KLOBUCHAR: “The innovation that is vital to our American economy cannot thrive without open, competitive markets”
WASHINGTON – At today’s Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights hearing titled “The Impact of Consolidation and Monopoly Power on American Innovation,” U.S. Senator Amy Klobuchar (D-MN), Chairwoman of the Subcommittee, highlighted the urgent need to update our antitrust laws to spur innovation, protect consumers, and stop dominant digital platforms from treating small businesses and entrepreneurs unfairly.
“The innovation that is vital to our American economy cannot thrive without open, competitive markets, because it’s competition that pressures manufacturers to invest in research and development — to constantly innovate, to improve their products and introduce new products to compete,” Klobuchar said.
She continued: “Once upon a time, disruption was a good thing in tech…Now, disruption is what they seem to fear. Before Facebook bought Instagram, Mark Zuckerberg wrote in an email that if Instagram were to ‘grow to a large scale, they would be very disruptive to us.’ We will never know if an independent Instagram would have found solutions to the massive privacy and content and children’s problems we are seeing today — why? Because Facebook bought it. Our laws are not equipped to address this kind of conduct.”
Sen. Klobuchar: I call to order this hearing of the Subcommittee on Competition, Antitrust, and Consumer Rights, entitled “The Impact of Consolidation and Monopoly Power on American Innovation.” Good afternoon, I want to welcome our witnesses, and I thank Senator Lee and his staff, as well as my staff, for planning this hearing.
Innovation is part of the American spirit. It is the core of the American spirit. Innovation generates new opportunities and new hopes for businesses, workers, and families. Breakthroughs in science and technology have given us the vaccines that are getting us through the pandemic and driving the development of clean energy solutions to take on the climate crisis that we see every day, as my state is getting a record heat wave and thunderstorms in the middle of December today. Emerging technologies like artificial intelligence are driving innovation across our economy. Of course, some of our economy’s largest companies began as start-ups with new innovations and we continue to see innovations. But we also have to remember that innovation is all about competition and bringing in new players to innovate. That if we just simply have monopolies, over time, we do not get the innovations that we need. I think history shows us, with the story of the breakup of AT&T and the innovations that we saw after that, in terms of everything from the cell phone industry on.
Looking back at our history, it’s always been innovation that has fueled the American economy. From the railroads and the telegraph to smartphones and the internet, America would not be where it is today without innovations, and strong, competitive policy and laws on the book.
But the innovation that is vital to our American economy cannot thrive without open, competitive markets, because it’s competition that pressures manufacturers to invest in research and development — to constantly innovate, to improve their products and introduce new products to compete. It’s competition that provides opportunities for entrepreneurs to develop new ideas and start new businesses and for young people to dream about new possibilities.
But in recent years, we have seen the growth of monopoly power across the American economy — from cat food to caskets. Dominant players are using their power to maintain monopoly positions and thwart competition. Between the early 1980s and the last few years, the rate of new business formed in the U.S. fell. Now, data suggests that as we move out of this pandemic, Americans are starting new businesses at historic rates – that’s great, remember we fell by 40 percent before. But businesses can start, but can they really grow to the point of being competitive?
And that is something that we want to talk about today. Why invest in innovation, why spend on research and development, why start a new business if the markets are controlled by a handful of dominant companies that control access to customers and have the power to suppress new businesses? Monopoly power threatens to choke off innovation.
Over the last several decades, companies like Google and Amazon, Apple, Facebook, and Microsoft have created many great innovations. We went from the Wall Street Gordon Gekko days with his cell phone, affectionately known as “the brick,” that weighed two pounds and was 13 inches long — to cell phones the size of a watch. But while these tech companies were once scrappy startups innovating to survive, they are now the largest companies the world has ever known. They are still innovating and introducing new products, yes, but they are also gatekeepers — and that is the thing that we need to focus on — gatekeepers that use their powers to stifle competition and innovation by their competitors and the businesses that have no choice but to use their services. We don’t want to stop them from innovating. We don’t want to destroy them. We just want to stop them from stopping others from catching on and innovating. Just yesterday, the Competition and Markets Authority in the UK issued a report highlighting that Apple and Google’s control over app stores “can limit innovation and choice and lead to higher prices – none of which is good for users.”
Small businesses develop new and innovative products for American consumers, and many of them advertise on the gatekeepers: Facebook, Google, Amazon. But can they sustain this incentive to innovate when Amazon or Apple knocks off their products and puts their own copycat products first in search results? Developers across the country are creating useful new apps for consumers, but they are sometimes slow to reach users because Apple takes weeks or months to review them before putting them up on the App Store. And if they want to reach iPhone customers, they have no choice because there’s no other way into the market.
Once upon a time, disruption was a good thing in tech. New companies on the block were proud of breaking into markets and changing the status quo, adopting company mottos like “move fast and break things.” Now, disruption is what they seem to fear.
Before Facebook bought Instagram, Mark Zuckerberg wrote in an email that if Instagram were to “grow to a large scale, they would be very disruptive to us.” We will never know if an independent Instagram would have found solutions to the massive privacy and content and children’s problems we are seeing today — why? Because Facebook bought it.
And our laws are not equipped to address this kind of conduct. Current law allows judges to consider harms to innovation in antitrust cases, but they rarely do. That’s because judges often demand an impossibly high standard of proof, which can be hard to show when you are talking about how innovation in the future might be harmed.
We need solutions to these problems. The Competition and Antitrust Law Enforcement Reform Act would update the legal standard to prohibit harmful mergers across the economy, shifting the burden to dominant companies to prove that their acquisitions don’t threaten competition. This doesn’t mean they’re not going to purchase other companies — they are. It just makes them have to prove that they don’t hurt competition.
To address the issues in the digital economy, I joined Senator Blumenthal and Senator Blackburn to introduce a bill that will open up the twin app store monopolies that Apple and Google operate — that’s the Open App Markets Act.
I’m also proud of the bipartisan legislation that Senator Grassley and I have introduced to prevent dominant digital platforms from engaging in behavior that harms competition by favoring their own products or services just because they own them. We have authors from across the political spectrum on that bill — someone referred to it as the Ocean’s Eleven of sponsors.
American businesses and consumers need a renewed and strengthened antitrust movement.
They need a movement grounded in a pro-competitive economic agenda that will actually help capitalism and innovation across the economy. We must act now to protect American innovation and promote competitiveness in tech, in healthcare, and indeed in all sectors of the economy. I’ll now turn it over to Ranking Member Senator Lee, and I note that our Chair is here, we’re grateful he’s here, Senator Durbin, and if you would like to say a few words as well when Senator Lee is finished.
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