and to be sort of bullied by these large, dominant platforms. So this is part of a larger investigation. As you said, it's the first of its kind in quite some time. What else have you learned? How much more do you have to do before you wrap it up? You know, we're nearing the end of the collection of evidence and the investigation. We may have an additional hearing or two, I think, to finish the hearing.

I mean, the investigation, and then we'll begin the work of drafting the report, which will set forth the findings about how the marketplace is functioning or not functioning, what the absence of competition means. And then we'll present a series of proposals, both legislative and calls for regular. regulation that we think will respond to the absence of strong competition in this marketplace. So you are expecting to propose legislation at the end of this? Yes. How, I mean, I know your report isn't done and you're still working, but how sweeping do you expect that to be?

Well, I mean, I think it will be very significant. You know, I think as I've said throughout this investigation, these are very easy problems to diagnose. I mean, the evidence is, I think, very clear about the kind of market dominance of these large technology platforms and some of the anti-competitive behavior that they're engaged in. The greater challenge is coming up with the solution. So I think it's easy to identify the problem, but these are very complicated marketplaces. There are not easy answers to this. So we're going to work hard to come up with solutions that make sense that actually create competition in the space and protect consumers and protect innovators. I mean, one of the things that I think

is not always well understood is this market dominance has resulted in a significant decline. in innovation. If you think about the social media platforms, I mean, we haven't had a new successful social media platform in almost a decade. Isn't that, I mean, TikTok is new. It's successful. It's not at the scale quite of the other ones, but it's new and it's certainly successful. Yeah, I mean, we have had smaller ones, but I'm talking about we, you know, part of the purpose of this is to make sure that the marketplace is working so you make room for the next Facebook or the next Amazon or the next Apple. and their both acquisition strategy but also their behavior, I think, has made that less likely

we've seen a significant amount of evidence about a reduction in capital formation because people are less inclined to invest in something that they don't think can be built out to be a successful and big company. And so, you know, there are real implications of this kind of dominance, and the expectation is that the report will kind of set out what we found, will set out what the impact of this kind of market consolidation is to maybe modernize and update the antitrust statutes. It will certainly include some proposals or suggestions for regulatory framework that would be appropriate. And I think it will also include some discussion about the current level of antitrust enforcement

and ensuring that there are sufficient resources to robustly enforce the antitrust laws and making sure that they are staffed by people who are sufficiently creative and enthusiastic to actually be doing the work. So I think you'll see. see discussions of all those things. So we're talking, it's, you know, opening arguments of impeachment are going on in the Senate. It seems like there's just a lot of polarization in the world. But I was watching a hearing and I was struck that there seems to be at least a bipartisan consensus on the problem, if not the solution.

Absolutely. You know, when we launched the investigation, it was done in a bipartisan way with the full support of the ranking member, the Republican leader, on the judiciary committee, as well as the ranking member of the subcommittee, Mr. Sensenbrenner. So, and the investigation has been thoroughly bipartisan and in a very real way. Our staffs are working closely together. And I think you're right. I don't know that we'll have agreement on every single, you know, recommendation that the

final report makes. But I think there's broad recognition from Republicans and Democrats that this market is not functioning properly, that there is a significant absence of competition and a, and strong evidence of anti-competitive behavior by the dominant platforms. And I think there's a real understanding and expectation that we're going to do something about. It's been very bipartisan, and I hope it will stay that way. One of those striking things from the hearing last week was how different the accusations against each of these companies was. How much do you think the same remedy is going to work for Google and Apple and Facebook and Amazon?

It's a great question. And, you know, we've been very careful in this investigation to, you know, solicit information from the platforms, both in testimony and in documents, relevant to the way those platforms are operating, because I think they're not all the same, and their behavior has been different in many respects. So I think we're going to look at solutions that provide, you know, a response broadly to the marketplace. There's some issues where I think there has been very serious concerns by a particular company in this area or this particular company in that area. but I think this is very much about the marketplace generally,

and you will not see recommendations that are specific to a company, just like the investigation is not about a company. It's really about the marketplace broadly. And the application or the suggestions we develop both in terms of legislation and in terms of proposed regulations will address the marketplace broadly, but obviously respond to a number of different activities that we've seen throughout the investigation. Yeah, do you think that you can craft a single framework that's going to address, say, the whole spread of problems from that hearing? Yes, I do.

