Momentum Is Building for Antitrust Reform. Here’s What That Means for Big Tech
Worry about the concentration of wealth and power achieved by monopolistic—or potentially monopolistic—entities have always been wrapped up in each respective era’s technological innovations. It is not surprising then that the focal point of today’s debate around antitrust reform is the size and scope of internet giants like Google, Facebook (Meta Platforms, Inc., Amazon and Apple—the pioneers laying the digital “railroad tracks” that have upended communication and commerce and, not coincidentally, allowed these companies to grow very, very powerful.
The history of antitrust legislation in the U.S. stretches back to the Second Industrial Revolution in the late 19th and early 20th centuries, when transcontinental railroads bridged the coasts and ushered in a new era of mobility for both people and goods—along with concern about the formidable size and scope of these entities as they expanded, and then consolidated, to encompass entire industries.
Sherman Antitrust Act of 1802 made it illegal to have monopolies or trusts. The Clayton Antitrust Act of 1914, more than 20 years later, expanded on the Sherman Act. It prohibited business practices, including price discrimination. This was to prevent companies from using monopolistic practices.
In the past, antitrust legislation was primarily seen as a way to stop big corporations from outselling smaller ones. But that changed when it became more common to view it as a tool for protecting small competitors. Since then, the governing principle of antitrust law has been the “consumer welfare standard.” When rival companies have to compete for the same pool of customers, it incentivizes them to improve their products and keep prices low, both of which benefit consumers, the standard says.
Experts in antitrust say that officials from the Justice Department and Federal Trade Commission have the power to increase oversight and enforce anticompetitive activities, such as mergers. However, in practice it is not so simple. June reportBeacon Policy Advisors discovered that the permissibility framework implicit in consumer welfare standards and conservative judges are constraining officials. Many have argued that the Consumer Welfare Standard is inadequate or insufficient, especially since the outbreak of the pandemic. They also point out the increasing influence of Big Tech and call for antitrust reform from both the White House (at varying levels) and members of Congress.
“One group of antitrust activists really are arguing for enforcing the laws in a radically different way than they’ve been enforced for the past 40 years,” says William Kolasky, partner in the Washington, D.C. office of Hughes Hubbard & Reed.
Biden’s aggressive approach
Joe Biden announced plans to capitalise on the momentum that has been building for significant antitrust reforms since taking office. Biden tapped antitrust scholar and Big Tech critic Lina Khan to lead the FTC, putting a proponent of more robust antitrust regulation in charge of the agency—along with the DOJ’s Antitrust Division—on the front lines of antitrust compliance.
“Khan has indicated she really wants to transform the way the FTC enforces antitrust law. The extent to which she’ll be able to do that in a way that passes muster with the courts, we don’t know yet,” Kolasky tells TIME.
The White House, along with Khan has attempted to fill key antitrust policies roles with Big Tech critics. Biden tapped anti-monopoly legal crusader Jonathan Kanter to serve as assistant attorney general for the DOJ’s Antitrust Division—a nomination that is expected to receive Senate confirmation—appointed Tim Wu, a Columbia University law professor who has compared today’s economic disparities to those of the late-19th century Gilded Age, to the National Economic Council.
Advocates for stronger antitrust regulation are calling for an alternative set of criteria for determining how large a company is. According to a July Executive OrderBiden attacked Big Tech, along with the other large industry sectors. Biden claimed consolidation was good for corporate bosses, and bad for American citizens.
“Robust competition is critical to preserving America’s role as the world’s leading economy,” the order says, citing examples in agriculture, health care, telecommunications, financial services and global shipping in which there is a dearth of competition.
The executive order calls for marshaling a “whole-of-government” response and establishing the White House Competition Council to reorient American economic priorities to cultivate greater competition.
The Administration has “basically directed the agencies with jurisdiction over antitrust enforcement to be very aggressive,” according to Jonathan Osborne, a business litigation shareholder at Gunster, a law firm. Osborne claims that this standard will apply to mergers and acquisitions that could lock current—or even future—competitors out of a given market
Biden’s strong support of unions and organized labor also has antitrust implications. He will be considering the effect on workers and consumers in his White House coalition.
What’s happening in Congress?
Monopolistic power, especially in Congress, is something that can sometimes make strange friends. There is still momentum to reform antitrust on both sides.
Following the House Judiciary Committee’s passage of a package of six antitrust bills in June with bipartisan support, Sen. Amy Klobuchar (D-MN), chair of the Senate Subcommittee on Competition Policy, Antitrust, and Consumer Rights, advanced Senate versions of some of those bills with Republican colleagues.
