Fair Play: So, Are We For or Against Big Tech?

Makan Delrahim Blog

Forgive a casual observer for being confused by Justice Department antitrust chief Makan Delrahim’s speech last week on concentration in the digital market.

Are we or are we not cracking down on big tech firms like Google Inc., Facebook Inc., and Amazon.com for dominating the internet?

On the cracking-down side, Delrahim offers this: “Antitrust enforcers may need to take a close look to see whether competition is suffering and consumers are losing out on new innovations as a result of misdeeds by a monopoly incumbent.”

On the not cracking-down side, he offers this: “Rather than a failure of antitrust, concentration may be the byproduct of healthy competition, as the most innovative and efficient firms grow and attract customers.”

The back and forth isn’t an accident. That speech, like some dozen others presented by Delrahim and his deputies over the last six months, was carefully calibrated to signal to industry participants that U.S. antitrust enforcers are closely watching how they wield their economic and societal power. But the regulators are also signaling that the government won’t come banging on the door with sanctions unless those companies demonstrably misuse that power.

The next logical question is, “What exactly is a misuse of power?”

One case comes from 2012, when the Federal Trade Commission entered an agreement with Google to stop the social media giant from engaging in behaviors that the FTC said could stifle competition. The commission said Google had been overly aggressive in defending patents that developers needed in order to innovate in wireless communication. It also said Google made it too difficult for advertisers to conduct the same ad campaigns on its platform and those of competitors. It’s easy to see how both of those practices could cause harm to rivals, and it makes sense that the FTC went after Google because of them.

Importantly, however, the FTC was unable to garner enough evidence to justify legal action against Google for what the EU sees as fairly egregious anticompetitive activity – biasing its search results. Google was fined a whopping $2.7 billion in the EU last year for the same behavior, but U.S. regulators thus far haven’t found what Delrahim says is essential for enforcement action – evidence.

“Antitrust demands evidence of harm or likely harm to competition,” he said in last week’s speech.

This laser focus on proof that there is tangible harm to competition and the consumer is the key to understanding the delicate balance that Delrahim is laying out. In the current political environment, where consumers worry that Facebook is mishandling their data or that Amazon is driving out mom-and-pop shops, he says regulators need to take a deep breath before diving in to fix things.

In the Facebook instance, Delrahim says it isn’t enough to declare that a successful tech company is abusing its power over an un-monetized commodity like personal data or privacy. Enforcers need evidence that the commodity has actual value, based on consumer consensus, and then measure that value.

If a value on a new commodity can be established, the next question is an even harder one: Would it help or hurt consumers to step in, especially if Facebook is addressing the situation voluntarily, and consumers’ outcry may be creating a new market for a no-data-sharing social media platform?

That may be impossible to determine, and some observers say Delrahim is setting up a framework in which nothing can get done. Cowen Washington Research Group analyst Paul Gallant said Delrahim's comments “should benefit Facebook and Google by giving intellectual backing to congressional Republicans who don't want to regulate internet companies but feel political pressure to support privacy legislation.”

Delrahim also said if the dominant company is keeping out new entrants to the market, that’s another clue that there’s a violation.

He cited the U.S. District Court for the District of Columbia’s 2001 decision against Microsoft Corp., which found that Microsoft violated the law by entering into exclusivity agreements that significantly contributed to maintaining its monopoly. Microsoft intended to own the market through those agreements, the court found, and violated competition laws by doing so.

Delrahim said that decision shows that antitrust law can adapt to new technologies. At the time it was issued, the internet was new and so were software packages. But Marshall Steinbaum, research director at the left-leaning Roosevelt Institute, said that example shows the ineptness of his evidence-based approach. The consent decree following the Microsoft decision “laid the groundwork for more recent dominant tech platforms to skirt the law and assemble monopolies,” he said.

Here’s what we know: Delrahim is making it clear that the DOJ isn’t afraid to come down on big companies, as is demonstrated by its lawsuit to stop AT&T Inc. from buying Time Warner Inc.

But, enforcers aren’t going to go after those big companies without a reason that they see as “evidence-based.”

Clear as mud? Stay tuned. This conversation is just getting started.

What’s Happening

On Monday, the Justice Department’s case to stop AT&T and Time Warner’s merger continues. It should wrap up before the end of the month, trial watchers say.

On Wednesday, the Senate Commerce Committee will vote on Rebecca Slaughter to be a Democratic commissioner on the Federal Trade Commission. The vote will round out the slate of five FTC nominees for the Senate to vote on as a bloc.

On Thursday, the DOJ antitrust division will host a public roundtable discussion on antitrust consent decrees. Delrahim will give opening remarks.

On Thursday, the House Financial Services Committee will hold another hearing on expanding the authority of the Committee on Foreign Investment in the United States.

Quote of the Week

“The accusations regarding this issue are much ado about nothing. We are striving to provide a better experience for the consumer.”

--Verizon spokesman Rich Young, on reports that antitrust enforcers are investigating Verizon Communications Inc. and AT&T for colluding to make it harder for customers to switch wireless carriers.

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