You know, and I think, again, the goal is to create competition, to protect competition in that digital marketplace so that, you know, when Amazon says give us back, you know, money for selling your product at a lower cost, that people have an opportunity to think about another platform because that other platform will have had an opportunity to grow and be successful and enter the marketplace. So, I mean, I think, you know, competition in each of these examples is the solution and making sure that we're promoting competition and protecting folks from a whole range of discriminatory behavior or bullying. I mean, I think you can imagine a number of ideas that would just say you can't engage in behavior that does X, Y, or Z. That would have a large digital platforms. So that's like a pretty classic conception of a behavioral remedy, right?

You can't do this. We're going to say you can't do it. you're forbidden from doing it. But there was a lot of talk about, you know, especially with Amazon, the platform self-dealing, cutting themselves better deals, selling their own products after finding the data. I spoke to Elizabeth Warren last year, and she said, you can't just do behavioral solutions. You've got to do a structural solution, and that's why she was proposing breakups. Do you agree with her on that? Well, you know, first of all, I think it's hard. I mean, Congress has certain power. Breaking up companies is actually not one of them. So while,

we may have made a mistake by allowing some of these companies to get as large as they have. In fact, we have made a mistake. I think we should have had much more rigorous antitrust enforcement that would have prevented a number of these companies from getting as big as they are. That's a problem. And so I think what we have to figure out now is, are there ways to require retrospective review of some transactions? There's a way to ensure that if the transaction is approved based on a set of expectations that you then have an opportunity to go and see if those expectations were met or did something different happen and learn from that. But I think it's harder for Congress to think about enacting a statute that break. I do think that we, I think the other

suggestion that Senator Warren has made is a really interesting one and something I think that I thought a lot about this notion of you can be either a platform or you can be a, you know, manufacturer, producer of services, but you can't do both. Sort of the glass deagle of the internet. It's kind of an interesting idea because people go to a platform thinking somehow when they do a search, there's some neutral way that evidence is reviewed and you're provided with a result from that search. Well, we know that that is not the case that the way items get into the Amazon buy box and Amazon's used of its own private label to promote its own goods. It creates sort of an inherent conflict. You know, you're both a platform and a manufacturer of goods. And so it's kind of an

interesting idea to think, like, should you at least separate out those functions and say, you can be one or the other, but you can't be both. But I think breaking up, you know, these companies are too big, and we've allowed them to exercise monopoly power. We have to figure out how to correct that. So I think, you know, I'm looking at kind of what are the current antitrust tools that are available to antitrust enforcers and how we might use those to promote competition and think of that would allow us to, as a Congress, to go and break up a particular company. I think We can do a lot of things to petition that space. But, you know, everything is on the table in my view.

But I'd have to think long and hard about how we could, in a congressional enactment, actually break up a company. That point you made about platforms and self-dealing is really interesting. I'll tell you, I've had a bunch of Microsoft executives from the 90s just tweeting at me all day about how the Microsoft antitrust suit didn't actually accomplish anything. And really the question that they keep asking is what shouldn't. you be able to integrate, right? So Tile was at the hearing. They built a tracking product. It appears, we don't know yet, but Apple is rumored to be building a tracking product. Apple's product will obviously have greater access to the operating system in the iPhone than Tiles product. Should that kind of conduct be prohibited? Should Apple have to have open APIs, which was

part of the Microsoft consent decree? Yeah, I mean, I would, I'd have to think about the example you gave, but certainly if in that example, Apple makes it much more difficult for people to access the tile product using their software and buries it in, or as they describe, you know, they constantly get reminders, do you want to, you know, continue this service or do you want to wave, you know, I forget the particulars, but basically constantly prodding them to have to answer a prompt. And that creates the kind of friction that ensures that their competitor doesn't really have access to the marketplace, or if they do, it's short-lived.

