The recently released Netflix documentary “The Social Dilemma” is far from being the only thought-provoking episode of the year revolving around the impact of Big Tech on society: on December 9, 2020 the U.S. government and attorneys general of 46 states filed a landmark antitrust lawsuit against Facebook Inc.
The complaint alleges that the social networking giant has been trying to secure its monopoly through a years-long course of anticompetitive conduct, based on a “buy-or-bury” strategy towards potential rivals and on anticompetitive platform conduct.
With regards to anticompetitive acquisitions at the centre of concern are chiefly the 2012 acquisition of up-and-coming competitor Instagram and the acquisition of the mobile messaging app WhatsApp just two years later.[i]
The aim of the lawsuit is, in fact, to force Facebook to unwind these two major acquisitions, thus resulting, if successful, in the first split of a major corporation in the US driven by an antitrust lawsuit since 1984, when the telecoms network AT&T (also known as Ma Bell) was ordered to sell off a string of local telecommunications companies known as Baby Bells.[ii]
According to the State and federal complaints Facebook’s behaviour not only harms competition, but also results in few choices to consumers when it comes to personal social networking and in the deprivation of the benefits of competition for advertisers.
On the one hand, the Federal Trade Commission (FTC) complaint relies largely on internal correspondence - prior to Instagram acquisition - from Facebook CEO Mark Zuckerberg, who allegedly wrote “It is better to buy than compete”, thus suggesting the intent behind its purchasing. On the other hand, Jennifer Newstead, the company’s general counsel, not only stressed that WhatsApp and Instagram’s success is precisely due to Facebook’s massive investments in them, but also stated that “the government now wants a do-over, sending a chilling warning to American business that no sale is ever final”. Indeed, at the time of the Instagram acquisition, the photo-sharing tool had about 2% of the users it has today, only 13 employees, no revenue and virtually no infrastructure of its own.
Despite being a seemingly straightforward strategy, to base a monopolization case on a CEO's own explanations of conduct has to come to terms with the court's reluctance to hang their rulings on allegedly revealing internal documents.
Nonetheless, it must be noted that internal “hot documents” have worked before. Namely, in another headline-generating Big Tech Antitrust precedent, that of Microsoft. Then, internal correspondence made it hard for the company to argue that its conduct was not predatory. Indeed, Microsoft lost the case in 2000 since it was found to have violated the Sherman Act and only after that ruling was overturned by the appeals court the company managed not to be broken up into two separate entities.
Curiously enough, nonetheless, the Microsoft case was instrumental in creating a market environment favorable for the emergence of the main big techs today, such as Google and Apple.[iii]
In the early 2000s, Microsoft’s fear of additional antitrust investigation influenced its decision not to crush Google, as it could have killed today’s search behemoth in the cradle, and, thus, paved the way for Web 2.0 and a significant wave of new companies.
And, among these companies, Google has been hit repeatedly by EU Commission antitrust investigations since 2010 to the present day, with fines totaling over 8.25 billion Euros for violating EU’s competition laws.[iv]
Eventually, the hands-off approach by U.S. regulators on the Silicon Valley has been abandoned as well: on October 20, 2020 a civil antitrust lawsuit against the internet gatekeeper was filed by the DOJ along with 11 state Attorneys General to stop Google from unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search advertising markets.[v]
But what do the antitrust lawsuits against Microsoft, Google and Facebook and the EU Commission antitrust decisions have in common? They are all aimed at a big tech or - more specifically - a company that is part of the GAFAM grouping (acronym made by abbreviating “Google”, “Apple”, “Facebook”, “Amazon” and “Microsoft”). The latter can be referred to as a global oligopoly that dominates the internet by concentrating market power, financial power and thanks to the use of patent rights and copyright.[vi] If this is the case, how should this problem be dealt with by antitrust law and authorities?
In the U.S., years before concerns over monopolistic practices have led to investigations from the DOJ and FTC triggering the aforementioned lawsuits against Google and Facebook in the U.S., the impact of these companies on competition had already been questioned by commentators.
