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Antitrust

Recent Supreme Court Decision Likely to Help Big Tech if Charged With Antitrust Violations

Jericho Casper

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Photo of Prof. Fiona Scott Morton courtesy the Yale School of Management

October 12, 2020 – Because the network effects of digital platforms makes it hard to prove harm to consumers, it is difficult to rein in the monopoly power of big tech companies.

That was the message at Georgetown Law Center event on Tuesday included as part of the 14th Annual Global Antitrust Enforcement Symposium.

“Determining which transactions are pro-competitive and which are anti-competitive is not so easy,” said Fiona Morton, professor of economics at Yale University.

Network effects mean that as the total number of users on the platform increase, benefits to users rise. And that makes it hard to prove the consumer harm that is required for traditional antitrust analysis.

Panelists detailed the impact that the 2018 Supreme Court ruling in Ohio v. American Express Co. has had upon the future of competition law for multi-sided digital platforms.

In the case, the Supreme Court ruled that American Express did not break federal laws by prohibiting merchants from steering consumers to alternative payment methods, which is central to the AmEx business model.

AmEx defended its practice by arguing that the anti-steering policies benefited its cardholders, as the higher transaction fees help maintain member services.

While the Department of Justice and several states prevailed during a district court trial in 2015 because it harmed merchants, the appeals court reversed. It ruled that plaintiffs had not shown harm to both sides of the two-sided market.

The Supreme Court’s June 2018 decision affirming the appeals court.

In upholding the appeals court’s decision, the Supreme Court gave a powerful antitrust defense to the big tech planforms for the frequent situation in which two-sided and multi-sided markets are deployed.

Antitrust

Lawmakers And Newsmakers Tackle Google and Facebook Market Power

Sen. Klobuchar, Rep. Cicilline and experts discuss antitrust, big tech and local journalism.

Tim White

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Screenshot of Amy Klobuchar taken from Open Markets Institute event

April 21, 2021 – Google and Facebook pose a serious threat to local journalism and—without that journalism—democracy generally, said panelists at an Open Markets Institute event held Tuesday.

With free market competition as a backdrop, the participants discussed antitrust legislation and regulation, data privacy, and funding for journalism.

Sen. Amy Klobuchar, D-Minnesota, who chairs the Senate judiciary’s subcommittee on antitrust, spoke on the recent tussle between Facebook and Australia over news feeds on the social media platform. “That is the very definition of a monopoly — when you can hold a country hostage simply because they want to make sure the content is paid for from the news,” she said.

Both Google and Facebook face several anti-competitive lawsuits from the Department of Justice, states attorneys general, federal agencies and several news publications that claim the big tech’s behavior has led to a monopoly in the digital space.

Google controls over 90 percent of the search engine market and Facebook has eaten up all of their competitors including Instagram and WhatsApp to maintain a social media monopoly, Klobuchar said. She also looked beyond just the tech industry: “America’s competition problem as well, as you all know, isn’t just limited to digital markets. It’s part of a broader problem that affects our entire economy from cat food to caskets,” she said.

“The consequences of the collapse of local news are catastrophic; it’s hard to overstate how severe a threat this is to democracy,” said Steve Waldman, president at Report for America, a national organization dedicated to supporting local journalism.

“We have two dominant platforms who sit between us and our readers, who extract the value of our content, and then they systematically deliver it to the users—our readers—in a highly predictive way so that the users stay within their walled gardens,” said Danielle Coffey, senior vice president at News Media Alliance. The platforms continue extracting user data that they use as a currency, then when we do get readers, we only get a small percentage of ad revenue, she said. We get hit on the distribution side and the ad revenue side, she added.

Minnesota’s Attorney General Keith Ellison focused on the importance of information for democracy. People need to have access to information, which primarily comes from news sources, and those news sources need funding, he said. Without funding, news publications will close or change, and it will challenge the very foundation of our society, because we need informed people who can make decisions, he said.

No leverage on big tech

“We see our bargaining power with Google and Facebook as zero,” said Randy Lebedoff, senior vice president at the Minneapolis’ Morning Star publication. The digital advertising we get from the online platforms doesn’t make up for the drop in print advertising, because “someone else is getting paid for marketing our articles,” she said.

Although Klobuchar focused mainly on competition in tech industry, she also expressed concern over misinformation on social media. America needs to use free market capitalism that will foster new companies with “privacy bells and whistles” and better policies to control misinformation, she said.

Social media has impacted consumer readership through “the rise of what people call fake news, which is just really low-quality, click-bait propaganda,” said Julia Angwin, editor-in-chief at the Markup, a news organization that investigates big tech. Propaganda used to be expensive to produce, but we’ve decentralized that and now it’s cheap and possible to make money from, she said. The tech companies elevate misinformation through news feeds with their algorithms and then take no responsibility for it, she said.

Legislation to address concerns

“It is high time for privacy legislation in the United States to protect consumers, we’re going to need something at the federal level. It’s going to be a patchwork mess if we approach it only at a state level,” Yale University fellow Dina Srinivasan said.

In February, Klobuchar introduced the Competition and Antitrust Law Enforcement Reform Act, S.225, legislation that would target anti-competitive behavior. The bill would increase funding for regulators at the Justice Department’s Antitrust Division and the Federal Trade Commission, and shift the burden of proof in mergers to the company to prove their acquisition does not harm a competitive market, among other things.

