Measured antitrust enforcement and a more comprehensive regulatory regime can ensure that we continue to benefit from digital markets. In attempting to increase competitiveness, however, enforcers will have to first overcome hostile antitrust jurisprudence and lengthy procedures.
After years of timid enforcement against powerful online platforms, and silence from Congress, we are witnessing the awakening of antitrust in the United States. At last, antitrust enforcers have accepted that digital market dynamics are imperfect and justify closer scrutiny. Congress has also woken up to its responsibility to update competition policy.
These changes in attitude mark a departure from the past approach to antitrust and competition policy, which was firmly embedded in the belief that markets will self-correct and that disruptive innovation and competition dynamism will be enough to protect consumer interest. While true in many market settings, those beliefs have lost much of their shine in the platform economy. Many now acknowledge that alongside the efficiencies delivered by platforms, they have also amassed significant power that has enabled them to distort competition.
Measured antitrust intervention and a more comprehensive regulatory regime can ensure that we continue to benefit from the digital environment, and that companies continue to invest in innovation, while safeguarding consumer interests. They bring hope for a more transparent and fairer digital environment and open online markets in which small and medium-sized companies can flourish and are not quashed by giant platforms leveraging their power.
But while there is hope that the revival of enforcement and scrutiny will help increase the competitiveness of online markets, two key challenges remain:
First, antitrust jurisprudence—the analytical framework in the US—has long been affected by voices that call for limited intervention. The reliance on markets to self-correct has led to the creation of a legal environment designed with low tolerance to doubt. After all, if the market offers an alternative solution, any doubt should lead to no action. Despite self-correction being unlikely in the current platform economy, this legal regime firmly applies. The platforms, as skilled veterans in this game, can push back on enforcement efforts by raising doubt and pointing to the assumed dynamics of competition. While they have every right to do so, they benefit from a playing field designed in their favor. A design that may suit traditional brick and mortar markets, has less validity in the present platform environment.
Enforcing antitrust in such an environment is a long uphill struggle, as agencies try to weave theories of harm into old jurisprudence. Along this journey, vocal crowds and pressure groups gather to increase doubt about the validity of the concerns. Often supported by their current masters (and seldom disclosing this fact), they will suggest a U-turn is in order.
Acknowledging these challenges, and the difficulties faced by antitrust agencies, the recent House Judiciary Committee’s staff digital markets report recommends updating antitrust laws, including, among other things, lowering the evidentiary requirements to prosecution, and in some cases shifting the burdens of proof. Such proposals, if approved, could facilitate enforcement in concentrated markets and contribute to regenerating digital competition.
A second challenge concerns the length of procedures. Antitrust litigation is enormously complex and time-consuming. For example, the Department of Justice filed suit against American Express in 2010, got the case to trial in 2014, and the Supreme Court resolved the case four years later. In other words, American Express was free to engage in conduct the government deemed harmful for competition throughout the eight years of litigation and appeal.
While the right of defense must be safeguarded and intervention carefully monitored, delays come at a cost. This is particularly so in platform markets that can quickly tip to monopoly, and which unlike some other industrial market players in the US, have no sector-specific regulator. With this in mind, dominant players often employ a strategy of prolonging the proceedings. While procedures drag, the platforms continue to cement their control over the ecosystem, increase their hold over the market, adjust input and output interfaces and strengthen their grip over data and users.
After many months of legal debate, one might see some results, possibly in the form of a fine and remedy. The agency might celebrate the pyrrhic victory. By then, however, the patient is often dead, or in critical care. The reality is that even when the agencies are successful in overcoming the obstacles and impose a fine and a remedy after establishing a violation, that remedy is a diluted version that rarely suffices to restore competition. The internet giants are often able to circumvent it, and are rarely materially affects by financial penalties.
The limitations of antitrust enforcement, affected by jurisprudence and lengthy procedures, underscore the significance of supplementing the current antitrust toolbox with additional rules that can help set the boundaries of acceptable online competition and clarify the rights of users, sellers, input providers, and the platforms.
In Europe, the European Commission has initiated a consultation on the creation of a pre-emptive tool which will enable the agency to engage in market investigation with the aim of identifying structural deficiencies and putting in place behavioral and structural remedies aimed at increasing competitiveness. The Commission has also launched a consultation on a proposed regulatory instrument for large online platforms. This regulatory tool will not seek to establish ongoing monitoring of markets or prices, but rather set the rules for a fair trading environment across the online platform ecosystems. It will help limit the negative effects of strong networks and controlled ecosystems, and address the imbalances in commercial relationships in the digital economy. The core idea at the heart of these tools is to put in place ex-ante mechanisms that can instill change in market dynamics to protect competition and prevent market power distortions.
The House Judiciary Committee seems to also acknowledge the need to supplement existing enforcement capabilities. Proposals include the facilitation of data portability and interoperability as tools to overcome strong barriers to market entry and economic forces which tip digital platform markets toward monopoly. Proposals also address discrimination, self-preferencing, and unjustified leveraging. While they differ in some aspects from the approach in the EU, they offer an important opportunity to recalibrate the rules that govern digital markets.
These proposals present an opportunity for game-changing momentum in the evolution of digital markets. They have the potential to open the door to competition, displace gatekeepers, encourage new entrants, facilitate data portability between platforms, multihoming, and empower users.
No doubt, due to their likely pro-competitive effects, the proposals will face strong opposition from the same powerful industry players that have hampered past antitrust enforcement, and hold substantial sway over legislators. Once again, they will seek to convince us, the people, that those who seek to protect us—protect our welfare and our markets—are the real enemies. They will unleash their lobbyists, their sponsored advocates, and their captured politicians to convince us that it is in fact the (alleged) powerful violators that have our interests in mind. That restriction of their power will herald the collapse of the digital economy and form an assault on competition and our freedom.
But as markets tip in favor of the platforms; as they vertically integrate and quash the opposition; as our data is harvested with little control; as small players are pushed out, delisted, ignored; as input providers are overtaxed for the right to reach us; as we all walk the path set by these giant platforms (sometimes with a false sense of autonomy); we should ask: “What freedom?”
We the people should demand from our representatives and our enforcers to act, making sure that the promise of free competitive markets in which the consumer welfare is maximized does not remain a theoretical idea. We should ask that they rise beyond the noise created by giant corporations to delay action. We should ask that they carefully listen to voices on both sides, making sure that enforcement is measured yet effective. That they separate valid concerns from sponsored pushbacks and capture. But most importantly, that they act in a timely manner, while it still matters.
As they do so, it may be a good opportunity to reflect more broadly on the consequences that corporate power has on our society and whether digital markets in their present forms serve us, or rather the other way around.