Here's What's in Joe Biden's Sweeping Executive Order on Competition in Big Tech - 8 minutes read
On Friday, President Joe Biden signed an executive order aiming to encourage competition in the economy—specifically targeting some business practices popular with massive tech firms.
Titled the Executive Order on Promoting Competition in the American Economy, the sweeping order contains 72 separate initiatives directing federal agencies such as the Federal Trade Commission and Department of Justice to rein in monopolistic corporate practices that suppress competition and benefit big business at the cost of their workforces. Among those 72 initiatives are a number of other directives of particular interest to the likes of Amazon, Apple, Facebook, Google, and Microsoft, the five most powerful tech companies based in the U.S., as well as telecoms and pharmaceutical giants.
The order reflects the increasingly anti-big business sentiment of the times and represents a shift in federal government priorities to emphasize the impact of business practices on consumers. But it also relies heavily on federal agency rulemaking authority that is prone to getting bogged down in court battles and won’t achieve the loftier goals set out in more sweeping reforms Democrats are struggling to pass through Congress.
“Today, I’m going to be signing shortly the executive order promoting competition to lower prices, to increase wages and to take another critical step toward an economy that works for everybody,” Biden told reporters, according to CNN. “... The heart of American capitalism is a simple idea: Open and fair competition. That means that if your companies want to win your business, they have to go out and they have to up their game.”
Biden added, “Let me be very clear: Capitalism without competition isn’t capitalism. It’s exploitation. Without healthy competition, big players can change and charge whatever they want and treat you however they want. And for too many Americans that means accepting a bad deal for things you can’t go without. So, we know we’ve got a problem, a major problem. But we also have an incredible opportunity.”
The order asks the Federal Communications Commission to restore Barack Obama-era net neutrality guidelines that were thrown out during Donald Trump’s administration. The rollback of the rules essentially freed internet service providers, many of which are part of massive conglomerates that own media companies, to selectively block, speed up, or limit customers’ access to various websites to suit their own business practices. For example, today, there’s nothing stopping Comcast from giving customers faster access to content produced by its subsidiary NBCUniversal while throttling content made by Netflix. Biden also directed the FCC to reintroduce requirements that service providers provide a “broadband consumer label” with “clear, concise, and accurate information regarding provider prices and fees, performance, and network practices.”
Additionally, the FCC is tasked with developing rules prohibiting telecom providers from charging termination fees when customers switch to other providers.
In June, the House Judiciary Committee advanced a slate of bills designed to prohibit major tech companies from preferencing their own products over competitors, limit their ability to buy stakes in competitors, prohibit them from launching product lines to stave off competitors, prevent them from shifting antitrust suits to corporate-friendly courts, and several other measures.
Biden’s order adds to that pressure, directing antitrust regulators at the FTC and DOJ to update their rules vetting on mergers and acquisitions to better reflect practices in the tech sector, including revisiting deals that have already been completed. The executive order particularly targets so-called “killer acquisitions,” which is when a dominant company buys up lesser competitors to eliminate the potential they will pose a threat to their market share down the road. Facebook, in particular, is notorious for this kind of acquisition—particularly its takeovers of Instagram and WhatsApp—but investigators with the House Judiciary’s antitrust subcommittee also accused Amazon, Apple, and Google of partaking in this practice as well in an October 2020 report.
In a fact sheet, the White House wrote that it “recognizes that the law allows [regulators] to challenge prior bad mergers that past Administrations did not previously challenge,” focusing on those “by dominant internet platforms, with particular attention to the acquisition of nascent competitors, serial mergers, the accumulation of data, competition by ‘free’ products, and the effect on user privacy.”
