The rise of Big Tech
To ensure a level playing field for businesses operating within particular industries, countries adopt laws designed to regulate companies, protect consumers and promote competition. In the United States, these are generally known as antitrust laws, while many other jurisdictions refer to them as competition laws.
Effective competition mechanisms are important because they can prevent monopolies from developing and limit the ability of individual companies to acquire excessive control over a market.
The growth of major technology companies has brought these issues into sharp focus.
During the 21st century, Big Tech has transformed how billions of people communicate, shop, access information and conduct their everyday lives. Technology has also become increasingly important across almost every sector of the economy, creating concerns about whether consumers have sufficient alternatives and whether smaller businesses can realistically compete with dominant platforms.
In the United States, the growing influence of companies such as Facebook, Apple, Google and Amazon has attracted increasing attention from regulators and policymakers.
The political debate has also intensified. Elizabeth Warren, then a Democratic presidential candidate, proposed breaking up some of the largest technology companies as part of her campaign platform. Her position reflected concerns that major technology businesses had accumulated levels of corporate power capable of restricting competition and harming consumers.
Regulatory scrutiny increased significantly during 2019.
In July 2019, the US Department of Justice announced that its Antitrust Division was examining whether market-leading online platforms had acquired or maintained market power through practices that reduced competition, restricted innovation or harmed consumers. The review considered concerns relating to online search, social media and retail services.
The question was becoming increasingly important: had Big Tech become too powerful for existing competition laws to regulate effectively?
Investigations into Big Tech
Facebook faced scrutiny from US authorities on both privacy and competition issues.
In July 2019, the Federal Trade Commission (FTC) announced a $5 billion penalty against Facebook following allegations that the company had violated a 2012 FTC order concerning the privacy of users' personal information. The settlement also imposed extensive new requirements concerning Facebook's privacy practices and corporate oversight.
The privacy proceedings were separate from the emerging antitrust investigations, but Facebook's market position raised broader competition concerns.
Regulators were examining whether Facebook's dominance in social networking could allow it to disadvantage potential competitors or restrict their access to resources, including user data.
The company's acquisition of Instagram and WhatsApp also attracted attention. Both platforms had been significant players in social networking, raising questions about whether the acquisition of established or potential competitors could reduce competition within the market.
The competition issue was therefore broader than Facebook's size alone. Investigators were considering whether greater competition could give consumers more meaningful choices, including alternatives offering different approaches to the collection and use of personal data.
These concerns contributed to the wider question of whether Facebook's market position could amount to unlawful monopolisation under the Sherman Antitrust Act 1890.
It is important, however, to distinguish between an investigation and a finding of liability. At this stage, regulators were examining Facebook's conduct rather than having established that the company had unlawfully monopolised the social networking market.
Google was also subject to significant antitrust scrutiny.
The Department of Justice's July 2019 review included concerns about whether market-leading online platforms had acquired or maintained market power through practices that restricted competition.
Google's dominance in search and online advertising was particularly significant because of the company's role in connecting consumers, advertisers and businesses.
State authorities also became involved. In September 2019, a coalition of state attorneys general announced an investigation into Google's business practices, with particular attention being given to its dominance in online advertising and search.
The underlying concern was whether Google's position resulted from successful competition and innovation or whether certain practices enabled the company to maintain its dominance at the expense of competitors.
Again, the distinction is important. A dominant market position is not automatically unlawful. The legal issue is whether that market power has been obtained or maintained through conduct prohibited by antitrust law.
Amazon
Amazon presented regulators with another complex competition problem.
The company operated both as an online marketplace and as a retailer selling products directly to consumers. This created questions about whether Amazon could use information generated by third-party sellers on its platform to compete against those same sellers.
The issue was particularly significant because businesses selling through Amazon depended on the platform to access consumers while potentially competing with Amazon's own products.
The concern was therefore not simply Amazon's size within online retail. It was the possibility that the company could occupy the position of both market operator and market competitor, creating an unusual competitive relationship.
These circumstances demonstrated some of the difficulties involved in applying traditional competition principles to digital markets.
Are the investigations justified?
The central issue surrounding the investigations was whether Big Tech companies represented a genuine antitrust threat or whether regulators were simply reacting to the enormous size and influence of successful technology businesses.
Being large does not, by itself, constitute an antitrust violation.
A company can become dominant because consumers prefer its products, because it has developed superior technology or because its business model allows it to operate more efficiently than its competitors.
The challenge for regulators is therefore to identify the point at which legitimate commercial success becomes unlawful conduct.
Some Big Tech services also present a particular difficulty because they are provided to consumers at little or no direct financial cost.
Social networking platforms, for example, allow consumers to communicate and access services without paying a conventional subscription fee. Businesses can also use platforms such as Facebook and Instagram to advertise products and services to large audiences.
This means that regulators cannot necessarily rely on traditional indicators of consumer harm, such as increased prices.
Instead, they may need to consider other factors, including reduced consumer choice, barriers to entry, reduced innovation, deterioration in service quality and the use of personal data.
The Department of Justice's 2019 review reflected this broader approach by considering whether the practices of major online platforms had reduced competition, stifled innovation or otherwise harmed consumers.
Economies of scale or anti-competitive conduct?
One explanation for the dominance of Big Tech is economies of scale.
Large technology companies can benefit from enormous user bases, significant financial resources, sophisticated infrastructure and access to extensive quantities of data. These advantages can make it extremely difficult for smaller competitors to establish themselves.
However, this does not necessarily mean that the dominant company has acted unlawfully.
A business may achieve market dominance through legitimate competition. Its success may reflect consumer demand, technological innovation, effective management or an ability to operate more efficiently than its competitors.
The difficult question for antitrust regulators is therefore not whether Big Tech companies are powerful. Their power is evident.
The question is whether that power is being used in a manner that unlawfully restricts competition.
This distinction becomes particularly important in digital markets, where traditional concepts of market power and consumer harm may be more difficult to apply.
The challenge for antitrust law
The investigations into Big Tech highlight a fundamental challenge for competition law in the digital economy.
The basic principles remain familiar. Markets should remain competitive, consumers should be protected, and businesses should not unlawfully abuse market power.
The difficulty lies in applying those principles to companies whose business models differ substantially from those of traditional businesses.
Digital platforms can provide services that appear free to consumers while generating significant revenue through advertising, data and other commercial activities. They can also operate simultaneously as technology providers, retailers, advertising platforms and competitors.
This creates difficult questions for regulators, policymakers and lawyers.
The investigations taking place in 2019 therefore represented more than scrutiny of individual technology companies. They raised broader questions about whether existing antitrust frameworks were capable of regulating an economy increasingly dominated by digital platforms.
For lawyers, this creates opportunities across several areas of practice.
Competition law increasingly intersects with corporate law, commercial law, intellectual property, technology, consumer protection and data protection. Lawyers advising technology companies must therefore understand not only the traditional principles of antitrust law but also the particular characteristics of digital markets.
The central challenge is finding the appropriate balance between allowing successful businesses to innovate and grow while preventing excessive market power from undermining meaningful competition.
In 2019, that balance was becoming increasingly difficult to define.
What was clear was that the relationship between Big Tech and antitrust law was entering a significant new phase, and the decisions made by regulators could have consequences extending well beyond Silicon Valley.
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