Yesterday, the Federal Trade Commission (FTC) announced the creation of a new task force to monitor competition in technology markets. Given the shortcomings in antitrust enforcement by the federal government over the last generation, we welcome the new task force and reiterate our suggestions as to how regulators can better protect markets and markets. technology consumers.
Citing the creation in 2002 of a task force that has revitalized antitrust review of mergers and ongoing hearings on competition and consumer protection, FTC President Joe Simons said:[I]It makes sense for us to look closely at technology markets to ensure that consumers enjoy free and fair competition. "The director of the office, Bruce Hoffman, said that"
We could not agree more.
Unfortunately, antitrust enforcement in the United States has been strangled in an old-fashioned economic doctrine that does not recognize the realities of the current Internet. We recently submitted comments to the FTC outlining some of the key ways to strengthen the enforcement of antitrust laws and to better protect competition, the marketplace and the welfare of consumers.
Measures of consumer well-being must include the power of censorship of businesses
Increasingly, consumers "pay" for the services we use online, not in dollars, but with our data, which companies then use without compensation to enable targeted advertising. Since these services are theoretically "free" for consumers, it makes no sense to assess consumer welfare solely on the basis of price.
The fetish with price among antitrust regulators originates from a group of economists known as the Chicago School. Their stated goal was to found antitrust in empiricism. But the empirical measures they have adopted have become much less inclusive and their theories have little meaning in the current context of the business Internet.
In particular, the most important "cost" paid by consumers for technology companies is often not a price we pay, but rather the data we provide, as well as our agency and our autonomy in dealing with censorship of advertising and the platform.
In the advertising context, companies monetize users' data by selling them the privilege of reaching those users to third parties. Given that third parties, not the users themselves, pay the price of advertising, a price-oriented measure of consumer welfare essentially does not take into account the crucial externalities that should inform antitrust analysis. .
In addition, censorship of the platform harms users in a dimension unrelated to the price. Arbitrary filters (sometimes motivated by perceived national security concerns, but often also by narrow interests such as the extreme application of copyright law) often suppress Internet discourses. Users dissatisfied with the practices of a service should be able to migrate to alternative platforms, but this assumes a competitive market that is almost non-existent on the current Internet.
Federal antitrust regulators should take into account these very real costs to consumers when assessing mergers, acquisitions and anti-competitive behaviors of companies taking advantage of long-established monopolies in specific digital markets .
Market power is apparent in various online sectors
Several giant corporations dominate today's Internet, each of which tends to hold monopoly power in at least one particular segment. Facebook's advertising revenue share on social networks in the US exceeds 79%, while Google enjoys similar dominance over search tools, Amazon's data infrastructure, Microsoft, operating systems and on the manufacture of Apple peripherals.
Among the characteristics of the contemporary market that root these monopolists are the network effects. In simple terms, their value is the number of established users and the size of their user bases is a barrier to entry by potential competitors.
One of the features that inhibit the choice of the user is the refusal of the company platforms to allow interoperability. In other contexts, unsatisfied consumers of a service may choose a competitor. But in the context of social media, the established content that a user has generated serves as inertia, increasing the transaction cost of migrating to alternative services, especially those that have not yet established effects. comparable network.
Platforms do not benefit from this inertia simply passively. Instead, they actively prevent users from migrating – and prevent others from developing tools that can help users to support themselves – in at least two ways. First, companies have implemented excessive claims taking advantage of the Computer Fraud and Abuse Act. They have also broadly interpreted the powers specified in the contracts of use, which are legally suspect under traditional contract law principles, such as membership contracts without the possibility of negotiation or the possibility of negotiation. of modification.
To deal with the realities of today's digital economy, regulators and courts must finally begin to look at the harm to consumers beyond price, including the censorship of corporate platforms.
The critical facilities doctrine could spark and fuel innovation
At the same time that antitrust regulators and courts have developed an unsustainable short-sighted interpretation of the harm done to consumers, they have also severely limited one of the most powerful levers of antitrust law to protect competition: the doctrine of essential facilities ". It has been applied to ensure that railways can access river bridges even when their competitors own them and that advertisers can run ads in newspapers even if the newspaper prefers to exclude them as retaliation for advertisers. who also buy ads in other media.
When a company with monopolistic power exploits a resource that other companies can not duplicate by denying access, courts can enforce the doctrine of essential facilities. On the one hand, leveraging a company's unique infrastructure may seem like a normal way of doing business. Seen from another angle, this type of activity benefits consumers – and competition – by preventing competition from emerging and by forcing users to settle for the first investor.
The applications of the doctrine of essential facilities may seem aggressive, but the application of the doctrine does not impose the type of obligations that compel the common carriers. In fact, the restrictions imposed on network operators on social networks could lead to damage to speech. On the other hand, the recognition of the rights of essential facilities claimed by competitors hampered by a denial of anti-competitive access would encourage a diversity of approaches to content moderation, as well as other behaviors (such as predatory uses of computer fraud and abuse law) that harms users. Critical facilities claims would also encourage the development of new social media platforms and broaden competition.
We argued that the FTC should consider harm to consumers beyond the manipulation of prices and the doctrine of essential facilities, to inform and reactivate the application of antitrust principles. We plan to make similar submissions to the Department of Justice and the courts to assess potential claims. And we hope that the new task force, through its work in monitoring technology markets, will help the federal regulators of the FTC and DOJ to focus on these opportunities.
Properly understood and freed from the constraints of an outdated economic theory that refers to the abuses of corporate monopolies, antitrust laws can be an essential tool to protect the Internet platform's economy and the billions of users who use it. use, of the dominance of companies holding a monopoly.