The antitrust push against tech firms that began under the Trump administration has seen mixed results so far. On June 28, a federal judge threw out an antitrust suit brought by the FTC and 48 state attorneys general against Facebook, finding it was riddled with legal errors. The DOJ and dozens of states are waging a similar suit against Google that is likely to drag out for years, which is just one of several. Another legal battle of similar scale against Amazon, possibly in coordination with the FTC, is only in its nascent stages. The DOJ is also investigating complaints related to restrictive policies Apple developers are required to sign before they can participate in the company’s App Store.
Other parts of the executive order target crucial parts of tech companies’ business models, such as collecting data on their users and how they run online marketplaces. Biden instructed the FTC to develop new rules around “unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy.” The order directs the FTC to work on rules surrounding “unfair competition in major Internet marketplaces”; this could particularly affect Amazon, which has long faced accusations from third-party sellers of arbitrary policies designed to squeeze them of revenue. It also asks the agency to develop rules against “unfair anticompetitive restrictions on third-party repair or self-repair of items.” The order specifically cites manufacturers of farm equipment that prohibit buyers from using third-party repair shops, but Apple is notorious for the stranglehold it keeps on independent repair shops it partners with.
Biden also came out strongly against non-compete agreements that companies use to threaten employees with legal action if they leave to work for a competitor, urging the FTC to use its statutory authority to prohibit employment contracts that “unfairly limit worker mobility.” Traditionally, according to NPR, the legality and enforceability of these types of agreements have varied from state to state (not that it has swayed a large number of companies from including them in contracts regardless of what the law says).
The most infamous example was sandwich chain Jimmy John’s, which abandoned its ultra-restrictive non-competes for its restaurant employees in 2016, but tech firms are no stranger to imposing non-competes outside of California, where they are not enforceable. According to NPR, this particular section of the order may flirt with the boundaries of the FTC’s rulemaking authority. Alongside that, Biden’s order asks the FTC and DOJ to pass meatier guidance around employers who share compensation information with competitors in order to keep wages and benefits lower than they would be otherwise.
Biden also directed the FTC and DOJ to look into state job licensing requirements that the administration sees as overly restrictive and preventing competition within the affected industries. In the order, the president wrote that such restrictions can be a serious impediment to workers’ ability to find new employment when moving across state lines. According to the Harvard Business Review, these rules can increase the income of some workers while preventing others from competing with them and resulting in higher prices for consumers.
Finally, the order takes aim at prescription drug pricing. Biden told the Food and Drug Administration to work with states and Native tribes to increase importation of cheaper drugs from Canada (something that’s enjoyed bipartisan appeal and became an initiative under the Trump administration). The Wall Street Journal reported the order also aims to increase the use of generic drugs as opposed to pricier brand-name prescriptions and curtail “pay for delay” rules in which manufacturers pay off competitors to not introduce generic versions of a drug for a period of time. But the order doesn’t take any action towards allowing Medicare to negotiate drug prices with pharmaceutical companies, a long-sought priority of Democratic lawmakers that has not materialized for years.
Executive orders sound tough but are rarely a substitute for the kind of sweeping legislative reforms that the Biden administration is seeking to push through the Senate, which is split 50-50 and reliant upon Vice President Kamala Harris to break ties. Conservative Democrats, such as Senator Joe Manchin, have insisted on “bipartisanship” even as Republicans in the Senate have declared all-out resistance to Biden administration priorities.
Just how tough the resulting proposals are will depend on how far the agencies responsible for developing them will go (although the FTC, prominently highlighted throughout the order, was recently taken over by antitrust crusader Linda Khan). As the Washington Post noted, businesses are likely to wage court battles in an attempt to prevent the new regulations from ever coming into force, while liberal economists believe that labor laws like the Biden-supported PRO Act would have far more of an effect on worker wages.
“This will do some things—it all seems fine to me—but will it increase wage growth for the bottom fifth of workers? I doubt it,” Matt Bruenig, the founder of the People’s Policy Project, told the Post. “The most important thing for workers’ wages is that they are able to coordinate what they’ll be—to do that you need better union laws—and the dynamics of competition within firms is a much less significant factor.”
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