American Antitrust Revolution

Read part one of this two-part series here: Is Biden prepared to break up Big Tech?

Since the late 1970s the US courts have pared back the meaning of the country’s underpinning antitrust laws – the Sherman Act of 1890 and the Clayton Antitrust Act of 1914 – to look solely at the question of “consumer welfare”, ie, whether mergers would have the effect of raising consumer prices, instead of at whether competition exists in the market structure itself. 

This extremely narrow interpretation, which ignored both the spirit and the letter of the Sherman and Clayton Acts, was heavily influenced by Yale Law School professor Robert Bork, a graduate of the University of Chicago, who promoted a Friedmanite, Chicago School approach to antitrust. Bork, who served as a solicitor-general under the Nixon and Ford administrations, and later as a senior judge under the Reagan administration, published his views in The Antitrust Paradox in 1978 – namely, that “the only legitimate goal of antitrust is the maximization of consumer welfare”. 

The Supreme Court formally adopted this view in 1979, stating, “Congress designed the Sherman Act as a ‘consumer welfare prescription’.” In 1982, Reagan’s Federal Trade Commission (FTC) issued new merger guidelines based on Bork’s doctrine, defining market power as the “ability of one or more firms profitably to maintain prices above competitive levels”. In 2015, the FTC issued a policy statement binding its own hands to only investigating potential breaches of the Sherman and Clayton Acts as interpreted through the prism of short-term consumer welfare.

Put simply, the problem with this approach is this: how can you prove a negative impact on consumers in terms of price rises when the digital platforms largely operate for free, and profit from monetising data generated by users?

As a law student in 2017, newly appointed FTC Chair Lina Khan published a scathing critique of the courts’ post-1970s interpretation of antitrust law in the Yale Law Journal, ‘Amazon’s Antitrust Paradox’, arguing that the “current paradigm in antitrust has failed” and is entirely inadequate for regulating platform markets. 

She argued that antitrust law must be revised by asking two questions: “First, does our legal framework capture the realities of how dominant firms acquire and exercise power in the internet economy? And second, what forms and degrees of power should the law identify as a threat to competition? Without considering these questions, we risk permitting the growth of powers that we oppose but fail to recognize.” 

One of Khan’s first acts as FTC chair in July was to revoke the 2015 FTC policy restricting its ability to investigate cases beyond the consumer prices framework. When Biden issued his Executive Order on July 9, Khan responded with an FTC announcement the same day confirming the agency would immediately act on the order’s instruction to revise the merger guidelines, saying: “We must ensure that the merger guidelines reflect current economic realities and empirical learning and that they guide enforcers to review mergers with the skepticism the law demands.” 

Lawsuits against Google and Facebook

In 2019 and 2020, the House Judiciary Committee’s Antitrust Subcommittee held a 16-month long investigation into competition in the digital economy, focused on Apple, Amazon, Google, and Facebook, publishing a detailed report last October. Chaired by Democrat David Cicilline, the subcommittee made a series of recommendations including structural separations (break-ups), a new standard to “proscribe strategic acquisitions that reduce competition”, revising antitrust legislation and strengthening the powers of the FTC and the Department of Justice’s (DOJ) Antitrust Division.

The bipartisan support for the measures reflected the shaky alliance between Democrats and Republicans on Big Tech, with Republican Jim Jordan stating during a high-profile hearing of tech CEOs, “I will just cut to the chase – big tech is out to get conservatives”.

Just two weeks after the subcommittee published its recommendations, the DOJ and 11 Republican state attorneys-general filed an antitrust civil suit against Google on October 20, alleging “anticompetitive and exclusionary practices in the search and search advertising markets”. The ongoing case is the most significant antitrust action taken by the DOJ since its suit against Microsoft in 1998. 

Biden’s nomination for the new antitrust head of the DOJ, Jonathan Kanter – who has led private antitrust cases for his clients (which include Microsoft) against Google and Apple – will take over the case if the Senate’s Judiciary Committee confirms his appointment in a hearing, likely to take place in September or October. The EU filed a new antitrust case against Google on June 22, arguing Google was discriminating against competitors to favour its own services in the ad-tech supply chain.

In December, the FTC sued Facebook for constructing a personal social networking monopoly through a “years-long course of anticompetitive conduct”, including its acquisition of Instagram and WhatsApp. A parallel suit against Facebook was filed at the same time by 46 states, and Guam and the District of Columbia. 

Judge Boasberg dismissed the cases on June 28, with the New York Times describing the decision as a “stunning setback” to the effort to break up Facebook, which passed $1 trillion in market capitalisation for the first time following the news. But while the states’ case was dismissed for not acting in time, the FTC was given a 30-day window to appeal the court’s decision and provide a clearer analysis of how it defined and calculated Facebook’s market share. The judge also indicated, “the agency is on firmer ground in scrutinizing the acquisitions of Instagram and WhatsApp”, affirming that the court “rejects Facebook’s argument that the FTC lacks authority to seek injunctive relief against those purchases”. 