And so, you know, I think what we have to look at is, is the behavior of the company, you know, can it fairly be described as anti-competitive? Are they using their market dominance to make it impossible for a competitor, enter the marketplace, and survive? And as a result, you know, leading to a reduction of innovation, whereas maybe ultimately an increasing cost. But, you know, they're only able to do that because they have so much market dominance. And so part of this is how do we deal with the reality that these four large technology platforms

are so big. controls so much of the market that they can, with a change of an algorithm, with making more difficult to access their software, you know, that's not good for the economy. It's not good for consumer choices. It's not good for innovation. And it's not good for competition. So there were some really pointed questions and comments about consumer harm. Like Sonos, obviously, was talking about how people just aren't getting features because of Google's dominance. So are you thinking about ways to think about consumer harm more expansively, or do you think think that we need to develop a standard that changes the consumer harm requirement completely?

Yeah, I mean, I think for sure, sometimes it was a good example of where consumers are actually, you know, there was testimony that they're being harmed as a result of not being able to provide services as a result of, and I think that's very problematic. But that's a good example of where just consumers are not getting the benefit of services they would otherwise get, but for this very large dominant market. But I think, you know, we've been thinking a lot about that in the investigation. whether or not, you know, you want to think about consumer welfare more broadly or whether or not we ought to have an anti-trust statute that really contemplates the harm that comes from an absence of company in the digital marketplace.

And, you know, maybe that relates to a whole range of other concerns about the impact on consumers and the impact on jobs, the impact on privacy and the impact on the ability of people to control their own data. And I think, you know, I'm thinking very broad, you know, expansively about, you know, what we should be protecting in our antitrust statutes, whether we need to modernize and update them to reflect kind of the current economy and the current, kind of the 21st century broadly. I mean, you think about our antitrust statutes. They were principally developed at the turn of the century in response to tremendous market consolidation and the oil and gas and railroad industries.

These are very different markets. And so it's, I think, an appropriate time to look at the existing antitrust statutes and say, do they capture what we need to capture when we think about promoting competition in this space? and do we need to kind of update them in some way? And I think thinking about that really broadly, there are a lot of good economists, technologists that we've listened to about the implications of this kind of market consolidation in the digital marketplace. And, you know, it has an impact on issues that I care a lot about.

You know, one of the first hearings we did was the impact of the large technology platforms on free and diverse press and its impact on local journalism. And so it's not just like impacting the sale of widgets and the price people pay and the access they have to, you know, products. It's about access to free and diverse and reliable, trustworthy news, which is a cornerstone of our democracy. And so I think there are really serious issues beyond the kind of economics of this about, you know, undermining our elections,

about undermining our ability to access, reliable, trustworthy information that is essential to holding public officials to account and exposing corruption and all those things. So there are really profoundly serious implications. Yeah, how does antitrust and this report specifically intersect with other potential tech-related reform, like the hearing last week touched on targeted advertising and data privacy, both of which kind of exist as their own issues? There's obviously some argument to be made that to the extent that a platform privacy protections for their users, that there at least one response to that is a competent you could imagine a requirement that, you know, a requirement that.

all platforms provide for interoperability and portability so that if people are dissatisfied with the level of privacy protections of one particular platform, they can move easily to another platform and maintain the same level of interoperability. And that's certainly a competition-based solution that might, hard to imagine that that would be sufficient, but I think I'm certainly, I think many of us are thinking about that as one of the approaches to this, obviously that's in PR and even the state of California, the idea of like giving people the ability to quickly and easily move to a competitor who might offer them. So that kind of ties into, you were saying the economy is different now.

I don't think oil companies had a network effect where every incremental customer they had made the whole oil company more valuable for every other customer. That is how these companies got really big. And people do like it. At the end of the day, people really like Amazon. They're happy with it. Our listeners and readers tell us, I wish Apple made X new product. They kind of want them to be really big.

