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Antitrust

Debaters Consider Whether a New Agency to Regulate Tech Platforms Would Do More Harm Than Good

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Screenshot from the virtual debate

November 9, 2020 – At a formal debate on whether technology platforms require a new regulatory regime, two well-established experts also clashed over how seriously policy-makers should take the recent House Judiciary Antitrust Subcommittee report on breaking up big tech companies.

In the Technology Policy Institute debate between Jason Furman of Harvard’s Kennedy School and Josh Wright of George Mason University’s Global Antitrust Institute on October 26, Wright prevailed in that he persuaded more people to flock to his point of view.

Polled before the debate on whether a new regulatory agency should be established, 60 percent said yes and 40 percent said no. After the debate between economic policy professor Furman and Wright, a law professor and executive director of the institute, 30 percent said yes and 70 percent said no.

Does the current antitrust system work with tech platforms?

“I support a pro-competition light touch regulator that focuses on an enforceable code of conduct, greater data mobility, and systems with open standards and more data openness,” said Furman, who was chair of the Council of Economic Advisors under President Barack Obama.

Such a system would make antitrust clearer and more predictable by curbing tech company abuses and allowing users to use different services, switch services, and enable more real and potential competition from new entrants, Furman said.

But Wright, a Republican-appointed commissioner at the Federal Trade Commission from 2013 to 2015, said the real question was how well the existing antitrust infrastructure and consumer protection laws were performing.

Wright said current institutions were performing well because they were “very effective” at addressing anticompetitive conduct when it arose and were capable of being applied in a manner that distinguishes anticompetitive conduct, identifies market failure, and provides remedies where needed.

Good antitrust regulation identifies and carefully distinguishes between anticompetitive conduct without deterring procompetitive conduct, he said. Wright did not feel that a new regulatory regime would do as good a job at achieving these goals under consumer welfare standards.

Can bright line rules stop hundreds of acquisitions by Big Tech?

Furman said that the current system was not effective at handling mergers. Some of the big tech companies have grown organically  and through hundreds of mergers. Because we cannot “put the toothpaste back in the tube” and undo these mergers, the country needs a new agency to regulate them. He also proposed a “bright line” rule against new mergers for tech companies.

Wright retorted that there was no empirical evidence that the merger system wasn’t working. He compared the idea of a bright line rule to the law under guidelines issued pursuant to Section 7 of the Clayton Act. These guidelines consider mergers presumptively unlawful only when they lead to a market share greater than 30 percent.

In the past decade, the number of successful defensive mergers challenges by the government was three, according to Wright.

But Furman argued that both Democratic and Republican administration have failed to blocked any important mergers in the tech space.

Banning vertical integration by tech companies?

To Furman, so much consolidation has already happened that the country needs a code of conduct for tech platforms going forward. Such an agency needs to combat problems that arise from a platform preferencing their own search results or creating standards that made it difficult to move between platforms.

One of the agency’s chief goals should be to promote data portability, meaning that a person could use any platform to engage with any other platform, just like email.

The two disagreed about whether a ban on mergers by tech companies could lead to a ban on vertical integration by technology companies. A half-century ago, such vertical combinations were suspect under antitrust law, but are now generally permitted. Wright took issue with Furman’s suggestion that such a ban was a “strawman,” or an absurd hypothetical suggestion.

“I wish banning vertical integration were a strawman,” said Wright. “I’m not saying it’s your strawman, but it’s not a strawman and it exists in the House report, it exists in [Democratic Sen. Elizabeth] Warren’s proposals, it exists in banning particular forms of vertical integration in allowing Walmart to sell private label products or Apple to have apps in its app store, or Google to have Google Maps.”

Such vertical integration is a pervasive function of a modern technology economy, and suggestions for banning such integration “are getting a lot of attention and have been proposed inside new regulatory regimes.”

Besides which, Wright said, creating a new regulatory agency would simply exacerbate the two-way antitrust fight between the Justice Department antitrust division and the FTC and turn it into a three-way fight.

A pathway toward regulating a maturing tech industry?

Furman replied that there were obviously good and bad ways to regulate and that he was against the bad ones and in favor of the good ones.

He pointed to mature industries that have been successful with regulated networks like energy, telecom and transportation. Interestingly, both debaters agreed that there were competition problems in the healthcare industry that should have been better addressed by regulatory agencies and by the courts.

Senior Fellow and Emeritus TPI President Tom Lenard moderated the debate.

Reporter Liana Sowa grew up in Simsbury, Connecticut. She studied editing and publishing as a writing fellow at Brigham Young University, where she mentored upperclassmen on neuroscience research papers. She enjoys reading and journaling, and marathon-runnning and stilt-walking.

Antitrust

Public Interest Groups Urge Passage of Six Antitrust Bills Targeting Big Tech

Nearly 60 public interest groups signed a letter to House leaders to call a vote on six antitrust bills.

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WASHINGTON, September 2, 2021 – Nearly 60 public interest groups signed a letter Thursday urging the House party leaders to push for a vote on six antirust bills that cleared the House judiciary committee in June.

