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Amazon Comes Under Fire as Lawmakers Grill Tech on Competition

David McLaughlin and Ben Brody

(Bloomberg) -- Amazon.com Inc. was challenged by a top House lawmaker over whether the online retail giant is harming competition as the biggest tech companies faced their harshest antitrust scrutiny in years on Capitol Hill.

Democratic Representative David Cicilline of Rhode Island, who chairs the House antitrust panel, put Amazon on the hot seat at a hearing Tuesday, suggesting its business model suffers from conflicts of interest and that it can use its control over data to thwart competition from third-party sellers on its platform.

“You are selling your own products on a platform you control and they’re competing with products from other sellers,” Cicilline said.

Amazon lawyer Nate Sutton denied the company uses data it collects on sales to favor its own products over third-party sellers. He also argued that it’s common in the retail industry for stores to sell their own brands that compete against others.

Cicilline fired back: “The difference is Amazon is a trillion-dollar company that runs an online platform with real-time data on millions of purchases and billions in commerce and can manipulate algorithms on its platform and favor its own product -- that is not the same as a local retailer,” he said.

The exchange, as Amazon’s Prime Day sales event extended into a second day, came at hearing where four of the biggest U.S. tech firms -- Amazon, Facebook Inc., Alphabet Inc.’s Google and Apple Inc. -- defended their businesses against criticism that they are too dominant. The session marked the first time the companies have faced grilling from Congress about whether they are hindering competition.

Cicilline said his inquiry is still in the fact-gathering stage but the series will eventually lead to legislative steps that go beyond self-regulation.

“I think it will absolutely require some action by Congress, either by way of regulation, new statutory enactments, new resources for antitrust agencies, more likely a combination of those three things,” he told reporters after the executives testified.

Cicilline is bearing down on the companies as antitrust enforcers prepare their own scrutiny after a mostly hands-off approach to the industry.

The Justice Department and the Federal Trade Commission, which share antitrust jurisdiction, have taken the first steps toward investigating conduct by the biggest companies by divvying up oversight with the Justice Department taking responsibility for Google and Apple, and FTC overseeing Facebook and Amazon.

A report by the University of Chicago’s Stigler Center this year found that digital markets tend to be winner-take-all in which one firm comes to dominate. That creates an incentive for the companies to edge out new challengers that could threaten that dominance.

Republican Jim Sensenbrenner of Wisconsin on Tuesday cautioned against calls for breaking up the big technology companies.

“Just because a business is big doesn’t mean that it is bad,” he said. Antitrust laws “do not exist to punish businesses just because they are big.”

All four companies repeatedly insisted that they face abundant competition, from one another and from other companies. Although Amazon controls about half of U.S. e-commerce sales, Sutton pointed out the company makes up just 4% of all retail sales, with competition from Walmart Inc. and Kroger Co., among others. Facebook’s Director of Public Policy Matt Perault pointed to competition from Apple, Amazon and Google, among others.

That argument met with skepticism from lawmakers. Representative Joe Neguse, a Colorado Democrat, pointed out that Facebook has the most monthly active users worldwide of any social media platform, with its Instagram, Whatsapp, and Facebook messenger in the top six.

“You can understand the skepticism because when a company owns four of the largest six entities measured by active users in the world in that industry, we have a word for that, and that’s monopoly – or at least monopoly power,” he said.

--With assistance from Daniel Stoller.

To contact the reporters on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net;Ben Brody in Washington, D.C. at btenerellabr@bloomberg.net

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, John Harney

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