President Joe Biden issued an executive order in July to “promote competition” in the US economy. The injunction specifically calls out Big Tech, stating that “today, a small number of dominant internet platforms are using their power to foreclose market entrants, gain monopoly profits, and gather intimate personal information that they can exploit for their own benefit.”
In November, the US Senate introduced a bill targeting anti-competitive takeovers by technology companies. There has been no meaningful monopolization in the United States for twenty years, but this recent momentum suggests that the current administration wants to maintain one.
To date, there is still too much gray area in the rules and ambivalence among citizens to enforce antitrust law, but with a few changes in approach, good intentions can lead to new policies, fines and even prosecution.
Over the past century, antitrust regulation has lost its teeth and its broader goals have been abandoned for a vague standard around “consumer welfare.” The acid test for antitrust introduced in the 1980s reduced everything to the question of whether alleged antitrust actions led to higher consumer prices.
This attempt to distill antitrust into a single test of economic consequences has proved too simplistic. Defenders of this unique, consumer-price-based approach to antitrust evaluations cite falling technology prices as indisputable evidence of prevailing fair competition.
Breaking tech monopolies won’t be easy, but it can be done with a three-pronged approach: blocking anti-competitive mergers and acquisitions, shaping data as market power to rewrite policy, and boosting public interest in the topic, so citizens involved can choose antitrust policymakers.
In an era of easy money, with prolonged periods of very accommodative monetary policy and heavily inflated stock prices, buying out future competitors at high values is now part of the business playbook.
Examples abound in the tech world, and Facebook’s acquisitions of Instagram and WhatsApp are irrefutable examples. Excessive regulation kills innovation, but free markets depend on regulation to remain fair and free.
Current law requires any deal valued at $92 million or more to be reported to the Federal Trade Commission and the Department of Justice, with a few exceptions.
Given one of the stated intentions of the Biden injunction is more oversight of mergers and acquisitions, consumers may see the government taking more legal action to block deals that “significantly reduce competition.”
The bill that would block certain acquisitions is a good sign of recognition by both sides of the aisle that there is abuse, but the bar for violators remains high, especially when data monopolization isn’t widely seen as anti-competitive. The FTC and DOJ will have to exercise their power to enforce antitrust law against Big Tech, which it can do better with this new legislation.
Data = money = market power
Offering free products has turned out to be a stealthy strategy for some tech giants to amass other assets—particularly personal information about their unwitting “free” customers—that not only gave them outrageous multi-billion dollar profit streams, but also created these companies. monopolists of exactly those assets. Search engine marketing and social media advertising are built exactly this way. Such digital assets are now rented out to all other companies as a tax on their marketing budgets – a clear example of market power.
We have unprecedented concentration in most industries, and companies in industries with increasing concentration invest less because they can more easily exercise their market power.
However, when the weather turns bad, the fair-weather friends of self-correcting markets will easily switch teams and support extraordinary market interventions, such as the multiple actions the Federal Reserve has taken during the pandemic to unabashedly prop up markets.
Welcomed by Biden’s decision is the encouragement for the FTC to enact new rules for online surveillance and the accumulation of user data. Our monopolistic tech giants have been setting the rules of this game for far too long, and have indulged gullible lawmakers on ridiculous oaths of self-regulation.
Until mass collection and scrutiny of data is properly categorized as market power, the levers of justice will continue to favor Big Tech, not consumers. New policies and new legislation will only become a reality in this case if the public outcry feeds the legislators.
Changing the public story
Consumers and citizens are largely affected by lax competition enforcement and loose policies. Whether it’s surrendering personal data, overpaying for services, or being unable to choose between products, monopolies somehow violate consumer welfare. But is there anything they can do?
Biden’s executive order is the direct result of heightened public pressure over antitrust in this country. The same goes for the new Senate bill. Increasingly, private companies are filing their lawsuits against monopolies in state courts filled with elected officials.
It may sound ridiculous now, but antitrust could become a leading topic that politicians should stumble upon. Meaningful antitrust policy reform will come from reformers elected by the political body, so voting for candidates based on their views on antitrust enforcement will be critical to changing the status quo.
We now need stronger antitrust and privacy regulations. The privacy and well-being of our citizens are at stake. Antitrust, like charity, must start at home.