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Antitrust

Is the Consumer Welfare Standard Sufficient to the Big Tech Antitrust Challenge?

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WASHINGTON, July 25, 2019 — The efficacy of antitrust enforcement against big tech companies was energetically debated at an Internet Governance Forum conference on Thursday.

The current consumer welfare standard sufficiently supports robust antitrust merger analysis, claimed Keith Klovers, an attorney advisor at the Federal Trade Commission. Although each new market and investigation has its own unique facts, the same law can still apply.

The Department of Justice and FTC are enforcement agencies, which limits their power to take action, said Public Knowledge President Chris Lewis. This creates a need for going beyond the limits of antitrust to protect the marketplace.

Another barrier to enforcement is the difficulty of discerning between efficiency-enhancing acquisitions and problematic acquisitions, said Orrick Partner Alex Okuliar.

We need some sort of nondiscrimination rule to promote competition, localism, and small independent voices in the marketplace, said Lewis, highlighting the need for a new metric to determine when a platform is dominant.

Current laws are very capable of addressing the issues at hand, argued Jeff Farrah, general counsel for the National Venture Capital Association. If the dominant operator is using its position to discriminate against companies that operate on the platform, that exclusionary content could be addressed under the existing law.

While the standard of “consumer welfare” could be more clearly defined, it’s a good standard, Farrah said, suggesting that antitrust laws should slowly evolve to reflect the market rather than being dramatically changed.

Replacing antitrust standards with prescriptive regulation would “effectively calcify the existing market dynamics,” cautioned Okuliar.

Things have changed since the days of Standard Oil, Lewis said. New mergers such as Facebook and WhatsApp are far less disruptive to the marketplace, due to the constant trend of rapidly changing technology.

The goal should not be to completely replace antitrust laws, Lewis said, but to implement “an appropriate complement based on analysis” that factors in technological developments like the rise of big data the Internet of Things.

Policymakers should consider using a cost of exclusion metric to measure the impact of network effects on digital platforms, Lewis continued. At some point, big social media platforms such as Facebook become so ubiquitous that there is a cost to individuals or businesses to not be on the network, potentially having a prohibitive effect on competition.

The discussion followed a tumultuous week for big tech, as Facebook disclosed on Wednesday that the Federal Trade Commission had opened an antitrust investigation into the company.

Antitrust action is also being considered against other tech giants such as Amazon, which Treasury Secretary Steve Mnuchin said on Wednesday has “destroyed the retail industry across the United States.”

(Picture of panel by Emily McPhie.)

Development Associate Emily McPhie studied communication design and writing at Washington University in St. Louis, where she was a managing editor for campus publication Student Life. She is a founding board member of Code Open Sesame, an organization that teaches computer skills to underprivileged children in six cities across Southern California.

Antitrust

FTC Mum on Microsoft-Activision Deal, Proposes Review of Merger Guidelines

The deal would elevate Microsoft in an even more favorable position in the games-as-a-service market.

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FTC Chairwoman Lina Khan on CNBC last week

WASHINGTON, January 24, 2022 – As Federal Trade Commission Chairwoman Lina Khan does media rounds this past week, she has refused to comment on last week’s news that Microsoft has agreed to buy video game making giant Activision-Blizzard for nearly $70 billion.

As per policy, the FTC and the Department of Justice, which on Tuesday jointly held a press conference on merger reform on the same day of the announced consolidation, said they could not comment on the deal, which would increase the Xbox maker’s gaming market share and allow it to better compete with Japanese behemoth Sony.

During the press conference, Khan, installed as chairwoman in June as an already outspoken critic of certain big tech practices, announced that the organizations would be launching a review of merger guidelines. Khan stressed that the current guidelines do not adequately protect consumers and promote competition in the era of the digital economy.

“While the current merger boom has delivered massive fees for investment banks, evidence suggests that many Americans historically have washed out with diminished opportunity, higher prices, lower wages, and lagging innovation,” she said. “These facts invite us to assess how our merger policy tools can better equip us to discharge our statutory obligations and halt this trend.”

She reiterated those goals on a CNBC interview on Wednesday. The purchase of the highly influential Call of Duty franchise maker will have to go through her office. It also presents another stress test for the office, as it is already engaged in an existing lawsuit against Facebook practices. Both Facebook and Amazon have asked for Khan to be recused from investigations in their companies because of her past positions on them.

The deal would significantly expand Microsoft’s Game Pass platform, which offers free games to play for a monthly subscription. Microsoft announced on the day of the proposed deal that Game Pass surpassed 25 million subscriptions.

“Upon close, we will offer as many Activision Blizzard games as we can within Xbox Game Pass and PC Game Pass, both new titles and games from Activision Blizzard’s incredible catalog,” said Microsoft Gaming CEO Phil Spencer said in a statement.

Despite its numerous successful intellectual properties, Activision Blizzard has been marred with scandal in recent years. In 2021, the company was sued by California Department of Fair Employment and Housing for promoting a “frat boy” culture, whereby female employees were not only allegedly discriminated against, but also subjected to sexual assault and misconduct.

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Antitrust

American Innovation and Choice Online Act Advances to Senate Floor With Bipartisan Alliance

Klobuchar was able to rally Democrats and Republicans to support her bill, but its future depends upon a shaky alliance.

