|
|
Home
| Databases
| WorldLII
| Search
| Feedback
University of Otago Law Theses and Dissertations |
Last Updated: 25 September 2023
TACKLING THE TITANS: AN ANALYSIS OF PROPOSED US ANTITRUST LAWS TO TARGET BIG TECH
Eleanor Lester
A dissertation submitted in partial fulfilment of the requirements of the degree of Bachelor of Laws (Honours) at the University of Otago, Dunedin, New Zealand – Te Whare Wānanga o Ōtākou
2022
ACKNOWLEDGMENTS
Firstly, thank you to my supervisor Rex Ahdar. This area subject has been a huge interest of mine, and I could not have done this research without your supervision.
To my parents, who have supported me in more ways I can name. My dad, for being an endless sounding board this whole year, and my mum who is always a phone call away whenever I am going through a stressful time. Thank you.
Finally, this dissertation would not have been written without the vast amount of support I have received from friends and family. An especial thank you to Rosie, Emma, Karishma, Sarah, Monique, and Ruby. Your endless support helped me get to the finish line.
CONTENTS
US – United States
ACCESS Act – Augmenting Compatibility and Competition by Enabling Service Switching Act
DMA – Digital Markets Act
CHAPTER I: INTRODUCTION
With the rise of technology having well and truly dawned in the 21st century, new threats have appeared: Big Tech. In a short period of time, technology companies have acquired huge economic power, becoming titans ruling over the digital industry. Their sheer size and ubiquity alone have been causes for alarm, attracting worldwide attention. Of particular concern are the dangers they pose to competition in the economy – their huge market power approaching monopolist status. In response to this crisis, the legislative branch in the United States of America (US) has introduced a package of antitrust bills (the Bills). This includes the American Innovation and Choice Online Act1, Augmenting Compatibility and Competition by Enabling Service Switching Act2 (ACCESS Act), Platform Competition and Opportunity Act3, Ending Platform Monopolies Act4, and Open App Markets Act5.6 An analysis of these Bills demonstrates tensions between opposing theories behind antitrust law, and raises the question of what should be done, if anything, about these firms.
Big Tech refers to dominant platforms in the digital sector – Amazon, Apple, Google, Facebook/Metaverse, and in some instances Microsoft is also included. These firms are virtually monopolies in their respective areas of business: Amazon for ecommerce, Apple for hardware and software, Google for search engines, and Facebook for social media. However, they have many business lines, expanding both horizontally and vertically. They rank among the wealthiest companies in the US and globally, with vast market capitalization.
Academics, particularly those of structuralist/Neo-Brandeisian inclination, are the true driving force behind these Bills. For some years, scholars have warned of the anticompetitive dangers of Big Tech, calling for change and making recommendations. Users of Big Tech’s offerings have also advocated for legal reform. All this attracted the attention of politicians, with
1 S2992; HR 3816.
2 HR 3849.
3 S 3197; HR 3826.
4 HR 3825.
5 S 2710; HR 5017; HR 7030.
6 The Merger Filing Fee Modernization Act S 228, Merger Filing Fee Modernization Act HR 3843 and the Tougher Enforcement Against Monopolists (TEAM) Act S 2039 are related bills, however as they only relate to merger filing fees, they will not be focused on in this paper.
Congressional investigations finding extensive evidence of anticompetitive behaviour and identified a pressing need for legislative reform.
Whether someone supports these Bills or not will largely depend on the theory of antitrust they adhere to. Unlike other areas of the law, antitrust is inherently political, with debate on fundamental objectives competition law aims to achieve. In this paper, the Chicago school (which currently predominates US antitrust), and structuralism/Neo-Brandeisian theory (the theory behind the introduction of these Bills) will be explored. Ultimately, the structuralist/Neo-Brandeisian perspective, prioritising competitive process and pursues goals beyond economic metrics, is a far better theory, truer to the origins of antitrust and more attuned to conditions of the market.
In studying these Bills, an overall question can be answered: what, if anything, should be done about Big Tech? As the evidence shows, the size and behaviour of these firms cannot be tolerated if competitive markets are to be preserved. Private power needs to be curbed. While increasing private wealth is a problem across multiple industries, the digital market is at the forefront, which combined with the novelty of the industry, makes it ripe for regulation. Legislative action will be the most potent method of targeting the digital industry.
An analysis of these Bills will thus reveal insights on the current status of antitrust law, and the status of the economy in the US and the world at large. In chapter II, the background to the Bills is explored, detailing specific features of the digital market and Big Tech that warrants attention, and a general overview of why current antitrust law in the US is failing. The Bills themselves, and what they purport to do, are also explained. In chapter III, the argument in favour of these Bills is presented. Benefits of the Bills, being a legislative response, and their nuance as illustrated by a comparison by European antitrust efforts, are detailed. Analysis through a structuralist/Neo-Brandeisian lens further emphasises the advantages. Chapter IV presents the alternative; arguments against the Bills being passed. Harms they may perpetrate, especially from a Chicago-school perspective, are not to be discounted, however as will be shown, much of this lacks credence. Alternatives ways to combat Big Tech are also considered. Chapter V will present the conclusions on the analysis, summarising why these Bills are not only desirable, but necessary, beyond even confines of the US.
CHAPTER II: THE BILLS
I Background to the Bills
The Bills are a response to mounting outcry against the size and power of Big Tech. They comprise a part of a burgeoning global response. The US, as the home of these companies, and the forefather of antitrust, has been the particular focus of anti-Big Tech advocates.Broadly, two threads have led to the introduction of the Bills. First, the evolution of tech firms into the titans of industry they are today. This has been enabled by particular features of the digital market, and the firms’ anticompetitive conduct. Secondly, the general weakening of US antitrust law. The decreased strength of the antitrust regime is what provided the fertile ground for the tech firms to grow and made the particular features of the digital market so effective at compounding market power.
A The Rise of the Titans: Specific Features of Digital Markets and Conduct that Generated Big Tech
While the digital market is not unique in its oligopolistic conditions, there are several features that have enabled Big Tech firms to rise in power and will seemingly allow them to hold onto it indefinitely. This includes multi-sided business models, network effects, data, strategic acquisitions, and size.
The multi-sided business model describes when a firm serves several sides of a market at once. The firms provide products or services to several markets simultaneously. While this is not unique to the digital market, it is pronounced in tech companies and has been integral to their accumulation of market power. Other features of the digital market have exacerbated its effect. Every Big Tech firm has a multi-sided business model in at least one of its lines of business. The platform the firm owns is the key feature. One side of the market will be consumers/end users, the general public. The other side of the market is business users. Big Tech provides platforms for selling or advertising, acting as a gateway between business and consumer users, linking them together.
Two anticompetitive issues arise from multi-sided business models. First, the position of tech firms as ‘gatekeepers’. As they control how business users and consumers interact, they can
impose exploitative conditions on users (particularly business users) and control the market. This is magnified by the size of these firms, with huge components of the economy now reliant on these platforms, with a “large swath of businesses across the US economy now depend on these gatekeepers to access users and markets”.7
The proportion of the economy at the mercy of tech firms is itself concerning itself, but anticompetitive concerns come to the fore when considered with the second issue, inherent conflicts of interest. Big Tech not only owns the platforms, but frequently offers products or services to consumers in direct competition with business users. There is a strong incentive to use its position as platform controller to benefit themselves, and self-preferencing. For example, ranking their own products in search results ahead of third-party business’ products.8 The combination of a multisided market, and conflict of interest, means the competition will never be fair – the business user is always beholden to the platform controller that choses how successful their competitors will be.
Network effects are when the value of a product or service increases as more people use it. There are direct network effects – the more people using a product or service, the more valuable it becomes to other users.9 For example, Facebook becoming a true ‘social’ platform when there are more users, able to create a network between people. There are also indirect network effects – considerable use of a product or service makes it a new standard, so that third-party businesses are induced to develop products or services compatible with the first product or service.10 For example, Apple, with their hardware products. Accessory developers are incentivised to create products compatible with the mainstream Apple ones. This reinforces the popularity of the Apple products, as consumers have the guarantee that accessories will work with the original Apple product.
At first glance, network effects may not seem anticompetitive. Rather the opposite –achieved by offering superior products and services, outcompeting rivals. However, network effects operate as a barrier to entry into the market, and an effective one at that. While originally it may have rewarded innovation, it now operates to consolidate market power. Once a tech firm
7 Jerrold Nadler and David N. Cicilline Investigation of Competition in Digital Markets (Subcommittee on Antitrust, Commercial and Administrative Law of the Committee on the Judiciary 2020), at 39.
8 Nadler and Cicilline, above n 7. 9 Nadler and Cicilline, above n 7. 10 Nadler and Cicilline, above n 7.
acquires dominance, “threats come largely from outside the dominated market, because the degree of dominance of such a market tends to be so extreme”.11 Further, all of this is self- reinforcing. By virtue of an extensive network, a firm is the best on the market and the obvious consumer choice, and as more consumers join, this compounds. Network effects enables Big Tech to maintain capture of the entire market, preventing rivals from even entering the competition.Network effects also create switching costs. As Big Tech firms have acquired such a large network, consumers are in effect ‘locked in’, and deterred from moving to rival offerings. To go to a competitor means losing all the benefits that came with using Big Tech. No competitor can establish a consumer base, thus no competition ever arises.
Data, perhaps above all, is the most unique anticompetitive feature of the digital market, originating with technology. It has attracted global attention. Data refers to information Big Tech firms has on consumers, their products and services, and the market in general.
There are a multitude of competition concerns. Firstly, its relation with the multi-sided business model. Platform operators can collect data from their site and use it to advantage their own offerings.12 For example, advertising a second product on the page of a another product, is they are frequently bought together. More concerningly, it allows the platforms to identify competitors early on. Once identified, the platform can acquire the competitor, or use tools as platform controller to outcompete the competitor.13 This constantly disadvantages any firm competing, so it cannot do so in a meaningful way. With data, Big Tech ”can systematically tilt a market in their favor”.14
A second concern is the phenomenon of consumers paying with data, rather than money. Under current antitrust framework, price is largely the only metric considered, so non-monetary payment evades virtually all scrutiny. Big Tech runs ‘attention platforms’, in which services
11 Maurice Stucke and Allen Grunes Big Data and Competition Policy (Oxford University Press, Oxford, 2016) at 163.
and products provided are seemingly free or low cost, however valuable consumer data is extracted and used.15Thirdly, collection of data into the hands of the few facilitates collusion.16
The data held by Big Tech also raises many consumer issues, namely privacy, and targeted advertising. Whether consumer protection should be incorporated in antitrust policy against Big Tech is an ongoing debate. As this paper focuses solely on antitrust concerns, it will not address consumer protection goals. That is not to say that these issues do not intersect. Indeed, the use of consumer data in tailored advertising enables firms to very effectively price discriminate.17 Firms are able to use data to extract supranormal profits from consumers, and have far more effective marketing than competitors.
Big Tech has a strategy of buying out any potential competitors. This enables them to absorb any competitive threats and acquire the benefit for themselves, and thus maintain dominance. Potential competitors may be offering a rival service or product, or be a new technology with the capability to oust Big Tech. If buy-out of potential competitors is not possible, then Big Tech will ‘copy’ that competitor, and with their superior resources, drive the emerging rival out of business.18 Usually smaller firms are acquired, however even acquisitions of large competitors has occurred.19This strategy has not only concentrated the market into the hands of a few firms, but also had serious impacts on innovation. Markets surrounding the core businesses of Big Tech have generally seen a decrease in new start-ups and entrepreneurship.20 Innovation ‘killzones’ have been formed.21 New technology firms are not good investments due to the threat of incumbents and high start-up costs; the threat of Big Tech disincentivises entry into the market. Further, evidence shows that actual entry by Big Tech results in less innovation and increased prices.22
15 Big Data: Bringing Competition Policy to the Digital Era DAF/COMP(2016)14, 27 October 2016 (Background note by the Secretariat, Directorate for Financial and Enterprise Affairs Competition Policy, OECD).
