Yesterday's Big Tech Congressional hearing featured something that's exceedingly rare in Washington: bipartisan agreement.
Sure, there was the expected grandstanding about hypothetical conservative bias, and weird questions about emails going into spam folders and when HBO Max would be on Amazon Fire TV. But there was also a strikingly consistent belief among the 15 members of the U.S. House of Representatives' Antitrust Subcommittee that Apple, Amazon, Facebook and Google have too much power.
Both Republican and Democratic Congressmen laid out instances where companies have stifled competition, including Amazon using data from third-party sellers against them and Facebook's internal discussions about how buying startups Instagram and WhatsApp could choke off eventual threats. While the CEOs "respectfully disagreed" with many characterizations, years of deflection around touchy issues may have undermined their overall credibility with both lawmakers and the public.
So Congress thinks there's a real problem here. But we didn't learn anything about what they plan to do about it. And that's probably because the members simply don't know. It's likely all four companies will be highly scrutinized for any market pivots or strategic acquisitions moving forward. But scrutiny doesn't equal action.
This isn't a new American problem. It's easy to diagnose problems: Rising health care costs, growing inequality, electoral college unfairness, and so on. Doing something about them takes bold leadership and, sometimes, fumbling legislation. It would have been nice to hear some ideas about how the companies would respond to potential legislative or regulatory solutions, such as spin-outs of divisions (Google and YouTube, Facebook and Instagram), restrictions on future strategic acquisitions, or laws around Apple's App Store policies.
There's not going to be a one-size-fits-all legislative or regulatory fix for the four companies. Each company has its own dominance issues, making it unfeasible to create a single broad law that applies to all of them.
But it was notable that representatives both sides of the aisle basically came to the same conclusion.
This type of basic agreement -- even at the lowest levels of "there seems to be a problem here" -- is increasingly rare in high-profile Congressional hearings, which often degrade into political showcases where Democrats take one side and Republicans argue the opposite. While Sensenbrenner did note that bigger companies aren't necessarily problematic, there were few, if any, comments echoing what Morgan Stanley Vice Chairman Robert Kindler told CNBC earlier this week:
"I think companies like Amazon have been absolutely terrific for the economy and for the consumer," Kindler said. "What would we have done during this pandemic if we didn't have companies like Amazon? I just can't imagine that people don't think that these are fantastic things that all of these huge companies have brought."
Even if Congress can't figure out the next steps, Amazon, Apple, Facebook and Google may have to approach future acquisitions very carefully to avoid regulatory pushback. Even small deals could be at risk to be blocked, especially in a Democratic administration, given the committee's attention to CEO Mark Zuckerberg's emails about how buying Instagram could stifle future competition. Facebook only paid $1 billion for Instagram -- peanuts from today's perspective, where Facebook has a $662 billion market valuation and earned more than $18 billion in profit last year. While Facebook was much smaller in 2012, the committee highlighted several instances of Zuckerberg saying in emails that it was easy to acquire startups, suggesting Facebook could use its market power to throw cash at entrepreneurs who may be tempted by big payouts.
Indeed, a revealing back-and-forth between Zuckerberg and Instagram CEO Kevin Systrom highlights this point. Systrom tells Zuckerberg that "I'm not coming back at you to change the offer (then $500 million) because I don't think that's what drives us. Of course there's a limit to that logic."
Sure enough, Zuckerberg raised the offer to $1 billion and Systrom sold. Further, Systrom told Zuckerberg he had concerns about Facebook limiting his independence to run Instagram as he pleased. Zuckerberg responded, "You reference flexibility and things you'd like to do independently that you couldn't do at Facebook. I'm curious what you think you couldn't do at Facebook, given that what I offered was for you to keep building out Instagram as a separate product and brand. I actually think you'll be able to do all the same things with Instagram at Facebook."
Six years later, Systrom left Facebook after butting heads with Zuckerberg over how he was integrating Instagram with Facebook. Even if you take Zuckerberg at his word at the time that he had no plans to mess with the company's operations, he knew in the back of his mind that, ultimately, he was the boss. This is true for any acquisition. But with Apple, Google and Amazon all over $1 trillion in market capitalization and Facebook near $700 billion, the ability of these companies to throw money and equity at startups is unrivaled and nearly risk-free when purchase prices are so relatively small.
While Kindler may be correct that consumers have benefited from the immense growth of big technology, a continual stream of start-ups merging into four or five big companies may not only limit technological innovation but also thought innovation. If the same leaders are controlling companies, the same ways of thinking will continue to dictate corporate policy. That's a bipartisan concern. And, in this political environment, that's a rarity.