“We all want successful American companies, but if we want to see the rise of the next generation of great American companies, we need to reinvigorate our competition policy.”
WASHINGTON – At the first Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights Hearing of the 117th Congress, U.S. Senator and Subcommittee Chair Amy Klobuchar (D-MN) emphasized the broad importance of antitrust reform, stating “America’s market power problem cuts across our entire economy.” Klobuchar outlined how her proposed legislation, the Competition and Antitrust Law Enforcement Reform Act, will reinvigorate antitrust enforcement, preserve competition, and position the economy for growth.
I’m gaveling this hearing to order. This hearing, the Subcommittee on Competition Policy, Antitrust, and Consumer Rights entitled “Competition Policy for the Twenty-First Century: The Case for Antitrust Reform.”
Good afternoon and welcome to our witnesses. I want to thank Senator Lee for his friendship, we’ve been working together for a long time on these issues and I look forward to that continuing. I appreciate his passing of the gavel to me, whether it was voluntary or not, and I also appreciated his text last night where he asked me if I should be called “Chair,” “Chairwoman,” or “Klobuchair,” which was a new one so that’s nice.
We’re here today to examine, as you know, the state of competition across our economy and to consider what should be done to protect, preserve, and foster competition in the 21st Century. American prosperity was, of course, built on a foundation of open markets and fair competition. It is competition between companies that give consumers lower prices, forces manufacturers to constantly innovate and improve their products, it forces companies to pay fair wages because there’s competition for those employees. Competition provides opportunities for entrepreneurs to start and grow new businesses, fueling future economic growth.
But if you look at our markets today, we see big cracks in that free market foundation. We see more and more consolidation. In so many areas, markets aren’t as competitive as they once were and the devastating impact of COVID-19 on small and medium sized business threatens to make things even worse. We have lost hundreds of thousands of small businesses. But even before the pandemic, well before the pandemic, it was clear that America had a major monopoly problem. An example: more than two-thirds of U.S. industries have become more concentrated even between the years of 1997 and 2012.
Now we all know that the problem is most obvious in technology industries. We thank our friends in the house, Chairman Cicilline and Chairman Nadler, for the hearings they conducted all last year and the report. I would suggest people read that report. At the root of this power lies the ability of a few companies to act as gatekeepers. Thanks to Senator Lee, we had a hearing together on one of those gatekeepers, Google, recently, last year, which, in this case, controls over 90 percent of the search market, giving it the leverage to hold companies hostage. But, even as we’ve recently learned, entire countries hostage by using its leverage to threaten these countries that they would just pick up their business and their search engine and go somewhere else.
That, my friends, is a sign of a monopoly. If there was, in fact, greater competition in the tech market, you would see companies that would come up with bells and whistles that I think would remedy some of the problems that we have today. If there was true competition, we could have small businesses, maybe there would have been Instagram or WhatsApp, that could have risen up, developed bells and whistles, developed better privacy protections, developed better policies for handling misinformation, developed better arrangements for paying for content. But, if you have big monopolies that buy up all that potential innovation, that buy up those small companies, you lose the ability to get at those major challenges. Over time, if left unchecked, big companies dominate markets, exclude their rivals, and buy out their competitors, even small competitors, even what is known as nascent competitors.
Perhaps we should just look at the words of Facebook head Mark Zuckerberg. In his own email, he said this, “these businesses are nascent but the network’s established, the brands are already meaningful, and if they grow to a large scale, they could be very disruptive to us.” Disruption actually is a positive word in tech. Disruption means that you’re disrupting the status quo, that you’re bringing in new ideas and new competitors. But in this sense, when Zuckerberg looked at some of these smaller companies that were coming up to compete, he thought they would disrupt what? Disrupt the monopoly power of Facebook. As he wrote in another email, when you’re building a monopoly, quote, “it is better to buy than compete.”
