Bloomberg interview with FTC Chairman Simons
Bloomberg News interviewed FTC Chairman Joe Simons Tuesday about tech antitrust enforcement. We did one story on his comments related to breaking up companies and another on the FTC’s interest in complaints about Amazon.
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David McLaughlin
Bloomberg News
FTC Chief Says He’s Willing to Break Up Big Tech Companies
By David McLaughlin
(Bloomberg) — The head of the U.S. Federal Trade Commission said he’s prepared to break up major technology platforms if necessary by undoing their past mergers as his agency investigates whether companies including Facebook Inc. are harming competition.
FTC Chairman Joe Simons, who is leading a broad review of the technology sector, said in an interview Tuesday that breaking up a company is challenging, but could be the right remedy to rein in dominant companies and restore competition.
“If you have to, you do it,” Simons said about breaking up tech companies. “It’s not ideal because it’s very messy. But if you have to you have to.”
Simons is overseeing a tech task force to examine conduct in the industry and could move to unwind mergers if investigators find the deals were anticompetitive. The agency has opened a broad investigation into Facebook, including whether the company acquired startups to thwart competition, according to people familiar with the matter.
Antitrust experts and lawmakers argue that giant tech companies have used a wave of takeovers of startups to shut down competition by buying -- and eliminating -- emerging rivals.
Facebook bought photo-sharing site Instagram in 2012 and WhatsApp, a messaging service, in 2014. The FTC approved both acquisitions at the time. Critics including Facebook co-founder Chris Hughes have called for antitrust enforcers to unwind those deals.
U.S. antitrust officials could move to undo the acquisitions even though they previously won approval, Simons said. The FTC could say “we made a mistake,” he said. A breakup would require court approval.
Facebook declined to comment.
Facebook CEO Mark Zuckerberg has said he welcomes regulation, but that breaking up the company wouldn’t address legislators’ privacy and data concerns. In fact, Facebook argues that its size actually enables it to do the things that regulators want to see, such as better policing of content, which would be much harder if Instagram or WhatsApp were separate companies.
The FTC is examining conduct of tech companies in parallel with the Justice Department’s antitrust division, which in July announced a broad inquiry into the biggest online platforms to determine whether they are harming competition. The announcement cited concerns about search, social media and online retail, suggesting at least partial overlap with the FTC’s investigation of Facebook.
Simons said an agreement between the FTC and the Justice Department to divide scrutiny of the tech industry is based on specific conduct, not on the companies themselves. One company could potentially be investigated by both agencies, though he declined to provide details about their agreement.
“It’s possible for sure that we could be investigating the same company at the same time but just for different conduct,” he said. Simons said, for example, that the FTC could scrutinize Amazon.com Inc. for buying a grocer, because of the agency’s expertise in the supermarket sector, while the Justice Department would probably look at, say, the purchase of a music-streaming site.
William Kovacic, a former FTC commissioner now at George Washington University’s law school, called it “nuts” to take one company and split investigations into its conduct. The agencies have frequently fought over tech because it’s high profile and because it overlaps with other sectors, he said.
“It is bizarre to take these enormously complicated institutions and enterprises and have two separate teams of analysts looking at the same enterprise,” Kovacic said. “It will be a source of real frustration and confusion for the companies if that’s how they’re dividing things unless there’s cooperation.”
The FTC and the Justice Department are stepping up scrutiny of the tech industry amid a bipartisan outcry in Washington to rein in the power of the dominant companies.
Presidential candidate Elizabeth Warren, a Massachusetts senator, has been among the most outspoken about targeting Facebook, Alphabet Inc.’s Google and Amazon, saying earlier this year that they have too much power and should be broken up. The companies are “using mergers to limit competition” by buying competitors, she said, citing Facebook’s deal for Instagram, Google‘s acquisition of mapping company Waze and Amazon.com’s takeover of Diapers.com.
Simons didn’t confirm details of the Facebook investigation beyond what the company disclosed in July, when it said that the FTC had initiated a broad probe into several business lines -- social media, digital advertising and mobile applications. Any inquiry into its past acquisitions would focus on what would have happened to those companies if they hadn’t been bought by Facebook, Simons said.
“There’s a question about what caused Instagram to be as successful as it is,” Simons said. “Was it the fact that the seed was already there and it was going to be germinated no matter what or was the seed germinated because Facebook acquired it?”
Amazon Seller Complaints Drawing FTC Interest, Chairman Says
By Naomi Nix
(Bloomberg) — Federal Trade Commission chairman Joe Simons said Tuesday the agency is interested in hearing complaints alleging that Amazon.com Inc. is punishing merchants that offer lower prices on other e-commerce websites.
“Anyone who wants to complain, we’re all ears,” said Simons in an interview Tuesday. “That’s the type of scenario that would be among the ones that we would want to look at, but I can’t tell you we are doing it for any particular platform.”
Simons, who is leading a broad review of the technology sector and is investigating Facebook Inc., in particular, stopped short of confirming the agency has opened a formal probe into how Amazon treats merchants on its marketplace.
Bloomberg has reported that Amazon third-party sellers have raised their prices on products they sell on competing websites to avoid being penalized by the e-commerce giant. When Amazon discovers a product is cheaper on another website such as Walmart.com, the company alerts the merchant selling the item. It also makes that product’s listing harder to find and buy on its own marketplace, the article said.
FTC officials have spoken with at least one seller who has complained that Amazon pushed out merchants of recycled Apple devices after it made a deal with the phone-maker to sell its products directly on Amazon’s website. John Bumstead, who sells refurbished Apple products, said in a Facebook post last month that about seven lawyers and an economist from the FTC interviewed him.
Amazon declined to comment, but has said sellers have full control over the prices they set.
Online merchants typically sell their products on multiple websites, including Amazon, eBay Inc. and Walmart Inc., which also removes products with “highly uncompetitive” prices compared with those on other sites.
Simons said he generally disagreed with Democratic presidential candidate Elizabeth Warren’s proposal to prohibit large tech companies from selling goods on e-commerce platforms they operate. He said Amazon has “enabled a whole universe of competitors” that might not otherwise be able to reach the consumers they currently have access to through the company.
“As a rule I would say I don’t agree with that,” Simons said. “If you basically said you can’t compete with any of the people on your platform, Amazon could take the position of saying, ‘Okay then we won’t have them on the platform. We’ll just sell everything ourselves.’”
Simons said the task force that’s investigating potentially anti-competitive conduct in the technology industry has been evaluating a broad range of complaints.
“The technology task force is having lots of conversations with lots of people in the industries,” he said. “So part of that process might be hearing these types of complaints.”
A House Judiciary antitrust subcommittee and European antitrust officials are already investigating claims that Amazon may be shortchanging smaller merchants that sell on its marketplace.
So far, criticism of Amazon’s market power has centered on whether it mines merchants’ sales data to launch competing products and then uses its dominance to make the original product harder to find on its marketplace.
The European Commission opened a formal investigation last month into Amazon’s dual role as retailer and platform-operator, focusing on the potential misuse of merchants’ data.
Representative David Cicilline, the Rhode Island Democrat leading the House panel, expressed dissatisfaction with Amazon’s testimony that the company doesn’t use data it collects on sales to favor its own products over those of third-party sellers.
Amazon later defended using aggregate sales data from third-party sellers. In a letter to Cicilline, Amazon said it is a common practice in the retail industry.