16 Big Data: Bringing Competition Policy to the Digital Era, above n 15.
17 Khan, above n 14.
18 Tim Wu The Curse of Bigness: Antitrust in the New Gilded Age (Columbia Global Reports, 2018).
19 For example, the Facebook-Instagram merger.
All these features have enabled the growth of tech firms into titans. The sheer size and economic power amassed by Big Tech is concerning of itself. The market has ‘winner takes all dynamics’, so that the market tips in favour of only a few firms. The competitive process has shifted “from competition in the market to competition for the market”23. Now there are only 4 or 5 technology firms, with largely discrete markets – Amazon for ecommerce; Facebook for social networking; Google for search engines, and technology hardware competing alongside Apple and Microsoft. In September 2020, Amazon, Apple, Google, and Facebook had a combined value of $5 trillion USD, more than one third of the value of the S & P 100.24 Current projections show that in the next decade these firms may control over 30% of the world’s total output.25 With this economic power, Big Tech can further maintain dominance and leverage into other markets. If left unchecked, there will be limited competition to prevent everything antitrust aims to prevent – extraction of supranormal profits, suppression of innovation, and complete private control of the economy.
B The Weakening of US Antitrust Laws
If specific aspects of the digital market are the fertilizer for tech giants to grow, the general weakening of antitrust laws provided the soil in which they could take root. Although US antitrust law ”has long been at or near the centre of the competition law world”,26 changes in analysis framework and underenforcement means it can do little, if anything, against industry titans today.
The US antitrust regime is statutory. There are five core federal statutes – the Sherman Act,27 the Clayton Act,28 the Robinson-Patman Act,29 the Hart-Scott-Rodino Act,30 and Federal Trade Commission Act31.32 The Sherman Act of 1890 was the inaugural antitrust statute, passed with the explicit goal of reigning in large industrial companies of the time that had become ‘Barons’,
23 Nadler and Cicilline, above n 7, at 37.
24 Nadler and Cicilline, above n 7, at 10.
25 Nadler and Cicilline, above n 7, at 10.
26 David J. Gerber Competition Law and Antitrust (Oxford University Press, Oxford, 2020), at 92.
27 15 USC §§ 1-7.
28 15 USC §§ 12-27.
29 15 USC § 13.
30 15 USC § 18a.
wielding huge private power not subject to any checks and balances. There was a focus on preventing concentration of wealth in the hands of a few, preserving open markets, limiting transfers of wealth from consumers to producers, and citizen interests and worker interests.33 Courts, as interpreters and appliers of the statutes, originally enforced antitrust with zeal, focusing on the broader goals of fairness, economic liberty, and equality of opportunities between competitors.34 Enforcement actions, including break-ups of large companies (a bold remedy which legally splits a firm into separate entities to either generate more competitors, or remove a conflict of interest within the firm’s business model), were done.35 This is described as the era of ‘economic structuralism’, hostile to concentrated market structures per se, holding that the structure itself lends itself poor market outcomes.36In the 1980s, however, a fundamental shift in antitrust law occurred, mainly with the introduction of the consumer welfare standard. This replaced the broad, multi-faceted goals of antitrust to prioritise only one – benefitting consumers. The concept originated with the Chicago school, which holds that market forces are better at regulating competition.37 Competition law succumbed to Chicago school theory on two fronts: firstly, the Reagan administration of the 1980s adopted the consumer welfare standard thus so did the federal enforcement agencies; and two, Chicago school academics influenced how the court interpreted antitrust statutes. The case law formulated still prevails today. Analysis narrowed to economic measures,38 with almost exclusive use of consumer price to identify consumer harm.39 Whether this constitutes ‘weakening’ of antitrust is a matter of debate, however growing numbers of scholars and policy experts are critiquing the standard and calling for a rethink, given the devolution of many industries into oligopolistic or monopolistic structures, including the digital market.
Some specific weaknesses in US antitrust can be identified as enabling the growth of Big Tech firms, including consumer price as a measure, lack of enforcement by federal agencies, and narrow interpretation of antitrust statutes by the courts.
Focus on consumer price as a measure of competition has meant much anticompetitive conduct by tech firms has evaded attention. To the consumer welfare theorist, lower prices corresponds
33 Khan, above, n 14.
34 Gerber, above n 26.
35 Broder, above n 32.
36 Khan, above, n 14.
37 Broder, above n 32; Khan, above, n 14.
38 Gerber, above n 26.
39 Khan, above, n 14.
to competition, with rivals lowering prices to capture sales. This benefits consumers, who do not have to pay as much. Quality reduction is also considered within this framework, a lessening of quality equivalent to price increases. This analysis fails in digital markets. In multi- sided business models prices may be maintained or even lowered on the consumer side, however prices or harsh terms (representing a quality reduction) may be present on the business side. The consumer welfare approach completely fails to capture this behaviour.40 Similarly, consumer payment with data and attention also evades antitrust attention.There has also been a significant weakening the antitrust enforcement agencies in the US. The Federal Trade Commission (FTC), and Department of Justice (DOJ), are tasked with publishing competition guidelines, monitoring mergers and acquisitions, and bringing enforcement actions to court for breaches of antitrust laws. However these enforcement agencies have become overly business-friendly, and permissive of market abuse and dominance.41
This business-friendly, Chicago School attitude, also underlies the US court system. Repeatedly, courts have chosen to interpret antitrust statutes narrowly and overlay common law requirements. Again, this emerged with the 1980s rise of consumer welfare standard. Although antitrust laws in the US are statutory, their enforcement occurs through the court, thus the common law is an integral part of the competition regime.42
All of these features have contributed to the growth of Big Tech. In short, the ”U.S. has become a suitable breeding ground for large technology companies to create monopolistic business models”.43 The digital market is ready for regulation.
II What the Bills Purport To Do
The Bills are a targeted response to the specific anticompetitive challenges posed by Big Tech. They prohibit or require certain actions, with the aim of promoting competition in the digital market.
A Application
40 This has already occurred, with Amazon employing this strategy with high success rates (Khan, above n 14).
41 Nadler and Cicilline, above n 7.
42 Broder, above n 32.
43 Peter R. Enia “A Continental Rift? The United States and European Union’s Contrasting Approaches to Regulating the Monopolistic Behavior of Gatekeeper Platforms” (2022) 16(2) Brook J Corp Fin & Com L 249.
The American Choice Online Act, ACCESS Act, Platform Competition and Opportunity Act, and Ending Platform Monopolies Act, apply to ‘covered platforms’. The FTC or DOJ designates platforms falling within the criteria as ‘covered’ and thus falling within the scope of the Bills; if there is no designation, the Bills still apply if the criteria are met. The overarching criteria are the same across the four Bills, however there are some variations in specifics (e.g. amount of capitalization of the market required).The platform must be an online platform. This means a website, online or mobile app, mobile operating system, digital assistant, or online service that does one of three things: enables a user to generate content that can be viewed or interacted with by other users; facilitates sale, purchase, payment, or shipping of products or services between and among users; or enables user searches that access and display large volumes of information.44 There are then three elements that must be met – the US-based users, the company value, and the critical trading partner standards.
To meet the US-based users standards, the platform must have minimum numbers of US-based monthly active users: at least 50,000,000 consumer users, or 100,000 business users.45
To meet the company value standard, the platform must be owned or controlled by a person with net US annual sales greater than, or have an average market capitalization of greater than,
$550-$600 billion.46 Different Bills use different values. All allow adjustment for inflation. Some Bills also include having at least 1 billion worldwide monthly active consumer users as an alternate requirement.47
To meet the critical trading partner standard, the platform must be owned or controlled by a person that is a critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform.48 A critical trading partner is trading partner that can restrict or impede the access of the business user to its customers or to a tool or service needed to effectively serve customers.49
44 American Choice and Innovation Online Act S 2992 s 2(a)(9); ACCESS Act HR 3849 s 5(12); Platform Competition and Opportunity Act S 3197 s 3(h); Ending Platform Monopolies Act HR 3825 s 5(10).
45 American Choice and Innovation Online Act S 2992 s 2(5)(B)(ii)(I); ACCESS Act HR 3849 s 5(6)(B)(i); Platform Competition and Opportunity Online Act S 3197 s 3(d)(2)(A); Ending Platform Monopolies Act HR 3825 s 5(5)(B)(i).
46 American Choice and Innovation Online Act S 2992 s 2(a)(5)(B)(II); ACCESS Act s 5(6)(B)(ii); Platform Competition and Opportunity Online Act s 3(d)(2)(B); Ending Platform Monopolies Act s 5(5)(B)(ii).
47 American Choice and Innovation Online Act s 2(a)(5)(B)(II)(bb).
48 American Choice and Innovation Online Act s 2(a)(5)(B)(III); ACCESS Act HR 3849 s 5(6)(B)(iii); Platform Competition and Opportunity Online Act S 3197 s 3(d)(2)(C); Ending Platform Monopolies Act HR 3825 s 5(5)(B)(iii).
49 American Choice and Innovation Online Act s 2(a)(6); ACCESS Act HR 3849 s 5(8); Platform Competition
and Opportunity Online Act S 3197 s 3(f); Ending Platform Monopolies Act HR 3825 s 5(7).
It is likely that all Big Tech firms will meet the covered platform criteria.50
In contrast, the Open App Markets Act applies to ‘covered companies’. A covered company means any person who owns or controls an app store which has over 50 million US-based users.51
B The American Innovation and Choice Online Act52
The American Innovation and Choice Online Act aims to prevent those operating covered platforms using their position of power as controller of the platform to advantage themselves, and disadvantage users (particularly business users). The prohibitions are set out in s 3. Some specific prohibitions include the preferencing of their own products or services over providings of rival business users,53 discriminating in the application or enforcement of terms of service among similarly situated business users in a way that would materially harm competition,54 condition access to or preferential treatment on the platform on purchase or use of other services provided by the covered platform operator (tying),55 and using non-public data generated by consumer user-business user interactions on the covered platform to offer or support products or services of the covered platform that compete with business users56. This addresses many of the concerns with multi-sided business models, prohibiting actions taken by platform operators due to the conflict of interest.
Several defences to conduct that would otherwise be prohibited are provided in s 3(b). The covered platform has the onus to prove that the requirements of the defence are met. Defences are permitted if the conduct was required for compliance with the law, user privacy or safety, or maintaining the functionality of the covered platform. Conduct taken for these reasons must be narrowly tailored and reasonably necessary, or not resulted or will not result in material harm to competition.
50 Monika Schnitzer and others International coherence in digital platform regulation: an economic perspective on the US and EU proposals (Tobin Center for Economic Policy at Yale, Policy Discussion Paper No. 5, 9 August 2021); Enia, above n 34.
51 Open App Markets Act HR 7030 s 2(3).
52 American Innovation and Choice Act S 2992.
53 Section 3(a)(1).
54 Section 3(a)(3).
55 Section 3(a)(5).
56 Section 3(a)(6).
C ACCESS Act57
The ACCESS Act is aimed at ensuring data is portable between covered platforms, and that platforms are interoperable. In theory, this would promote competition as users can switch from one platform to the other easily, reducing ‘lock-in’. There are two branches to this Bill – data portability requirements, and interoperability requirements.
Data portability requirements are given in s 3. A covered platform must maintain third-party accessible interfaces to enable transfer of data to consumer users or business users. The data must be structured and transferred in a workable way. This would facilitate consumers transferring data stored on one platform to another and thus facilitate switching of providers. For example, transferring data from a Facebook profile to another social media site, so that the switching costs of establishing a new network from scratch is eliminated.
The interoperability requirements are given in s 4. A covered platform must maintain third- party accessible interfaces to facilitate and maintain interoperability with a competing business or potential competing business. Interoperability is when multiple platforms work together, with activity transferred from one to the other. This is continuous, rather than a one-off transfer as for data portability. For example, actions of Facebook are also transferred to another social media platform. This is already done within Facebook’s/Metaverse’s offerings, with interoperability between Instagram and Facebook that it owns. The ACCESS Act would require this interoperability to extend to competitor platforms as well. This is to encourage consumers using multiple sites at once.
Both data portability and interoperability aim to reduce entry barriers for new platforms to enter the market, increase consumer choice, and thus promote competition.
The ACCESS Act also includes data security and privacy regulations, which limits data portability and interoperability in certain situations.
