Over the last few years, there has been a growing shift in the power dynamics between governmental bodies and the companies that operate within the consumer economy. It is a shift that has found Big Tech companies一primarily Apple, Amazon, Google, and Facebook一under attack from policymakers for violating laws that aim to govern fair competition in the free market. Antitrust is the umbrella under which these laws fall, and it is a proprietary legislation that is designed to protect consumers from malicious business practices and behaviour. It has irrevocably become the driving force responsible for recent movements against tech giants and other similar corporations.
More specifically, Antitrust pursues a free market by addressing matters of monopolization—the process by which a company attempts to hold majority control over a market, which results in influence beyond a fair standard. Antitrust legislation attempts to define what it means to have “majority control” or “a fair standard” by stipulating that a monopoly is fair as long as it is not anti-competitive in its nature一a definition muddled in smoke and mirrors.
At a surface level, it may seem like the conflict is fairly one-sided. However, while the idea that “righteous antitrust legislation fights to control power-hungry Big Tech corporations” is a comfortable narrative to establish, it is largely inaccurate. The public and major trades might proclaim antitrust laws as heroic because of a deep institutional worry around the concept of “Big Brother”, but the real story finds itself to be both more complex and worrying. The philosophy behind Big Brother represents the inherent fear of an organization exercising complete control over the lives of others. As Big Tech continues to become rapidly ingrained in the consumer culture, these fears begin to influence a largely negative view towards their involvement in our lives.
As antitrust legislation grows more aggressive in an era where inorganic growth via M&A (mergers and acquisitions) has become prolific, the missing perspective realizes the flawed nature of its hero. Unfortunately, antitrust legislation in its current form is less a protective mechanism fighting against the monopoly power of Big Tech, but rather an economically misguided, politically motivated and legally conspicuous institution focused too much on tearing things down and too little on building them back up.
A Reductionist Approach to Economics
The most pressing problem with current antitrust laws is how it unfairly targets monopoly power. The platform behind Antitrust is based largely on a reductionist viewpoint implying monopolies are a force of economic disruption.
At the very core of monopoly power stands one of its most significant instruments of success一M&A. Both of these processes are responsible for changing the ownership of a company. A merger will combine two companies to form a new one, whereas an acquisition would have one company absorb the other. Oftentimes, when monopoly power becomes a topic of discussion, M&A is commonplace because companies grow through the purchase of ownership. When a company goes through M&A, market share is transferred over. Thus, Antitrust needs to carefully evaluate major transactions that may obstruct competition.
Furthermore, it is important to realize that there are several main types of M&A activity一horizontal vs. vertical consolidation, and potential competition are the most common. Horizontal consolidation indicates a merger between two competing firms, whereas potential competition is a merger with one competitor buying another company that is planning to enter the market as future competition. Both of these forms of mergers are harmful to the economy because they can hinder healthy competition in the market, and thus exert unfair control over prices for consumers.
On the other hand, vertical consolidation is a merger between two companies that are in different stages of the production cycle, and it is a powerful economic process that can improve cost savings and business synergies as well as prices for consumers. This effectively combats the detrimental risks of M&A activity by antitrust standards.
Beyond the oversimplification of M&A activity, there is a misunderstanding that these large companies are hindering competition. Dropbox, which is a successful cloud backup and file sharing company, is a good example of how this is not true. Even though Apple, Google, and Microsoft provide cloud storage of their own, Dropbox still doubled revenue to $1.2B from 2015-2018.
Essentially, by providing a different experience, Dropbox was able to get a slice of the market even though there was apparent saturation. Not to mention that with hard-to-define markets that are constantly shifting, M&A essentially allows companies to participate in a variety of sectors by diversifying their product/service categories. Disney is a good example of an entertainment conglomerate that does this. The company provides services ranging from theme parks, streaming, to even dining. With companies now merging their business model into one that combines other markets, competition in these markets is becoming more fierce and not less. The best example of this can be seen in the proliferation of streaming services in the industry (ex. HBO Max, NBC Peacock, Apple TV+) after the launch of Disney+ into a market previously dominated by only Netflix. Soon after the entry of new companies into the industry, Netflix’s pricing power was hit significantly and their subscriber growth during their fourth quarter earnings report in 2020 fell short of expectations by 180,000. It is important to note that this would make it the third quarter consecutively that Netflix has underperformed after a steady rise for decades. This goes to show that not all M&A activity is detrimental to competition after all.
