Explainer Episode 16 – An Update on Antitrust and Big Tech
Recent weeks have been chock-full of headlines regarding antitrust and big tech companies, from the House Judiciary Antitrust Subcommittee report to the Senate Commerce Committee subpoenas of top CEOs. In this episode, Neil Chilson breaks down these recent developments and discusses how they fit into the broader picture of antitrust law in the United States.
Jack Derwin: Welcome to the Regulatory Transparency Project’s Explainer Podcast, which is part of RTP’s Fourth Branch podcast series. My name is Jack Derwin, and I’m Assistant Director of RTP.
Today, I’m happy to be joined by Neil Chilson to discuss the recent developments in the big tech antitrust saga. Neil is Senior Research Fellow for Technology and Innovation at the Charles Koch Institute. Formerly, he served as Acting Chief Technologist at the Federal Trade Commission and worked in private practice with a focus on telecommunications law.
Thanks so much for joining us today, Neil.
Neil Chilson: It’s great to be here.
Jack Derwin: Great. So I guess we’ll jump right in. To get us started, would you mind just running us through the major developments of the last few weeks on the topic?
Neil Chilson: Sure. So the biggest, most recent development was last Tuesday, culminating, I think, 16 months of investigation. The House Democrats unveiled their nearly 450-page report on antitrust and big tech. The report covers a lot of different issues, but it focuses on only four companies: Amazon, Apple, Facebook and Google. And it’s based on the many hearings that the House Antitrust Judiciary Subcommittee had. In addition to that — that report comes out on the background of a lot of other action on the antitrust front debate and action. There have been ongoing state investigations of Google, there have been DOJ investigations of Google, an FTC investigation of Facebook, and a lot of academic debate over the role of antitrust in the world of technology, specifically — although there have been some other debates about whether antitrust generally across the economy is serving the purpose that it was intended.
So that’s sort of the [inaudible 00:02:14]. It’s a lot of activity; there’s lots going on. And it’s an interesting area to pay attention to right now.
Jack Derwin: Definitely. That sort of leads me into my next question. Do you see these most recent developments as significant to the longer-term picture and as a turning point of sorts, or are they just the next phase of headlines and developments?
Neil Chilson: It can be a little bit difficult to know.
Antitrust law changes in two ways. It’s primarily a common-law evolution as courts interpret and apply the very general statutes that were passed 100 years ago. And cases are one way that the law is shaped. So, the ongoing investigations, if they culminate in cases, could result in changes to antitrust doctrine. That process is very slow; it’s very incremental. And in many cases, that’s right. That’s a good idea because the antitrust is a very powerful tool, and you want to think hard about how it applies in various cases.
The other way that the law could change, obviously, would be for Congress to pass new statutes. And some of the academic work as well as the House regulatory — or the House report that came out focus on this solution, primarily. And it’s hard to know, between those two — legislation obviously can change the landscape very quickly compared to incremental changes through cases. And, so, whether or not these have lasting effect will really depend on what happens next. So if these cases are brought, then there could be changes to antitrust law doctrine. Or, if the government wins, or it could — the law could be incrementally evaluated but not really changed much if the government loses.
If Congress gets behind some of these ideas that are in the Democrats’ report, then there could be changes to the law. But, honestly, that looks pretty unlikely in the near term right now. This report that the Democrats tried desperately to get Republicans to sign onto it, but it was too radical. And I think it honestly does not really represent the mainstream of the Democratic Party on antitrust issues. Antitrust law, at least the main body of it, has had quite a consensus for the past 20 to 30 years around what the goal is. And the Democrats’ report sort of calls into question that particular goal, and I think they’re having a tough time getting people on board.
So I think these are both incremental effects. I think, over time, there could be an evolution. There will continue to be an evolution of antitrust law as there always has been. But I do think that right now, in the near term, these are much more hot headlines than they are big changes.
Jack Derwin: So you touched on the history of antitrust law there. I’d like to stay on that topic. And I’m curious what the history of antitrust law could teach us about the current concerns and proposals to modify the law.
Neil Chilson: So I mentioned that these laws are quite old. They are. They’re also quite broad. And antitrust — the statutes have been interpreted by courts as they’ve applied it to various cases. And, for quite a long time, it was very difficult as courts tried to balance what was good and what was bad about antitrust law. What was the goal?
So you saw a lot, especially in the ’60s or ’70s, a focus pretty much on big being bad. And there’s a lot of echoes of that today. In fact, antitrust law has consistently gone through these sort of cycles where there’s been an emphasis by advocates on why isn’t antitrust law protecting competitors. And there’s been a switchback, especially in the modern age, towards, well, the goal of antitrust is really to protect consumers, not competitors. So we’re sort of seeing a revival of the ’60s and ’70s, which was a focus on big is bad. A focus on protecting small companies rather than focusing on whether or not it was good for consumers.
And, in fact, there’s been even a revival of the sort of attack on low prices. The ’60s and ’70s have plenty of cases where low prices to consumers were looked at as sort of anti-competitive behavior, even though they were beneficial to consumers, because they made it hard for competitors who couldn’t keep up. And modern economics and modern antitrust law has sort of rejected that idea. And I think, when we look at people who are sort of trying to reverse back to the ’60s and ’70s, we should really push them hard on whether or not they honestly think this would be better for consumers or if their goal is something else—to protect companies or something else—at the cost of consumers.
Jack Derwin: Yes, this definitely seems to be a hot-button issue at the moment, antitrust in general and definitely specifically as it pertains to big tech. What do you think is motivating all that discussion that’s currently happening?