D Platform Competition and Opportunity Act58
The Platform Competition and Opportunity Act is aimed at preventing Big Tech’s strategic acquisitions to maintain market power and eliminate rivals. It makes it unlawful for a covered
57 ACCESS Act HR 3849.
58 Platform Competition and Opportunity Act S 3197.
platform operator to acquire directly or indirectly, whole or part of the assets of another person engaged in any activity affecting commerce.59 There are only a few exceptions: if the acquisition is a transaction under the Clayton Act; if the acquired assets are valued at less than$50 million; or if the acquired assets do not or will not compete with the covered platform, or will not increase the covered platform’s market power.60 This includes competition for user attention and data acquisition.61
This blanket ban is broad, aiming to promote competition by preventing the strategic buy-outs that have meant no new competitors have ever eventuated. The idea is to encourage new entrants into the digital market, and prevent incumbent firms extending their market power by leveraging into adjacent markets and killing potential competitors there.
E Ending Platform Monopolies Act62
The Ending Platform Monopolies Act is aimed at eliminating the conflict of interest inherent in the business model of covered platforms. It provides a structural remedy, forcing firms with a covered platform with assets on multiple sides of the business model to split, so these assets are held by separate entities. Section 2(a) makes it unlawful for a covered platform operator to own, control, or have a beneficial line of business, other than the covered platform, that: uses the covered platform for sale or provision of products or services; offers a product or service the covered platform requires business users buy or use; or gives rise to a conflict of interest. The conflict of interest business model that incentivizes anticompetitive behaviour is removed. The two components that create the conflict of interest are split into separate entities, so market forces can drive competition in the market. This is perhaps the most ambitious of all the Bills, given that successful break-ups have not been instituted by the US government for some years. There is overlap between the application of the Ending Platform Monopolies Act, and the American Choice and Innovation Online Act, both targeting similar situations. However they are very different in application. It is unclear how they will operate together. The American Choice and Innovation Online Act may be a ‘failsafe’, regulating in instances that fall outside the scope of the Ending Platform Monopolies Act, or a backup if the Ending Platform Monopolies Act does not get passed. Overall, this demonstrates the significant overlap between
59 Section 2(a).
60 Section 2(b).
61 Section 2(c) and s 2(d).
62 Ending Platform Monopolies Act HR 3825.
all the Bills, a package intended to work in tandem to combat competitive concerns in the digital market.
F Open App Markets Act63
The Open App Markets Act aims to promote competition on app stores. The regulations are largely similar to those imposed by the other Bills, however they are targeted specifically for app stores. App stores are an example of a multi-sided market; the covered companies providing the app store as a marketplace, the consumer user purchasing and downloading the apps offered, and business users/app developers selling apps. Section 3(a) prevents covered companies from tying business user access to the app store with other products or services the covered companies provide, or imposing exclusivity requirements to usage of the app store. The covered company also may not interfere with communications between business users and consumer users64, use data generated from business user-consumer user interactions to preference their own products65, or preference their own apps in searches66. Interoperability and access to operating system information requirements are also imposed.67
CHAPTER III: ARGUMENTS IN FAVOUR
There are many arguments in favour of these Bills being passed. Consumers, business users, and structuralist/Neo-Brandeisian scholars are among those supporting these Bills. Evidence speaks for itself – there is a dire need for some action to be taken, in response to the harms outlined in chapter II. There are several benefits to these Bills specifically, which is elucidated further when compared with similar legislation in Europe. From a structuralist/Neo- Brandeisian perspective, these Bills are what is necessary to prevent uncontrolled private power in today’s economy.
I A Need for Action
The rise of titans that have captured almost the entire digital market, and the anticompetitive behaviour they exhibit, demonstrates a need for some action to be taken. It has become
63 Open App Markets Act HR 7030.
64 Section 3(b).
65 Section 3(c).
66 Section 3(e).
67 Section 3(d) and s 3(f).
ludicrous to argue anything but. Scholars, experts, and legislators, have all observed that “unregulated digital platforms have created unprecedented concentrations of wealth and power to dismiss these concerns as the alarmist fantasies of disengaged academics or complaints of competitors”.68 Investigations have found over and over proof of anticompetitive conduct and harms to the market. The evidence demands action.
Not only are remedies for current ongoings needed, but preventative measures are also crucial to prevent further market concentration. If the status quo continues, with Big Tech underregulated, there will be further consolidation of market power, leading to serious, long- term harms to consumers.69 Harms already present could continue to worsen, such as the reduction of consumer privacy with the collection of personal data, or the chokehold platform operators have on business users. These are ‘typical’ competition harms to an economist; rising prices, reduction in quality of offerings, loss of consumer choice, lessening of innovation. However many scholars have warned of other consequences, wider than the economy. Economic power is correlated with political power, however wealth in the hands of private entities does not have checks and balances that public law has. Antitrust, traditionally, has served as the check on that power.70 Unconstrained market power can lead to distortion of the democratic process, as it allows control over individuals to an extent that undermines democratic values.71 Some even go so far as to claim that the rise of fascism can be attributed to monopolisation and corporate concentration.72
Big Tech dominates the digital market and intends to maintain and increase that dominance; a
market that increasingly is becoming integral to daily life. Already, Amazon, Apple, Google, and Facebook are ubiquitous in society, knowing about consumers, and able to control what they hear, see, and do.73 Intervention is required to avoid these few firms controlling individuals’ fundamental choices and decisions. Action is needed to prevent society becoming a puppet of gamemaster technology firms.
68 Harold Feld The Case for the Digital Platform Act: Market Structure and Regulation of Digital Platforms (The Roosevelt Institute, 2019) at 202.
69 Byowitz and others “Navigating the New Competition Law Frontier: Reviewing Global Antitrust Approaches to Technology Platforms” (2019) 52(2) Intl Law 159.
70 Tim Wu The Curse of Bigness: Antitrust in the New Gilded Age, above n 18; Barry C. Lynn “America’s Monopolies Are Holding Back the Economy” The Atlantic (online ed, 23 February 2017).
71 Tim Wu “Be Afraid of Economic ‘Bigness.’ Be Very Afraid.” New York Times (online ed, New York, 10 November 2018); Feld, above n 68.
72 Wu, “Be Afraid of Economic ‘Bigness.’ Be Very Afraid.”, above n 71.
73 Wu The Curse of Bigness: Antitrust in the New Gilded Age, above n 18; Feld, above n 68.
Even if those claims are taken as exaggerated hyperbole, there is no denying the competition harms Big Tech perpetuates. These Bills are specifically designed to target those harms. It is an incredibly tailored response. All the recommendations of the House Committee on the Judiciary74 for combatting the particular anticompetitive features of digital markets have been put into the Bills. The conflict of interest business model is addressed by the American Choice and Innovation Online Act, Ending Platform Monopolies Act, and the Open App Markets Act for app stores; network effects are mitigated by the interoperability and data portability requirements in the ACCESS Act; anticompetitive acquisitions are aimed at by the Platform Competition Online Act. The call for action is being answered by Congress – what remains to be seen is if that action will be effective.
II Benefits of the Bills
Broadly, there are several benefits specific to the Bills. Firstly, their legislative nature means they are a meaningful measure, rather than a toothless response to industry giants. Secondly, they are industry targeted, being antitrust regulation of the digital market. And thirdly, while also envisioned as having direct effect on the market if enacted, they also act prophylactically, and thus safeguards the market in future.
A Legislative Action
A legislative response to Big Tech is an advantage in itself. It is targeted, faster, and overall likely to produce better results than policy changes in enforcement agencies, or common law changes in the courts.
While antitrust is a creature of statute, it is the courts’ interpretation that animates the laws. There is much precedent constraining how antitrust statutes apply. Predatory pricing exemplifies this. The general monopolisation prohibition in the Sherman Act, under a broad reading, could include predatory pricing.75 However the Supreme Court formulated the recoupment test, which made proving predatory pricing much harder, especially in the context of digital markets.76 Narrow interpretations have happened across the board, including for anti-
74 Nadler and Cicilline, above n 7.
75 Indeed, the Sherman Act was initially interpreted this way by the Supreme Court to an extent (Khan, above n 14).
7676 Khan, above n 14.
monopolisation laws, tying laws, the grounds in which to prohibit mergers, and the general goal of competition law (shifting solely to the consumer welfare standard).77 Heavily influenced by the Chicago school, courts have become wary of underenforcement, and overly defendant-friendly. Trying to alter this attitude and broaden interpretation could take years, given that many of the precedents come from the Supreme Court. Claims would have to be initiated in State courts and appealed upwards – a process that would provide ample opportunity for Big Tech to fund opposition. Additionally, the court may be reluctant to overturn its precedent. The US judiciary is commonly criticised as slow to react to developments, and relying on outdated economic ideas.78 Big Tech by definition is novel in its technology, and exhibits behaviour that defies traditional antitrust logic. A court slow to respond to new developments and mired in Chicago school doctrine may not have the tools nor the inclination to make any significant changes.Theoretically, most of the anticompetitive behaviour of Big Tech could be captured by presently enacted antitrust law, but with the common law frameworks the behaviour has evaded scrutiny, not falling into the narrow confines the courts have established. In addition, there are ‘gaps’ in the antitrust regime due to the fact-specific evolution of the common law.79 Legislation can respond far more effectively. There are much fewer constraints on what legislation may cover, compared to what a court may consider. Rather than pinning hopes on a judiciary that has not shown any willingness to combat market concentration in digital markets, tailored legislation will prove far more effective. Clear instructions can be sent to the courts on what behaviour is and is not permissible.
Faced with a reluctant court system, policy changes in enforcement agencies are unlikely to produce the changes required. While the Biden Administration has signalled a strong anti- monopolist stance, appointing prominent antitrust reform advocates to positions of power,80 legally enforceable constraints on Big Tech are still required.
If the judicial and executive branches of government cannot eventuate the change (at least, to the extent required), then it falls to the legislative branch. A legislative response is natural – in
77 Nadler and Cicilline, above n 7.
78 Damien Geradin and Dimitrios Katsifis “Selecting the right regulator design for pro-competitive digital regulation: An analysis of the EU, UK, and US approaches” (2021) SSRN.
79 Geradin and Katsifis, above n 78.
80 Marth C. White “Momentum Is Building for Antitrust Reform. Here’s What That Means for Big Tech” Time
(online ed, 12 November 2021).
the past, Congress has acted when courts have narrowed antitrust law, and market concentration has increased. If the antitrust regime is not working as it should, and given the preponderance of evidence that shows they are not in the digital market, then Congress must act. Congress enacted the original antitrust laws, and as the originator, should be the one to pass additional antitrust regulation. Sector-specific antitrust regulation passed to function in concurrently with present antitrust laws will allow a fast, expedient response to the competitive crisis Big Tech poses.
B Sector-Specific Regulation
The sector-specific nature of these Bills means the regulations can be targeted and tailored. Anticompetitive behaviour that has flown under the radar can be explicitly regulated. Given the complexities in the digital market (particularly how their behaviour has turned conventional theory on its head, and the new technological developments), specially designed laws are warranted. In practise, the Bills will only apply to a small number of firms that have acquired the size necessitating regulation. At this size, these tech firms have acquired the “economic power and centrality in our daily lives to require federal oversight well beyond what even modified general rules of antitrust and consumer protection can adequately address”.81 These Bills would provide an essential support to overall antitrust laws, by regulating a specific market that desperately needs reining in.
Sector-specific regulation is not unprecedented, and rather has a proven record of success in other industries. Several markets have been recognised as posing particular antitrust threats, with Congress enacting targeted legislation to combat the risks. These have largely been ‘network’ industries, where regulation is needed for intermediaries in the market.82 For example, the banking market. The Bank Holding Company Act of 195483 regulates how banks may compete in the market. Banks are prohibited from acquiring non-banking companies or carrying out non-banking activities. This is to prevent any conflict of interest issues arising – if bank-held companies begun competing with third-party companies, banks could impact competition in the market by altering credit offerings to the third-parties to benefit their own companies.84 As an essential intermediary in the economy, banks must be separate from
81 Feld, above n 68, at 20.
82 Nadler and Cicilline, above n 7.
83 12 USC § 1841-1850.
84 Khan, above n 14.
commerce. In addition to conflict of interest concerns, there was an explicit fears of excessive concentrations of market power when the Bank Holding Company Act was passed.85 These concerns directly reflect those surrounding Big Tech. Arguably, large tech companies have come to act as intermediaries in the digital economy. They are able to choose who to provide their online services to, which have become essential, and thus have the capacity to control the market and distort competition.86 Industry specific regulations are effective, and viewed as common sense for the banking market – applying the same logic, the digital market warrants sector-specific regulation too.