In addition, the basic understanding that these companies are simply monopolists is just untrue because they constantly cultivate innovation and competition. Is it all possible that allowing monopoly power to grow and evolve in this modern landscape does more good than harm? It seems so, because Big Tech is responsible for exorbitant amounts of R&D in the consumer economy. In fact, Amazon went from $16.1B to $22.6B from 2017-2018, whereas Facebook went from $5.9B to $7.8B. In fact, Michael Mandel of the Progressive Policy Institute even determined that Big Tech seemed to outperform the rest of the private sector when it came to competition. Although, monopoly power appears to trigger more monopoly power, and in an economy where markets are not stringent and difficult to define, it is clear that there will never be one true monopoly. There will always be competition. Companies will have a fear of being replaced by another, so competition will be continuously fostered.
A Hidden Political Agenda
Another one of the biggest issues with Antitrust in its current capacity is that it is being utilized by policymakers not simply for consumer benefit but for the sake of pushing a particular political agenda. Policy makers are heavily intertwined with the current legal battle between Antitrust and Big Tech. This ultimately stems from the aggressive sentiment amongst politicians towards large technology companies. For example, in the US, both the Republican and Democratic Party have their own issues with these companies, and it becomes clear upon further exploration how deeply it ties into the current legal landscape. Political motivation can be justified, but this bias should still be examined.
In the same vein, Republicans also simply dislike that private technology companies hold strong political influence; these companies can control what information can reach a particular audience. The worry from their end stems from how many of these services are allegedly places where users can spread anti-Republican sentiment. Donald Trump has long lobbied that many of these social media companies, Facebook and Twitter specifically, are working to “undermine him”. In fact, his anti-Big Tech sentiment eventually got him banned from both Facebook and Twitter earlier this year and then from the Capitol for inciting violence and spreading misinformation. In more than one way, Donald Trump and the Republican Party demonstrate a conflict of interest in this matter which has less to do with wanting to correct antitrust abuses led by Elizabeth Warren, and more about controlling anti-Republican sentiment on these platforms.
This particular disconnect highlights that technologists and policymakers inhabit two different worlds. Usually, aggressive sentiments like the ones exhibited by both entities are typically not well-informed. Bias is created because neither side truly understands each other. The Republicans believe there is anti-Republican sentiment, whereas the Democrats believe regulation is necessary to control a service that has significant influence over speech. The problem arises not when there is a discussion on these matters but rather when the ongoing legal battles do nothing to explore these political biases and address their validity.
Sometimes, intentions are everything and in this particular situation, change the context and validity of Antitrust’s attack on Big Tech. Can someone blame an entire group of companies for something they cannot even prove? This is what makes their attempts to drown them in litigation in what can only be a war of attrition that much more confusing. A battle being fought to wear down the opposition through continuous losses so much so that the entire empire collapses.
A Legally Ambiguous Nightmare
Finally, another issue with Antitrust is that it no longer reflects the current market. In the case of Big Tech, antitrust legislation is too outdated to handle the complicated nature of what it means to be a monopoly in this dynamic technological market.
The issue becomes transparent with the legal implications regarding regulating Big Tech. At this moment, the DOJ (Department of Justice) and FTC (Federal Trade Commission) are focused on using the aforementioned antitrust laws to break up Big Tech. Their exploration of the statutes, particularly the Clayton Act一one of the first statutes set in place一prohibits any merger that can “substantially  lessen competition, or  tend to create a monopoly”. It could also possibly be used to unwind certain mergers that are viewed to be concerning such as the acquisition by Alphabet of Waze and Nest in 2013 and 2014, and the Facebook-Instagram merger in 2012.
However, the Clayton Act had a particular provision that complicated the situation. Essentially, to unwind a merger, the Clayton Act has to prove that it “meaningfully decreased competition in a particularly defined marketplace”. However, this prompts a myriad of legal questions around market definition in an increasingly complicated and shifting technological industry. How does one legally stipulate what is considered to be “decreased competition in a market” when there is difficulty in defining what the market should look like?
The numerous legal questions surrounding Big Tech originate from how the current laws barely scratch the surface for defining markets and monopolies in this climate. For example, when dealing with a monopolization case, it needs to be proved without a reasonable doubt that the company in violation possesses “market power”. This is defined as the ability of the company to raise prices to competitive levels, which is the legal stipulation set in place by the Clayton Act.