Klobuchar, Arkansas Senator Tom Cotton (a Republican) introduced last week the Platform Competition and Opportunity ActIt is. Big Tech would be unable to purchase rival businesses if the legislation is passed. Under the current law regulators who want to prevent mergers have to show they are unfair. The Klobuchar-Cotton bill would shift the burden to Big Tech companies, who would have to prove an acquisition or merger wouldn’t stifle competition.
Klobuchar (R) and Senator Chuck Grassley from Iowa introduced the Senate Judiciary Committee’s ranking member, the bill. American Innovation and Choice Online ActThis bill would ban large tech platforms from giving their products and services preference treatment. For example, they could not move their products to the top search results.
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Klobuchar also proposed the Merger Filing Fee Modernization Act. The Senate approved it. PastIt was June. The legislation—a version of which has cleared a key procedural hurdle in the House of Representatives with some level of bipartisan support—would increase funds allocated to the FTC and the DOJ Antitrust Division.
Despite the rare display of bipartisan coordination, the Senate and House —and members of both parties—have somewhat differing priorities when it comes to creating new laws aimed at thwarting monopolistic corporate power. Republicans want to rein in what conservatives view as big tech companies’ chokehold on political speech and, ultimately, free speech. Democrats are focused on, at the very least, constraining these companies’ ability to expand, with some—including members of the Biden team—calling for breaking up technology giants.
Big Tech: The main focus
During the pandemic, Big Tech was under increased pressure. Due to social and business constraints, Americans began to depend more on technology platforms for commerce and communication. Tech companies became visible, profitable, and much more powerful.
“COVID underscored their significance. They became vital lifelines for goods and services. The bad news was that their importance and those lifelines became more evident,” says William Kovacic, professor of Law and director of the Competition Law Center at George Washington University.
Antitrust reform advocates say Big Tech companies don’t need to be monopolies in order to stifle smaller competitors because they have an asset that gives them a critical competitive head start: access to data on millions and millions of people who use their products.
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In shaping how people wrestle with issues of law and culture, Big Tech also has “an outsized political significance,” Kovacic adds. “That’s why you have this interesting coalition of Democrats, who have stronger preferences for intervention, and conservative Republicans who, for the moment, despise Big Tech.”
Big tech has also attracted a lot of attention due to data privacy concerns. While antitrust law was initially only focused on price and output, today it also is concerned with consumer data privacy—a topic experts say very much pertains to the question of consumer welfare and the inherent value of their personal data to big technology firms.
Some experts in legal matters worry about the potential for technology firms to be overlooked. “For a very long time, antitrust laws prided themselves on being industry-agnostic,” says David Reichenberg, an antitrust litigator.
Reichenberg says that the risk of writing legislation that targets a specific industry over problematic practices is that the laws can be difficult to enforce, particularly in light of the rapid advancements in computing power, which constantly redefines what it means for a company to be technology-based. “The reason people have resisted industry-specific legislation for so long is it’s hard to administer, it’s hard to predict scenarios and know what’s going to harm consumers. We need laws that can adapt to the facts,” Reichenberg says.
Tech companies DiscussSimilar legislation to theThe Platform Competition and Opportunity Act would suppress competition and investment, particularly on a global level.
Other proposals have been attacked by antitrust experts who argue that Big Tech legislation could harm the customer experience. An industry-affiliated group signed an agreement with a nonprofit consortium. LetterWarning that tech companies could have to split their services and offer less user-friendly, more costly online services under the House bill. The letter suggested that Google might have to strip its map feature out of its search engine, Apple’s iOS would be forced to peel off functions like iMessage and FaceTime and Amazon would have to scrap its Prime subscription service.
Legal experts refute these claims. “I have some skepticism that any legislation that passed would have those kinds of draconian effects,” Kolasky says.
While technology is clearly in the cross hairs of the antitrust reform movement, other big industries from agriculture to biotechnology also are likely to face heightened scrutiny—and the Democrat-led executive branch isn’t willing to wait while lawmakers hammer out their differences. For example, a partnership between American Airlines (JetBlue Airways) that would combine the New York City-based operations of both JetBlue Airways and American Airlines is being investigated. Forensic analysisFiled last month by The DOJ and six state attorneys generalWashington, D.C. In addition to Washington, D.C. It will suit you to block publishing giant Penguin Random House from acquiring rival Simon & Schuster.
It seems that the moment of reckoning for business titans is now, whether in Congress or the executive branch. All signs indicate that it will be large in scale.
“What the laws are supposed to do is incentivize them to continue to be successful, without the harmful effects,” Reichenberg says.
The belief that competition barriers can be removed will make it easier for small and new businesses to compete, is the conviction of reform advocates from all political stripes. “I think that the left is saying this is synonymous with economic opportunity,” he says.
Ultimately, Reichenberg says what Congress and policymakers have to wrestle with is defining the law’s role as gatekeeper. “What all these laws are about is, through what lens are we evaluating if something is good or bad?”