Neil Chilson: Well, I think it’s a lot of different things. I mean, like I said, this has sort of been a wave in antitrust over time. So one of the things that’s motivating it is that we now have these very big, very influential, very successful companies. And that’s a pattern that’s happened over and over through antitrust that, when there’s been the rise of some big, successful companies, people have looked to antitrust to address all sorts of concerns, even if they’re not directly competition concerns. So we had, you know, in the early days, it was railroads. Then it was manufacturing. GM was a giant target of people trying to break up a company in the ’60s. You had big oil. And now it’s big tech’s turn.
And I think the appeal of antitrust is that it’s supposed to deal with big companies, right? It’s supposed to deal with monopolies. And it also is a very powerful tool. So I think that people are seeing a lot of different problems or possible problems that are happening in the tech space, whether it be privacy or bias in online platforms or competitors who are having a tough time keeping a low price when they’re competing against online companies. So all of these sort of concerns are driving a look towards antitrust as a potential solution, even if, really, antitrust is mostly focused on competition issues and not many of these other types of issues.
Jack Derwin: Right, right. So we’ll stay there, actually, on sort of, in the abstract sense, antitrust law is meant to enhance competition, correct?
Neil Chilson: Yeah, that’s right.
Jack Derwin: So can you talk a little bit about the problems that the increased competition can solve in an industry — the general goals of antitrust action?
Neil Chilson: So the general goal of antitrust is to protect the competitive process. And the competitive process is what delivers dynamic, new, lower-priced, improved products and services to consumers as companies try to satisfy consumers and market their wares that maybe consumers aren’t quite sure yet that they need, but then they find out that they do, and they become an essential part of their lives.
I think tech is a great example of a competitive industry with tons of innovation where there has been a lot of change, right? When you just think about how we did communications even 20 years ago, you’d be hard pressed to say that this has been a slow, evolving ecosystem. And antitrust is aimed at protecting the competitive process by ensuring that companies, when they compete, don’t act in ways that are anticompetitive. And defining that term “anticompetitive” has been the challenge for antitrust in part because any type of action that a company takes, a competitive action, could harm competitors. And the question is whether or not that’s the type of harm to competitors that benefits consumers, or if it’s the type of harm to competitors that hurts consumers.
So that consumer welfare standard has been the main centering philosophy of antitrust approaches for the past 30 years, at least. And it’s really given a good sort of measuring stick for when we think that there’s been an undermining of the competitive process that affects consumers.
Jack Derwin: All right. So back to the immediate topic at hand. Looking forward — I don’t necessarily want to pin you down to a specific prediction unless you feel comfortable to make one, but do you see these developments culminating in game-changing antitrust action against big tech companies? And, if not, how do you see the situation kind of playing out and coming to a head?
Neil Chilson: Well, there really does seem to be an appeal for — a political appetite for taking on big tech companies. So I do think that it seems relatively likely that either the state attorney generals or the DOJ will bring an antitrust case against one or more of the big tech companies.
I think that part of the reason that that process has taken so long, as far as an investigation, is that these are hard cases to make because consumers really like these companies, generally speaking, and the harms to the consumers are very hard to establish. And, so, I think the case that the states will have to make will have to be something like, but for the existence of these companies or whatever actions they took, consumers would be even better off, which is much more challenging than proving that consumers would be worse off or that consumers are worse off than they were in the past. And I think that, because that’s a hard case, it’s hard to know exactly if this will be game changing.
The history of antitrust enforcement suggests that probably not. I mean, like I said, I gave the example of GM, with a long investigation that never culminated in a case. But GM faced its own competitive problems pretty quickly with other car companies coming into the market, especially international competition. And, when you look back at something like the Microsoft case, which was a case that was brought that took a long time to come to fruition, to come to a conclusion, and in many ways it was sort of passe by the time it was concluded. Microsoft’s status as the desktop — as a large presence on desktop computers still exists today. I mean, they still have a giant market share in that market. It’s just that that market doesn’t matter as much any more because there’s tons of competition for other platforms, such as mobile devices.
And, so, I think antitrust has a long history of sort of fighting the last — fighting the big guy that’s about to be taken down. So, as far as lasting effects of such cases, I don’t see many. The fight over whether or not we’re doing antitrust right, that could have lasting effects in the long term. Again, this is not an immediate sort of event. This is the sort of thing that takes a long time to develop.
But if we step away from judging actions by companies based on whether or not they benefit or harm consumers and we start trying to work other goals into antitrust, I think we do risk going back to an age where antitrust was pretty arbitrary, where Justice Potter Stewart said the only consistency that he could find in the law was that the government always won. And if we return to that sort of regime, I think we will end up raising prices to consumers and shutting out some innovative practices. So there could be some long-lasting effects. I think that’s why this is an important thing to think really hard about now and for policy makers to study some history of antitrust and see how it’s gone in the past. I think that they can learn a lot from the way that antitrust has evolved.
Jack Derwin: Great. Well, thank you so much, Neil, for joining us today. I certainly, as you mentioned, think it is a very timely and important discussion to have, and I really appreciate you taking the time.
Neil Chilson: Absolutely. Glad to be here.
Jack Derwin: Well, thank you for tuning in to this episode of RTP’s Explainer Podcast. If you’re interested, please check out our website, www.regproject.org, to learn more about this issue and a host of other regulatory topics. Thank you.
Senior Research Fellow for Technology and Innovation
Charles Koch Institute