Khan has the option of rewriting the FTC case and lodging it in the coming days before the July 28 deadline expires, or of allowing it to be thrown out and pursuing a new case in the future. Gilad Edelman from Wired suggests the FTC can meet the current challenge in a new submission, while Tufts academic Bhaskar Chakravorti argues that for Khan “to put her ideas into practice, she ought to have the freedom to bring a case that rests on the argument that a company’s impact on the market structure inhibits competition”. Both strategies carry distinct risks, and will be limited by the restrictive legal interpretation of “consumer welfare”. 

Congress bills

With the judiciary stacked by conservatives, antitrust efforts against Big Tech monopolies will require new laws to be passed by Congress if they are to be successful. Following the House antitrust subcommittee report led by Congressperson Cicilline, five new bills were proposed in June and have been adopted by the Judiciary Committee. 

One of them – the Merger Filing Fee Modernization Act – is a simple proposal to increase fees for merger applications, aimed at helping to finance regulators’ reviews of such proposed mergers, and has already been adopted at committee stage.

The four antitrust bills target companies with at least 50 million US-based monthly active users, and which are worth $600 billion or more. Tech commentator Ben Thompson suggests that along with Apple, Amazon, Google, and Facebook, these criteria will also cover Microsoft, and will now or in the near future cover Visa, JP Morgan Chase, Walmart, Paypal and Shopify.

The Augmenting Compatibility and Competition By Enabling Service Switching Act is aimed at promoting interoperability between different platforms. It will require platforms to make user data (any information the platform collects linked to a specific person or device) interoperable with other services, and allow users to switch platforms and take their data with them. This would affect all of the major tech platforms. This bill is less controversial than the three below, but still faces obstacles.

The American Innovation and Choice Online Act prevents digital platforms from giving advantages to their own services and products on marketplaces they operate, to the detriment of competitors.  If adopted, it could affect Google’s search business, as well Amazon’s deals with third-party sellers and Apple’s App Store.

The Ending Platform Monopolies Act aims to stop platforms from owning services that operate on top of its own platform – “removing the ability and incentives of a dominant platform to use its control over multiple business lines to preference itself and disadvantage competitors”. This bill is primarily directed at Amazon, and would empower the FTC and DOJ to force companies to sell off parts of their business that could create a conflict of interest.

The Platform Competition and Opportunity Act prohibits pre-emptive acquisitions of competitors and potential competitors, such as those carried out by Facebook in acquiring Instagram and WhatsApp.

Despite the bipartisan co-sponsorship of this legislative package, the adoption of the most far-reaching bills – the American Innovation and Choice Online Act, the Ending Platform Monopolies Act, and the Platform Competition and Opportunity Act – is far from guaranteed. To beat the Senate filibuster requires 60 votes, and it is not a given that Democrats will sign up en masse to endorse the proposals in either the House or the Senate. House Republican minority leader, Kevin McCarthy, the Republican minority leader, opposes the proposals.

The tech lobby has gone into overdrive, utilising in full the extremely close links developed between Silicon Valley and the Democratic Party. Its key target appears to be California Democrats. A lobbyist told the Financial Times earlier this month the tech industry is confident the bills will not be passed in the House, saying, “The centrist Democrats and the California delegation should see to that”.

Beyond break-ups

Even if the new antitrust proposals were adopted in full by Congress, it would not bring about transformative change. Is forcing Facebook to sell Instagram and WhatsApp (while important) really the limit of our ambition when it comes to decentralising the internet?

In a best-case scenario, the goals that could be achieved through antitrust reform are limited. The Facebook break-up would be the most significant but other potential outcomes include changing Google’s search ranking, ending Apple’s monopoly on the App Store, and preventing Amazon from manipulating search results in Marketplace or from competing with Marketplace sellers. All of these outcomes would be welcome, and contribute to weakening the concentration of power these companies hold.  

But this approach alone fails almost entirely to deal with the question of data. Author James Surowiecki argues, “Truly challenging the power of the Big Four would mean rethinking how data is gathered and used by companies, and who gets access to it. It might mean requiring that data be shared, that algorithms be transparent, and that consumers have far more control over what they share and what they don’t.” 

The collection and processing of mass amounts of detailed and individualised data on every user of internet platforms in order to predict, and even modify, their behaviour is the source of these firms’ revenue, market control and social and political dominance – the process defined by Shoshana Zuboff as surveillance capitalism. 

Antitrust barely scratches the surface in addressing this source of power. It looks to the past for a remedy to a problem we have never encountered before – the fact that these firms profit by collecting human experience and monetising predictions about our future behaviour. Alongside strong antitrust measures, challenging Big Tech’s Big Four requires transformative change in many other areas – starting with privacy and intellectual property.

Featured image: Amazon workers protest in 2018. Getty Images.

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