C A Prophylactic Approach
The Bills enable future-proofing of digital market regulation, by taking a prophylactic approach. If enacted, while able to address current harms and behaviour, it will also act to prevent anticompetitive structures and activity eventuating. All the Bills take ex ante approaches, specifying certain conduct as anticompetitive and illegal, to deter it ever occurring in the first place.87 The idea is that these ex ante rules will complement current antitrust, and with it bring several advantages.
It allows swifter intervention.88 Current antitrust typically intervenes after anticompetitive behaviour occurs, and investigations and enforcement actions can take years.89 Not only is this due to the delays in the court system (which admittedly would be inherited by the Bills), but more importantly due to ad hoc intervention.90 Breaches are investigated on a case-by-case basis, with evidence standards that must be proved by the prosecution or plaintiff. Conversely, the Bills provide in advance what is and is not permitted, operating as presumptions, with the onus on the defence to prove their behaviour is not anticompetitive (and even then, there are very narrow grounds for this). They are per se rules. Clarity of the regulations deters breaches, and also means any violations can be quickly identified and disciplined. In a technology market that is fast-paced, swift intervention is vital to ensure remedial action is taken at the right time, before market power becomes entrenched and irreversible harm occurs.91 This also relates to
85 The Bank Holding Companies Act was enacted to “control the future expansion” of banks, and require “divestment of their non-banking interests”.
86 Khan, above n 14.
87 Geradin and Katsifis, above n 78. 88 Geradin and Katsifis, above n 78. 89 Geradin and Katsifis, above n 78. 90 Geradin and Katsifis, above n 78. 91 Geradin and Katsifis, above n 78.
another benefit with a prophylactic approach – predictability and certainty of the law to those affected.
With guidelines set out in advance of what behaviour is illegal, technology firms can make alterations in business strategy to comply with regulations.92 Of course, this also relies on the guidelines being clear, but the Bills likely achieve this. There is little room for arguing on the facts whether behaviour will have net benefit to competition, or there being some advantage outweighing market harm. Throughout, the Bills maintain a strong presumption of competition harm by the very nature and size of the firm. They prohibit any behaviour that could be anticompetitive, even if intentions are benign. Coherent regulations promulgated in advance mean that Big Tech can adjust their behaviour, and provides certainty to business users, consumers, and enforcers as well.93
The aim of a prophylactic approach is to prevent harms before they even occur. Whilst there are ongoing harms present in the digital market, these Bills will allow for preservation of a competitive market in the future, as well as remedying current behaviour. There is an element of future-proofing inherent in these Bills, highly beneficial in a market that shows perhaps the fastest development in history. The US is not alone in enacting prophylactic antitrust reforms
– globally, there is a consensus that ex ante regulations is the weapon required to combat Big Tech.94
A A Summary of the DMA
The DMA was drafted in 2021 by the European Commission (the European Union’s antitrust enforcement agency), aimed to regulate the Big Tech firms Amazon, Apple, Google, Facebook,
92 Geradin and Katsifis, above n 78.
93 Geradin and Katsifis, above n 78.
94 Schnitzer and others, above n 60; Geradin and Katsifis, above n 78.
95 Regulation 2022/... on contestable and fair markets in the digital sector (Digital Markets Act) COD 2020/0374.
and Microsoft.96 It operates as one large piece of legislation, encompassing many aspects of antitrust regulation for digital markets, rather than the five Bills that would operate in tandem in the US. There are large regulatory overlaps between the US Bills and the DMA – the American Choice Online Act shares the most crossover, however there are overlapping aspects with the ACCESS Act, and Ending Platform Monopolies Act.97 The DMA also covers much of what is contained in the Open App Markets Act as well, as app stores are ‘online intermediation services’.98The DMA applies to ‘gatekeepers’; firms that provide core platform services.99 Substantially, this is similar to the concept of covered platforms in the US Bills, albeit with slightly different specifications. There are several self-executing regulations, applying automatically to gatekeepers.100 This includes prohibitions on discriminatory conduct in relation to conflict of interest business models. Additional regulations may be specified, envisioned by a dialogue between the European Commission and the gatekeeper firm.101 This includes interoperability and data portability.
B Clearer Application of the US Bills
The US Bills are much clearer in application than the DMA. This will streamline enforcement, which is highly beneficial in a fast-moving market that needs rapid intervention. It also provides more certainty for captured firms, and users.
Clear application is particularly apparent in designation as covered platforms/gatekeepers. Both the US Bills and DMA use a mix of qualitative and quantitative criteria to designate platforms.102 Qualitative criteria are the measurable metrics, for example market capitalisation of the firm, or number of users. Quantitative criteria are the non-measurable metrics with room for argument on the facts, for example if a platform operator is a critical trading partner.103
96 Giorgio Monti “Taming Digital Monopolies: A Comparative Account of the Evolution of Antitrust and Regulation in the European Union and the United States” (2022) 67(1) The Antitrust Bulletin 40.
97 Schnitzer and others, above n 50.
98 Digital Markets Act, above n 95, article 2.
99 Article 2.
100 Contained in article 5.
101 Contained in article 6.
102 Geradin and Katsifis, above n 78.
103 American Choice and Innovation Online Act s 2(a)(6); ACCESS Act HR 3849 s 5(8); Platform Competition and Opportunity Online Act S 3197 s 3(f); Ending Platform Monopolies Act HR 3825 s 5(7).
There is little ambiguity in if firms are covered platforms under the US Bills.104 Firms will either meet the criteria or not, with no opportunity for rebuttal. Under the DMA, on the other hand, there is flexibility in designation. Firms may argue against designation as a gatekeeper, and discretion is granted to the European Commission to designate firms even if the thresholds set out in the DMA are not met.105 While this confers adaptability, it does so at the expense of certainty. Given the quick, decisive action needed in the digital market, easily applicable regulations are highly desirable. Any benefits of regulating Big Tech would be destroyed if they could prevent compliance, delaying with lengthy litigation battles over whether they apply or not.
Another area in which the US Bills have clear application is the structural remedy in the Ending Platform Monopolies Act. It is uncompromising – Big Tech must eliminate their conflict of interest business models by separating, or be forced to divest by enforcement actions. The Ending Platform Monopolies will either apply or it will not – there are no defences or legal justifications available. The DMA provides for a similar structural remedy, however it is discretionary, to be considered after there has been systematic non-compliance with the DMA regulations (3 breaches within a period of 8 years).106 Frankly, this would not be effective. Allowing Big Tech to continue behaviour for 8 years before a divestiture is considered could allow untold harms to occur in the market. While enforcers in the EU have been more ready to act aggressively against anticompetitive behaviour, with none of the underenforcement in the US, the DMA approach is not direct enough. Certainty and clarity should be prioritised here. Decisive, rapid action is required to mount an effective response against Big Tech.
C Understanding the Nature of Technology and the Digital Market
Across all the Bills, US policymakers have exhibited a more insightful comprehension of the nature of technology and the digital markets than their counterparts in Europe. There are several examples of this.
Most prominently is the structural remedy in the Ending Platform Monopolies Act. The US approach envisions this as a first line solution. Europe uses the structural remedy as a back-up when other regulations have failed. Separation of Big Tech’s multiple lines of business should
104 Schnitzer and others, above n 50.
105 Digital Markets Act, article 3; Schnitzer and others, above n 50.
106 Article 18.
be a leading option. It will force the firms to compete on price and quality,107 the very essence of a competitive market. As mentioned, structural remedies are not novel in the legal system, with the digital market sharing many similarities to industries regulated by structural restraints.108 The OECD has recommended structural separations of vertically integrated businesses,109 and many scholars argue its essentiality to addressing anticompetitive behaviour.110 Academics have noted that with conflicts of interest, it is “difficult, if not impossible, to think of behavioural remedies that might be effective”.111Part of the reason a structural remedy is a back-up is because the DMA proposes a regulatory system where data is shared between platforms and business users, forcing interoperation, to reduce the competitive advantages the platform company has. However this has significant data sharing concerns over security of platforms and consumers, and more importantly would be virtually impossible to enforce.112 Millions of transactions are performed on these platforms daily; a system to oversee these transactions would be a huge investment of resources. A break- up, however, would be a once off with continuous, long-term effects, as it has eliminated the essential feature incentivising anticompetitive behaviour. It is a ‘self-executing’ method.113 It can be highly effective, transforming entire markets and realigning industry motives.114 A structural remedy “could at one stroke break up many of the present-day internet giants”.115 This fundamental change is needed in the digital market.
Regulations in the American Innovation and Choice Online Act also demonstrate a more flexible and broad approach than the DMA. The DMA’s regulations are far narrower, drafted to specific behaviours.116 While substantially similar conduct is captured, the more expansive US rules means it is more ‘future-proofed’, having the capability to capture new technologies and behaviours. In a market that is rapidly evolving, this is highly beneficial to creating an antitrust regime that will retain its strength going forward. A blanket presumption of illegality is made, with firms able to rebut this in certain circumstances if defences are met. This shows
107 Enia, above n 43.
108 See chapter II(I)(B).
109 Structural separation in regulated industries: Report on implementing the OECD Recommendation OECD 2016.
110 Enia, above n 43.
111 Schnitzer and others, above n 50, at 25.
112 Enia, above n 43.
113 Wu The Curse of Bigness: Antitrust in the New Gilded Age, above n 18. 114 Wu The Curse of Bigness: Antitrust in the New Gilded Age, above n 18. 115 Monti, above n 96, at 66.
116 Schnitzer and others, above n 50; Monti, above n 96.
understanding of the digital market in several ways: firstly it recognises that anticompetitive behaviour has become integral to the success of these firms, and secondly that the risks of underenforcement are greater than previously acknowledged. The rule-of-reason/case-by-case analysis that has come to dominate US antitrust has led to years of significant underenforcement;117 a return to bright-line rules will prevent Big Tech circumventing competition regulations. Firms are prevented from gaming the system.118
Another highly significant difference demonstrating the better understanding the US has of the digital market is the inclusion of merger and acquisition bans in the Platform Competition Online Act. There is no analogous ban in the DMA, nor other regulation in Europe.119 Given that unrestrained merger activity has allowed firms to acquire dominance and prevent competition ever eventuating, and will continue to do so if no action is taken, reform of merger control is needed to preserve open markets and prevent excessive market concentration. The merger ban in the Platform Competition Online Act is presumptive: mergers are assumed to be harmful, with the burden on the merging firms to prove it will not be anticompetitive. If there is harm to competition, net benefits will not outweigh the downsides. This shows accurate judgment of the current conditions of the market. Given the vast wealth, and broad activity of Big Tech, any acquisition will increase their power, whether adjacent to their current areas of business or not. Merger blocking itself is a structural remedy, preventing concentrated market structures ever arising, and not letting conflict of interest business models being created.120 It addresses the anticompetitive concern before it comes into being, arguably easier to fix than after a concentrated industry structure emerges.121 Mergers, along with break-ups, are the ‘historic core’ of antitrust,122 and rather than recoiling from these remedies, they should be embraced as indispensable tools.
IV A Structuralist Analysis
A structuralist analysis of the Bills highlights their many benefits. This is unsurprising, given that Neo-Brandeisians, a type of structuralist, were the driving force behind the Bills. The proposed legislation encapsulates the core tenets and beliefs of structuralist theory.
117 Nadler and Cicilline, above n 7. 118 Schnitzer and others, above n 50. 119 Schnitzer and others, above n 50. 120 Khan, above n 14.
121 Khan, above n 14.
122 Wu The Curse of Bigness: Antitrust in the New Gilded Age, above n 18.
A Structuralism and Neo-Brandeisian Theory
Structuralism is an economic theory of antitrust. It holds that concentrated market structure promotes anticompetitive conduct, and that markets with few firms are inherently less competitive than markets with many firms.123 In terms of competition law, structuralists are hostile to oligopolies and monopolies of themselves, regardless of behaviour. Instead of consumer welfare as the goal of antitrust, structuralists advocate a goal of promoting the competitive process.124 Policies and laws should be aimed at protecting a competitive process and market structure, as this is the best ‘guardian of competition’.125 Structuralism was the animating theory behind antitrust at its origins,126 only declining relatively recently with the advent of the Chicago school.
