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Kathryn McMahon comments on investigation of tech giants

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U.S may launch antitrust probe into tech giants – Expert Comment

Kathryn McMahon, Associate Professor at the Law School has commented:

"The reports that the US DoJ and FTC have begun antitrust investigations into the digital platforms Google, Amazon, Facebook and Apple are welcome.

"Ever since the protracted litigation against Microsoft in the 1990s, the US regulatory authorities have been reluctant to investigate possible instances of misuse of market power in digital markets. In 2013, for example, the FTC closed its investigation into Google’s online search practices. The renewed interest coincides with the setting up in February 2019 of an Antitrust Taskforce by the FTC, to investigative possible breaches of antitrust and concerns with the abuse of personal data. It also coincides with calls by Democratic presidential candidates such as Senator Warren, for the breakup of the tech giants.

"The application of US antitrust law will not necessary be easy however. Since the late 1970s the US Supreme Court, through a series of decisions, have interpreted the antitrust provisions of the Sherman Act 1890 in accordance with the pro-market, consumer welfare standard of the ‘Chicago School’ of antitrust. This interpretation will only find a consumer detriment if the conduct results in higher prices or output restrictions. This higher bar for intervention is increasingly irrelevant in digital markets where Google and Facebook give away their services for free to consumers and Amazon gains market share with very low prices. Calls for greater antitrust intervention are also met by claims that it is merely a response to unfounded populist fears and not in keeping with modern economic theory.

"In contrast to the US, the European Commission has been far more willing to use its antitrust laws to intervene in these digital platforms. In March 2019, it awarded its third fine against Google since 2017 for abusing its dominance in online search, bringing the total fines to €8.26 billion. EU antitrust law is better suited to a more interventionist approach, guided by a willingness to ensure that market dominance is subjected to greater scrutiny and restraint and that the market structure is competitive, in contrast to the Chicago School’s more narrow focus on price elevation.

"There are difficulties in regulating these markets. The presence of multi-sided digital platform markets (where a service is given away for free to consumers on one side of the market and advertisers pay for access on the other side; two sides of the market are interdependent) and network effects, makes traditional competition law analysis of market definition and the determination of dominance difficult. Remedies are also complicated and difficult to monitor, and the fines, although large, are small relative to global revenue of these tech giants. Abusive conduct can also be difficult to characterise and yet a further examination of many of the contentious practices such as a refusal to deal, discriminatory terms, exclusive dealing and loyalty rebates all fall within traditional categories of abuse. What has also been found to be effective is that the mere threat of litigation may be enough to expose these practices and nudge positive changes in behaviour."

Wed 05 Jun 2019, 13:12 | Tags: GLOBE Centre, Staff in action, Expert Comment