Anti-trust Regulation of Big Tech
Anti-trust regulation, particularly surrounding large tech firms, is one of the foremost topics of discussion among politicians around the world but especially in America, the home of so many of these firms. This discussion has generally centered on the need for tougher regulation in the sector and what this looks like. Recently in America, the proposal of two bills aimed at curbing Big Tech and the appointment of Lina Khan to head the Federal Trade Commission have provided further evidence of the shift in attitude in big tech regulation building on a number of historic moments both within and outside the US over the past few years. Underpinning this intense discussion is a new perspective on what anti-trust legislation should aim to do and how this should be measured as purely focusing on consumer prices has come under scrutiny.
One of the two bills brought to Congress is that of Representative David Cicilline, chair of the antitrust subcommittee. If enacted, this bill would force platforms to stop giving advantages to their own products. Industry lobby groups have pushed back against the bill which would likely stop Google from including YouTube videos in search results and block Apple from pre-installing apps such as Find My iPhone. The other bill focused on antitrust regulation currently being considered by Congress is Representative Pramila Jayapal’s. This bill seeks to stop companies competing on their own platforms. The latter bill in particular would likely have the effect of forcing companies to spin off parts f their business for such as Google Maps and Apple Music to remain compliant. It is thought that both of these bills are likely to make it through Congress although their fate in the Senate is uncertain.
The proposal of these bills follows a 16 month review led by Cicilline in his position as chair of the antitrust committee which concluded that tech giants were abusing their dominant positions. Acting as a counsel to the committee during the investigation was Lina Khan, a 32 year old lawyer who has recently been sworn in as chair of the US Federal Trade Commission (FTC). Her appointment is significant as she has become known for her dim view of large tech companies, initially gaining attention via a paper she published criticizing Amazon’s role in both providing logistics for, and competing with, millions of small businesses selling through the Amazon platform. This critical approach had led her to receive many plaudits, most notably from Elizabeth Warren who called her appointment ‘tremendous news’. That the 2020 presidential hopeful is pleased with Khan’s appointment speaks volumes about the agenda Khan will set as the head of the FTC given Warren’s repeated pledges to break up big tech companies.
Khan taking the helm of an FTC which has already begun a comprehensive overhaul of how it views not only Big Tech, but also competition more broadly. In particular, with regard to Big Tech, in December 2020 the FTC sued Facebook, alleging that it had engaged in systematically anti-competitive practices as it sought to stifle competition. In the case, the FTC highlights the purchases of WhatsApp and Instagram as examples of such behavior. Indeed, given leaked emails show Mark Zuckerberg emphasizing that Instagram ‘can hurt us’ when discussing the potential acquisition, it may be that there is a strong case to be made. Whilst the case was recently rejected for being too broad the judge left the door open for a more specific case to be brought. If the FTC does win a revised case, it is likely that Facebook may be forced to sell both Instagram and WhatsApp. Whilst sizeable purchases such as these have been largely absent over the past few years, large tech companies are nonetheless active in acquiring new companies. This has, however, largely shifted to smaller, earlier stage companies which allow them to pay lower prices and avoid a large amount of regulatory scrutiny.
However, regulators are increasingly unhappy about this and are considering making large tech companies show that an acquisition will aid competition rather than trying to prove themselves that it will worsen competition. Alongside this proposed fundamental change to the process of approving transactions, there is also a growing feeling that the old methods of evaluating the competitive impact of a transaction are outdated. In the past when evaluating a transaction the focus has been solely on consumer prices, one of the benefits being that this has allowed clear mathematical comparisons of various price scenarios. However, leading antitrust voices such as Lina Khan feel that this metric is increasingly flawed. It is, for example, completely inadequate when considering free services including many social media firms such as Facebook. Instead, it is argued, that it is more appropriate to consider not only the price, but also the level of choice (a metric better able to evaluate takeovers of firms providing free goods). Furthermore, a broader consideration of who is the customer and other stakeholders is suggested, thus considering the impact on advertisers in the Facebook example.
It is undeniable that Big Tech is facing an increasingly challenging antitrust environment in the US and it is likely to continue to become more challenging, whether the bills currently being considered by Congress pass into law or not. These changes in the US are mirrored across the world with some areas such as the European Union actually ahead of the US in their push back against the Big Tech. The impact of this, including a wholesale redefinition of what antitrust is about, is highly unclear. Given that large companies exist it often appears rational to let them acquire and develop into other sectors to compete with each other effectively. Without this competition, the consumer may become worse off. However, this continuous increase in power of a few makes many uncomfortable. The alternative to keep competition in markets, may be to break up companies but the economies of scale in many of these industries mean such a result would be inefficient and worsen the outcome for the consumer. These factors mean that, whilst some asset disposals may be forced and new acquisitions may come under increasing scrutiny, it is likely that regulators will want to continue to see big tech compete against one and other albeit under increasingly heavy regulatory scrutiny.