David Cicilline, a Big Tech watchdog in Congress, wants to learn from past merger mistakes

Key Points
  • House Antitrust Subcommittee Chairman David Cicilline, is looking toward new regulations to reform the digital marketplace and empower antitrust enforcers, the Rhode Island Democrat told CNBC in an interview.
  • Unlike the investigations into Big Tech by state attorneys general, the Federal Trade Commission and the Justice Department, the House cannot impose enforcement actions on the companies as a result of the probe. But it can use its findings to inform new legislation.
  • Cicilline said he hopes to wrap up the investigation into Facebook, Google, Amazon and Apple by early April.
Rep. David Cicilline, D-R.I., speaks with reporters after a meeting of the House Democratic Caucus in the Capitol on Wednesday, January 8, 2020.
Tom Williams | CQ Roll Call | Getty Images

As the House committee investigation into Big Tech is wrapping up, Rep. David Cicilline is beginning to turn his attention to new laws and regulations he believes can help fix areas of the digital marketplace he sees as broken.

One possibility: figuring out a way to measure the outcome of mergers versus what companies promised, and unwind them if there's a discrepancy.

"If a merger or an acquisition is approved based on a certain set of projected outcomes in terms of impact on the market, but it turns out to be quite different, is there a mechanism to go back and, whether it's unwind it or at least learn from that transaction so that it will inform the next decision about another acquisition or merger?" he said.

Report coming in early April

The Rhode Island Democrat and House Antitrust Subcommittee chairman hopes to complete a report on the panel's investigation into Facebook, Google, Amazon and Apple by early April, he told CNBC in an interview in his D.C. office Wednesday.

The investigation won't result in an enforcement action like the investigations by the Justice Department, Federal Trade Commission and state attorneys general could. But Cicilline hopes it will result in laws and regulatory proposals that target behaviors in the broader digital marketplace that he believes hinder competition and prevent start-up growth.

"As I think about this marketplace, it's pretty clear to me that it's not functioning properly, that there's not robust competition there," Cicilline said.

Cicilline has previously expressed skepticism around the federal agencies' ability and willingness to enforce effective remedies on the tech giants. He slammed the FTC's record $5 billion fine of Facebook last year and accused the DOJ's Antitrust Division of having "weaponized its advocacy program to help monopolists and undermine robust enforcement," referring to its support of Qualcomm in a case the FTC brought against the company.

"I think there's substantial evidence of discriminatory practices that favor platforms' own products and services. So the question of, how do you get competition back into this marketplace so that you can create room for the next great Apple or the next great Facebook or the next great Amazon, that's part of the reason you want to have a competitive market to make space for that."

While all four companies share the label of "tech," their business models vary significantly. Cicilline said while legislation won't target any particular company, it's possible to address the problems across the different business models by limiting certain types of behaviors -- for instance, like prohibiting behaviors favoring a platform's own products and services or limiting consumer data usage.

In particular, Cicilline said he is thinking about ways to measure the success of antitrust enforcement, such as requiring federal agencies to report on past mergers that they cleared to understand if the companies' representations of their future actions held true.

"I think there's a real opportunity to figure out how do we learn from a set of transactions that maybe turned out to be very different than all of the enforcement agencies thought would be the case."

Under that framework, regulators might have to reexamine Facebook's acquisitions of Instagram and WhatsApp. Facebook bought Instagram for an eye-popping $1 billion in 2012 when it had just 13 employees, and committed to running it as an independent service, according to a New York Times article announcing the deal. In 2014, when Facebook was trying to buy WhatsApp for $19 billion, the company told the FTC, "WhatsApp will operate as a separate company and will honor its commitments to privacy and security." But last year, Facebook revealed its plans to integrate and encrypt the messaging services across all three businesses.

Digging through past mergers would require a lot of work, and Cicilline said if the government expects "to reinvigorate antitrust enforcement in this country, then we need to be prepared to invest resources to do it."

Bipartisanship and cooperation with the states

As the group shifts gears from probing to legislating, Cicilline said he hopes the effort will remain bipartisan. The top Democrats and Republicans of both the full Judiciary Committee and Antitrust Subcommittee jointly agreed to launch the House investigation, and both agree that protecting small entrepreneurs and innovation is vital.

Members of both parties want to "protect innovation and give new entrepreneurs that are starting up an ability to compete and survive this kind of environment where there is such a huge dominant platform sometimes that controls their access to the market," Cicilline said.

But apart from that broad goal, members of both parties have different concerns.

Some Republicans, for example, have accused tech companies of baking political bias into their algorithms, a claim many Democrats dismiss. And Democrats may be more willing to impose broader regulations on the industry while Republicans tend to favor a more narrowly defined approach.

"I admit that it's easy to diagnose the problem, developing the solutions to respond to it that will be effective will be much more difficult," Cicilline said.

He's also keeping tabs on the states' relationship with the DOJ, which has been somewhat fraught as a group of Democratic state attorneys general have challenged the Antitrust Division's clearance of a merger between T-Mobile and Sprint in court. Cicilline said he had a "productive meeting" with Colorado Attorney General Phil Weiser while in the state for a field hearing with executives lodging complaints against the Big Tech companies.

He said he also spoke with staff at the New York Attorney General's office in a December conference call. New York AG Letitia James is leading the probe into Facebook, which includes 46 other attorneys general, and has been a leader in the states' case against the T-Mobile/Sprint deal. Her office is also involved in the antitrust probe into Google, which is backed by 50 total state and territory attorneys general and led by Texas AG Ken Paxton.

"We're trying to work collaboratively with some of the states that are doing this work, and the attorneys general and Colorado is really one of the leaders, to kind of understand what they're doing, what their experience has been with the DOJ, with the FTC, and looking for opportunities to share information that might be useful to the work they're doing and vice versa. So that was the beginning of what I expect will be an ongoing conversation," Cicilline said, adding he did not have enough information to characterize the states' relationship with the DOJ.

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