Neo-Brandeisian theory is a very recent antitrust perspective, arising in the 21st century. It advocates for the return to structuralism and broader goals of antitrust. In their view, concentrated economic power in the hands of private entities is held to be a threat to democracy, with antitrust acting as the ultimate check on that power.127 The weakening of antitrust and concurrent rise of Big Tech is cause for alarm. Some describe a return to the ‘Gilded Age’,128 the era of oil barons and railroad tycoons in the late 1800s that prompted the formation of antitrust legislation in the first place. In addition to an overriding goal of preserving the competitive process, supplementary aims present when the core antitrust statutes were drafted should also be reinstated.129 These include non-measurable concepts such as fairness, preserving open and accessible markets for new entrants, preventing excessive concentrations of private power, and preserving free societies.130
B A Structuralist/Neo-Brandeisian Analysis on the Bills
123 Khan, above n 14, at 718.
124 Khan, above n 14; Wu The Curse of Bigness: Antitrust in the new Gilded Age, above n 18.
125 Khan, above n 14, at 745.
126Tim Wu “The Utah Statement: Reviving Antimonopoly Traditions for the Era of Big Tech” (19 November 2019) OneZero <https://onezero.medium.com>.
127 Wu The Curse of Bigness: Antitrust in the new Gilded Age, above n 18.
128 Wu The Curse of Bigness: Antitrust in the new Gilded Age, above n 18.
129 Wu “The Utah Statement: Reviving Antimonopoly Traditions for the Era of Big Tech”, above n 126; Khan above n 14; Wu The Curse of Bigness: Antitrust in the new Gilded Age, above n 18.
130 Gerber, above n 26.
Through a structuralist/Neo-Brandeisian perspective, these Bills are not simply beneficial, but necessary to respond to the crisis point in the digital market. The Utah Statement131, as the collective voice of structuralists/Neo-Brandeisians in the US, identified several changes to antitrust they saw as necessary, and almost all of them have been put into the Bills. There are several aspects that are particularly notable.
Firstly, the introduction of a structural remedy, with divestitures that may be imposed by the Ending Platform Monopolies Act. The entire aim of this Bill is to split vertically integrated firms that have inherent conflict of interests in their business structure. To the structuralist/Neo- Brandeisian, this is exactly the aim of antitrust – breaking up large firms to create a less concentrated market. The digital market, dominated by only a few large firms, is an intolerable market structure. Big Tech has acquired monopolistic power. The Ending Platform Monopolies Act will restore competition by creating rivals and competitive pressures.
Secondly, the Bills represent a willingness to intervene in a market where competition is suffering. There is a commitment to avoid underenforcement of Big Tech, with presumptions against defendants, and no ability to ‘excuse’ anticompetitive behaviour on the grounds that it will overall create efficiencies in the market. This is a departure from what has previously prevailed in antitrust in the US, shifts away from a business-friendly attitude. Structuralists/Neo-Brandeisians are antimonopoly. They are against big firms for the sake of their being big – this is reflected by underlying hostility to size underlying the Bills. The Bills will intervene without fault required, applying if the size thresholds are met. Big Tech firms will be regulated by these Bills, with no fears of efficiency losses standing in the way.
Thirdly, the Bills reflect a movement away from the consumer-welfare framework, so that antitrust can encompass a variety of economic and non-economic goals. The Bills focus on process and structure of the market, as opposed to the outcomes. By applying to companies simply because of their size, and prohibiting and requiring certain acts, they target an ongoing process of competition, rather than metrics of efficiencies or consumer benefits. Barriers to entry are particularly targeted, such as prohibiting discriminatory conduct by covered platforms. The whole goal is to promote an open market that competitors can access. When
131 Wu “The Utah Statement: Reviving Antimonopoly Traditions for the Era of Big Tech”, above n 126.
structure and the competitive process are protected, the market will self-correct, as market forces drive firms to compete.
CHAPTER IV: ARGUMENTS AGAINST
As much as there is support for the Bills, there is also a substantial group against them. Unsurprisingly, Big Tech is at the forefront, but there are also a significant portion of scholars and economic analysts.
The main critique of the Bills is that they will cause harm to targeted businesses and the business cycle. There will be considerable disadvantages that will outweigh benefits, if any. This is very much a Chicago school position. Analysing through this theoretical lens gives an estimate of the challenges the Bills will face if enacted, showing how the status quo will view them.
Underlying the entire analysis of the digital market and these Bills is a larger question – how should Big Tech be targeted? There are several alternatives to regulating the digital market, such as treating them as public entities, and the essential facilities doctrine. More suitable alternatives speaks against these Bills being passed.
I Harms to Businesses and the Business Cycle
The central argument against the Bills is that they will harm the tech firms they target with flow on consequences to users, exacerbated by disruption to the business cycle and competitive process. In short, the Bills will do the opposite of what they intend to do – instead of promoting competition in digital markets, they will hinder it.This position is not just promulgated by Big Tech firms. Several organisations, scholars, and economic experts that stand by this. For example, the US Chamber of Commerce, small business spokes groups, and technology associations have all voiced their opposition. However a close analysis of their arguments reveals several weaknesses.
A Harm to Big Tech and Consequences for their Users
One of the claims is that the Bills will place an undue regulatory burden on Big Tech, resulting in huge costs that ultimately will be passed on to business users and consumer users. Somehave estimated $319 billion USD total if the Bills were enacted as they are.132 These costs would come from several aspects – the expenses in complying with behavioural regulations, loss of efficiencies due to mergers and acquisitions that would be prohibited, and diminishing economies of scale and scope associated with break-ups into separate independent entities.133 This excludes fines if technology firms violate the regulations, a high potential if they cannot adjust their business structure quickly enough to comply in the short-term.
Several responses can be made to this argument. Perhaps most importantly is asking why Big Tech will suffer these costs. This figure may simply represent the losses associated with a shift from anticompetitive to competitive behaviour, losing the ability to extract supra-normal profits. If competition is the goal, this is desirable, despite costs to Big Tech. Taking the loss of efficiencies from a general ban on mergers and acquisitions – admittedly there may be an opportunity cost. But competition law has never been focused on protecting individual players in the game. A wider look at market conditions shows a host of evidence that banning mergers will have beneficial outcomes for the competitive process as a whole. Given the huge economic power these firms have, it is hard to give credence to costs they will incur if competitive restraints are placed on them.
A far more compelling argument, however, is the passing on of these costs to users. The expense associated with complying with the regulations, and becoming independent companies that cannot cross-subsidise services and products, means that consumer prices will rise. For example, some claim that the popular Amazon Prime membership could increase by $148 USD for each consumer per year.134 There could also be significant reduction of service and product quality – expected formats of online sites and software, ease of using associated services in conjunction, and improvements to offerings, could all be impeded by the Bills.135 Consumers could see a return to early-2000s interfaces if Big Tech is not permitted to provide their usual services.136
132 Christian M. Dippon, Matthew D. Hoelle “The Economic Costs of Structural Separation, Line of Business Restrictions, and Common Carrier Regulation of Online Platforms and Marketplaces: A Quantitative Evaluation” (2022) NERA Economic Consulting.
133 Dippon and Hoelle, above n 133.
134 Dippon and Hoelle, above n 133.
135 Michael Mandel, John Scalf and Daniel Sokol “What does the American Innovation and Choice Online Act mean for consumers and competition?” (18 January 2022) Progressive Policy Initiative
136 Mandel, Scalf and Sokol, above n 135.
Particular attention is paid to the harms on business users, especially small to medium sized businesses. Some business users rely on platforms provided by Big Tech to access a customer base, avoiding marketing and sale infrastructure costs.137 Free, highly valued services may become unviable under the Bills. Business users would have to either pay fees to Big Tech for using the platform, or fund their own selling platform, both potentially being a significant financial strain. Some may go out of business, and potential entrants may be deterred from entering the market at all. Consequently, there will be a reduction in consumer choice as businesses not able to keep up with rising costs are lost to the market. Ergo there will be a reduction in competition.Again, however, that raises the question of why those services offered by Big Tech are free, monetary-wise, in the first place. Business users could be paying in other ways, such as sales data.138 Even accepting there will be a rise in price and other harms, the consequences if Big Tech is left unchecked outweighs this. Given the extensive evidence of market concentration that has no signs of stopping, a disadvantage to business users may be a tolerable repercussion. Indeed, Big Tech as titans of the industry, controlling the entire digital economy, could do far more harm to business users, as already seen with the exploitative terms of services. These Bills look to long-term solutions, fixing foundational causes of market power.139 Negative effects in the short-term, with harms to consumers and business users, is endurable, with the prospects of positive market change to restore competition. Big Tech has long pursued a long- term agenda – to be effective against them, the Bills must too.
B Harm to the Business Cycle and Competition
Opposers to the Bills also claim they will stifle the competitive process in the digital market, and thus do the opposite of what they are intended to do. Reduction in consumer choice, and harm to business users comprise of part of this, however other competition factors will be affected in other ways as well.
One avenue competition will be affected is innovation. Innovation is a desirable trait in a market, and a sign of competition, as firms create new and better products or services to outcompete rivals. Opponents claim that the Bills would decrease technological innovation.140
137 Dippon and Hoelle, above n 133.
138 See chapter II(I)(A)(3).
139 Geradin and Katsifis, above n 78.
140 Dippon and Hoelle, above n 133; Byowitz and other, above n 69; Mandel, Scalf and Sokol, above n 135.
Estimates have put reduction of venture capital investment in start-ups at 12%.141 This comes from a distortion of “the dynamic incentives and cost structure for both established technology firms and startup technology firms”.142 The ban on mergers and acquisitions would be a key culprit. Buy-out from a Big Tech firm can be a motivator for technological start-ups in itself;143 removing that incentive will deter innovation Alternatively, costs associated with the Bills’ regulations would deter market entry by new firms – whether that be the costs of compliance, or losing free services provided by Big Tech.144However there is also evidence for the opposite. Other sources describe how in the present market, entrepreneurship and start-up rates have dropped significantly, from 60% in 1982, to 38% in 2012.145 The whole concept of the ‘innovation killzone’ in the digital market demonstrates current harm to innovation. Policymakers have decided that the Bills would actually improve innovation rather than kill it, or may consider the benefits of preventing Big Tech acquiring new technology firms and thus being master-controllers of the entire market outweigh any small losses in innovation.
Overall the competitive process and business cycle would supposedly be harmed. The regulations would impede the competitive process, particularly between Big Tech itself.146 Divestiture requirements would result in market segmentation, as firms focus on core services.147 Big Tech, rather than competing with each other, would retract operations to central offerings. Some claim the Bills are the beginning of a governmental assault on the free market.148 Natural market forces are being interfered, meaning that the market will not be able to self-correct, an anti-interventionist stance heavily influenced by the Chicago-school.
However this argument fundamentally fails to recognise that the competitive process is suffering ongoing harm currently. There is overwhelming evidence that anticompetitive behaviour has become the norm in the a market. Big Tech can manipulate the industry as they wish, and they will stand increasingly gain control if nothing is done. The Bills remedy this,
141 Dippon and Hoelle, above n 133.
142 Dippon and Hoelle, above n 133, at 48.
143 Alan J. Devlin Reforming Antitrust (Cambridge University Press, Cambridge, 2021).
144 Dippon and Hoelle, above n 133.
145 Nadler and Cicilline, above n 7.
146 Mandel, Scalf and Sokol, above n 135.
147 Mandel, Scalf and Sokol, above n 135.
148 Sean Heather “Antitrust Bills: Gateway to Sweeping Changes Across our Economy” (23 May 2022) US Chamber of Commerce <www.uschamber.com>.
eliminating the incentives for the anticompetitive conduct – prohibiting conflict of interest business models, prohibiting self-preferencing, presumptively banning mergers. Despite their claims, opponents’ arguments have limited traction when Big Tech has become the monopolies and oligopolies antitrust was designed to prevent.
II A Chicago School Analysis
From the Chicago school perspective, the Bills represent a dangerous shift in antitrust law. With the Chicago school having strong anti-interventionist policies, the Bills are an unwelcome interference in the market that will have detrimental effects to the competitive process.It is unsurprising that Chicago school adherents are generally opposed to the Bills, given that the Neo-Brandeisian theory that underlies the law change is heavily critical of the consumer- welfare framework. Rationales behind these Bills are fundamentally against the Chicago school framework. As the Chicago school is the status quo in the current antitrust landscape in the US, an analysis from this perspective is incredibly useful, providing insights into how the courts may react to the Bills.