How are you thinking of balancing some of the consumer affection for the big tech companies with the fact that regulated the network effect would kind of necessarily change them in a meaningful way? Well, I mean, I think part of the response we have in this investigation, and I think you'll see this report, is explaining to the American people. We've tried to do that in a series of hearings. Explain to the American people what the implications are of this kind of market dominance and what it means in terms of job creation and what it means in terms of innovation, what it means in terms of making space for the next great Amazon. And so, you know, that is part of our responsibility to show, look, this is not that nobody, this is not

a suggestion that we don't like these companies. This is a suggestion of, they are so large and the market has competition so that we're not making room for the next great company. And then giving people some examples of why this matters, both in terms of their ability to control their own data, the misuse of their data, the bullying by these companies being treated. That ultimately has implications for consumers too. But part of this investigation is to really speak to folks about why this matters. It's not just sort of an academic exercise for a bunch of members of Congress who are, you know, fascinated at this. You know, I'm embarked on this because my constituents know, you know, part of the reason

the economy is not working for them is because we have seen an enormous concentration of economic power behaviors that are making these marketplaces less competitive and that are, you know, probably to do something about it. But we, you know, I understand that these are companies that have, you know, broadly speaking, popularity. And, you know, we recognize that, which is why we're going to be. very carefulness report to kind of describe why it is that this is important work to do and what will be the consequences of us failing to take consumers and protect competition and

protect innovation. Have you reached out to these companies as well directly? Have you had a hearing with Apple and Facebook and Google or you've just talked to them? I've talked to the CEOs when the investigation began. They all pledged their cooperation and so far that has been the case. and were in regular contact to my staff and their general counsel. You know, I've made it very clear that this purpose of this investigation is not directed to a particular company or a particular incident that, you know, we don't have, this is not an investigation that is done in connection with an enforcement action. This is an investigation about the marketplace broadly and about our responsibility to develop

good solutions and good ideas to get this marketplace working and to really help to expect and they have, in fact, been part of this. All right, you've given us more time than you promise, but I do have one more question if you have time to answer it. I am curious on your view of the Microsoft Netscape enforcement action, which seems to be the, it's like the shadow over all of this. Like, did it work? Did it not work?

Did just knocking Microsoft back a little bit, create the environment for Google to emerge? There are multiple interpretations of what happened there. I'm curious for yours. Yeah, I don't think there's any question it worked. I think I think there's any question that made space for an enormous amount of... Just pursuing the enforcement action itself, not the consent decree. Yes.

And are you hoping for a similar result here? Are you hoping to take it one step farther? Well, I mean, you know, we don't have... This is not an investigation that will result in an enforcement action. This is an investigation that, you know, Congress is the only place that has the ability to actually change the statutes and update the laws and put, you know, proposed regulations to actually fix this marketplace. So unlike an enforcement action, that focuses on the behavior of a... single company that then gets directed to do a single thing. Our work is much broader and it is actually more significant because if we do it right, we can get this digital marketplace

working properly and that will benefit consumers. It will benefit the next great company that's going to come down the pike because competition was possible. But if you write a bunch of new laws and regulations and then you staff an agency with creative, enthusiastic people who want to do it, you're going to result in a bunch more enforcement actions, presumably. Correct. Or a bunch better behavior by digital platforms. Yeah, it makes sense. Are you working with Elizabeth Warren or any of the other candidates on legislation actively, or are you just taking inspiration for them? No. I'm... Got it. Well, Congressman Cicillini, thank you so much for the few extra minutes here, and we hope to hear from you and hear about this investigation soon. Great. Thanks so much for having me.

My thanks to Congressman Cicillini for joining us. That was a great conversation. My thanks also to Addie Robertson. We're obviously covering more of this as it continues to grow. We're going to be really interested in the results of this investigation when it comes out. We'll be back tomorrow with the chat show, back on Tuesday with the interview show. We've got a lot of interview shows books, so you might see some extra ones from us as we go down the weeks here, but I think they're all pretty good. Tweet at me, I'm at Reckless. We'll talk to you soon.