Amy Klobuchar: Breaking up Facebook ‘has to be on the table’

Antitrust may become Senator Amy Klobuchar’s signature issue, and if things go right, the pinnacle achievement of her years in Congress. Not only does she now have the chair of the powerful Senate Judiciary antitrust committee, but she has a book called Antitrust coming out in the spring.

On Thursday, the Minnesota Democrat and 2020 presidential contender introduced an omnibus bill that would reform antitrust law and retool regulatory agencies to confront anticompetitive behavior by big corporations—notably, tech companies.

Many Democratic lawmakers have become keen to put a check on the growing political and market power of Big Tech, and a number of more serious-minded Republicans feel the same way. Now, with a Democrat in the White House and narrow Democratic control of both houses of Congress, the stars may finally have aligned for antitrust reform.

Some important things have already happened. The House subcommittee on antitrust released an exhaustive report on the business practices of Amazon, Apple, Alphabet, and Facebook, finding that the companies hold “monopoly power.” The Department of Justice and the Federal Trade Commission subsequently filed major lawsuits against Google and Facebook, respectively.

Silicon Valley has profited from its friendly stiff-arm of Washington for decades, but change is in the air. In the past, regulators have been shy about bringing antitrust cases against tech companies, in part because they’ve had trouble fitting 20th-century laws to the excesses of 21st-century digital business models. If Klobuchar’s bill can deftly remedy that, and win support from some Republicans, the relationship between government and the tech sector may finally enter a new chapter.

I talked to Klobuchar about her bill and the challenges that lie ahead. (The interview has been edited for clarity and brevity.)

Fast Company: Well, Senator, your antitrust work is already having its effects. Jeff Bezos just stepped down as CEO of Amazon.

Amy Klobuchar: Oh yeah, that’s all because of me. I wish him well.

FC: The omnibus antitrust legislation you’re proposing is very broad; it covers all industries, not just the one I’m primarily interested in, which is tech. And antitrust is a deep issue with lots of different aspects. Given that, do you plan to take a piece-by-piece approach to this, like dealing with mergers and acquisitions or exclusionary conduct first and then going on to other areas?

AK: Well, first of all, I’m well aware that tech, with the gateway issue, is a major monopoly issue right now. So there are all kinds of monopoly issues. My plan is to introduce a major bill that would include all of it and then start having hearings on different pieces of it.

I’d say the first thing that has a chance of passing, or somehow being included in this bill, is my bill with [Iowa Republican] Senator [Chuck] Grassley . . . to add significant resources to the FTC and the antitrust division of DOJ. [The funding would be] accessed by increasing the fees on mega mergers for deals that are over $5 billion; that alone would bring in over $130 million. Put between the agencies, that would greatly help them to pursue their cases against Facebook and Google and others.

So to me, making sure they have the resources when they are basically a shadow of their former selves. In 1980 when the Justice Department was working to break up AT&T, the [antitrust] division had 453 lawyers. This was important because AT&T involved structural relief [a breakup]. In 2017 it had just 330 lawyers. The FTC, which of course has the Facebook case, had 1,719 employees in 1980. In 2018 it had 1,102.

Yet we’re expecting these agencies to take on the biggest companies the world has ever known. Two of them are over trillion-dollar companies [Amazon and Alphabet have market caps above $1 trillion; Apple is over $2 trillion]. That’s why you can pass all the bills you want, but if you can’t enforce them, it doesn’t matter.

The Sherman Act passed, and it wasn’t till Teddy Roosevelt came in that it mattered. There was a dormant state for years before that happened, I think a decade or so, and so part of this is enforcement.

[The 1890 Sherman Act was the first antitrust law, a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade.” Congress passed the two other antitrust laws that are still used today–the Federal Trade Commission Act, which created the FTC, and the Clayton Act, which, among other things, prohibits mergers and acquisitions that “substantially lessen competition” or “create monopolies.”]

The second piece of it is looking at the legal standards. Part of this is that we’ve always changed our laws in this country. When new situations come up, we have done it many, many times. That’s what the Clayton Act was about. That’s what [the] Hart-Scott-Rodino [Antitrust Improvements Act] was about.

But what has happened? We’ve seen this major transformation of our economy with these gateway industries, and we haven’t done one thing to change the law.

In 2008, a former Justice Department official observed that it had been more than 15 years since the plaintiff had won an antitrust case before the U.S. Supreme Court. We know that with the addition of [Justice Neil] Gorsuch, who’s incredibly conservative on antitrust, and [Justice Brett] Kavanaugh—who had two very out-of-the mainstream dissents when he was on the D.C. Circuit when it came to antitrust—that they are not going to be changing things, and that we will be waiting a century if we wait for the courts to catch up.

Breakup is always an option

FC: I want to be really clear about the “looking back” part. Are you precluding the idea of retroactively unwinding some of these [tech] deals?