A The Chicago School Framework: An Overview
At its core, the Chicago school holds belief in the efficiency of markets. It has a central, simple premise, of “rational economic actors working within the confines of the market” to maximise profits and efficiency, and a “failure to act in this fashion will be punished by the competitive forces of the market”.149 Market forces will result in the most efficient outcome, and thus be most beneficial for the economy.150 For example, when monopolistic or oligopolistic market structures come into being, and they are inefficient, market forces cause them to naturally lose power.151 Adherents take a strong anti-interventionist position, wanting minimal government interference.152 Antitrust laws should be employed sparingly. Associated with an anti- interventionist policy is a fear of over-enforcement and hostility of false positives153 – antitrust law that is too broad and captures behaviour that is not anticompetitive in fact, should be
149 Marc Allen Eisner Antitrust and the Triumph of Economics: Institutions, Expertise, & Policy Change (University of North Carolina Press, United States of America, 1991) at 107.
150 Manuel Wörsdörfer “Big Tech and Antitrust: An Ordoliberal Analysis” (2022) 35 Philos Technol.
151 Florian Kraffert “Should EU competition law move towards a Neo-Brandeis approach?” (2020) 16(1) ECJ 55; Wörsdörfer, above n 150.
152 Enia, above n 43; Wörsdörfer, above n 150.
153 Khan, above n 14.
avoided. Over-enforcement would interfere with market forces, and thus is more harmful than underenforcement.154
As mentioned, the predominant feature of the Chicago school is the consumer-welfare analysis of antitrust issues. This is primarily assessed through prices – higher prices disadvantage consumers and indicate a lessening of competition, and lower prices advantage consumers and indicate healthy competition in the market. Methodology generally focuses on measurable metrics, like price, rather than intangible measures, and pursues an empirical, scientific application.155 It is outcome based, 156 with goals other than efficiency, including fairness and wealth concentration, generally ignored.
B A Chicago School Analysis of the Bills
As the Bills are a radical departure from current antitrust laws, the Chicago-school, as the contemporary framework, views these Bills as detrimental.
The Chicago school would critique these Bills as being economically unsound. The Bills have ex ante application, which means they will apply regardless of the outcomes. Even efficiency generating behaviour could be captured. The regulations act as rules, applying per se rather than having in-depth case-by-case analysis of whether benefits outweigh negative effects. Regulations apply to any platform that meets the ‘covered platform’ criteria, with no net- benefit or offsetting factor analysis permitted. While this may provide certainty, to the Chicago school, it sacrifices too much accuracy. Commercial markets are complex and fluid, and especially with a digital market that is not yet fully understood, precision is required.157 An effects-based, ex post facto approach, allows proper consideration of all the factors.158 Application of the Bills is based in structuralist assumptions, with a lack of supporting evidence. This is shown with the proposed changes to merger analysis. The Chicago school permits mergers, even if it reduces competition in the market, if pro-competitive effects outweigh the harms. Most mergers will have benefits, primarily in generating efficiency159 – opposed to two smaller firms, a single larger firm has increased economies of scale and scope
154 Devlin, above n 143.
155 Devlin, above n 143.
156 Khan, above n 14.
157 Devlin, above n 143.
158 Devlin, above n 143.
159 Devlin, above n 143.
and productivity gains that are passed to consumers in the form of lower prices. The blanket ban on mergers in the Ending Platform Monopolies Act disregards benefits that can arise from mergers. No economic factors support hostility towards consolidation of markets.
However this position fails to understand the breadth of argument the Bills stand for. One of the fundamental tenets of structuralists/Neo-Brandeisians, is the importance of non-economic factors in antitrust. The ban on mergers for example, is not to promote efficiency, but rather to prevent consolidation of market power. It is explicitly to prevent Big Tech using the market power they hold today to control the ‘technology of tomorrow’ by eliminating future competition.160 The preferred growth methd, instead of through mergers and acquisitions, is from innovation that would arise if the market barrier of buy-out is removed.161 Neo- Brandeisian proponents of the Bills, while recognising the benefits economic analysis can have, know that pursuing democratic and institutionalist values can come at the expense of efficiency and consumer welfare.162 They embrace it. Thus a critique that solely focuses on the loss of efficiencies in the Bills and fails to engage with the broader socio-political goals, misses much of the reasons these regulations were proposed.
To a Chicago school adherent, the Bills also destroy the self-correcting properties of the market. The behavioural and structural remedies interfere with the market, and prevent proper market forces acting. This is the underlying idea behind the Bills harming the business cycle.163 (The digital market, as much as any other, is subject to the cycling of dominant firms, with a perpetual monopoly only a myth.164 The Big Tech of today displaced a previous set of industry giants that many feared would never end, and those giants had replaced dominant firms before it, and so on and so on. While the current technology titans are new, and their business practises novel, their market power is not, and history shows that even the most powerful firms fall as new innovators arise.165 The Bills are detrimental because they alter natural market incentives. Prohibitions and requirements applying to platform operators force private entities must provide their services to business users, on non-discriminating terms. Property rights are not
160 Nadler and Cicilline, above n 7.
161 Nadler and Cicilline, above n 7.
162 Daniel A. Crane “How Much Brandeis Do the Neo-Brandeisians Want?” (2019) 64(4) The Antitrust Bulletin 531.
163 See chapter IV(I)(B).
164 Devlin, above n 143.
165 Devlin, above n 143.
respected, and incentives to control these platforms are destroyed, as other businesses can ‘piggy-back’ off their efforts. Disruption of incentives disrupts innovation, and thus the business cycle cannot work properly. In the digital market, “[d]isplacement occurs unpredictably and suddenly – often from lateral markets – against a backdrop of steady incremental innovations”.166 These Bills distort the market and competitive incentives, and thus disrupts natural forces that would self-correct the technology industry.
Following from this, a Chicago school analyst would argue that these Bills are completely unwarranted. Some go so far as to say that current antitrust is not failing, and there are no issues in the digital market. If the current consumer-welfare framework is in place, then current antitrust laws allow for the most efficient outcome. Market structure is a reflection of market power167 – the size of Big Tech is by virtue of outcompeting rivals. The Bills apply to firms based on size, rather than behaviour. Companies are targeted because they have been successful, and acquired a large share of the market. “If consumers see fit to reward an innovator with a monopoly of breath-taking scale, then antitrust agencies have nothing to say absent exclusionary practises”.168 Given natural market cycling, Big Tech is transient and cannot represent a failure of antitrust. The Bills are intrusive, unfairly punishing Big Tech.
In the face of swathes of evidence that points in the other direction, that the digital market has become uncompetitive and will continue to be so unless action is taken, it is hard to give credence to the Chicago school’s faith in self-correcting market forces. By all accounts, Big Tech is now in the position to manipulate the market entirely, and is in fact doing so. A belief that US antitrust has not failed reads more as a clinging to relevance and concepts that have not kept pace with the evolution of the digital market. Self-preferencing on platforms, strategic acquisitions, collection and utilisation of data, all with explicit goals of driving out competition and maintaining market power, have become normal in the digital industry. Market forces have failed. Under the Chicago school, antitrust has failed. These Bills directly remedy that. Despite the protests that Chicago school adherents, including the courts, will undoubtedly make if the regulations are passed, the Bills’ clear wording and application means they are up to the challenge.
166 Devlin, above n 143, at 160.
167 Devlin, above n 143.
168 Devlin, above n 143, at 270.
III Alternatives to the Bills
In assessing whether these Bills should be passed, it is relevant to examine any alternatives that may be better at regulating Big Tech. Some proposed alternatives are regulating large technology firms as public utilities, and reviving the essential facilities doctrine. As will become apparent, however, these alternatives lack the robustness to stand against Big Tech, with far more benefits to legislative action.
A Regulating as a Public Utility
Regulating Big Tech as a public utility involves accepting they are inherently monopolistic or oligopolistic, and instead of regulating them through competition, doing so through direct government oversight. Public utility regulation aims to eliminate competition, to benefit from economies of scope and scale, but limit how firms may use their monopoly power.169 Industries that are currently regulated as public utilities include electricity, water supplying, and transport.170 Public utility regulation is relatively rare, often only done for natural monopolies, when the industry is “too important to be left exclusively to market forces”.171 Certain services are deemed so essential, that the government has a responsibility to ensure everyone has access.172
There are many similarities Big Tech shares with industries currently regulated as public utilities. They have become integral to the digital economy, and are impossible to escape. Digital firms possess such “economic power and centrality in our daily lives” that they require “federal oversight well beyond what even modified general rules of antitrust and consumer protection can adequately address”.173 Big Tech operates essential infrastructure in the digital economy. Public utility regulation would envision these monopolists maintaining these platforms, subject to regulation. Regulations that would likely be imposed would include non- discrimination in prices and services, limits on price setting, and capitalisation and investment requirements.174 The non-discrimination requirements are similar to regulations in the Bills, but done in a completely different framework: to ensure legitimate market power is not abused, rather than eliminating an entry barrier.
169 Khan, above n 14.
170 Khan, above n 14.
171 William Boyd “Public Utility and the Low-Carbon Future” (2014) 61(6) UCLA L Rev 1614.
172 Feld, above n 68.
173 Feld, above n 68, at 20.
174 Khan, above n 14; Feld, above n 68.
Public utility regulation would come with several benefits – mainly preserving economies of scale so there are efficiencies for society, but preventing the firms exploiting dominance.175 The concerns regarding loss in quality of services would also be addressed, as tech firms can continue to provide integrated offerings to consumers. Features users have come to value and rely on would remain.
However there are significant downsides, all of which point to legislation being a better method of regulating Big Tech. Most notably, public utility regulation would require ongoing, extensive oversight. While the Bills also require investments into enforcement activities, a legislative regime would still be far less costly in terms of people power. A body, perhaps several, would need to be established to oversee the tech firms that become public utilities. Given the vast amount of activity on these sites, supervision would have to be considerable. In addition, regulatory bodies could be susceptible to the same errors the judiciary and enforcement agencies have made, being overly business-friendly and focusing on efficiency and consumer frameworks that fail in the digital market. Indeed, one of the critiques of the concept of public utilities is that they are a form of corruption, being a collusion between private and public entities to control the market.176 Even the underlying theory of public utility doctrine is unappealing. It is a ‘giving up’ on a competitive market, and may destroy the chance of new innovators with revolutionary technology entering the scene and rivalling incumbents. Some have noted that there is no need for digital platforms to be a public utility, only meriting consideration for this type of regulation by virtue of size and market share.177 There is no natural resource they have monopolised unlike traditional public utility industries. Antitrust legislation would be a far more nuanced tool, allowing the market to self-correct, and provide unforeseeable benefits that may be lost if an uncompetitive structure is accepted.
B Reviving the Essential Facilities Doctrine
The essential facilities doctrine is a common law feature that has been singled out as having potential on regulating Big Tech. For it to be effective, however, extensive reinvigoration would be required.
175 Khan, above n 14.
176 Khan, above n 14.
177 Feld, above n 68.
There are four elements to the essential facilities doctrine – a monopolist must control an essential facility, with competitors unable practically or reasonably able to duplicate that facility, denial of competitor use of the facility by the monopolist, when providing use would be feasible.178 It acts to prevent monopolists from refusing to deal with competitors. Essential facilities are often infrastructure, traditionally including bridges, ports, electrical networks, and telephone networks,179 however there is no reason the doctrine cannot extend to more modern concepts.For Big Tech, their online platforms would be the essential facility. They have become essential infrastructure in the digital sphere, acting as a gateway between the two sides of the markets they serve. It is unreasonable to expect competitors to start their own platform in which to serve consumers. Although theoretically possible, acquiring the size and instituting the benefits of Big Tech platforms would take huge investments of time and energy, and due to consumer lock-in and a recurrent practice of any rivals being bought out or driven from the market, is unfeasible in practice.
