Reining in Consumer Big Tech: Antitrust and Beyond

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.

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Antitrust After American Express: Down a Competitive Effects Rabbit Hole

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.

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How tech forces a reckoning with prediction-based antitrust enforcement

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. Ostensibly, it is 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 less 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.

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Don’t believe the hype: managing expectations for the antitrust investigation of Google

Although much attention has been given to last week’s report that federal and state governments conducting antitrust investigations of Google in the US may file lawsuits as soon as this summer,1 those keeping score at home would be wise to manage their expectations for a groundbreaking case.

Exactly what kind of case the government is thinking about bringing is not clear, but it appears on track to involve claims that Google has abused a dominant market position in search and advertising. Yet if recent history teaches us anything about such monopolization cases, it is that they are difficult to bring and to expect, at most, incremental–not sweeping–changes in the course of the antitrust laws. That is because any case the government brings will be confined by a strong case law precedent that has in recent decades significantly curtailed the reach of monopolization laws in the US.

Those looking for big change anytime soon would be wise to instead put their energy elsewhere, such as new tech-specific industry regulations. Looking to competition laws—at least as they are currently crafted—for a big fix is only likely to disappoint and frustrate.

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Why industry regulation of tech is coming, and what it will look like

Shortcomings in antitrust enforcement are causing jurisdictions around the world to consider industry regulation of tech. But instead of sweeping utility-like regulation, so far those efforts are targeting specific sectors such as digital platforms and particular conduct that is outside the reach of traditional competition laws.  

After years of analysis, debate, and enforcement efforts, policymakers are realizing that competition laws cannot deal with many of the social and economic problems created by the proliferation of digital platforms. The EU, UK, Australia, and Japan are taking a hard look at sector-specific regulation to deal with issues related to data access and unfair business practices that overlap with antitrust issues but cannot be clearly regulated by those laws. These new rules will redefine the legal landscape for online platforms and be a testing ground for industry regulation in other tech sectors.

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