Is “Big Tech” too big? Reestablishing trust in antitrust law.
Washington, August 7, 2020
Last week, the leaders of “Big Tech” – Amazon, Apple, Alphabet (Google), and Facebook – testified before a House committee on whether they were, in fact, too big. Unsurprisingly, these companies argued they face robust competition. But does the presence of any competition eliminate monopolistic market power?
Federal Communications Commissioner Brendan Carr recently stated in an interview with Politico that “Big Tech is a handful of corporations that now have state-like power and influence that can shape everything from the information we consume to the places we shop.” Currently, Big Tech is facing antitrust investigations from the Department of Justice and Federal Trade Commission as well as from European authorities. Others have called for the breakup of Big Tech because they are simply too big.
Should these companies face stronger regulation given their size and significant influence on consumer patterns and public discourse? Some would argue these are simply measures of success.
Consumer choice may degrade a perceived monopoly better than regulation. Antitrust enforcement can reverse anti-competitive monopolies, but it cannot remedy disagreements with business decisions. Big does not necessarily mean bad. The “Big Tech” companies originated as small startups that would not have succeeded without providing a market demanded product or service in a limited regulation environment.
We must be careful not to infringe on future American dreams before they are conceived. Absent truly anti-competitive behavior, the best way to influence business conduct is to actively consume where and what you support. Market dominance only lasts as long as consumers are willing to accept the terms and conditions of a given business. If consumers disagree with the practices of a business, that business will have to retain them by earning back consumer trust.
What is a monopoly?
In economic theory, a “perfectly competitive” market requires companies to price products at or near cost of production in order to retain their customers. A “perfect market” includes informed market participants and low or no entry barriers. When the structure and services of modern companies deviate from these characteristics, they obtain market power. Market power does not equal monopolization unless a single entity monopolizes a market through anti-competitive behavior. The Supreme Court has ruled that simply being a large, successful company with significant market power does not qualify as anti-competitive monopolization.
Examples of anti-competitive behavior include lowering prices below market value to push out competitors, acquiring a competitor to eliminate it, or requiring the use of one product in order to access another by the same company.
Congress passed the first antitrust legislation in 1890 to prohibit trade restraints and monopolization. Congress subsequently passed the Clayton Act of 1914 to prohibit price discrimination and anti-competitive mergers. Together, these laws form our antitrust law.
While the name comes from the large “trusts” they were originally intended to regulate, a modern view could understand antitrust law as regulating untrustworthy behavior. The United States has long incentivized success of the American dream by allowing businesses to develop largely based on market forces rather than government intervention or manipulation. This structure relies on trust placed in businesses to operate according to applicable laws and behave in a market determined manner. When this trust is breached, antitrust law may apply to correct the market imbalances that are created.
Has “Big Tech” breached consumer trust?
In a “perfectly competitive” market consumers are well-informed to make purchasing or service use decisions. When consumers feel misinformed this trust is breached. Loss of consumer trust often results in shifting demand that requires companies to adapt or lose their customers. When this trust cannot be maintained with legal business adaptations, some companies might resort to anti-competitive actions to retain their market position. In this case, antitrust law may provide legal remedies to restore fair market competition.
It is important that we do not conflate loss of consumer trust due to anti-competitive actions with a dislike for commercial business behavior. Many consumers are rightly concerned about biased algorithms, unequal application of content moderation policies, or acquisitions of potentially competitive startups. While these concerns are valid and deserve investigation, unless the activity results in anti-competitive monopolistic conduct, it is likely not subject to antitrust enforcement.
There is concern that large companies may leverage their market power to influence buying or use decisions in ways that may not technically count as anti-competitive. For example, social media companies face scrutiny for how they moderate user-generated content, with some contending they improperly use liability protections from Section 230 of the Communications Decency Act. Unless they violate applicable law, content moderation policies are a business decision. Users may opt not to use a given service, but many do so because of the ability to access numerous customers and content near simultaneously.
The Department of Justice and the Federal Trade Commission enforce antitrust law. There are ongoing antitrust investigations into Amazon, Apple, Google, and Facebook centered on the use of third-party seller data, management of the app store, search practices, and anti-competitive acquisitions, respectively. These agencies will determine if any “Big Tech” companies should face antitrust enforcement. Without these judgments, changing antitrust law may be premature.
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