This would be most relevant for platforms where the platform operator directly competes with users. For example, Amazon, owning Amazon marketplace and simultaneously selling rival products to business users. Apple’s app store is another example, where they sell competing apps on a platform they control. It is unclear how the essential facilities doctrine would apply to other platforms such as Facebook, where competitors do not act through the dominant social media platform. Some have put forward data as an essential facility, the information Big Tech holds as vital inputs about consumers. However the non-rivalrous nature of data (being able to be held in duplication) challenges its ‘essentiality’.180 Additionally, the courts have rejected data being an essential facility.181
There are some benefits to an essential facilities doctrine. It imposes sharing requirements, when refusing to grant access to a facility would mean acquiring a monopoly or maintaining a monopoly.182 It expressly deals with anticompetitive concerns, facilitating open access to the
178 MCI Communications Corp v American Tel & Tel Co [1983] USCA7 822; 708 F 2d 1081 (7th Cir 1983).
179 Brett Frischmann and Spencer Weber Waller “Revitalizing Essential Facilities” (2008) 75(1) Antitrust LJ 1; Khan, above n 14.
180 Kristen O’Shaugnessy and others “Big Data, Little Chance of Success: Why Precedent Does Not Support Anti- Data Theories of Harm” (2022) Competition Policy International.
181 See hiQ Labs Inc v LinkedIn Corp 485 F Supp 3d 1137 (ND Cal 2020) and Sanborn Library Llc v Eris Info
2021 US Dist LEXIS 165496.
182 Frischmann and Waller, above n 179.
market and eliminating entry barriers. In comparison to regulating Big Tech as a public utility, it is a far less arduous option.183 The doctrine also has a long pedigree in the common law tradition,184 so may be more palatable than novel legislation.
However there are very significant issues. Primarily, because the doctrine has had limited acceptance by the US judiciary. While it has been recognised and used by lower level federal courts, it has never been explicitly accepted by the Supreme Court.185 In Verizon Communs Inc v Law Offices of Curtis v Trinko,186 despite not being relevant to the case, the court stated they have “never recognized such a doctrine”.187 Even in the lower federal courts, the scope of the essential facilities doctrine has been narrowed overtime, with increasingly strict requirements of what counts as ‘essential’.188 Huge litigative effort would be needed to overcome this judicial hostility to get the doctrine to work effectively against Big Tech, particularly applying it to such a novel industry.
Legislation would be a far more targeted and effective response. The essential facilities doctrine will be unable to address all the anticompetitive concerns in the digital market, with doubtful application to Google and Facebook, and data. Legislation allows a freer, more creative response, unconstrained by the bounds of common law. Big Tech demands a nuanced, comprehensive regulatory effort. A judiciary untrained in technology markets with a tendency to err towards underenforcement will not be able to apply the essential facilities doctrine effectively. Even if applied expansively, it would only be one component of an antitrust overhaul that is desperately needed.
CHAPTER V: CONCLUSIONS
I Reflections on the Bills
Overall, these Bills are a welcome response to Big Tech. They combat almost every concern about the digital marketplace, offering nuanced remedies with an effective structuralist background. Although not discussed in depth in this paper, the penalties for violating the Bills are strong deterrents for targeted companies. Fines based on total US revenue for the length
183 Khan, above n 14.
184 Frischmann and Waller, above n 179.
185 Khan, above n 14; Devlin, above n 143.
186 [2004] USSC 4; 540 US 398 (2004).
187 At [411].
188 Frischmann and Waller, above n 179.
the violation occurred, injunctions, and surrendering of compensation, and enforced break-ups, are all heavy punishments that give the Bills ‘teeth’ necessary to compel compliance.These Bills are not a complete answer to Big Tech. Despite its advantages, there are several areas where the Bills could be strengthened, particularly from adopting some of the aspects of the European approach. In addition, further steps outside of the legislative regime are needed to support a coherent and effective attack to properly mitigate harms in the digital market.
A Proposed Improvements of the Bills
Although the Bills are generally nuanced and propose effective remedies in the digital market, there are certain areas apt for improvement. This becomes apparent when compared with the DMA in Europe, which despite being a weaker regulatory scheme, has some features that could be adopted by US policymakers. These improvements are more clarifications, or more detailed specifications – minute changes in the grand scheme of things, which only goes to show how well drafted these Bills already are.
Firstly, some of the components of designating firms as ‘covered platforms’ or ‘covered companies’ could be reconsidered. Currently the Bills have more general language than the DMA when defining an online platform, focusing on capturing core functions.189 While this leans itself to being able to apply to a wider range of services with the potential to include future technological developments, it loses some specificity. The DMA lists examples of online platforms, including advertising services, communication services, and cloud services.190 Arguably the wording of the US Bills includes these, but due to the importance of these services in the digital market, it may be worth specifying them to remove any doubt. This would mean the Bills would fully encompass all the platforms they intend to address.191Some have also critiqued the US Bills’ reliance on quantitative criteria in designating a platform or company as ‘covered’. It risks the scheme being ‘gameable’.192 However this danger is mitigated in several respects. One, US-based users standards, and company value standards,193 are relatively hard to manipulate, as they are based on use of the services, outside the firms’ control. Two, the Bills allow for these standards to fluctuate alongside inflation rates,
189 Schnitzer and others, above n 50.
190 Article 2(2).
191 Schnitzer and others, above n 50. 192 Schnitzer and others, above n 50. 193 See chapter II(II)(A).
thus is resistant to economy-wide changes. Finally, even if this warrants some redrafting of the designation requirements, the criteria as they stand would capture Big Tech currently. If enacted, they will have immediate effect, thus addressing present issues. Amendments can be made later on.
The regulations also contained in the American Innovation and Choice Online Act, and ACCESS Act, could be clarified, and some additional rules could be specified. Particularly as these Bills will be applied by a court system historically hostility to expansive antitrust laws and lacking expertise on technology markets, specification could be advantageous. Additional regulations contained in the DMA, and could be adopted by the US Bills, include price and performance transparency for advertisements; fair, reasonable, and non-discriminatory sharing obligations for search query and click data to rival search engines; and prohibitions on data sharing between services without active user consent.194 Again, arguably these already are captured by the broad provisions in the Bills, but further specification could make application more certain, sending a clear message to enforcement agencies, the courts, and Big Tech themselves.
B Concurrent Steps to be Taken with the Bills
In addition to legislative action, there are other steps that should also be taken to properly gear up antitrust to tackle Big Tech. This includes an overall revitalising of antitrust in the common law, strengthening enforcement agencies, and reframing the goals of antitrust.
There are several common law frameworks that overlay antitrust statutes that need to be revitalised. These changes will then work concurrently with the Bills to reign in Big Tech. One such doctrine that has been recommended for revitalization is the essential facilities doctrine195.196 It has significant overlap with much of the regulations contained within the American Innovation and Choice Online Act, both placing obligations on
194 Schnitzer and others, above n 50.
195 See chapter IV(III)(B).
196 Tim Wu “The Utah Statement: Reviving Antimonopoly Traditions for the Era of Big Tech”, above n 126; Nadler and Cicilline, above n 7.
platforms/infrastructure that is a gateway in the market, to deal with competitors fairly. It would overlay the legislative regulations, and perhaps capture behaviour that may evade the Bills.The common law on predatory pricing is another area that has attracted a lot of attention for reform. Many advocate for the current recoupment test to be overruled.197 As in digital markets, firms can cut prices to below-cost levels for years due to investment backing or subsidisation from other lines of business, this recoupment test fails. Advocates propose recoupment not be an essential condition of predatory pricing, marking a return to how the Supreme Court originally applied anti-predatory pricing legislation.198 This is not explicitly dealt with in the Bills, thus a change to this common law framework would be highly beneficial, targeting a typical behaviour in technology markets.
Strengthening antitrust enforcement agencies is also a crucial step to making these Bills effective.199 The FTC and DOJ will be the ones enforcing the Bills, thus must be staffed with experts who are unafraid to take action against Big Tech. This has already started, with several appointments of Big Tech critics to leading roles in enforcement agencies.200 Continuing hostility to large technology firms and readiness to bring litigative action will mean these Bills will not just be a footnote of the legislative agenda. Additional funding, increased investigative action, market inquiries, and revised guidelines, are all steps that the FTC and DOJ could take to strengthen antitrust in the executive branch of government.201
A further step, and one that has been alluded to throughout this analysis, is a shift in the goals of competition law. A structuralist/Neo-Brandeisian aim of promoting the competitive process is the underlying theory of the Bills, but there should also be explicit recognition of this goal by enforcement agencies and the judiciary. Rather than being a radical shift, it would be a return to original anti-monopoly goals of the antitrust statutes. The Chicago school consumer- welfare framework is the outlier. Economic analysis can remain, but broader political goals should play integral roles. Even some Chicago school adherents have recognised that the
197 Tim Wu “The Utah Statement: Reviving Antimonopoly Traditions for the Era of Big Tech”, above n 126; Khan, above n 14; Nadler and Cicilline, above n 7.
198 Khan, above n 14.
199 Nadler and Cicilline, above n 7.
200 White, above n 80.
201 Nadler and Cicilline, above n 7.
framework should include preservation of the competitive process.202 Enforcement agencies should adopt a structuralist theory, and expressly recognise the wide range of goals antitrust should be considering. Getting the courts to shift perspective may be harder and more gradual, but far from unachievable.
II Relevance of the Bills to the Global Community and to New Zealand
Even though the Bills are of US origin and apply in the US, it would be erroneous to think they are without wider significance. If passed, their effect will be felt globally, even in New Zealand. Even now, they have ignited academic debate and policy discussion on the global stage. There are broadly two reasons why these Bills are important beyond just a US context – firstly, the influence of the US in antitrust law; and secondly, by being an effective response against companies that have a strong presence in New Zealand.
A The Influence of the US on Antitrust Law
The US has historically been at the centre of antitrust law. It was a pioneer in the global arena in passing the Sherman Act as a general law to combat anticompetitive conduct.203 The US regime has in the past served as a model to other jurisdictions.204 While now Europe rivals the US for its leading status205 (due in part to the US’s pursuit of the consumer-welfare model), the US is still a hub of scholars, technological advancement, and private power. In the global antitrust system, it is still a “point of reference, source of experience, expertise’ and is a ’potential international standard”.206 Any antitrust changes in the US will have trickle-on effects to other countries. While New Zealand might not use the US as a model directly, there will be an influence on the general antitrust community. Analysis of these Bills may provide expertise that can be used if New Zealand pursues legislative action against Big Tech. Particularly as the US Bills are only one component of a worldwide effort to regulate the digital market,207 understanding how different regulations operate will inform how to incorporate changes in an antitrust regime. Reforms in US antitrust could very much come to be reflected in New Zealand competition law.
202 Devlin, above n 143.
203 Gerber, above n 26.
204 Gerber, above n 26.
205 Monti, above n 96.
206 Gerber, above n 26, at 201.
207 In addition to the Bills in the US, and Europe’s DMA, action has been taken in the United Kingdom, Australia, China, and other countries.
B Striking at the Root: The Location of Targeted Companies
Big Tech is ubiquitous globally – they have huge market capitalisation worldwide, particularly in Western countries. New Zealand is no different, with Amazon, Apple, Google, Facebook, and Microsoft being integral to the digital ecosystem. However all of these firms are homed in the US. Of the top 50 global tech start-ups, 21 of them are US based.208 Any new competitor with potential to eclipse incumbents are likely to come from Silicon Valley in California,209 as the world’s technology capital. This is one of the advantages of US regulations, and why these Bills have been focused on opposed to other jurisdictions’ efforts. Indeed, one of the critiques of the DMA is that because the targeted platforms are US-based, its remedies may be of little effect, particularly enforced break-ups.210Regulations that strike at Big Tech’s foundation will inevitably have effect on their extended activities. With these firms having global reach, “developments in some jurisdictions may have significant impact on the operations of technology platforms in other places”.211 These Bills may not only change the game for technology markets in the US, but have ripple effects extending into the global market, including New Zealand.
III Conclusion
Market evidence and legal analysis show these Bills are up to the challenge of tackling Big Tech. There is extensive proof of anticompetitive features and behaviour that have become the norm in the digital market, in part allowed to become so due to repeated failures of current antitrust laws in the US. These Bills are a nuanced, highly specific response, and are perhaps the best regulatory initiative to Big Tech on the global stage thus far. Many of the arguments against these Bills can be dismissed, either because they lack strength through a structuralist/Neo-Brandeisian lens, or because advantages far outweigh any detriments.
