People may like to say data is the new oil, but digital platforms have no business being regulated like old-school oil companies.
Lawmakers and enforcement authorities on both sides of the aisle and across the globe agree it’s time to rewrite the rules that regulate competition for a new internet age.
“Distinct features of digital technologies have ushered in new market dynamics and business strategies that require us to update our approach,” said Lina Khan, chair of the Federal Trade Commission, addressing a room of her European peers on Thursday at an antitrust event hosted by global consulting firm Charles River Associates in Brussels.
The European Union passed sweeping antitrust legislation last week in the form of the Digital Markets Act, which has Big Tech platforms directly in its crosshairs.
The new law prevents large platforms from combining data sources without an explicit opt-in, prohibits self-preferencing across services, requires interoperability between messaging apps and generally aims to keep “gatekeepers” in check by forcing them to engage in fair business practices.
The US trails the EU in terms of federal antitrust legislation, but there are multiple antitrust bills floating around Congress right now backed by bipartisan politicians, including Sen. Amy Klobuchar (D-MN) and Rep. Ken Buck (R-CO).
One such bill, the American Innovation and Choice Online Act, which aims to stop companies like Amazon or Google from bundling or preferencing their own products, was publicly endorsed by the Department of Justice on Monday.
Making the frame work
The legal frameworks that enforcers have relied on in antitrust suits for the past three decades were developed based on precedent and economic theory when the US economy still revolved around factory smokestacks and linear supply chains, said Jonathan Kanter, assistant attorney general in charge of the DOJ’s antitrust division.
Although some of that precedent may still be applicable in certain instances, Kanter said, the underlying rules of business have changed, and if enforcers don’t roll with those changes, “we’re missing the boat.”
“We should focus on competition rather than a theoretical model of what someone thinks competition looks like,” Kanter said.
There is movement toward modernized antitrust enforcement. The DOJ and the FTC announced in January the agencies will rewrite their merger guidelines to reflect today’s market realities. One important concept to take into account is that price controls – often the only metric a regulator can use to legally define monopoly power – doesn’t make sense when we’re talking about free consumer products like social media platforms and search engines.
Facebook bought Instagram almost exactly 10 years ago for $1 billion when the photo-sharing app had just 13 employees, and the FTC cleared that deal at the time without a single objection because Instagram was free and pre-revenue, since it had no advertising yet. The commission is now suing Facebook in part to try and unwind its acquisitions of both Instagram and WhatsApp. The FTC also didn’t stand in the way of Facebook’s purchase of WhatsApp back in 2014.
The current M&A guidelines haven’t been updated in more than 12 years.
But antitrust enforcers don’t just need new tools; they need a new mindset.
Being effective will require more than just coming up with “a grand framework,” Khan said. Enforcers need to study the markets and understand the business incentives that motivate companies to act as they do.
Sometimes, though, a company’s actions, particularly those taken by the Big Tech platforms, are quite transparent – and not in a good way.
Their lobbying efforts can be downright laughable, said Rep. Buck, joining the Brussels event virtually from his office in Washington, DC.
“It’s fairly humorous when these giant companies talk about how the [antitrust] bills we’re discussing in congress are ‘anti-American’ – we hear that all the time,” he said. “That we’re actually helping China and we’ll lose our leadership position in the economies of the world – it’s absolutely silly and it’s been mocked by a number of people here.”
“The idea that these companies are American companies is also nonsense – they’re multinational companies and they are seeking profit, which is fine, but they don’t share American values,” Buck said. “For these companies to talk about any actor in the world doing something that is anti-American … they just don’t have the standing to do that.”