Reining in Big Tech: Updates to the Antitrust Regime

Sen. Amy Klobuchar (D-MN) introduced new legislation to the U.S. Senate earlier this year in response to perceived continuous overreach by American technology companies. This legislation aims to modify sections of the Clayton Antitrust Act of 1914 that define unethical business practices and uphold workers’ rights. Critics argue that the Clayton Act and other similar legislation provide no checking power to an increased number of monopolies and monopsonies that collude with each other in the digital space. While governmental action in this sphere is required, the existing laws, written in the last century, cannot keep pace with the maneuvers of modern technology companies, leading to ineffective and slow regulatory action.

Klobuchar’s Competition and Antitrust Law Enforcement Reform Act seeks to achieve greater equality for consumers and upcoming businesses through a two-pronged approach. First, the law will shift the burden of generating proof to the business community, requiring them to demonstrate how their actions do not construe anti-competitive behavior. Under the proposed law, companies will have to prove how their actions do not disrupt markets, stifle competition, or in any way decrease free and fair competition. By contrast, the current law requires the government to prove with near certainty that potential mergers are harmful to the consumer and other market participants. These changes will help provide greater freedom of choice to consumers while decreasing the stronghold held by a few companies.

Second, the law seeks not just to increase the scope of actions available to the judiciary but also to tangibly increase regulators’ budgets. This will empower the government to go after companies and ensure that collusion and anti-competitive consolidation do not occur in the technology space. The bill, by increasing funding for both the Antitrust Division of the Department of Justice as well as the Federal Trade Commission, hopes to bolster lackluster growth in their budgets over the past decade. This is essential, as the influence of technology has grown exponentially to become the dominant lever of the American economy. Mergers and acquisitions led by technology firms are now more prevalent, as are concerns of market consolidation and single-firm dominance. In 2020, technology mergers and acquisitions stood at a value of $603 billion led by the efforts of large Silicon Valley firms.

The most pertinent example of such consolidation is Facebook’s acquisition of Instagram in 2012 and WhatsApp and Oculus in 2014. This consolidation of adjacent spheres has become a defining feature of Silicon Valley culture. Large companies, like Google, Microsoft, and Facebook, regularly buy out rivals and similar companies before they become competitive threats, possibly by driving down prices or growing in a complementary field. Such practices are harmful and prevent growth and diversity in a space that is already dominated by very few. These firms refuse to deal with perceived rivals: they contract between themselves and implement pricing discrimination, both of which serve to inhibit competition, exploit consumers and maximize profits.

Another such example of anti-competitive practices is the alleged collusion between Facebook and Google. According to a December 2020 complaint led by the Texas Attorney General, Google and Facebook have colluded since 2017 to quash competition in the online advertising space. This agreement was reached after Google contacted Facebook and gave the latter significant advantages in advertising spaces in exchange for the social network toning down its competition. Consequently, by 2020 these two companies controlled more than 50% of online advertising in the U.S.

Google’s parent company, Alphabet, faced another major lawsuit in December 2020, as 38 states and territories in the U.S. accused the company of abusing its market power to make Google products and services dominant inside cars, TVs, and speakers. This lawsuit also raised the possibility of requiring asset sales but did not go into further detail. Apple, too, has been embroiled in lawsuits surrounding its App Store this year. Despite this barrage of legal action, these companies continue to score victories or delay judgments in high-profile cases in courtrooms across the country.

Although this bill, if it passes, will not retroactively apply to behavior predating amendments to the Clayton Act, having such legislation in place will prevent future ambiguity about what is construed as anti-competitive behavior. The legislation will compel the judiciary to act more decisively when competition is hampered and significantly reduce the governmental burden of proof. This should force all corporations, not just technology firms, to modify their behavior if they want to reduce their exposure to antitrust lawsuits.

Industry-backed groups have provided significant backlash to this law and other similar pieces of legislation. They argue that the quality of their services depends on the scale they have acquired. Their defense stems from the understanding that seamlessness in multiple services, such as browsing, checking emails, and shopping are not the same as self-preferential behavior intended to consolidate the internet market between a few large companies.

Although legal action in America lags compared to the European Union, Klobuchar’s proposal is a move in the right direction: it not only plays catch-up, but it sets the tone for antitrust policy worldwide. Klobuchar’s proposed legislation and other similar proposals have bipartisan support, as both parties seek to rein in big tech firms. To add to this, federal prosecutors have teamed up with multiple state attorneys general to bring wide-ranging lawsuits against these firms. Any action taken by U.S. regulators will result in significantly more scrutiny in Silicon Valley, tech companies’ home turf. By contrast, existing European enforcement has only resulted in changing business practices within that continent. Demands for tech giants to be broken up, for example, are only possible to address in U.S. courts, which continue to have jurisdiction over the biggest players. In time, these efforts could reshape the landscape of the tech giants which control how the world gathers information and accesses the internet. Overall, legislation that looks to severely restrict big tech might result in more freedom for business and consumers but potentially a more fragmented internet.