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Big Tech Painted as The Railroad Barons of the Digital Age in Antitrust Hearing

In early May, Senator Amy Klobuchar convened a Senate Judiciary Committee antitrust panel to discuss how Google and other dominant internet companies “squeeze” smaller tech competitors and take advantage of consumers in the name of profits.

“These technological giants–which have vastly consolidated search, cloud computing, and social media–are abusing their power,” said Senator Klobuchar during the May 2, 2019 hearing. “Google, Facebook, and Amazon have in effect grown to be the railroad barons of our digital age–making it next to impossible for technology entrepreneurs to reach broad audiences.”

The committee hearing highlighted the power that the tech giant giants have over the online marketplace and the ability they have to make pricing decisions based on consumer purchasing preferences and create unequal market power among them.

Using behavioral economics, known as the Wilhelmina Effect, the panel members had firsthand experience demonstrating the ways in which the tech industry privileges its own marketplace advantages, including AdWords, which primarily uses Google Ads.

“How does this market maximize some companies’ profit by underpaying small businesses in keywords like ‘online marketing,’ while fully charging consumers for goods and services they won’t find unless they search for them?” asked Senator Merkley.

The panel looked at examples of how Google purchases keywords that may favor its own AdWords offering, while excluding companies with lower rankings from the opportunities and engagement offered by the search results. The panelists looked at how Google occasionally allocates a certain keyword in AdWords based on the search “for coffee shop.”

Senators also discussed how some of these big tech platforms create price-elimination algorithms designed to ensure that small competitors are excluded from the platform and how that creates an uneven playing field for smaller tech companies as they compete against the tech giants’ dominant position.

“One of the most problematic aspects of Google’s monopoly for small digital businesses–like bike-sharing or hotel booking–is that no small business can compete with Google’s market share in such verticals. When businesses cannot compete, consumers can be harmed,” said John Messersmith, CEO of Small Business Majority.

In addition to determining whether or not Google and Facebook have over-inflated the internet marketplace, the panelists also discussed their input on additional questions–dubbed by Klobuchar “busting antitrust myths”–that need to be answered about possible monopolies by Google and Facebook.

“Just like oil, gas, and power, we want to ensure Google, Facebook, and other large tech companies don’t have unfair market power,” said Senator Klobuchar during the May 2 hearing. “We can start by understanding what is happening today, especially in the search space, and make sure the big tech companies don’t hold consumers hostage to their own profits.”

In 2016, Senator Klobuchar and Senator John Kennedy filed a letter with the Federal Trade Commission and the Federal Communications Commission to investigate market dominance by Google and Facebook.

During the May hearing, Senator Klobuchar asked the Federal Trade Commission (FTC) to “get those antitrust folks on the case” and require these companies to license their search technology so it’s fair to all competitors. Senators Mike Lee and Richard Blumenthal also voiced concerns about the internet monopoly platforms as well.

“The Commission should work with the Justice Department to scrutinize the major platforms and consider whether there should be a wide-sweeping antitrust action that prohibits them from using their market power in anticompetitive ways,” said Senator Lee in his opening remarks.

Senator Blumenthal specifically called out the antitrust actions of the Railway Retirement Board, the government agency whose actions range from antitrust actions against rural railroads to antitrust cases against large integrated utilities.

“Let’s just be clear what I’m saying: our Federal Railroad Retirement Board is at war with the companies with whom it regulates. These companies are my constituents’ friends. I don’t mean to be scandalous, but I want to be truthful. My constituents have a right to know whether this same antitrust process would have been performed against my friends at Google and Facebook,” said Senator Blumenthal.

The antitrust panel is part of a larger hearing into a broader topic that was recently brought to light by Senator Klobuchar during the Senate Intelligence Committee hearings regarding Russian internet influence during the 2016 election.

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