At some point, and I say this to all the Senators on this subcommittee, we need to reply to those emails, not by just holding hearings and throwing popcorn at a screen, at whatever CEO we want to throw that popcorn at. No, not by just getting a sound bite for the day, but by actually responding with action, by responding with legislation. With all due respect to the views of a few of the witnesses here today, I don’t think that the status quo is going to do that for us. One of the points we need to make today is that this isn’t just about big tech. America’s market power problem cuts across our entire economy. We see it in agriculture, a number of Republican senators just yesterday approached me about this. We see it in online travel, where when people go to these travel sites they think they have all of these great choices, but in fact over 90 percent of the market is owned by just two of the companies. They simply own the brand names under them. We see it in the live event industry, where one vertically integrated company dominates ticketing, event sponsorships, and performance venue booking. We see it in everything from cat food to caskets.
So it is no wonder that two-thirds of Americans have come to believe that the economy, quote “unfairly favors powerful interests,” end quote. So why has this all been happening? Why is there a monopoly problem?” A big reason is that the courts have become increasingly closed off to antitrust actions. Cases like Trinko, Brook Group, and most recently Ohio v American Express, have made enforcing our antitrust laws more challenging. Add to that the fact that Congress and multiple administrations have failed to ensure that antitrust enforcement budgets have kept pace with the demand of a growing and increasingly complex economy. In 1980, when the Justice Department’s antitrust division was working to break up AT&T, the division had 453 lawyers. 453 lawyers -- this includes during the time of Ronald Reagan. By 2017, it had 330 lawyers. The FTC is also a shadow of its former self. Its 1719 employees in 1980 had fallen to 1192 by 2018.
Our agencies cannot fight the biggest companies the world has ever seen with duct tape and band-aids. And I know that Senator Grassley, who has been such a leader on this, agrees. We are together leading a bill to inject some more investment into these agencies. Because we know they actually deliver money when they bring these cases to the government. We know it’s worth the money. And we also know that we can do it in a way that’s not on the back of taxpayers, by simply changing the fees assessed on large companies. For them, it’s a drop in the bucket when they bring these mergers before the agencies.
The purpose of the antitrust laws is to protect competition. In America, when we see a problem, we take action, we figure out what is working, what isn’t working, and we fix it. That’s why I introduced the Competition and Antitrust Law Enforcement and Reform Act with many people on this committee, including Senator Leahy, Blumenthal, and Booker, and many others off the committee have since joined. The bill would increase the baseline for antitrust agency budgets, update the Clayton Act to stop harmful consolidation, outlaw anti-competitive exclusionary conduct by dominant firms, and I’m here talking about markets that are already highly concentrated, and make other reforms to protect competition.
I’ll end with this, because I truly, with Senator Lee and I starting a new year with so much interest on the Republican side as well as the interest we already had on the Democratic side, this has always been a bipartisan issue. Our founding fathers recognized the dangers of monopoly power. The Boston Tea Party and our fight for independence was partly motivated by British government granted monopoly on the tea trade. And America’s long tradition of promoting pro-competition policies have often been led by Republicans. Senator Sherman of Ohio is a Republican. Teddy Roosevelt, most notably, the nation’s most famous trust buster, a Republican president.
Our current monopoly power problem didn’t just come out of nowhere during the last administration. It is the product of decisions by Republican and Democratic administrations over the last 40 years. It took both parties to get us into this situation and it’s going to take both parties to get us out of this situation. One good example of that, just yesterday Senator Kennedy and I introduced a bill to help newspapers and broadcasters negotiate on a level playing field with the powerful digital monopolies that now dictate how consumers get most of their news. I think its three out of four consumers get their news off of Facebook and Google. We have strong support for this bill. Senator McConnell was on it last year, Senator Durbin has supported this bill, and the companion bill was by Representative Cicilline and Representative Buck over in the house. Again, bipartisan. So we must find common ground on these issues. At stake is nothing less than the future of our economy and the way of life that it supports.
This is about saving capitalism and building an economy that works for all Americans. It’s about laws that throughout our history have rejuvenated capitalism. The breakup of the rail trust, the breakup of standard oil, to the breakup of AT&T. What could we get out of that? Lower long distance rates, we got an innovative cellular phone industry, we got a strong AT&T that still employs many people, with their own former chairman saying they were a stronger company because of the breakup. We all want successful American companies, but if we want to see the rise of the next generation of great American companies, we need to reinvigorate our competition policy. I look forward to the witness’ testimony and turn it over to Senator Lee.
# # #