Antitrust

States Take Antitrust Aim at Big Tech

Everybody’s going after Google and Facebook. But how do you prove they’re harming consumers?

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The hits just keep coming. Last week, the attorneys general of several states plus the District of Columbia and Puerto Rico announced formal antitrust probes into the market dominance of Facebook and Google. This is in addition to the ongoing Federal Trade Commission (FTC) and Department of Justice (DOJ) inquiries into the terrible two plus Apple and Amazon, as well as the House Judiciary Committee's investigation of Silicon Valley shenanigans.

Meanwhile, the top tech antagonist across the pond, EU Competition Chief Margarethe Vestager, just got appointed to a second term, with a promotion and expanded authorities to boot.

There are actually two state-based probes underway. One of them consists of 48 states plus Puerto Rico and the District of Columbia and is aimed primarily at Google. Texas A.G. Ken Paxton, a Republican, leads the bipartisan effort, which intends to "investigate Google's overarching control of online advertising markets and search traffic that may have led to anticompetitive behavior that harms consumers."

The second, smaller effort sets its sights on Facebook. It is comprised of seven states plus the District of Columbia, and will be led by New York A.G. Letitia James, a Democrat. In addition to competitive concerns, the state Facebook probe will consider whether "Facebook's actions may have endangered consumer data, reduced the quality of consumers' choices, or increased the price of advertising."

No one should be surprised by these events, least of all the targets themselves. As the press has exhaustively detailed over the past few days, this is a predictable encore to the antitrust proceedings that gripped Microsoft in the 1990s. And then, as now, state A.G.s provided more oomph and investigatory ammunition to ongoing federal efforts against the top dog in tech.

But while we have the benefit of hindsight to pick apart the Microsoft decision, the antitrust efforts against today's techies are just getting started. These undertakings are still in the exploratory phase, and it is unclear what particular charges, if any, will make their way through the courts.

Right now, the problem is that these companies are big and that scares us. We think of recent missteps—particularly regarding privacy—and dump those negative feelings into the "break 'em up" bucket. But being big is not a crime. Rather, in the U.S., antitrust enforcers intervene in markets when firm activity is shown to harm consumers, like when a company agrees to fix prices or lower quality. Often, this is observed when a business exploits its market position to raise prices.

This "consumer welfare" standard becomes less straightforward when applied to digital platforms. It costs me $0 to use Twitter. Even though I don't use other social media platforms, there are plenty of options out there for me, and they would cost me $0, too. These platforms do charge advertisers money to put their wares in front of my eyeballs, but there seems to be a lot of competition there, too.

Part of the problem facing antitrust enforcement of technology companies is that it's difficult to define the relevant market. We lump Facebook, Google, and Apple as "technology" companies, but really, their services span many markets. They are variously advertising companies, telecommunications providers, media firms, cloud architecture platforms, storage companies, software-as-a-service providers, and digital libraries, among many other things. Yes, they are "big," but they face considerable competition in most or all of these domains.

What plan of attack will antitrust regulators choose? There are many options. Yelp has been chomping at the bit to take down Google for allegedly promoting its own services over Yelp's. The company has convinced European regulators of their crusade's righteousness, perhaps American counterparts will also train its sights on such possible anti-competitive prioritization.

The problem is that it's hard to prove that users don't simply prefer the native service over a competitor's. In the case of Yelp, maybe Google's review services really were superior. Should companies be required to promote inferior competitors, just to stay in the government's good graces? In general, basing your business model on the benevolent prioritization of your competitor's platform does not seem especially wise.

Or maybe antitrust regulators will go really retro and revive the browser war case for the app age. European regulators have already scrutinized the Google Play Store as an anti-competitive edge. Just as Internet Explorer coming pre-installed for free on Windows computers to Netscape's detriment was found to be a no-go, maybe the Play Store's default nature and app fees won't pass antitrust muster. There are similar criticisms with the Apple App Store.

The worst outcome would be one where the general animus against technology companies prevents a focused antitrust investigation. Perhaps these companies have engaged in activities that have harmed their customers. It is legal and legitimate for the authorities to investigate whether this is so.

But tying in unrelated concerns like "customer privacy" or "election integrity" risks turning these proceedings into an expensive and unproductive political spectacle. Already, state A.G.s have included language indicating this is a real possibility, particularly in the Facebook case. Not only would antitrust be an inappropriate tool to alleviate such concerns, these unconnected matters could distract the investigations from any legitimate inquiries.

If history is any guide, we shouldn't expect any resolutions any time soon. Antitrust efforts can last for more than a decade. Often, by the time regulators and the courts issue a ruling, yesterday's titan has already become a struggling has-been. Perhaps this will again be the case, and the normal but unpredictable swings of fickle consumer taste and market discipline will once more make this brouhaha redundant. But we can probably expect a lot of unfocused anger against technology in the meantime.

NEXT: Free speech for thee and for me

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  1. For the Fun of it How many people use DuckDuckGo or other search engines instead of Google? And why we are talking monopoly here do not all of our American companies have to compete with state own monopoly of china and other countries as well ? or am I living on a different planet.