However, many tech companies do not even charge their customers for their services and so, what then? Moreover, market power is also defined by proof “that the defendant-firm is insinuated from new rivals by barriers of entry”. However, it has been argued by several European authorities that this idea is also flawed since certain technological markets have structural features一economies of scope, network effects, and structural features一that make this barrier uniquely difficult. The legislation does not consider this when dealing out judgement. Modern monopolies are far more complex than the legal statutes give them credit for, and so how can someone wield a set of laws that themselves are - for lack of a better word - ignorant?
It does not even begin to address the recent movement made by politicians to change Antitrust laws. While one might hope that these changes would address the aforementioned questions, they seem to be making it even more legally conspicuous. At the moment, Amy Klobuchar, a US Senator, is introducing a bill that would bar mergers that “create an appreciable risk of materially lessening competition” by shifting the burden of persuasion to the defendant in question. Burden of persuasion is defined as the “obligation of a party to introduce evidence that persuades the factfinder, to a requisite degree of belief, that a particular proposition of fact is true.” In other words, it seems to completely abolish the long standing philosophy of “innocent until proven guilty” and instead approaches a sentiment where it falls on the company to prove whether or not they injured competition. This means that each company goes into a case already guilty, and it could lead to several companies being charged for behaviour that is not anti-competitive. Similar to how someone innocent might be charged for a crime they did not commit. That is not a comparison that should be made for a regulatory statute that is responsible for governing the consumer economy.
A Path Forward
The entire conflict between Big Tech and Antitrust brings up a myriad of questions about the government’s increasing involvement in the free market and whether companies should prepare themselves for a rude awakening. It seems more and more likely that the industry itself should prepare for a change, since aggressive sentiments are growing across the world to reign in Big Tech.
However, this change is a reflection of what is wrong with the system in place. Antitrust legislation in its current capacity has proven to be economically misguided, politically biased, and legally ambiguous. So why is a clearly flawed piece of paper deciding the fate of the entire consumer economy, and what can be done about it? With a situation like this, it can be easy to default to either breaking up Big Tech or abolishing Antitrust, but the problem is that both of these entities are part of a symbiotic and mutually beneficial relationship. One without the other would do far more damage than keeping them in their current state, since removing Big Tech or Antitrust may eventually lead to a complete market collapse. As such, the answer does not simply lie in either of these options and rather in the collaboration of both Antitrust and Big Tech. Both should move away from the current war of attrition that is doing nothing but bleeding the entities dry. The best way for them to do this is to work on improving the issues with Antitrust that we identified - improving the economic, political, and legal constructs of the legislation.
From an economic standpoint, there must be a realignment in the way economic growth via monopolies is understood. Specifically, the consumer welfare principle should be emphasized as the primary goal of Antitrust. The CW principle “urges that antitrust policy should encourage markets to produce output as high as is consistent with sustainable competition, and prices that are accordingly as low”. This would make markets more competitive but not necessarily result in smaller firms.
From a legal standpoint, there would need to be a mechanism to combat the uncertainty behind defining markets and monopolies. It should start by keeping the burden of proof on the prosecution and then be implemented via injunctions一which is a legal order that requires a company or entity to stop a certain action. Instead of focusing on providing generalized definitions about what is considered competitive or not, it may be smarter to take each potentially dangerous act on a case-by-case basis and prosecute it using a case-by-case tool like a legal injunction. A positive example of its promising effect was during the Google search engine case. During the conflict, complaints were filed against Google for limiting competition by paying billions of dollars to make their search engine the primary search tool on iPhone and Android devices. An injunction was filed that forbade Google from paying other companies to make their search engine the primary system. From a political standpoint, there needs to be a way for lawmakers and technologists - who essentially exist in two separate worlds - to start understanding each other better. This can be addressed by setting interoperability requirements that would force platforms to share data collected from users with competitors if the user agrees to it. This would allow for analytics between companies to be shared and prevent either side from spreading misinformation. By making this information widely available, you prevent the risk of political bias becoming as influential a factor in this conflict as it has been thus far.
At the end of the day, these solutions are a guide for what a world might look like if people were less focused on tearing each system down and one focused on helping each other instead. It is easy for the public to create a narrative that characterizes one side as the villain and the other as the hero, but nothing is that simple. The truth behind the war between Antitrust and Big Tech is that it is unnecessary. With a focus on analyzing the systems that run the world and the ones people put on a pedestal, individuals can begin to create a system of co-existence that may offer a brighter future to these entities and allow them to help consumers.