U.S. House Subcommittee Hears Complaints About Purported Anticompetitive Conduct by Platforms

The U.S. House Subcommittee on Antitrust, Commercial and Administrative Law recently held hearings concerning potential anticompetitive conduct by platforms against smaller companies who may offer services or products on those platforms at University of Colorado Law School.  Notably, the congressmen on the committee were all concerned about the activities of the platforms.  Here are a few of the notable points: 1) the relatively small companies do not spend a lot of money on lobbying; 2) some of the companies are very concerned about having to purchase their trademarks as keywords from Google; 3) there is concern about bargaining or the lack of it with Amazon; 4) there are concerns about the size of Apple’s cut of App Store sales as well as Apple using control over iOS to disfavor competitors of its own products; 5) there is potentially predatory pricing being conducted by some platforms; 6) there is fear that the platforms are using data about a smaller companies’ products or services created when they use the platform against them to compete; 7) none of the smaller companies could very clearly answer the question of whether the complained about conduct violated current antitrust law; and 8) the congressmen repeatedly thanked the smaller companies for their courage for speaking out against the platforms.  There was some discussion concerning intellectual property.  Sonos, the speaker company, noted that a platform was involved in “efficient infringement” against them.  The smaller companies also complained about the cost of litigating against the platforms and how it diverts funding from research and development.  At least one company noted that having the government pursue these cases would help them because of the cost.  As previously mentioned, there was also concern expressed about trademarks, and additionally, how platforms use similar trade dress to competitor's trade dress on products that platforms use to compete against smaller competitors.  Counterfeiting was also a concern. The full hearings can be found, here. 

Going After FAANG in the United States: States Attorneys General Begin Investigation into Google

An interesting question is when do you regulate a new technology.  Do you regulate it early, potentially impeding its development?  Or, do you give it time to develop and the industry around it?  One issue with respect to waiting to regulate concerns the difficulty in doing so because of public choice issues.  The industry becomes too powerful to regulate effectively, or essentially captures the agency regulating it.  Some may argue that the United States, through the federal government, has failed to effectively regulate the FAANG companies—Facebook, Amazon, Apple, Netflix and Google.  However, another set of potential regulators exist in the United States—State Attorneys General.  Indeed, state attorneys general have led lawsuits against many industries, including tobacco and more recently the pharmaceutical industry.  Those attorneys general may be subject to similar public choice issues; however, sometimes they still act.  And, now, 50 attorneys general are going after Google.  Here is the press release: 

Attorney General Ken Paxton today announced that Texas is leading 50 attorneys general in a multistate, bipartisan investigation of tech giant Google’s business practices in accordance with state and federal antitrust laws.

The bipartisan coalition announced plans to investigate Google’s overarching control of online advertising markets and search traffic that may have led to anticompetitive behavior that harms consumers. Legal experts from each state will work in cooperation with Federal authorities to assess competitive conditions for online services and ensure that Americans have access to free digital markets.

“Now, more than ever, information is power, and the most important source of information in Americans’ day-to-day lives is the internet. When most Americans think of the internet, they no doubt think of Google,” said Attorney General Paxton. “There is nothing wrong with a business becoming the biggest game in town if it does so through free market competition, but we have seen evidence that Google’s business practices may have undermined consumer choice, stifled innovation, violated users’ privacy, and put Google in control of the flow and dissemination of online information. We intend to closely follow the facts we discover in this case and proceed as necessary.”  

Past investigations of Google uncovered violations ranging from advertising illegal drugs in the United States to now three antitrust actions brought by the European Commission. None of these previous investigations, however, fully address the source of Google’s sustained market power and the ability to engage in serial and repeated business practices with the intention to protect and maintain that power.

The World of Concentration and the Absence of Competition Harming Workers/Consumers and Innovation

Jonathan Tepper and Denise Hearn recently published in 2019, “The Myth of Capitalism,” which is around 290 pages with endnotes.  Jonathan Tepper is a former hedge fund analyst and trader, and founded Variant Perception, a consultancy.  Denise Hearn is Head of Business Development for Variant Perception.  In “The Myth of Capitalism,” the authors provide a very ambitious analysis and diagnosis of U.S. economic problems—they start with the question: “Who killed your paycheck?,” and provide many policy proposals.  They critique the Chicago/Harvard School approach to antitrust and point to how investors such as Warren Buffet specifically seek out investing in firms in markets with significant concentration.  They point to the significant increase in merger approvals.  The authors point to the technology companies as problematic, but also point to many other industries which are relatively highly concentrated.  They discuss the problem of “tacit cooperation” between firms in markets with relatively high concentration—smart people do not need to have a meeting to get something done like price fixing.  They further discuss how concentration has led to a monopsony in labor markets—there is only one buyer of labor (or just a few).  This is part of the basis of their argument for why we have for the most part been stuck with relatively stagnant wages.  One of their policy prescriptions is renewed, vigorous antitrust enforcement.  They also discuss intellectual property in various sections of the book and raise some of the well-known critiques of the system.  The authors generally seem to believe that because intellectual property resembles a monopoly (although not always is) then it is problematic.  There is not too much of the book discussing the benefits of intellectual property to start-ups—new entrants to the market and how this may ultimately lead to fewer highly concentrated markets.  However, they do discuss the literature concerning a lower number of startups.  Similarly to Professor Timothy Wu's new book, they also raise issues with respect to political freedom and market concentration. This book is available here for around $18.  

I am also in the process of reading Harvard Business School Professor Emerita Shoshana Zuboff's book, "The Age of Surveillance Capitalism: The Fight for A Human Future At the New Frontier of Power," almost 700 pages with endnotes.  So far, she does not seem to think that rigorous antitrust review will make a difference at all--the problem is more centered around the new markets of selling our personal information and habits by technology companies, and then framing and controlling our behavior through software we interact with.  The number of technology companies does not matter.  She believes there is a need to redefine what is happening in this new surveillance age without trying to refer to preexisting structures--we're dealing with something very new with great danger.  This is a very ambitious book.  This book is available here for around $23.  It is interesting to read the two books close in time.