The scholarly article titled “Amazon’s Antitrust Paradox” written by the then Yale Student Lisa Khan and published in the Yale Law Journal in 2017 quickly became a breakthrough legal text, sparking debate on the weakness of American antitrust regulation when put to test by online platforms. According to Khan, American antitrust law, as redefined to focus on consumer welfare (short-term price effects) in the 1970s, is unequipped to capture the architecture of market power in the modern economy: potential harms posed to competition cannot be appreciated by measuring competition primarily through price and output. In light of these arguments, two are the potential regimes for addressing Amazon’s (and other Big Techs’) power in the author’s view: promoting competition, thereby limiting the power that any one actor accrues, or to accept dominant online platforms as natural monopolies or oligopolies, seeking to regulate their power instead.[vii]
In the EU, by contrast, a more cautious, at times even hostile, approach has been adopted towards the dangers of a growth-at-all-costs-mentality of Tech giants: Commissioner for Competition Margrethe Vestager’s fight against the “GAFAM” group is emblematic of such an attitude.[viii]
Given the recent doctrinal debate and the initiatives taken in the US and EU in order to target Big Tech companies, Antitrust rules have been subjected to reformation proposals on a global scale. A trend of regulating Digital Services, which include a wide range of services such as online platforms, social media and online marketplaces, has emerged.
The European Commission, for instance, elaborated two legislative initiatives - the Digital Services Act (DSA) and the Digital Markets Act (DMA) - to upgrade rules governing digital services in the EU.[ix] The EU is trying to enhance consumer protection and create fairer and more open digital markets. Information, auditing, reporting, risk management and industry cooperation obligations will be imposed to Digital service providers.[x] Notwithstanding the drastical evolution of the digital market throughout the last two decades, accelerated by the pandemic outbreak, the regulation of digital services in the EU has mainly remained unchanged since the entering into force of the e-Commerce Directive in 2000.
Why are these rules necessary? Such Acts are believed to re-establish competition in the digital market and contrast the unprecedented power of Tech giants. Further, as much as online platforms have been a game-changer and have facilitated cross-border communication and trading, there are also many risks related to the growth of the Digital Services market. Some of the worries arising with regards to the digital sector are the proliferation of illegal activity and the misuse of online services by manipulative algorithmic systems used to augment the spread of disinformation.
The DSA and DMA are expected to enter into force in 2023[xi] and, on the one hand, are aimed at creating a safer digital space, in which the protection of fundamental rights of all users is guaranteed and set very high standards in terms of digital service providers; on the other hand, the DSA and DMA have the purpose to create a level playing field in order to fuel innovation, growth and competitiveness. All undertakings operating in the EU would have to respect these rules,[xii] which ensure fairer market competition considering how dominant firms like Facebook, Google and Amazon have become.
In the US Big Tech companies have been targeted with the presentation of a major antitrust reform proposal - the Klobuchar Antitrust Bill - in the first months of 2021.[xiii] The Sherman Antitrust Act, the Federal Trade Commission Act and the Clayton Act are the main Acts that regulate competition in the United States, preventing companies from blocking and obstructing the latter. Nevertheless, it is argued that such Acts are not enough to control Big Tech companies, which have become incredibly powerful throughout the years.[xiv]
The aim of the aforementioned Bill is, among others, to prevent anti-competitive actions by big companies, do more to prevent anti-competitive mergers - a problem which emerged in the abovementioned Facebook lawsuit - and enhance antitrust enforcement.
But are Antitrust Laws sufficient to guarantee competition in the digital market and contrast the increasing power of tech giants? According to some scholars, the digital market has developed in such a quick manner that Governments have been unable to react adequately, rendering laws often outdated and inefficient. Hence, the constitution of a specialist regulator - ergo, a digital service regulator/digital platform agency[xv] - could represent a more efficient and rapid approach to restore competition in the digital market. Specialist regulators are no novelty as there are globally renowned ones, such as the Securities and Exchange Commission (SEC) in the US. This solution would be characterised by faster-paced reactions when compared to legislative measures. Nevertheless, the institution of a regulator for the digital market is believed to bring about some significant downsides: Herbert Hovenkamp, a professor at the University of Pennsylvania, baptized tech regulators, which, in theory, would have to approve determinate changes and operations, as “innovation killer(s)”.[xvi]
The UK has embraced the proposal of constituting a specialist regulator and in April 2021 the Digital Markets Unit (DMU) was launched[xvii] - in the interim, within the Competition and Markets Authority (CMA). The specialist regulator has the aim to regulate powerful companies in the digital sector. Once legislation passes, the DMU will be granted full statutory powers to enforce the new, pro-competition digital markets regulatory regime.[xviii]
Contrarily, the EU has - at least until now - preferred to tackle the digital dilemma by promoting competition in the digital sector by means of legislative initiatives. Whether such measures will prove to be adequate in tackling Digital Service Cartels, or whether more incisive measures, as sustained by critiques, are required, is for the future to show.