AK: No, no, no. That’s what fixed AT&T. [Breaking up the company] was on the table because they were both a vertical and horizontal monopoly—they had monopolies on overall phone service horizontally—but then underneath they literally owned the hardware, and so they also were a vertical monopoly.

And what happened there? The remedy was structural relief, and they broke them up. With Facebook, it’s pretty obvious given Zuckerberg’s email that they were gobbling up nascent competitors with WhatsApp and Instagram, and so you could break those off.

So I think that has to be on the table. It’s on the table in the Trump [administration] lawsuits [against Facebook and Google]. It’s going to continue to be on the table as the Biden Justice Department continues those lawsuits and what attorneys general across the country have done [with antitrust suits].

And there are things you can do to make it easier to look back and to put guardrails in place—consent decrees to continue to look back to see if the promises were made. Because I’ve had my own experience not even being in the Justice Department where these companies promise a bunch of stuff at hearings and other things and then it doesn’t come true.

FC: Are you considering expanding the FTC’s authority to create codes of conduct? For Big Tech, it’s this issue of a company operating an e-commerce platform but also selling products on that platform.

AK: I think that we’ve got to look at everything when it comes to putting rules in for tech. A lot of this is making it more transparent . . . and doing more when it comes to privacy.

They basically lobbied against that in such a big way. And after the states went for their own privacy laws, now [tech companies are] coming to Congress, asking for more help when it comes to privacy and health data.

FC: We saw very few antitrust actions brought for many years, as you mentioned, and I understand that part of the reason for that is there’s a standard where if the defendant company can prove that a disputed business practice is actually beneficial to customers, it usually wins the day. Facebook, for instance, will argue that its customers benefit from the network effects that come from its massive size.

AK: This isn’t about punishing success. We’re proud that we have a strong technology sector in our economy. It’s very, very important.

But my problem is, no matter how successful you are, you have to follow the laws. One of the things that has happened—and we know this through history and we know it through [Facebook’s] purchases—is when you start deliberately buying up what we call nascent competitors for the purpose of dominating the market, then you stop that innovation that might develop that would create the next new privacy protection or that would create a way to do the algorithms differently. No one has a chance of having a new product when they buy them all up and are the monopoly provider.

I think they can still be successful companies without trampling over everything in sight. That’s what they have done. And that has led to less opportunity for these innovations that could solve the very problems that they have caused.

Precedent, if you look back far enough

FC: In [Rhode Island Representative David] Cicilline’s House antitrust committee they suggest that any merger that creates a 30% or higher market share was going to be a no-no. Is that one of the things from the report you feel good about?

AK: Yes. That is the Philadelphia Bank standard [from 1963]. The fact is that the Supreme Court has chipped away at all this precedent, using the Robert Bork definition of consumer welfare, which is this really warped way of looking at it, where consumer welfare also includes efficiencies for big companies.

Well, I hope that because of these tech issues that the court will start looking at this differently. It is these very decisions from the past, even predating Gorsuch and Kavanaugh, that got us to where we are.

FC: So as this [bill] progresses, who do you think is going to be standing in your way?

AK: First of all, you have the tech companies, which last year employed tens of millions of dollars in lobbying over the last Congress. So you would most likely have problems with mainstream [tech] businesses. Then you would have problems with people who are close to these industries in the Congress.

So we’ve got a big hill to climb. But in the past we’ve gotten behind it as a nation, whether it was the farmers with their pitchforks or the union organizers during the Gilded Age, who finally had had enough.

You saw it during the breakup of AT&T. Both parties were skittish about being lobbied by AT&T and looking like they were caving—including for business interests, because [AT&T] wanted to launch the now successful cell phone industry, which was really put on ice because of monopoly.

So what I’m saying is that in the past our country has done it. We’ve responded. And so given that there’s some Republican interest in this as well, I think there is a strong possibility of building bipartisan support.

FC: Do you have people you think you can call right now who can sign on to this bill from the other side of the aisle?

AK: Well, no, or they would have. But I do have people who have been interested in various aspects of it, and I obviously have the funding bill with Grassley.

I also think we should stop using the name “antitrust,” despite the name of my book, because I think that it should be called competition policy.

FC: Do you have any concerns about attorneys working inside the DOJ or the FTC who have histories with the tech industry or who are friendly with the tech industry?

AK: I think it just depends on what the work is. I thought Makan Delrahim [U.S. assistant attorney general who ran the DOJ’s antitrust division under Trump] did a good job in bringing those cases at the end. It’s all going to depend on the guidance. [Attorney General nominee] Merrick Garland has handled antitrust cases himself and understands this complex area of the law . . . which is going to be very helpful. It won’t be new to him when the deputy comes to him about ideas and what they should do about a lawsuit.