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Antitrust regulation: the biggest story in tech
The biggest story in tech in 2024 might not be how misinformation influenced elections, or the rise and risks of AI, or the crackdown on social media.
Instead, 2024 may go down as one of the most monumental years in decades because of what’s happening in the antitrust space: upcoming rulings, new lawsuits, and far-reaching implications for how governments are striving to protect consumers and markets from the vice-grip of the biggest tech companies.
This week we’re exploring the implications of the wave of antitrust regulation against major tech firms.
//The latest antitrust news
Between the complex legal jargon and the three-letter acronyms of US government agencies that file antitrust lawsuits, it’s easy to lose track of the latest news.
Last month, the Justice Department (DOJ) filed a lawsuit against Apple alleging that its entire iPhone ecosystem is a monopoly that drove an “astronomical valuation” at the expense of consumers, developers, and competitors.
In January, the DOJ filed a lawsuit against Google seeking to break up its advertising business, arguing that Google penalizes web publishers and advertisers from using competing products
Last year, Google was tried in a lawsuit by the DOJ, which accused Google of abusing its power as a monopoly to dominate the search engine business and squash competition. A ruling is expected later this year.
Starting in 2020, the Federal Trade Commission (FTC) and Meta have been in an ongoing antitrust duel, with the FTC alleging that Meta engaged in anticompetitive practices by acquiring Instagram and Whatsapp. A ruling could happen later this year.
And this was only in the US. The EU is the real antitrust juggernaut with its newly passed Digital Markets Act, which aims to clamp down on anti-competitive practices for the biggest tech companies.
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In the US, the level of antitrust activity in the last few years might signal a shift in how the government perceives tech companies, the internet, and its role.
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//The pros of antitrust regulation
Regulators filing lawsuits against major tech players are often seeking one or more of the following benefits.
Competitive, fair markets: Completely free markets are often not fair markets, and the concept of competitive fairness sits at the heart of antitrust lawsuits against big tech companies that exploit network effects or bundle products to stifle competition. For example, the team collaboration software company Slack (owned by Salesforce) has claimed that Microsoft has engaged in illegal activity by bundling its Microsoft “Teams” chat app with the Microsoft Office Suite of products.
More innovation: It’s possible that if monopolies unfairly throttle their competitors, there will be less incentive for them to innovate. But there is nuance in the tech space—last year researchers from Vanderbilt and Stanford found that antitrust regulation can lead to greater technical innovation (in terms of the number of new patents filed), but not necessarily greater product innovation (in terms of the number of patents that get commercialized).
Consumer protection: From less consumer choice to unfairly high prices, unfair markets dominated by major tech firms can harm consumers. The most recent lawsuit against Apple alleges that it has locked its consumers into the iPhone ecosystem and has designed it in a way that “extracts money from consumers.”
//Careful what you wish for
How the governments in the US and EU decide to enforce the law can create new problems entirely.
The remedies imposed by regulators tend to be either structural (like breaking up a large company into smaller companies) or behavioral (like prohibiting a company from engaging in certain business practices like bundling Microsoft Teams with Microsoft Office).
After the 1998 DOJ case against Microsoft, research from Brookings found that structural remedies have not historically advanced regulators' goals of creating more competitive markets and protecting consumers.
Herbert Hovenkamp, a professor of law at the University of Pennsylvania, cautioned that structural remedies might not be the best approach. According to Hovenkamp, market power attaches itself to products, not firms, a nuance that requires care when regulators impose remedies. For example, Microsoft is dominant in its Windows operating system (60-70% market share) but not in its Bing search engine (3% market share). Remedies, according to Hovenkamp, should be focused at the product level instead of at the firm level (like a structural break-up).
The laws of physics tell us that every action has an equal and opposite reaction. The DOJ antitrust lawsuit against Microsoft in 1998 was successful in reigning in Microsoft’s power and creating a competitive market. But it gave rise to Google.
//The next-gen internet
In the US, the level of antitrust activity in the last few years might signal a shift in how the government perceives tech companies, the internet, and its role.
Last year’s search engine case against Google was the first case brought by the DOJ against a major tech company in over 20 years.
An article in the Washington Post put it this way: “It is part of a broad reappraisal in Washington of the common wisdom that the internet is open by nature and therefore can self-regulate through free-market competition.”
This is positive news. We need to move beyond the era of laissez-faire regulation where big tech companies were largely unpoliced.
But not all regulation is the same. There are opportunities for regulators to impose creative remedies that usher in the next generation of the web.
For example, a report by the Electronic Frontier Foundation in 2019 argued that instead of breaking big tech apart, regulators should impose requirements for major platforms to be interoperable. Interoperability would limit the compounding accrual of network effects, make for more competitive markets, and give consumers more choices.
There is precedent for a shift to interoperability: Due to antitrust regulations in 1984, the US phone system became interoperable where hundreds of competitors subscribed to interoperable protocols. Today, that’s enabled a person with Verizon to seamlessly call a person with ATT and keep their number, regardless of provider.
In tech platforms, interoperability might be coming. Meta has claimed that Threads will become interoperable to align with EU requirements.
As more tech firms consider interoperability as a key design feature for the next generation of their products, we’ll need innovations at the protocol level to build a decentralized, interoperable web.
When policy can move beyond just penalizing bad behavior to fundamentally shaping tech governance to be more distributed and open, not only do we get closer to the underlying goals of embracing fair competition, nurturing innovation, and strengthening consumer protection, but we are able to rebuild the digital infrastructure that holds up the entire web.
Other notable headlines
// 🛡 An article in The Economist discussed the implications of the recent stealth attack that came close to compromising the world’s computers.
// 🏛 Big tech has a new favorite lobbyist: you. Millions of Americans have become unwitting lobbyists for companies like Google and TikTok, according to an article in the Wall Street Journal.
// Tech & Public Policy Fellows in Tech Policy Press
Georgetown’s Tech & Public Policy Fellows Maria Fernanda Chanduvi, Divya Goel, and Mateo Garcia Silva co-authored an analysis on Murthy v Missouri in Tech Policy Press. Read it here.
// Virtual event on the European declaration of digital rights
April 15th at 12pm ET
Identity Valley is hosting an in-person and virtual discussion of Europe's declaration of digital rights, exploring the bill and what it means for citizens. Register here.
// Virtual event on election integrity & social stability
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