A Different Take on Big Tech
We are evaluating a variety of complaints about Big Tech to see whether our ramshackle antitrust laws represent an appropriate remedy. So far, we’ve learned that antitrust action is a clumsy approach at best. But let’s look at one more major complaint against Big Tech.
Previously in this series: “The Ridiculous Instagram Case: Antitrust Is More Interesting Than You Think, Part XII”
Competing with the customers
A chronic complaint from both businesses and neo-Brandeisians is that Big Tech competes with the companies that use their platforms. In fact, there is a national coalition of small businesses called Small Business Rising that seeks to prevent Amazon from selling its own products on its own website, and The U.S. House recently proposed legislation requiring Amazon (e.g.) to stop selling its own products on its own website.
If you go to the Amazon site or app and search for, e.g., “batteries,” you get the usual suspects—Duracell and Energizer—but also the Amazon offering, usually called something snappy like “Amazon Basics.” The Amazon product is invariably cheaper.
Exactly why we wouldn’t want to offer some competition to the Duracell-Energizer duopoly is beyond me. Don’t the Amazon products reduce prices, increase consumer choice, and enhance convenience for all of us? Isn’t that exactly what free market competition is supposed to do?
One wonders whether any of the complainers have ever been inside a grocery store, which is, after all, nothing but a “platform” for selling other people’s food and drug products. In addition to the usual brands—Heinz, Del Monte, Johnson & Johnson—every grocery chain also offers its own “generic” brand, which is invariably cheaper.
No one complains about this practice because it reduces prices, increases consumer choice, and enhances convenience. And this is true even though many grocery chains have dominant market positions in their regions. Walmart alone controls more than 25 percent of the entire national grocery market. Amazon, meanwhile, controls about 5 percent of the national retail market.
As an aside, many companies began by selling their own products on their own website, then inviting other businesses to sell their products on the site (Walmart, Target, J. Crew, Express, Urban Outfitters). Should all these companies be broken up?
Alternatives to using antitrust against Big Tech
If the usual antitrust approaches are unlikely to be effective against Big Tech, what other avenues might there be? While some of the complaints against the FAANGs are silly, there are certainly some Big Tech practices that are serious and worrisome. Let’s look at some alternative strategies we might consider using to control the most anticompetitive aspects of the Big Tech companies.
Leaving it to the private sector
I began this series with a description of the trial of a private antitrust case brought by one steel company against another. The plaintiff had a good breach of contract case against our client but, because he was so angry, he tacked on an antitrust complaint hoping to triple his damages. It backfired and he lost the entire case.
But there are many instances when the best approach is not for the United States government, in the form of the FTC or Justice Department Antitrust Division, to come swooping in with all guns blazing. Why not let private industry deal with the problem?
Neo-Brandeisians don’t like this approach because they want the government to do everything, and other critics of Big Tech fear that the tech companies are simply too big and too powerful for anyone but the government to take on.
But this is hardly the case. Most businesses that feel they are being abused by Big Tech probably are too small to do much about it. Even private antitrust litigation can be long and costly. But it only takes a few plaintiffs to make the world better for everyone else, and many businesses that rely on Apple, Amazon, Facebook, et al. are huge themselves, even if not quite the Goliaths of the FAANGs.
Consider Epic Games’ current antitrust lawsuit against Apple. Epic is the creator of the Fortnite video game and was recently valued at $29 billion. Yes, that’s a minnow compared to Apple, but it’s big enough to hire Cravath, Swaine & Moore, the firm that represented IBM and AT&T in their antitrust cases. In fact, Epic has also sued Google on similar grounds, so, clearly, its resources are sufficient to the task.
I have no idea how the epic Epic v. Apple case will turn out—it involves claims that Apple monopolizes app distribution because its App Store is so dominant—but this type of private litigation makes a lot more sense than gearing up the power of the U.S. government every time somebody is unhappy with Big Tech.
The courts will decide whether Apple and Google are running monopolies, and they will decide much sooner than could possibly happen in a big, blockbuster U.S. government-funded antitrust case. Plus, it won’t cost the taxpayers a cent.
In a longish essay published, for some reason, in “Foreign Affairs,” even though it had little to do with foreign affairs, Francis Fukuyama (along with his co-authors) argues against the use of America’s creaky antitrust laws to control Big Tech.
Fukuyama’s argument relies mainly on two contentions: 1. his belief that the harm from Big Tech is more political than economic, and 2. his conclusion that antitrust laws and enforcement are too ham-handed and the cases take much too long. Fukuyama notes that by the time an antitrust case has finally ended (often after more than a decade), the competitive landscape has changed unrecognizably and the case is moot.
I agree with both of Fukuyama’s arguments, and also with his conclusion that antitrust regulation, forced corporate breakups, data portability, and privacy legislation are all dead ends. But the main point is that he has come up with a novel approach to dealing with Big Tech, using what he calls “middleware” companies to end Big Tech’s role as gatekeepers of content. Although I think Fukuyama’s specific idea is impractical, it might lead in a positive direction, as we’ll see next week.
Next in this series: “Academics and Europeans: Antitrust Is More Interesting Than You Think, Part XIV”