Rep. David Cicilline, D-Rhode Island, along with several other members of Congress, introduced the bipartisan Journalism Competition and Preservation Act in March, intended to allow small news publishers to collectively negotiate with online platforms to “protect Americans’ access to trustworthy sources of news online,” read the press release. The bill would allow coordination by news publishers if it “(1) directly relates to the quality, accuracy, attribution or branding, or interoperability of news; (2) benefits the entire industry, rather than just a few publishers, and is non-discriminatory to other news publishers; and (3) is directly related to and reasonably necessary for these negotiations, instead of being used for other purposes,” said the statement.

But Waldman said the Klobuchar and Cicilline bills would likely not help save local news. America needs to look at other policy steps to help local news, he said. He suggested donations toward local journalism efforts.

If there was a slight shift toward viewing journalism as an important part of a community’s health, it would be transformative, he said. It would take $1 to $2 billion of well-targeted money in local news that would double the number of local reporters, which would only be about half of one percent of philanthropic giving, he said.

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Antitrust

Former and Current FTC Commissioners Laud Efforts At Greater Resources For Antitrust Cases

Samuel Triginelli

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Screenshot of FTC Commissioner Noah Philips on C-SPAN in November 2018

March 17, 2021 – A new antitrust bill by Sen. Amy Klobuchar, D-Minn, is receiving high praise from current and former commissioners of the Federal Trade Commission for its focus on enhancing resources required to tackle competition issues.

“I think we could use more money still,” Noah Phillips, commissioner on the FTC, said at the Information Technology and Innovation Foundation conference on Tuesday. “The agencies could do more with more resources, and that goes without saying. There are hard decisions that we have to make with the limited resources that we have.”

William Kovacic, former FTC chairman, reacted to the bill by noting that the debate has effectively shifted from what agency should do the work to how they do it.

“The neglected questions of implementation are starting to receive the attention they deserve, and one of them is resources,” Kovacic said. “When I look at competition authorities around the world, there is an epidemic failure to match commitments with the means necessary to carry out the task in question.”

The FTC in the last year has brought more cases than it ever has since 2001, Phillips said.

“This is a bit of delusion that all of our countries engage in,” Kovacic said. “We have the highest aspirations, the boldest goals, but when it comes to paying for it, we don’t want to do that; we want to drive and take off the lot.”

He related antitrust enforcement’s strength to the net amount of resources that have to be increased to perform existing functions capably. “It is not simply competition,” Kovacic added. “If you benchmark the FTC resources devoted to data protection privacy, we have a decidedly inadequate allocation,” and that is not the FTC’s doing but those are legislative choices, he said.

Screenshot from ITIF event on Tuesday

For the FTC to be a genuinely full-fledged national data protection regulator for privacy, it would have to be double-to-three times the agency’s resources right now, he said.

More resources will enable the agency to carry out its mandate in a more capable way, he said. The essence of success in so many matters is maintaining continuity of staff at a high-level with high-quality.

Phillips, for his part, said part of the funding will go to hiring economists, experts and increasing salaries.

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Antitrust

House Committee Hears of Big Tech’s Alleged Anticompetitive Behavior in New Hearing

Samuel Triginelli

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Photo of House Antitrust Subcommittee Chairman David Cicilline at the Thursday hearing

WASHINGTON, March 2, 2021 – A House committee on Thursday heard of the need for strengthened antitrust measures to stem the influence of big technology companies, which are alleged to have increased its stranglehold on data on the internet.

The committee heard of Google’s and Facebook’s overwhelming control of the digital ad market; Amazon’s alleged anticompetitive practice of demanding small businesses that sell on its platform provide its proprietary information so it can make its own products; and Apple using its position as one of two app store platforms to extract taxes from competitors like Spotify and other news apps.

This is the first in a series of hearings held by the House Judiciary Antitrust Subcommittee to consider legislative proposals to address the rise and abuse of market power online and to modernize the antitrust laws.

On Thursday, the committee played host to antitrust experts and affected businesses for the hearing titled “Reviving Competition,” which was intended to address market power and big tech’s role as gatekeeper online.

The committee also heard about recent actions by the tech giants to silence speech online. Since early October 2020, according to the testimony, Google’s YouTube platform has been deleting numerous conservative channels; Facebook and Twitter have been shutting down pages, including former President Donald Trump’s; and Amazon kicked the controversial social media app Parler off its web hosting service.

Google and Apple blocked the app from their app stores.

Witnesses recommended the government strengthen enforcement agencies so they have more teeth and reform how merger cases are viewed.

Antitrust gatekeepers work to promote competition between powerful and smaller digital companies, and innovative connectivity competitors should be able to compete at the same level with big tech, said Charlotte Slaiman, competition policy director at Public Knowledge.

That would involve creating a level playing field where larger players cannot leverage their own platform to one-up competitors, said Hal Singer, managing director of Econ One.

Sharing those concerns, Eric Gunderson, chief executive officer of Mapbox, said that American competitiveness and innovation are at risk with these giants controlling the sector. Antitrust reform needs to be focused on allowing other companies to be able to compete in a level playing field.

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