The Big Story: House antitrust report suggests sweeping changes to tech landscape. After spending the past 16 months investigating allegations of anti-competitive practices by Amazon, Apple, Facebook, and Google, the House Judiciary Committee’s Democratic leadership this week released a 449 page report proposing that lawmakers overhaul existing U.S. antitrust laws, including limiting large tech firms’ ability to acquire startups. While policymakers proposed taking a variety of steps to address claims of market dominance and abuse—such as breaking up the largest firms and providing more regulatory authority and resources to federal agencies overseeing the tech industry—lawmakers must remain vigilant that their overall recommendations do not harm competition by hindering startup growth and innovation.
The committee’s report addressed a host of issues—such as acquisitions and the importance of interoperability—that are inherently vital to the startup community. But the report suggests sweeping changes to antitrust law based on select findings about a handful of companies without really considering how those changes will impact the broader and constantly evolving Internet ecosystem, including startups and their investors and users. Of particular concern is how the report hones in on acquisitions and includes a list of hundreds of startups and other tech companies acquired by the four large companies the committee chose to investigate as “evidence” of anti-competitive practices. The report then uses that list to justify its policy recommendation that dominant platforms have to prove to regulators that new acquisitions won’t be anticompetitive and will serve the public interest. While some acquisitions certainly deserve regulatory scrutiny, many acquisitions serve as a profitable exit strategy for startups or even act as a lifeline for struggling companies that would otherwise not make it on their own. Making it harder for startups to get acquired—or injecting uncertainty about acquisitions being unwound down the road—will hurt the ability of some new and small tech companies to raise funding and get off the ground.
While startups need Congress to focus on ways to boost competition, many of the recommendations in the report take too narrow a view of today’s reality. Importantly, over-emphasis on this report could mean lawmakers ignore the several pro-startup, pro-competition policy issues already in front of them. If lawmakers want startups to be able to launch and compete against the biggest companies in the industry, they should create regulatory and legal certainty for small companies by passing a federal privacy framework, defending commonsense liability frameworks that protect startups from bad faith lawsuits, and ensuring entrepreneurs have the access to the capital and talent they need—especially during the current economic downturn.
Policy Roundup:
Supreme Court hears case about permissible use of software interfaces. The U.S. Supreme Court heard oral argument this week in Google v. Oracle, a long-running dispute over whether software interfaces that promote interoperability—known as application programming interfaces (APIs)—can be subject to copyright infringement claims. Several of the justices expressed concern about an Oracle victory resulting in copyright protections being extended to APIs, saying that it could result in legal monopolies controlling critical software standards. As we noted earlier this week, an Oracle victory would chill startup growth and innovation.
President Trump sends mixed messages about COVID relief. President Donald Trump announced on Twitter this week that he instructed federal officials to stop negotiating on a bipartisan coronavirus relief package “until after the election.” But the president later reversed course, calling for Congress to pass standalone legislation that would provide $135 billion for the Paycheck Protection Program (PPP) and $25 billion in airline payroll relief, and another bill that would provide Americans with $1,200 stimulus checks. House Democrats passed a $2.2 trillion relief package last week which authorized funding for another round of PPP loans after negotiations with the White House stalled, although the bill is not likely to advance through the GOP-controlled Senate.
White House moves to overhaul H-1B visa program. The Trump administration announced new H-1B visa restrictions this week that would require employers to pay foreign workers significantly higher salaries, while also tightening the eligibility requirements for visa applicants and shortening the length of visas for some workers. The interim final rule, which goes into effect in 60 days and foregoes a notice-and-comment period, would narrow the definition of “specialty occupation” by requiring high-skilled workers to have a specific degree in the position for which they are applying—a change that will affect “over one-third of the H-1B petitions." As we noted in a blog post last month, high-skilled foreign workers make significant contributions to the country’s tech and entrepreneurial communities, and limiting companies’ access to qualified talent—particularly during a pandemic—could force them to relocate in order to meet their workforce needs.
FCC plans Oct. 27th vote following up on net neutrality repeal. Federal Communications Commission Chairman Ajit Pai announced in a Medium post this week that the agency plans to hold an Oct. 27th vote on issues raised by the agency’s 2017 decision to repeal its net neutrality protections. The vote comes after a federal appeals court last year ruled in Mozilla v. FCC that the agency must reconsider the impact of the net neutrality rollback on public safety, the Lifeline program that supports broadband for low-income Americans, and the agency’s ability to regulate pole attachments. The Obama-era net neutrality rules required Internet service providers to treat all online traffic the same, which allowed startups to grow and thrive by keeping the Internet a level playing field.
House members voice support for new data transfer pact. A bipartisan group of 20 House lawmakers sent a letter to Commerce Secretary Wilbur Ross and Federal Trade Commission Chairman Joseph Simons expressing support for their efforts to develop a successor agreement to the EU-U.S. Privacy Shield that was struck down in July by the European Court of Justice. The data transfer pact allowed U.S. companies to process and store European users’ data in America, and startups in particular relied on the agreement to comply with the European Union’s data privacy requirements. Without a clear framework in place, growing startups might be forced to abandon the European market as they wait for regulatory clarity when it comes to handling European users’ data.
Startup Roundup:
#StartupsEverywhere: Miami, Florida. Miami-based startup CitiQuants uses “decisional data” on cities’ livability, workability, sustainability, and governability to help other startups and established businesses make important hiring and expansion decisions. The focus on city-level data has also pushed the company to recently create tokenized city stocks that can be used to generate public investments in local communities.
Highlighting the policy concerns of the startup community. Engine is spotlighting a different startup on social media each week to highlight the policy issues affecting their business. If you know of a startup that would like to be featured, please have them reach out to us here.
