(MarketWatch) — Before the House Judiciary Committee on Wednesday began to consider a package of antitrust bills that represent the gravest threat yet to Silicon Valley’s power, the Big Tech Empire struck back.
Representatives from Apple Inc. AAPL, Facebook Inc. FB, and Amazon.com Inc. AMZN, — targets of bills that would severely hinder their ability to acquire smaller rivals, disrupt their digital platforms, and potentially break up their companies — warned the legislation would strangle innovation, compromise the privacy and security of consumers, and handcuff the U.S. in economic competition with China, among other dangers. (Google parent Alphabet Inc. GOOGL, GOOG, had no comment.)
Apple strongly pushed back with a letter to the committee and an internal paper online that outlined the security and privacy dangers of sideloading programs onto the App Store, amplifying comments from Chief Executive Tim Cook last week. On a tech panel, he warned that sideloading would “destroy the security of the iPhone, and a lot of the privacy initiatives we built into the App Store.”
The paper, timed to the House’s actions, also comes amid Apple’s legal showdown with Epic Games Inc. over the parameters of the App Store. Opening up the platform with proper security measures would be less safe for kids, as well as increase incidents of ransomware and malware, fraud privacy, and privacy violations, according to people close to Apple.
In a letter to the House Judiciary Committee Wednesday, Timothy Powderly, Apple’s senior director of government affairs, Americas, cautioned the legislation would impede innovation and not promote competition — compromising consumers’ privacy in the process. “Apple is concerned that current proposals would harm consumer privacy, device security, and innovation,” he wrote.
“We are still analyzing the bills, but from what we can tell so far, we believe they would have significant negative effects on the hundreds of thousands of American small- and medium-sized businesses that sell in our store, and tens of millions of consumers who buy products from Amazon,” Brian Huseman, Amazon’s vice president of public policy, said in a statement emailed to MarketWatch. “The Committee is moving unnecessarily fast in pushing these bills forward. We encourage Chairman Cicilline and committee members to slow down, postpone the markup, and thoroughly vet the language in the bills for unintended negative consequences.”
FTC and its new chair, Lina Khan, are taking a close look at Amazon.com Inc.’s proposed $8.45 billion acquisition of MGM studios to bolster its Prime Video streaming service.
A Facebook spokesman told MarketWatch: “Antitrust laws should promote competition and protect consumers, not punish successful American companies. The surest way to address the challenges facing today’s internet is to tackle the areas of greatest concern to people like content moderation, election integrity, and privacy – not attempt to dismantle the products and services people depend on.
These bills underestimate the unrelenting competition within the tech sector, including competition from foreign companies such as TikTok, WeChat, and Alibaba. The proposed bills aren’t a solution to the ever-changing challenges of the consumer internet; they are a poison pill for America’s tech industry at a time our economy can least afford it.”
Mark Isakowitz, vice president of government affairs and public policy at Google parent Alphabet Inc. GOOGL, GOOG, told MarketWatch that “American consumers and small businesses would be shocked at how these bills would break many of their favorite services. As many groups and companies have observed, the bills would require us to degrade our services and prevent us from offering important features used by hundreds of millions of Americans.”
“This would all dramatically undermine U.S. technology leadership, damage the way small businesses connect with consumers, and raise serious privacy and security concerns,” Isakowitz said.
The legislation, the handiwork of a House Judiciary Committee investigation over more than a year that led to a comprehensive report on digital market competition last year, is ambitious and could significantly reshape some of the world’s most valuable companies. But it is necessary, federal lawmakers said, to bring antitrust law into the 21st century digital economy.
“These bills are a direct and measured response to the competition problems we identified in our investigation and documented in our comprehensive report,” Rep. David Cicilline, D-R.I., chairman of the House Subcommittee on Antitrust, Commercial and Administrative Law, said in a statement Wednesday.
“The digital marketplace suffers from a lack of competition. Many digital markets are defined by monopoly or duopoly control. Amazon, Apple, Facebook, and Google are gatekeepers to the online economy. They bury or buy rivals and abuse their monopoly power—conduct that is harmful to consumers, competition, innovation, and our democracy.”
House members will first consider the “Merger Filing Fee Modernization Act of 2021,” he said.
While House Democrats seek to strike bipartisan support of the bills, many in the tech and business communities are rallying to present a united front against the package.
“While well-tailored regulation is certainly worth debating, the extreme provisions written into these bills would do more harm than good, and set us back in our fight against foreign dominance in the tech/e-commerce industry,” Alec Stapp, director of technology policy at the Progressive Policy Institute, said in a statement.
Bret Jacobson, co-founder of digital advocacy firm Red Edge, called the new legislation “misguided” and argued that policymakers should “be looking at how to create the environment for the next 25 Amazons, Facebooks, Googles, rather than trying to break up the companies that are successful at the moment.”
It remains unclear, however, what immediate impact — if any — antitrust laws will have on an industry that has only thrived during the pandemic. The collective market value of the top five tech companies, including Microsoft Corp. MSFT, is about $8.7 trillion as Amazon closes in on an all-time-high stock price and Facebook flirts with a $1 trillion market valuation.
Microsoft was not immediately available for comment.
“The lack of consensus and divergence among both sides of the aisle on the antitrust issues remains a major issue to move things forward in this elongated investigation,” Wedbush Securities analyst Dan Ives said in a note Tuesday.
“Despite the report/content and framework for recommendations around Big Tech players (e.g. M&A, business practices), without core law changes we believe this antitrust momentum hits a brick wall and for now is more a headline risk that investors are taking in stride.”
Ives remains “very bullish” on tech stocks for the second half of 2021, with shares up 15%.
Shares of tech’s big five were all flat in early-afternoon trading Wednesday.
Article originally published by MarketWatch