An executive order signed Friday by President Joe Biden directing federal agencies to beef up anti-competition rules increases the antitrust pressure facing large, local tech companies — Amazon in particular, though Microsoft could also be affected.
“Capitalism without competition isn’t capitalism. It’s exploitation,” Biden said in a speech at the White House before signing the order.
Biden urged the Federal Trade Commission to establish rules that could limit how Amazon operates its $295 billion online retail marketplace. The executive order also asks the FTC to reconsider guidelines for mergers and acquisitions, in part to prevent so-called “killer acquisitions” of potential competitors. The agency last year launched a comprehensive review of acquisitions by big tech companies, including Amazon and Microsoft, between 2010 and 2019.
The order included other measures that would affect how local tech companies operate. The FTC is tasked with making it easier for consumers to repair their electronic devices. Device manufacturers have historically tried to limit consumers’ ability to repair devices at home or at independent repair shops, a practice that environmental and consumer advocates have said boosts manufacturers’ bottom line at the cost of needless waste. Both Amazon and Microsoft have lobbied against previous efforts to ease device repair.
And tens of thousands of Seattle-area workers could be affected by the executive order’s instruction that the FTC ban or limit the use of noncompete agreements, which are common in the tech industry.
The order also included provisions addressing alleged anticompetitive behavior in the pharmaceutical, transportation and banking sectors.
Amazon did not respond to questions about the new executive order. Previously, the company has criticized antitrust reforms championed by the House Antitrust Subcommittee, calling them “fringe notions” that “would destroy small business and hurt consumers.” Amazon in recent years has strengthened its antitrust legal team and funneled more resources to lobbying on antitrust issues.
Microsoft declined to comment on the order.
Proponents of increased regulation on large tech companies lauded Biden’s action. Rep. Pramila Jayapal, D-Seattle, the vice chair of the House Antitrust Subcommittee, said in a statement that she was “thrilled” to see the new executive order.
“By unleashing the competition powers of the federal government and empowering everyday people, we can break the grip corporations have on our economy and put money in the pockets of the people who need it,” she said in the statement.
Jayapal last month sponsored antitrust legislation targeting large tech companies that if enacted, could allow the federal government to force Amazon to sell off its Marketplace platform for third-party vendors.
Biden’s executive order also takes aim at Amazon’s Marketplace platform by asking the FTC to rule that it’s unfair for companies to run online retail platforms on which they compete with their clients.
An investigation last year by the House Antitrust Subcommittee — authored in part by current FTC chair Lina Khan — found that Amazon had improperly used market data from third-party vendors on its platform to develop its own products that outsold competitors. The company’s platform is not a level playing field for vendors, the report concluded.
Groups advocating for a “right to repair” for consumer electronics also welcomed the executive order, saying it could help keep devices like phones, tablets and laptops out of landfills. Electronics are now the fastest growing category of waste in the world, according to a report by the World Economic Forum.
Advocates charge that one reason companies make it difficult to repair devices is to prompt consumers to keep upgrading their gadgets.
“If I was Microsoft, I would get with the program,” said Nathan Proctor, head of the United States Public Interest Research Group “Right to Repair” campaign. “I don’t see how they could possibly live up to their environmental goals if they don’t change their tune on repair.” Microsoft has committed to becoming carbon-negative by 2030.
Microsoft has pushed back against efforts to make it easier for people to repair devices like Surface tablets and Xboxes. Until recently, the company voided a device’s warranty if it was repaired by anyone other than a Microsoft technician. Microsoft revised that language after the FTC sent it a warning letter in 2018. The company successfully lobbied against a 2019 Washington bill that would have made it easier for purchasers to get devices fixed at unauthorized shops.
Amazon, whose Echo smart speaker and Fire tablet devices command major market share in their respective segments, has also fought state-level efforts to make it easier for consumers to repair devices.
Neither company responded to questions about its position on device repair.
Many of Microsoft and Amazon’s roughly 120,000 Seattle-area employees have signed noncompete agreements limiting their ability to take new positions at other tech companies. The White House says those agreements keep wages down and restrict workers’ mobility.
While both companies have pursued legal action against former employees who have allegedly violated noncompete agreements, Amazon in particular has drawn ire for what some say is its aggressive enforcement of such contract language.
Amazon Web Services, the company’s cloud-computing division, has filed a slew of lawsuits against its former employees, claiming those workers had violated their noncompete agreements when they took jobs at cloud-services competitors like Google. Amazon CEO Andy Jassy, who previously helmed AWS, personally set the tone of the division’s aggressive noncompete policy, according to Bloomberg. Amazon has denied that claim.
But the company has lobbied to exempt workers from noncompete protections. The company successfully convinced Washington lawmakers to lower the salary cap under which the state makes noncompete agreements unenforceable, from $180,000 to $100,000. The amendment allowed Amazon to continue enforcing noncompete agreements for most workers at its Seattle-area offices, who typically earn in excess of $100,000.
Amazon did not respond to questions about the provisions of the executive order addressing noncompete agreements. The company has previously said such restrictions protect its trade secrets, including its customer and business relationships.
Shares of Amazon and Microsoft remained relatively flat on Friday following Biden’s widely anticipated announcements.
For the longer term, though, investors are likely worried about the prospect of antitrust actions looming over Amazon, Google, Facebook and Apple, said Daniel Ives, managing director of Equity Research at New York-based Wedbush Securities.
Microsoft, on the other hand, is still “Teflon-like” when it comes to new competition measures, having survived antitrust litigation in the 1990s and 2000s, Ives added.
“I think right now, Microsoft’s smiling in Redmond, while at Amazon headquarters, they’re throwing things against the wall,” he said.