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    2. Yup, different planet. You are living on a planet which misunderstands platform users as the market for online companies like Facebook. That is not their market. Their users are their product, which they sell to their market, which is advertisers.

      In the US, a few such companies now so effectively monopolize the ad sales market that an entire national assemblage of competing media companies has been brought to a state near collapse. That has been done despite the fact that the news gathering and news distribution functions of those defunct or imperiled companies are no part of the business model of online giants—which have done nothing to replace the loss.

      1. You are living on a planet which misunderstands platform users as the market for online companies like Facebook. That is not their market. Their users are their product, which they sell to their market, which is advertisers.

        That’s a distinction that seems to be getting missed here. The consumer relationship with Microsoft, Apple, IBM, et al. is a direct one. They sell a specific product to a specific consumer. The consumer has some influence over their behavior based on how they choose to spend their dollars.

        I am not a customer of Facebook or Google, however, thanks to trackers embedded in virtually every web site on the net, I am their product. I have no reciprocal influence on these companies through the marketplace.

        This is where the model of letting the market self-regulate falls apart. Our participation in their business model is non-optional, given their ubiquity, but given that they don’t extract money from us directly, the public have no market mechanism for punishing bad behavior. Their actual customers have no reason at all to worry about harms done to the public at large.

        So the public at large pretty much has two options for recourse: government intervention or nothing. And the nothing option doesn’t seem to be working out so well.

      2. “In the US, a few such companies now so effectively monopolize the ad sales market ”

        This sentence contradicts itself. As a matter of definition a number of companies, where that number is greater than 1, can not monopolize anything.

        1. “This sentence contradicts itself. As a matter of definition a number of companies, where that number is greater than 1, can not monopolize anything.”

          The whiners seem to think they can define words at random.
          No, there are no monopolies. If you don’t like facebook don’t use it.
          And fuck off, slavers.

    3. “”How many people use DuckDuckGo or other search engines instead of Google?””

      Me

      1. Is that the full list of their user base?

  2. As much as this disgusts me, just about everything governments do disgusts me too. And the losers won’t be Google et al, it will be consumers, same as it ever was when politicians get wind of ways to flex their government muscles.

    And there’s always the fun spectacle of watching bullies taken down. AT&T flexed their muscle a bit too noisily, so did IBM, Microsoft, and the current crop of candidates; I knew the current set had started digging their own grave when they started signalling their political correctness and deviating from neutrality; the first I was aware of was banning gun ads and gun accessories. Live by virtue signalling, or by getting in bed with politicians, and they will show their true scorpion nature sooner than you expect.

    I wonder about two things. One is the alternate universe where they had actually stressed their neutrality and forsworn political pandering; I think they’d have had a lot more reliable friends down the road than the weather vanes they bought with their suckitupitude.

    Two is how these giants can be busted. AT&T was easy. IBM was easy. Microsoft would have been easy. Google? The search engine is their core, supporting Waymo and everything else. I can’t think of any natural split, and you sure can’t split the search engine. Facebook could be told to spin off Whatsapp and the other parts they bought, but who would buy them? They’d probably sink by themselves. Twitter? A one trick pony, nothing to split off or up. Amazon could destroy their house brand, but what else? You gonna try to split them by products — books at one web store, kitchen ware here, car parts there?

    1. For Google, split off google maps. They had to buy their free standing competitor Waze for their superior technology and active userbase, which shows that it can survive on its own.

      Split off youtube. Though it would have to scramble to figure out funding sources without google’s pockets, its a big enough institution to have options, and more importantly, pulling youtube away from google makes one more independent group that has to be individually convinced before someone can be unpersoned.

      These are just the features I use the most that could be their own thing again.

      1. Yep, sell youtube to Huffington Post and Google maps to CNN and call it a day. You idiots are so transparent.

      2. The problem with that is the ad revenue. That’s how Google makes money. Without all those ads, they couldn’t offer free search, free maps, and free videos.

        I doubt either youtube or Waze made enough money standalone. Their market value was strictly based on being bought by someone eventually.

        I could be wrong. That was my take at the time, but I sure haven’t paid a lot of attention to it. Whatsapp would seem to be in the same category, so I am probably wrong about one or the other.

    2. Yeah, AT&T’s split-up was a complete mess–by dividing the company into regional companies, and separating out the long distance portion, the government was acting on the assumptions of past decades. They were incapable of predicting the mobile revolution, or the growth in data backhaul, or even the expanded services under SS7 that really blew up in the 80s. The decade of chaos in US telecommunications really set back the US, which allowed Europe to take the lead for a good 15 years. It wasn’t until the very late 2000s that we finally caught up.

      1. This is the problem right here. The government wasted what, a decade going after Microsoft over a fucking browser.

    3. Well, I don’t think you actually have to bust up google. I think you need to get rid of the collusion that’s preventing any competition. The prevention of competition is what allows these platforms to get away with abusing their positions instead of just concentrating on attracting customers by providing good service.