The goal of the six bills is to rein in the power of Big Tech through new antirust liability provisions, including new merger and acquisition review, measures to prevent anticompetitive activity, and providing government enforcers more power to break-up or separate big businesses. They include American Choice and Innovation Online Act, H.R. 3816, Platform Competition and Opportunity Act, H.R. 3826, Ending Platform Monopolies Act, H.R. 3825, Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act, H.R. 3849, Merger Filing Fee Modernization Act, H.R. 3843, and State Antitrust Enforcement Venue Act, H.R. 3460.

The letter, which was directed at House Speaker Nancy Pelosi, D-California, and House Minority Leader Kevin McCarthy, R-California, were promoting a package of six bills that were the result of a two-year bipartisan investigation that included 10 hearings, featuring the testimony of the CEOs of the major tech companies, 240 interviews, 1.3 million documents and a 450-page report, the letter notes.

“We believe that these bills will bring urgently needed change and accountability to these companies and an industry that most Americans agree is already doing great harm to our democracy,” the letter said. Public Citizen was the first of the 58 groups on the letter.

America has a monopoly problem. Monopoly power lowers wages, reduces innovation and entrepreneurship, exacerbates income and regional inequality, undermines the free press and access to information, and perpetuates toxic systems of racial, gender, and class dominance,” the letter alleged.

“Big Tech monopolies are at the center of many of these problems,” it continued. “Reining in these companies is an essential first step to reverse the damage of concentrated corporate power throughout our economy. The bills that passed out of the House Judiciary Committee, with bipartisan support, do just that and it is imperative that they move forward in the House.”

List of signatories:

  • Public Citizen
  • Accountable Tech
  • Action Center on Race & the Economy
  • ALIGN: The Alliance for a Greater New York
  • Alliance for Pharmacy Compounding
  • American Booksellers Association
  • American Family Voices
  • American Independent Business Alliance
  • American Specialty Toy Retailing Association
  • Artist Rights Alliance
  • Athena
  • Cambridge Local First
  • Center for American Progress
  • Center for Digital Democracy
  • Center for Popular Democracy
  • Committee to Support the Antitrust Laws
  • Decode Democracy
  • Demos
  • Electronic Frontier Foundation
  • Friends of the Earth
  • Future of Music Coalition
  • Gig Workers Rising
  • Global Exchange
  • Indivisible Georgia Coalition
  • Indivisible Hawaii
  • Indivisible Ulster/NY19
  • Institute for Local Self-Reliance
  • International Brotherhood of Teamsters
  • Jobs With Justice
  • Kairos Action
  • Local First Arizona
  • Louisville Independent Business Alliance
  • Main Street Alliance
  • Mainers for Accountable Leadership
  • Media Alliance
  • Metropolitan Washington Council, AFL-CIO
  • National Employment Law Project
  • New York Communities For Change
  • New York Communities for Change
  • North American Hardware and Paint Association
  • Open Markets Institute
  • Our Revolution
  • PowerSwitch Action
  • Public Knowledge
  • Running Industry Association
  • Secure Elections Network
  • Service Employees International Union
  • Shop Local Raleigh/Greater Raleigh Merchants Association
  • SIMBA (Spokane Independent Metro Business Alliance)
  • Small Business Rising
  • Stand Up Nashville
  • StayLocal, an initiative of Urban Conservancy
  • Strategic Organizing Center
  • SumOfUs
  • The Democratic Coalition
  • UltraViolet
  • Venice Resistance
  • Warehouse workers for justice

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Antitrust

FTC Commissioner Phillips Warns About Shifting Direction of Agency

Noah Phillips voiced concern about the scope and practices of the Biden administration’s FTC.

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FTC Commissioner Noah Phillips

WASHINGTON, September 2, 2021 — Federal Trade Commissioner Noah Phillips said at a Hudson Institute webinar on Monday that he’s concerned about the direction the competition watchdog is moving toward considering recent events.

Phillips said the left-leaning voices in Washington and the appointment of Lina Khan to chair the agency has left him wondering about the legacy of the last 40 years of competition regulation in America – which have been hallmarked by the Hart-Scott-Rodino Antitrust Improvements Act of 1976. That legislation effectively gave the FTC the ability to review mergers and acquisitions before they were finalized, rather than afterward, which governed pre-legislation.

Under Biden-appointee Lina Khan, Phillips described how the FTC has done away with the process of early termination. In the past, this process made it unnecessary for every single company to provide advanced notice and advanced approval for mergers. “Historically, parties have been able to come to the agencies and say, ‘You’re not interested in this, can we just go ahead and finish our deal,’ and the agencies have said ‘yes.’”

He said this is no longer the case, and that every single merger must provide advanced notice and approval. “What we’re introducing is an inefficiency in the market for transactions that we have no interest in pursuing, just for the sake of it. I think that’s a problem,” he continued. “My concern is that it is making merger enforcement less effective, less efficient, and less fair.”

Phillips pointed to left-of-center and leftist voices in Congress, such as Rep. David Cicilline, D-New York, Sen. Elizabeth Warren, D-Massachusetts, and Rep. Alexandria Ocasio-Cortez, D-New York, who, at the outset of the pandemic, wanted to ban all acquisitions and mergers—regardless of their merit. He described this view as falling outside of mainstream perspectives, but noteworthy nonetheless.

