Donna Faye Imadi ‘22
Current Events Editor
On March 3rd, UVA Law’s Federalist Society ushered in the forthcoming Spring season by hosting a vibrant discussion on the ever-blossoming topic of “The Adequacy of Antitrust Law: Is Big Tech too Big?”
On one hand, Jessica Vu[1] advocated yes - with a spin. Big Tech is not subject to antitrust discipline due to inherent size; rather, the anticompetitive practices of Big Tech are the impetus for reining in their power under the Sherman Act. On the other hand, Daren Baskt[2] advocated for viewing antitrust law in the eyes of the “consumer welfare standard” (a standard which assesses welfare by the metric of price to consumers). Baskt’s case hinged on the concern that antitrust reform aimed at Big Tech would have consequences across the economy and is unnecessary for ensuring preservation of consumer welfare.
Moderating the debate, Professor Paul Mahoney quickly passed the baton to Professor Thomas Nachbar, who laid the groundwork for issues animating antitrust in Big Tech. Professor Nachbar elaborated on what the law is, leaving ideas about what it will be or should be to Vu and Baskt.
Professor Thomas Nachbar | Multisided platforms and network effects
“Antitrust law is about competition and largely ignores issues pertaining to social harms,” Professor Nachbar opened. He further introduced the broad debate over the ‘consumer welfare standard’ and whether antitrust should be used as a tool to address harms beyond “increased prices” to consumers. He left this an open question, as it currently animates the debate within the broader field.
With this theme in the fray, Professor Nachbar narrowed his presentation to Big Tech. He explained how the Supreme Court decision in Ohio v. American Express, “was the first opportunity for the U.S. Supreme Court to address antitrust harms in complex multisided-platforms, adopting an economic understanding with an emphasis on collective pricing of complementary products.” This is significant, he went on, because although multi-sided platforms are not limited to Big Tech, they do characterize the nature of these companies’ operation (Google, Facebook, Amazon, Apple).
So, what are multisided platforms? In the context of social media, they are platforms with two groups: Users [group #1] and Advertisers [group #2, connected by the platform intermediary site [i.e., Facebook, Google]. Another more palpable example is Uber. There are riders [group #1], and drivers [group #2], the Uber app connects the two.
Professor Nachbar continued, these “two-sided platforms are characterized by indirect and direct ‘network effects,’” which influence the amount of users on both sides of a platform. The greater the number of users on one side, the more likely others will join that same side of the platform, which is a direct network effect [the more friends you have on Facebook, the greater likelihood you will join it, as opposed to MySpace]. This direct network effect creates more users on one side of the platform. The benefit of those direct effects in group 1 influences the reward reaped across the platform by group #2 [the advertiser side] because more people will see advertisements. Thus, advertisers reap benefits across the two-sided platform [an indirect network effect].
He then explained how this two-sided structure complicates the antitrust inquiry of consumer harm across the platform and calculus of market power, citing issues that arise in a winner-take-all market structure. Then, Professor Nachbar passed along this sketch to Vu and Baskt to color in.
Jessica Vu | Sherman Act enforcement against conduct, not structure
Vu did not argue that “Big is bad.” She meticulously cast her view within the scope of the Sherman Act, arguing that antitrust laws need to be enforced against Big Tech firms’ conduct, not merely as a result of their structure, stating that “[the] crime is taking action that hurts competition”, not that they are “too big.” She maintains that the consumer welfare standard is predominant, but that consumers are being harmed if one measures the cost as decreased choice [acquisition of potential competitors], quality [as measured by privacy degradation], and innovation.
Vu furthered that enforcement is justified in light of measures by 48 state Attorneys General (AG) and the Federal Trade Commission suing Facebook, and two recent lawsuits against Google by the Department of Justice and 11 state AGs. She continued that these complaints “illuminate anticompetitive conduct, such as antiforking agreements, copying, self-preferencing, revenue-sharing agreements, exclusive contracts,” allegedly deployed to restrain competition. Although many of these allegations are not traditionally seen as anticompetitive on their own, innovative theories of harm or greater legislative guidance may be required to mitigate these harms. “There is no special exception for the tech industry because they exist online. Just because it’s hard to physically realize their power,” she said.
Overall, her view was that, “these lawsuits are not punishing businesses,” rather they are “punishing businesses for the conduct of breaking antitrust laws.” Her bottom line: “Big Tech threatens the free market and competition. Consumers/businesses stand to suffer in absence of action.”
Daren Baskt | Stick to tradition. Beware of “a cure worse than the disease.”
Countering, Daren Baskt represented that antitrust should be focused on consumer welfare, as defined by Robert Bork’s writings in the Antitrust Paradox. By determining antitrust inquiries in strict economic terms (measured by impact on price), he argued, antitrust will be less-prone to unpredictability and the social-policy preferences of judges.
“Antitrust is the wrong tool for addressing bias/censorship concerns,” Baskt said. Further, he warned “reform aimed to reach exclusively Big Tech will lead the federal government to use antitrust as a ‘weaponized’ tool ‘across every industry.’” Citing Justice Scalia’s opinion in Verizon v. Trinko, Baskt voiced concern that new legislative proposals punish “being Big,” and may disincentivize innovation. He identified proposals that would make it difficult for start-ups to have “exit-options” and shifts in burdens-of-proof as particularly problematic.
Baskt concluded that any “policy issues should be specifically, narrowly drafted to fit the harm,” not create broad antitrust reform. The U.S. is the world’s tech leader. “Why should we threaten that leadership?” he ended.
Consensus Borne of Debate?
If Baskt concedes that Big Tech has been engaging in unlawful conduct, then it’s possible that “the green light to the federal government to reshape entire industries,” as he put it, is not necessary to discipline Big Tech. Rather, as Vu put it, citing Northern Pacific Railway, Section 2 of the Sherman Act is sufficient to reign in Big Tech to allow “unrestrained interaction of competitive forces” to “lead to the best allocation of our economic resources, lower prices, highest quality, and greatest material progress…”
At this time, it is competition in the marketplace of ideas and competing policy preferences that are animating the antitrust debate. In the spirit of antitrust, we must hope that the loudest voice in the room does not stifle others, but that the most “meritorious” proposals will chart the path ahead.
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dfi3un@virginia.edu