The age-old metaphor of the “white whale” refers to something one pursues with little chance of success, as seen in the case of Captain Ahab in Melville’s “Moby Dick.” Think of it as an obsession that dominates a person’s thoughts and actions. This is the case for Lina Khan, chair of the Federal Trade Commission, in her tenacious pursuit of Amazon.
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On September 26, 2023, the FTC in collaboration with the attorneys general of 17 states, filed a much-anticipated lawsuit against Amazon, alleging anticompetitive behavior in violation of federal antitrust laws. Filed in the Western District of WashingtonThe suit focuses primarily on Amazon’s Prime program, alleging that the company used manipulative, coercive, or deceptive user interface designs to trick consumers into signing up while simultaneously making it more difficult to cancel the subscription. subscription.
This landmark lawsuit is part of a series of actions taken by both the FTC and the Justice Department’s Antitrust Division since the Biden administration took office in 2021. By appointing Ms. Khan to head the FTC and Jonathan Kanter To lead the Antitrust Division, President Joe Biden has signaled a much greater willingness to vigorously enforce antitrust law at the federal level. Both Kanter and Khan are considered antitrust hawks, calling for significant reforms, particularly focused on big tech.
In addition to the Amazon lawsuit, the DOJ is in the middle of a lawsuit against Google
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It should be noted that the first lawsuit against Google as well as the investigation into Amazon that ultimately led to the lawsuit in question both began under the Trump administration and were simply laid bare under the Biden administration. Despite this, in all four cases, federal regulators were joined by a bipartisan group of attorneys general; in some cases, overwhelmingly. In the case of Meta, the FTC was joined by the attorneys general of 46 states, as well as the attorneys general of the District of Columbia and Guam.although a federal appeals court later removed the states from the suit.
Given the proliferation of these lawsuits and the ongoing debate about how and why we should enforce antitrust laws, I thought it would be a good idea to discuss what actually motivates these actions.
Does America have a monopoly problem?
For the first time in American history, there is a public declaration of war on Big Tech. We must remember that antitrust is not just a national issue. There is an international race over who will regulate or break up America’s leading technology companies. Regulators outside the United States have a head start on U.S. regulators. Across the Atlantic, in the European Union and Australia, regulators are developing and enforcing new laws and regulations aimed directly at big U.S. tech companies, while here we are using old legislation passed years ago. is over a hundred years old and aimed at breaking up big tech companies. Oil monopolies. There is an academic debate over whether we can use old antitrust laws to try to rein in Silicon Valley’s biggest tech companies.
Essentially, there are three main antitrust concerns about Big Tech. The first is obvious: these companies exercise monopolistic powers to the detriment of their consumers as well as their suppliers. Meta, Google, and Amazon are all ubiquitous players in their respective markets. These are the dominant forces and it is no surprise that it is almost impossible to compete with them. They are simply too large and the costs of entry are simply too high for meaningful competition to step in and attempt to disrupt the market. By absorbing or killing competitors, Big Tech likely violates existing concepts of horizontal integration.
If you would like to know more about the practice of Deadly acquisitionsconsult the work of Florian Ederer et al.
Second, which follows from the first, these companies use the significant capital they have obtained from dominating their respective home markets to both enter new markets and move up the supply chain in existing markets. In antitrust law, this latter concept is called vertical integration. By controlling its upstream suppliers or upstream distributors, a company can continue to get more out of its suppliers and consumers while minimizing its own costs simply by taking charge of the supply chain itself. By expanding into new markets, as Amazon and Google have done with streaming, music and other areas of intellectual property, they can link their already enormous power in their home markets to new markets and bring the full weight of their power to it. If any of these companies want to quickly become a major player in a market tangential to their existing markets, they almost certainly can, with very little risk or effort on their part.
If you want to learn more about how Amazon’s search algorithm and interface design influence prices, using a behavioral economic lens, check out a new article from Rory Van Loo and Nikita Aggarwal.
Finally, there is an underlying concern about data privacy. From a policy perspective, this is likely the primary driver of bipartisan pressure against Big Tech. Almost every company considered part of Big Tech collects, manipulates and sells large amounts of data collected from its consumers. Ultimately, it is this data and how it is used effectively that explains the extraordinary success of these companies. But there are legitimate concerns about how, when and for what purposes they are collected. Consumers can rarely go back, and for a country that has long valued privacy but rarely legally protected it, it’s a bit of a dilemma. Although the first two questions clearly fall within the scope of antitrust law, this last and probably most pressing question does not, in my view, fall within that scope. But given the lack of political will in Washington to do anything, comprehensive privacy laws that would be better suited to solving this problem are a foolish task. In the meantime, antitrust law will have to do the trick.
To learn more about reshaping antitrust policy, see Tim Wu’s book, The curse of greatness: Antitrust in the new golden age.
Too much power?
There is a fear that big tech companies and their executives have too much influence over our lives because they revolutionize our economy, build our knowledge platforms, and can connect us to others. They have state-like powers and are also called “net-states” because they are essentially large, non-state digital technology companies.
The five largest companies are Microsoft
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My personal view is that while we need to reduce the monopolistic power of BigTech, we need to do so very carefully and not necessarily break them up easily. It must be limited to a case-by-case analysis. I am concerned about innovation policy, great power competition, and national security. Instead of disruptions, perhaps it’s time for us to really rethink how data is collected and used by big tech companies. Finally, we can actually use our traditional antitrust tools to prevent anticompetitive behavior. Stay tuned, I have an awesome new article on Nested directions with Moran Ofir, Miriam Schwartz and John Livingstone. I also have a book chapter on Interlocking directions: evidence from a natural experiment in Israeli competition lawin A HANDBOOK OF RESEARCH ON COMPETITION AND CORPORATE LAW, with Moran Ofir (Anna Tzanaki and Florence Thépot, ed).
Thanks to my researcher, John Livingstone. If you have any comments, suggestions, or comments, please send them to John Livingstone john.livingstone@case.edu or me anat.beck@case.edu.