“I don’t think that is what most people believe,” Phillips remarked. “I don’t think that is what Hart-Scott-Rodino envisions.”

This webinar took place only a couple of weeks after Phillips spoke at the Technology Policy Institute’s 2021 Aspen Forum, where he voiced similar concerns, stating that he feared that this new direction would make it more difficult for the FTC to hear cases that it should, and defended the commission’s record against critics who said it was lax under the Trump Administration.

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Antitrust

Antitrust Experts Zero In on Big Tech and Consumer Welfare Standard at Aspen Forum

At Aspen forum, a red-hot focus on Big Tech, antitrust and consumer welfare.

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Photo of the antitrust panel at TPI's Aspen Forum by Ben Kahn

ASPEN, Colorado, August 17, 2021— The Biden administration is taking a much harder line against big technology companies than was done by previous presidents, and is doing so by looking beyond the traditional consumer welfare standard of antitrust economics.

But the antitrust and competition economists making these assessments at the Technology Policy Institute conference here on Monday disagreed sharply about whether antitrust law should move beyond that consumer welfare standard.

Some these experts – including sitting Federal Trade Commissioner Noah Phillips – disagreed with stances taken by Biden’s hand-picked FTC Chairwoman Lina Khan.

Others, including Harvard Business School Professor Shane Greenstein, said that it was absolutely necessary for the FTC and the Justice Department antitrust division to investigate the gargantuan sums of money exchanged between big tech titans Google and Apple.

Speaking on a spirited panel session in the morning, “How is the U.S. Reshaping Antitrust,” Greenstein said Google pays Apple approximately $8 billion a year to make the Google search engine the default internet browser on all Apple devices.

Though this may not have historically fallen under the purview of antitrust, Greenstein was accusatory in his evaluation of the situation: “I’m sorry, no.” As to whether the antitrust division should investigate the matter, he said, “Go for it, guys.”

For a session on “Antitrust, the Consumer Welfare Standard and Big Tech Platforms,” see Broadband Breakfast Live Online on Wednesday, February 24, 2021. 

‘Deconcentration’ is not the goal of antitrust policy

But Carl Shapiro, professor of business strategy emeritus at University of California at Berkeley, dissented from Greenstein’s broader antitrust perspective.

“The goals of antitrust should be to promote competition—full stop,” said Shapiro. Deconcentration is not the goal of the FTC. The agency will have to determine whether it would depart from this long-held view, he said, and decide whether it would opt instead to consider concentration itself as evil.

“That’s not a version of capitalism that I want,” said Shapiro.

The primary issue is how one chooses to define competition, said Howard Shelanski, professor of law at Georgetown University. The dominant perspective has viewed competition through the lens of price effects. Other schools of thought borrow a wider aperture, considering this like privacy, wealth distribution, political power, product quality, and product variety when determining whether something improves or diminishes competition.

The more metrics that are accounted for, the more issues present themselves.

To this, FTC Commissioner Phillips responded, “If you are trying to solve everything at once, you will solve nothing at all.”

While polite, Phillips disagreed with FTC Chairwoman Lina Khan

At the beginning of the panel discussion, TPI President Emeritus Tom Lenard opened the session by asking Phillips for his impression of Khan.

Phillips responded diplomatically, joking that this question had not been on the list he had been sent. Because Khan has only been on the job for two months, it is too early for him to give a fully fleshed out appraisal of her time as chairwoman. “It’s always exciting to get new blood,” he said.

While he said he was supportive of Khan’s efforts to improve transparency by holding public meetings, he was critical of the direction in which the FTC is heading.

Proposed rule changes would create “needless friction” by delaying mergers that do not present a danger to consumers. This will make the agency less effective and less efficient.

“I worry that we are needlessly impeding our ability” to hear cases, he said.

Successes by big tech firms are ‘not a failure of antitrust’

Shapiro added that, in his view, concentration within an industry should not be viewed as a negative thing and that it is merely indicative of the fact that bigger companies are often simply more efficient and can compete more effectively in their industry. “That is not a failure of antitrust,” he said.

Shelanski said that he harbored serious reservations about expanding the consideration of antitrust. He noted that as it stands now, it is basically left to the FTC to decide how to pursue antitrust cases.

If the agency were to include considerations of value judgments, public health, environmentalism and wealth distribution, the country would need stronger democratic institutions to pursue this approach.

Former FTC Acting Chairwoman Maureen Ohlhausen, now with Baker Botts’s Antitrust and Competition Law Practice Group, shared Shelanski’s concerns about the ability of the FTC to make big, sweeping considerations on its own.

The public should not view the careful and deliberate approach to FTC decisions as lax. Indeed, she said, the commission has “done a pretty good job.”

Phillips agreed, stating that under the Trump Administration, the FTC had blocked more than 20 mergers—the most since 2001.

When asked if he felt whether antitrust guidelines should be revisited, he responded with skepticism, “There is a lot of promise of revisitation without much discussion of where [the FTC] is going.”

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