F. Lacava, A. Marzola
[i] “FTC sues Facebook for illegal monopolization.” Federal Trade Commission’s Website, December 9, 2020 https://www.ftc.gov/news-events/press-releases/2020/12/ftc-sues-facebook-illegal-monopolization [ii] Neate, Rupert. “Facebook faces biggest legal battle in years as US officials launch lawsuit.” The Guardian, December 10, 2020 https://www.theguardian.com/technology/2020/dec/10/facebook-faces-biggest-legal-battle-in-years-as-us-officials-launch-lawsuits [iii] “Microsoft Antitrust Case, the government’s case against Microsoft for trying to monopolize the personal computer market.” Corporate Finance Institute. https://corporatefinanceinstitute.com/resources/knowledge/strategy/microsoft-antitrust-case/ [iv] Yun Chee, Foo “Google’s advertising practices targeted by EU antitrust probe”, Reuters, January 20, 2020, https://www.reuters.com/article/us-google-antitrust-eu-idUSKBN29P23U [v] “Justice Department sues monopolist google for violating antitrust laws.” The United States department of Justice’s website, October 20, 2020. https://www.justice.gov/opa/pr/justice-department-sues-monopolist-google-violating-antitrust-laws [vi] Smyrnaios, Nikos “The GAFAM effect: strategies and logistics of the Internet oligopoly.”, Communication and Languages, volume 188, issue 2, 2016. https://www.cairn-int.info/article-E_COMLA_188_0061--the-gafam-effect-strategies-and-logics.html [vii] M. Khan, Lina “Amazon’s Antitrust Paradox.”, Yale Law Journal, volume 126, number 3, January 2017, pp. 564-907. [viii] Strauss, Marina and Evdokimova, Oxana and Semenova, Janina Semenova. “ Margrethe Vestager: EU antitrust czar and Big Tech's fiercest opponent.” Deutsche Welle, March 29, 2021. https://www.dw.com/en/margrethe-vestager-eu-antitrust-czar-and-big-techs-fiercest-opponent/a-56995791 [ix] “The Digital Services Act package.“ European Commission. https://digital-strategy.ec.europa.eu/en/policies/digital-services-act-package [x] “European Commission proposes impactful reform of rules for digital.” Working Paper, Linklaters. https://www.linklaters.com/en/insights/publications/2020/december/european-commission-proposes-impactful-reform-of-rules-for-digital-platforms [xi] “European Commission proposes impactful reform of rules for digital.” Working Paper, Linklaters. platformshttps://www.linklaters.com/en/insights/publications/2020/december/european-commission-proposes-impactful-reform-of-rules-for-digital-platforms [xii] Amaro, Silvia. “How Europe became the world’s top tech regulator.” Cnbc, March 25, 2021. https://www.cnbc.com/2021/03/25/big-tech-how-europe-became-the-worlds-top-regulator.html [xiii] Curry, Benjamin. “Big Tech In Crosshairs As Congress Takes Up Antitrust Reform.” Forbes, March 15, 2021. https://www.forbes.com/advisor/investing/big-tech-antitrust-reform/ [xiv] Curry, Benjamin. “Big Tech In Crosshairs As Congress Takes Up Antitrust Reform.” Forbes, March 15, 2021. https://www.forbes.com/advisor/investing/big-tech-antitrust-reform/ [xv] Lohr, Steve. “Forget Antitrust Laws. To Limit Tech, Some Say a New Regulator Is Needed.” The New York Times, October 22, 2020. https://www.nytimes.com/2020/10/22/technology/antitrust-laws-tech-new-regulator.html [xvi] Lohr, Steve. “Forget Antitrust Laws. To Limit Tech, Some Say a New Regulator Is Needed.” The New York Times, October 22, 2020. https://www.nytimes.com/2020/10/22/technology/antitrust-laws-tech-new-regulator.html [xvii] Sandle, Paul. “New UK regulator set to curb big tech's power over news publishers.” Reuters, April 7, 2021. https://www.reuters.com/article/uk-britain-technology-regulation-idUSKBN2BT319 [xviii] “Digital Markets Unit.” UK Government, April 7, 2021. https://www.gov.uk/government/collections/digital-markets-unit
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