What remains to be seen is whether these Bills will be passed, and officially become part of the antitrust regime in the US. As of October 2022, all of the Bills have been introduced, either in the House of Representatives, or the Senate, or both. They must pass through both chambers,
208 Patrick Barwise and Leo Watkins “The Evolution of Digital Dominance: How and Why We Got to GAFA” in Martin Moore and Damian Tambini (eds) Digital Dominance: the Power of Google, Amazon, Facebook, and Apple (Oxford University Press, Oxford, 2018) 21.
209 Barwise and Watkins, above n 208.
210 Enia, above n 43.
211 Byowitz, above n 69.
and then be approved by the President to be enacted into law.212 While there are several stages of the legislative process to go, there is bipartisan support. Both Democrats and Republicans are sponsoring the Bills; a promising sign. However the overall outlook is bleak. Policy advisors have described how these Bills will face an uphill battle.213 Of the Bills discussed in this paper, the American Innovation and Choice Online Act, ACCESS Act, and Open App Markets Act, are the most likely to be passed. As almost direct correlatives to Europe’s DMA, it demonstrates a general consensus of appropriate regulations for Big Tech. It indicates support policy-wise. The Ending Platform Monopolies Act, with the imposed divestitures, is the most ambitious, and thus the least likely to be passed.214 Despite break-ups being an integral part of US antitrust in the past, such an action has not been taken for many years, especially against huge firms the size of Big Tech.However, States have taken inspiration from these federal Bills, proposing State-level legislation to improve antitrust enforcement in the digital market.215 While it lacks the institutional level, wide-ranging reach that federal legislation would achieve, it is still a start. It would be a shame for these Bills to be no more than a footnote in history. They demonstrate insight into a complex and novel market, offering behavioural and structural remedies that deftly combats the specific concerns in the digital space. No matter their fate, the contents should be commended, and are worthy of consideration by other jurisdictions looking to weaponize antitrust against Big Tech.
Taking a step back, these Bills also demonstrate a fundamental shift that needs to occur in antitrust, back to broad economic and political goals. The structuralist/Neo-Brandeisian perspective is truer to antitrust origins, and avoids the overly narrow consumer-welfare approach, which arguably has been the key to Big Tech’s unfathomable success. In interpreting antitrust law, the courts should be aware of non-measurable objectives. Indeed, judges constantly deal with unquantifiable metrics, and balancing of competing ideas. Antitrust should embrace the numerous goals it was enacted to achieve.
This shift would allow an effective fight against Big Tech. Many industries are consolidating, but none perhaps are so concerning as the digital market, where products and services have
212 White House “Our Government” <www.whitehouse.gov/about-the-white-house/our-government>; Congress “Legislative Process” Congress.gov <www.congress.gov/legislative-process>.
213 Beacon Policy Advisors Antitrust Reforms’ Shifting Center of Gravity (Spotlight Report, June 2021).
214 Monti, above n 96.
215 Beacon Policy Advisors, above n 213.
become so ingrained they are vital to daily life, not to mention the new technologies that may allow firms to control society extensively. Non-economic goals are the only way these concerns can be dealt with.While there are other steps in the antitrust regime that could be taken, legislative regulatory efforts are the most important. Statutes are written by the people, for the people, with few constraints. With Big Tech proposing risks to the economy and society as a whole, antitrust legislation is needed to check this amassed private power, and maintain a free economy and our independence. These Bills are exemplary in tacking the technology titans of our day and age.
The text of this paper (excluding front page, acknowledgements, table of abbreviations, table of contents, footnotes, and bibliography) comprises approximately 14,987 words.
BIBLIOGRAPHY
A Bills
1 United States of America
American Innovation and Choice Online Act HR 3816.
American Innovation and Choice Online Act S 2992.
Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act HR 3849.
Ending Platform Monopolies Act HR 3825.
Merger Filing Fee Modernization Act HR 3843.
Merger Filing Fee Modernization Act S 228.
Open App Markets Act HR 5017. Open App Markets Act HR 7030.
Open App Markets Act S 2710.
Platform Competition and Opportunity Act HR 3826.
Platform Competition and Opportunity Act S 3197.
Tougher Enforcement Against Monopolists (TEAM) Act S 2039.
B Legislation
1 United States of America
Bank Holding Company Act 12 USC § 1841-1850. Clayton Act 15 USC §§ 12-27.
Federal Trade Commission Act 15 USC §§ 41-58. Hart-Scott-Rodino Act 15 USC § 18a.
Robinson-Patman Act 15 USC § 13.
Sherman Act 15 USC §§ 1-7.
C Cases
1 United States of America
Brooke Group v Brown & Williamson Tobacco Corp [1993] USSC 105; 509 US 209 (1993).
hiQ Labs Inc v LinkedIn Corp 485 F Supp 3d 1137 (ND Cal 2020).
MCI Communications Corp v American Tel & Tel Co [1983] USCA7 822; 708 F 2d 1081 (7th Cir 1983).
Sanborn Library Llc v Eris Info 2021 US Dist LEXIS 165496.
Verizon Communs Inc v Law Offices of Curtis v Trinko [2004] USSC 4; 540 US 398 (2004).
D Treaties
Regulation 2022/... on contestable and fair markets in the digital sector (Digital Markets Act) COD 2020/0374.
E Books
Patrick Barwise and Leo Watkins “The Evolution of Digital Dominance: How and Why We Got to GAFA” in Martin Moore and Damian Tambini (eds) Digital Dominance: the Power of Google, Amazon, Facebook, and Apple (Oxford University Press, Oxford, 2018) 21.
Douglas F. Broder A Guide to US Antitrust Law (Sweet and Maxwell, London, 2005). Alan J. Devlin Reforming Antitrust (Cambridge University Press, Cambridge, 2021).
Marc Allen Eisner Antitrust and the Triumph of Economics: Institutions, Expertise, & Policy Change (University of North Carolina Press, United States of America, 1991).
Harold Feld The Case for the Digital Platform Act: Market Structure and Regulation of Digital Platforms (The Roosevelt Institute, 2019).
David J. Gerber Competition Law and Antitrust (Oxford University Press, Oxford, 2020).
Maurice Stucke and Allen Grunes Big Data and Competition Policy (Oxford University Press, Oxford, 2016).
Tim Wu The Curse of Bigness: Antitrust in the New Gilded Age (Columbia Global Reports, 2018).
F Journal Articles
Byowitz and others “Navigating the New Competition Law Frontier: Reviewing Global Antitrust Approaches to Technology Platforms” (2019) 52(2) Intl Law 159.
William Boyd “Public Utility and the Low-Carbon Future” (2014) 61(6) UCLA L Rev 1614.
Daniel A. Crane “How Much Brandeis Do the Neo-Brandeisians Want?” (2019) 64(4) The Antitrust Bulletin 531.
Andrea De Mauro, Marco Greco, Michele Grimaldi “A Formal definition of Big Data based on its essential features” (2016) 65(3) Library Review 122.
Christian M. Dippon, Matthew D. Hoelle “The Economic Costs of Structural Separation, Line of Business Restrictions, and Common Carrier Regulation of Online Platforms and Marketplaces: A Quantitative Evaluation” (2022) NERA Economic Consulting.
Daniel T Deacon “Common Carrier Essentialism and the Emerging Common Law of Internet Regulation” (2015) 67(1) Adm L Rev 133.
Peter R. Enia “A Continental Rift? The United States and European Union’s Contrasting Approaches to Regulating the Monopolistic Behavior of Gatekeeper Platforms” (2022) 16(2) Brook J Corp Fin & Com L 249.
Brett Frischmann and Spencer Weber Waller “Revitalizing Essential Facilities” (2008) 75(1) Antitrust LJ 1.
Damien Geradin and Dimitrios Katsifis “Selecting the right regulator design for pro- competitive digital regulation: An analysis of the EU, UK, and US approaches” (2021) SSRN.
Lina M. Khan “Amazon’s Antitrust Paradox” (2017) 126 Yale LJ 710.
Florian Kraffert “Should EU competition law move towards a Neo-Brandeis approach?” (2020) 16(1) ECJ 55.
Giorgio Monti “Taming Digital Monopolies: A Comparative Account of the Evolution of Antitrust and Regulation in the European Union and the United States” (2022) 67(1) The Antitrust Bulletin 40.
Kristen O’Shaugnessy and others “Big Data, Little Chance of Success: Why Precedent Does Not Support Anti-Data Theories of Harm” (2022) Competition Policy International.
Manuel Wörsdörfer “Big Tech and Antitrust: An Ordoliberal Analysis” (2022) 35 Philos Technol.
G Government Materials
1 United States of America
Jerrold Nadler and David N. Cicilline Investigation of Competition in Digital Markets (Subcommittee on Antitrust, Commercial and Administrative Law of the Committee on the Judiciary 2020).
H Policy Reports
Beacon Policy Advisors Antitrust Reforms’ Shifting Center of Gravity (Spotlight Report, June 2021).
Monika Schnitzer and others International coherence in digital platform regulation: an economic perspective on the US and EU proposals (Tobin Center for Economic Policy at Yale, Policy Discussion Paper No. 5, 9 August 2021).
I International Materials
Big Data: Bringing Competition Policy to the Digital Era DAF/COMP(2016)14, 27 October 2016 (Background note by the Secretariat, Directorate for Financial and Enterprise Affairs Competition Policy, OECD).
Structural separation in regulated industries: Report on implementing the OECD Recommendation OECD 2016.
J Letters
Letter from Americans for Prosperity, Computer & Communications Industry Association, Connected Commerce Council, Consumer Technology Association, Information Technology & Innovation Foundation Schumpeter Project, National Taxpayers Union, NetChoice, Small Business Entrepreneurship Council, Software & Information Industry Association, Taxpayers Protection Alliance, TechNet, U.S. Hispanic Business Council to Charles Schumer (Majority Leader of US Senate), Nancy Pelosi (Speaker of US House of Representatives), Dick Durbin (Chair of Senate Committee on the Judiciary), Jerrold Nadler (Chairman of House Committee on the Judiciary), Mitch McConnell (Minority Leader of US Senate), Kevin McCarthy (Minority Leader of US House of Representatives), Chuck Grassley (Ranking Member of Senate Committee on the Judiciary), and Jim Jordan (Ranking Member of House Committee on the Judiciary) regarding Economic Analysis Finds Harmful Impacts of Antitrust Bills on Consumers, American Businesses, and US International Competitiveness (27 April 2022).
K Magazine Articles
Barry C. Lynn “America’s Monopolies Are Holding Back the Economy” The Atlantic (online ed, 23 February 2017).
Chris Sagers “Crack Down on Amazon” Slate (online ed, 19 June 2017).
Marth C. White “Momentum Is Building for Antitrust Reform. Here’s What That Means for Big Tech” Time (online ed, 12 November 2021).
Tim Wu “Be Afraid of Economic ‘Bigness.’ Be Very Afraid.” New York Times (online ed, New York, 10 November 2018).
L Internet Resources
Amazon “Stay informed and engaged on legislation that could impact your business”
<https://supportsmallsellers.us/>.
Congress “Legislative Process” Congress.gov <www.congress.gov/legislative-process>.
Lauren Feiner “Lawmakers unveil major bipartisan antitrust reforms that could reshape Amazon, Apple, Facebook and Google” (11 June 2021) CNBC
<www.cnbc.com/2021/06/11/amazon-apple-facebook-and-google-targeted-in-bipartisan- antitrust-reform-bills.html>.
Sean Heather “Antitrust Bills: Gateway to Sweeping Changes Across our Economy” (23 May 2022) US Chamber of Commerce <www.uschamber.com>.
Sean Heather “The Numerous, Significant Flaws in the American Innovation and Choice Online Act” (13 September 2022) US Chamber of Commerce <www.uschamber.com>.
Michael Mandel, John Scalf, and Daniel Sokol “What does the American Innovation and Choice Online Act mean for consumers and competition?” (18 January 2022) Progressive Policy Initiative <www.progressivepolicy.org>.
White House “Our Government” <www.whitehouse.gov/about-the-white-house/our- government>.
Andrew Winston, Barbara Bavis and Robert Brammer, Janeen Williams and Kellee Bonnell (eds) “Federal Statutes: A Beginner’s Guide” (28 June 2018) Library of Congress
<https://guides.loc.gov>.
Tim Wu “The Utah Statement: Reviving Antimonopoly Traditions for the Era of Big Tech” (19 November 2019) OneZero <https://onezero.medium.com>.
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/journals/UOtaLawTD/2022/24.html