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Sen. Amy Klobuchar

WASHINGTON, January 21, 2022 – Senators on the Senate Judiciary Committee have formed a tenuous, bipartisan alliance to curb allegedly anticompetitive behavior by large tech companies.

During a Thursday markup, the Senate Judiciary Committee voted 16-6 to send the American Innovation and Choice Online Act, S. 2992, to the Senate floor. The bill would prohibit certain companies with online platforms from engaging in behavior that discriminates against their competitors.

There is a laundry list of violations and unlawful behaviors enumerated in the bill, including unfairly preferencing products, limiting another business’ ability to operate on a platform, or discriminating against competing products and services.

This bill would only apply to companies with online platforms that meet one of the following criteria:

  • Has at least 50,000,000 United States-based monthly active users on the online platform or 100,000 United States-based monthly active business users on the online platform
  • Is owned or controlled by a person with United States net annual sales or a market capitalization greater than $550,000,000,000, adjusted for inflation on the basis of the Consumer Price Index and is a critical trading partner for the sale or provision of any product or service offered on or directly related to the online platform

Sen. Amy Klobuchar, D-Minn., the sponsor of the bill, referred to the bipartisan effort as “the Ocean’s 11 of co-sponsors,” featuring a diverse line-up of legislators, from Sen. Josh Hawley, R-Miss., and Sen. John Kennedy, R-La., to Sen. Dick Durban, D-Ill., and Sen. Richard Blumenthal, D-Conn.

Senators embrace specific and direct targeting of Big Tech

Klobuchar spoke directly about the need to target large companies, “We have to look at this differently that just startup in a garage – that is not what they are anymore. They may have started small, but they are [now] dominant platforms,” she said. “For the first time, the monopoly power is going to be challenged in what I consider to be a smart way.”

At the outset of the meeting, there were more than 100 amendments proposed by members of the committee, but by its conclusion, more than 80 of them had been withdrawn.

One of the amendments that worked its way into the bill was a markup that exempted subscription-based services from complying with the legislation, allowing services like Amazon Prime and Netflix to promote their own content above others’.

“The bill strikes the right balance between preventing the conduct that hurts competition, while also ensuring that platforms can continue to provide privacy and data security features to their users, compete against rivals in the United States and abroad, and maintain services that benefit consumers,” Klobuchar said.

A fragile alliance between read-meat Republicans and progressive Democrats

Though there were big names on both sides of the aisle supporting the bill, the alliance seemed fraught. Despite being supportive of the bill, Kennedy made it clear that his support was conditional. “I am a co-sponsor of this bill, but this bill is going to change – it is going to change dramatically,” he said. “I hope to be in the room when those changes are made, otherwise I will be off this bill faster than you can say ‘Big Tech.’”

Some of Kennedy’s criticisms harkened back to Section 230 issues raised by former President Donald Trump – calling some of the targeted companies “killing fields for the truth,” and stating that “their censorship is a threat to the first amendment.”

Despite his criticisms, Kennedy echoed other senators, both Republican and Democrat, who emphasized that they did not want the perfect to become the enemy of the good. “All we have done [for five years] is strut around, issue press releases, hold hearings, and do nothing. So, this is a start.”

Klobuchar also received push-back from members of her own party, with Sen. Dianne Feinstein, D-Calif., stating that she was critical of the bill because it is designed to specifically target large tech companies, many of which are based out of California (though she ultimately voted to advance the bill to the Senate floor).

Hawley rebuffed Feinstein in his comments, stating that he supports the bill for the same reason Feinstein refuses to. “[Feinstein] pointed out – I think rightly – that this bill is very specific and does target specific behavior – anti-competitive behavior – in a specific set of markets. I think that that’s a virtue and not a vice.”

The measure must be passed by the full Senate, as well as the House, before it goes to the president for his signature.

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Antitrust

CES 2022: Patreon Policy Director Says Antitrust Regulators Need More Resources

To find the best way to regulate technology, antitrust regulators need more tools to maintain fairness in the digital economy.

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Larent Crenshaw (left), head of Patreon's global policy team

LAS VEGAS, January 7, 2021 – The head of Patreon’s global policy team said federal regulators need more resources to stay informed about technology trends.

Laurent Crenshaw told CES 2022 participants Friday that Congress should provide tools for agencies like the Federal Trade Commission to enforce consumer protection standards.

“I’m not going to say that big tech needs to be broken up, but there should be appropriate resources for federal regulators to understand the digital marketplace,” he said. “We’re are still living in a world that is dominated by big actors, and we’re debating about whether to even give federal regulators the power to understand how the marketplace is moving toward digital.”

Crenshaw of Patreon said that more resources were necessary at the FTC in order to understand the digital marketplace. Patreon is a membership platform that provides a subscription service for creators to offer their followers.

Such resources would empower the agency to place appropriate safeguards for smaller technology innovators. “So in 10 [or] 20 years, it’s not just the replacements of the current Google, Apple, or Facebook, but something entirely new,” he said.

Panelists echoed Crenshaw’s point that consumer welfare should guide competition policy. Tyler Grimm, chief counsel for policy and strategy in the House Judiciary Committee, said that antitrust should bend to the consumer welfare standard. “Antitrust should leave in its wake a better economy,” he said.

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