Tue, 07/06/2021
This post is a summary of Episode 25 of The Nebraska Governance & Technology Center’s (NGTC) Podcast Series, Tech Refactored. In this TR/DT (just in time) episode, host Gus Hurwitz, Director of the NGTC, was joined by Jennifer Huddleston, Director of Technology and Innovation Policy at the American Action Forum.
In recent weeks, US antitrust law has entered the public conversation and news cycle in a way that it hasn’t for years, largely as a result of a set of five proposed legislative changes to antitrust law that are making their way through the house of representatives. For those unfamiliar with antitrust law, it is a set of laws, mostly federal, that regulate the ways in which corporations can operate, in a way that is intended to promote the functioning of the free market and prohibit the development of monopolies that are thought to be contrary to the public interest. The recent set of proposed legislative changes that are the subject of this episode deal primarily with the operation of large american tech companies, and range widely in scope, from an increase in the fees corporations pay in mergers, to the actual breaking up of some of the larger tech companies into a set of smaller corporations, each with a more limited scope of operations.
One central element in the conversation around changes to antitrust law has been the “consumer welfare standard.” The consumer welfare standard, as presently applied in US antitrust law, is the idea that, if consumer interests are being harmed by a concentration of market share in a single actor, then a court is more likely to hold that a corporation is a monopoly and in violation of antitrust law because breaking up that corporation into smaller subsidiaries would be in the interest of consumers. Huddleston notes that consumers, in this context, need not just be individuals, but can also be other actors in the market; for example, a body of smaller corporations, like app developers, can also be considered consumers for antitrust purposes. According to Huddleston, the consumer welfare standard attempts to remove an element of subjectivity from court antitrust decisions because the question of whether a concentration of market share is, for example, causing an increase in market prices, is deemed to be more empirical than other available metrics.
There has been a lot of variability in the conversation around these bills about what is the nature of the problems that they are trying to address. According to Huddleston, “for critics of the current platforms and critics of our current antitrust law, typically on the left, you see an increasing conversation that this is about more than just tech. You hear conversation about how this could be used on other industries, whether its big pharma or whatever. There’s a broader conversation about a push to potentially change more generally antitrust laws to move away from the consumer welfare standard potentially to something that looks a lot more like the European ‘abuse’ and ‘dominant position’ standards.’”
According to Huddleston, for resolving many market failure issues, “antitrust law is a sledgehammer when you really need a scalpel. So for example, around the content moderation concern, there’s no guarantee that smaller platforms… would have any different content moderation policy than the current large platforms. And in fact there could be concerns about what happens when they have fewer tools to deal with some of the content that most people don’t want to see to begin with.” The idea here is that smaller companies would lack the financial resources that are required to develop the tools necessary to remove objectionable content at scale.
Hurwitz characterized some of the proposed legislative changes to antitrust law this way: “It’s not quite a big is bad standard, but it’s a, if you’re big, that’s inviting substantial scrutiny, largely on a subjective basis from regulators.” Hurwitz agrees that “there are legitimate concerns that can come with companies getting really large and having the ability to abuse their dominance, to use a European term.” The central question then, for Hurwitz:
If you can do bad stuff, what’s the burden of proof? What evidence do we need to have in order to protect consumers and society from potential harms?
Explaining the concern as conceptualized by the Chicago School of Law and Economics:
Partly, if not entirely, the tools in the Chicago toolbox are generally placing a greater burden on the government to clearly demonstrate harm, which arguably, the concern goes, makes it hard for the government to fulfill its reasonable and legitimate consumer protection role. On the flip side is the evidence of the early years of antitrust, where the government was very abusive without strict rules (governing when) the government could use (antitrust) power to act against companies.
Lastly, Hurwitz and Huddleston turned to the proposed regulations around corporate mergers that are aimed at the concern that large tech companies allegedly buy up potential competitors, before they become mature enough to compete, in order to maintain their market dominance. For Huddleston, one major problem with these regulations is that it would eliminate a potential exit strategy for new digital product creators, which is to develop a product to a level of maturity at which point it would be attractive to a larger tech company with more resources, who will want to purchase that innovative framework in order to more fully develop it. And it may be the case that the skillset required in creating an idea and building out the initial framework is very different from the set of marketing and development skills, to say nothing of the capital requirements necessary to take a digital product from infancy to a fully developed product ready for prime-time.
Regardless of one's views on these set of proposals, it is certainly true that there is a lot of dialogue right now about the role of the FTC and whether it should be a more active agency. And that debate is mirrored in other parts of the world, most notably Europe, that have taken an active regulatory role with regard to tech. So stay tuned to see what happens in the antitrust and tech space in the next few years, both here in the US and abroad.
Tags: Tech Refactored Review
