2020 ended with a whirlwind of US antitrust activity against the tech industry. In a three-month span, state and federal authorities shook off nearly two decades of inaction by filing five separate lawsuits alleging wide-scale violations of the antitrust laws by Google and Facebook. The historic cases go to the heart of what online platforms can and cannot do in dealings with their business users, competitors, and partners. Antitrust now stands front and center in the US debate over how to regulate Big Tech, and the entire industry should take heed.
This first in a series of articles about the landmark antitrust lawsuits against Google and Facebook looks at how the mere filing of these cases signals a reshaping of the legal landscape and what it means for tech businesses, big and small.
This week I discuss the historic lawsuits filed last week by the U.S. Federal Trade Commission (FTC) and 48 States against Facebook alleging antitrust violations. I compare the complaints, highlight their strengths and weaknesses, and discuss their prospects for success.
The unregulated era for the digital economy is coming to an end. Governments around the world are done studying digital markets and have moved on to crafting new antitrust laws and regulations that will reshape the relationship that exists between large online platforms and their business users, trading partners, and competitors. The big online platforms will face new legal risks, while the tech companies operating in their spheres of influence will see new legal protections and business opportunities. Everyone will need to keep up with a fast-changing legal landscape.
The U.S. House of Representatives recently released a long-anticipated report on the state of antitrust in consumer tech. It found that key gateways and highways online are heavily consolidated around a few Consumer Big Tech giants and that reforms of antitrust laws are needed to inject more competition into the internet.
But while the report’s recommendations are ambitious, they are not enough to take on all of the harmful effects to our culture, economy, and politics caused by consolidated consumer tech markets. One reason is that they do not tackle the law’s foundational shortcomings, which overly complicate the antitrust analysis and must be reformed. The other reason goes to the core of what modern competition laws are and what they are not, which requires looking beyond antitrust to other rules and regulations to rein in the broader societal consequences of bigness in the digital economy.
This week’s episode is all about the important report that was published this week in the investigation by the US House of Representative’s Judiciary Committee into antitrust issues in big tech. I discuss the proposed reforms contained in the report, and what it might mean for the legal landscape of the digital economy.
In 2018, the Supreme Court affirmed a decision throwing out a major antitrust case that the Department of Justice and seventeen States Attorneys General had brought against American Express. The case concerned contractual restrictions the company imposes on merchants accepting its credit cards that prevent them from steering shoppers to other credit cards. The Supreme Court concluded that the government had failed to prove that these restrictions eliminated competition on both sides of a “two-sided” market because its case focused on harm imposed on merchants without giving enough attention to what it meant for cardholders.
American Express accelerated a half-century trend in modern antitrust orthodoxy that has disarmed enforcers by imposing impossibly high burdens on them to analyze and predict the competitive conditions of complex markets in order to make out a case. It also ensured that conditions supporting lax antitrust enforcement in the analog era would persist in the digital one. The consequences have already played out in two major tech cases that the government saw tossed out by courts following the precedent of American Express: the review of the Sabre/Farelogix merger, and the monopolization case against Qualcomm.
The trio of cases exemplifies the failings of basing the antitrust laws on predictions of “actual competitive effects” using economic theories, and highlights the need for a different approach that can take on the challenges of regulating a complex modern economy.
Tech is testing the limits of a half-century experiment in antitrust in which predictions made by experts have guided enforcement of the law.
Over that time, it has become increasingly common for the lawfulness of a given merger or monopolist’s conduct to be decided by predicting its actual effects on competition. On first blush, it seems a sensible approach. And ostensibly a rational replacement of what came before it, which was a set of hard-and-fast rules that trained antitrust on the protection of market conditions believed conducive to competitive outcomes, with little regard for how competition was actually impacted in an individual case.
But lawyers and economists may have jumped the gun in thinking themselves up to the task. A half decade of experience with the predictive approach to antitrust, bolstered by research in uncertainty and decision-making in other fields, suggests that little more than wishful thinking may support the premise that predictions about complex markets can be accurate enough to guide competition policy. And to make matters worse, the prediction-making apparatus has been focused exclusively on an overly restrictive subset of competition concerns that only serve to help consumers to buy more things for less money. The result has been the consolidation of large swaths of the economy.
This week’s episode is about how the antitrust laws are being used to try to rebalance the relationship between the large Big Tech online platforms and the business users who depend on them. I focus on the European Commission investigation of Amazon (surrounding third-party vendors) and France’s investigation of Google (surrounding web publishers).