      You look at what happened to Gab, it wasn’t so much that they couldn’t compete, it was that they weren’t allowed to compete. They were kicked off of hosting services, cut off from financial services. Not really any different than if somebody had tried to compete with Standard Oil, and Standard Oil had leaned on their suppliers to get them denied drilling equipment, arranged for their bank to call in loans prematurely.

      That’s what we need to do something about.

      The other answer is to start fully enforcing Section 230 as written. Including the “good faith” language that the courts have been ignoring.

      Any platform that engages in deplatforming should find they’re no longer immune to civil suits thanks to having failed to comply with the terms of Section 230. That would likely be enough incentive to stop the deplatforming movement cold.

  3. But how do you prove they’re harming consumers?

    But being big is not a crime. Rather, in the U.S., antitrust enforcers intervene in markets when firm activity is shown to harm consumers, like when a company agrees to fix prices or lower quality. Often, this is observed when a business exploits its market position to raise prices.

    Yes, they are “big,” but they face considerable competition in most or all of these domains.

    First, all the tech giants cannot be lumped together. Facebook and Apple are in very different businesses. Apple, for instance, is not a notable competitor in the press business. Facebook (and a few others) have demonstrated sufficient power over ad sales to brand them as destructive monopolists in the press business. The ongoing collapse of local media companies across the nation is evidence of the destruction.

    Also, the second quotation above, about antitrust intervention, is accurate as a matter of present practice, but problematic as a matter of history. For many years after passage of the Sherman Anti-trust Act, enforcers, including the Supreme Court, put emphasis not only on consumer harms, but also on harms to competitors—and they prioritized the latter. The original (and long-lasting) interpretation of anti-trust was that it protected a right to compete, and explicitly understood and said that economic efficiency should give way in the balance. That interpretation prevailed until shortly after WW II, when economists for the first time began to become sufficiently influential in politics that their doctrines were accepted by many politicians as state ideology.

    The older interpretation, on behalf of competition, and even at the price of economic inefficiency, needs a revival. Cases against media ad-sales giants are the place to revive it. What is at stake is the survival of a republic based on an informed citizenry. That seems a sufficient cause to protect.

  4. Does everyone now understand why these companies have been asking for federal regulations? Because State and Local regulations are their worst nightmare. Easier to control federal legislation.

    1. Just because Brier Rabbit is pleading not to be thrown in the brier patch, doesn’t mean you can’t throw him over a cliff, instead.

      Sure, they’re pleading for regulations designed to entrench them against competition. But that doesn’t mean those are the only possible sort of regulations. We could feed them the sort of regulations they DON’T want, instead.

  5. “Right now, the problem is that these companies are big and that scares us.”

    The least you can do here is accurately characterize what the people on the other side are saying. The problem we see isn’t that these companies are “big”; It’s perfectly possible for a company to be “big” and not abuse it’s position.

    The problem is that these companies are using their position as the dominant suppliers to warp American politics. And, as demonstrated by the fate of Gab, they’re not prepared to tolerate competition that doesn’t play along with that warping.

    Really, the case of Gab destroys the argument that these social media platforms aren’t an appropriate target for antitrust actions. Cooperation between multiple companies in different industries to destroy a competitor to one of them? This was about as clear a case of monopolistic behavior as you could ask for.

    1. Well said. Once I saw the strawman argument I stopped reading the article. You’re absolutely right – the least they could do is get the counterargument correct so we can take the article seriously.

  6. More diversion to try and distract us from the fact that our government does absolutely nothing to help better the lives of people in this country.

    They’re worthless. Every last one of them.

  7. At this point, if you don’t think there’s been adequate harm to justify an investigation, you’re just not paying attention.

    1. Or you approve of the harm. That’s where the left are, right now.

    2. I think there has been harm in some narrow cases, but pretty much all of the remedies blow chunks.

  8. Big is bad. Unless it’s the government, of course.

  9. Often, by the time regulators and the courts issue a ruling, yesterday’s titan has already become a struggling has-been.

    We finally got a ruling on allowing Windows users to uninstall internet explorer 4.0.

  10. “But how do you prove they’re harming consumers?”

    Get 12 average people to make that decision; viola!

    1. 12 average people hand-picked by a CNN “townhall” producer?

  11. “Everybody’s going after Google and Facebook. But how do you prove they’re harming consumers?”

    I’ve read Google and FaceBook has censored conservative speech on their sites, but it’s their sites. They can do what they please since it’s their property.
    But on the other hand, if this is true, it would just go to show what a bunch of fascist pigs who are running Google and FaceBook.

  12. Go to You Tube and find the documentary : “Killing Europe”. It was taken down because it was too factual about the invasion of Europe. You Tube protects the “One-Worlders” and anyone that respects borders and culture. Probably because of George Soros. you can’t see this and a documentary called “Heartland” that tells the story of Muslim persecution of Jewish Europeans and why they are leaving Europe for Israel. Thanks to Google and You Tube, you can’t even find a reference to this film. It has been shown in Europe. What we have here is censorship by the Elite that want no factual criticism of the status quo.

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