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The Digital Age Has Been Very Good, Competition Law Doesn’t UnderstandEmerging with the digital revolution of the 1990s were services that compounded that revolution. And it all happened with lightening speed, more or less. That speed and the financial scale of the those service providers enthralled virtually everybody, until it didn’t. Information and communications technologies (ICTs) are now more likely viewed as compromised if not nefarious.So, those enormous ICT providers are under more legal - and legislative - scrutiny even as their services remain as popular as ever. The FAANGs - Facebook, Apple, Amazon, Netflix and Google - are a much beloved investment category, along with the BATs - Chinese firms Baidu, Alibaba and Tencent. All but streaming video on demand service Netflix are constantly batting away a range of activists calling for investigations, fines and breakups. Netflix is batting away a plethora of television competitors forming “alliances” of dubious legality under competition law. Nearly every US state attorney general signed onto antitrust investigations, separately, of Google and Facebook earlier this month. This was shortly followed by a US House of Representative committee requesting documents, including internal emails, from Facebook, Apple, Amazon and Google seeking evidence of anti-competitive and other naughty behaviors. On the surface, these are investigations of data privacy issues. In reality, the investigators are about a generation late in their understanding of the business model of big tech, which has made them enormously rich and powerful. Control over advertising and other messaging is another cited concern. Similarly, the European Commission (EC) has levied eye-popping fines on Google, Facebook and Apple for a variety of sins. All are appealing the decisions. Another big US-based tech company, Microsoft, endured years of litigation and, finally, paid nearly €2 billion in fines to the EC for “abuse of dominant position.” The EC decided not to pursue a breakup of the company, Competition Commissioner at the time Joaquín Almunia concluded it “would do more harm than good.” A decade earlier the US Department of Justice also shied away from ordering Microsoft to be split-up. Current EC Competition Commissioner Margrethe Vestager was just given expanded duties overseeing digital policy. This could bring, recalling the ancient Chinese curse, interesting times. “It’s understandable that people sometimes think of competition as a panacea, a universal answer to all society’s problems,” she said in statement, quoted by Bloomberg (September 13). “But competition is only part of the issue. When platforms manipulate the way we see the world, in ways that we often don’t even notice, that affects our ability to understand the world around us.” In the US, antitrust law sprung up in the late nineteenth and early twentieth centuries, first with the Sherman Antitrust Act (1890), then the Clayton Act (1914). These laws came from popular and political concerns about the scale and power of big energy (coal and oil), transportation (railroads) and commodity (sugar and steel) companies. Set out were restrictions on corporate behavior like restraint of trade, price fixing, abuse of dominant position. The main thrust of these laws was that damage to competition was harmful. These US antitrust laws arrived at the end of the so-called Gilded Age, the last three decades of the nineteenth century when vast wealth accrued to owners of big industrial concerns, sometimes through secret agreements among themselves. The beginning of the Gilded Age coincided with the completion of the transcontinental railroad in 1869. Industrialization boomed, rich people became richer and conspicuously so. By 1909 the Gilded Age had come to a close as the US Justice Department filed to breakup Standard Oil under the Sherman Antitrust Act. The US Supreme Court concurred two years later. Standard Oil was broken into more than 30 companies, several still prospering. John D. Rockefeller retired to a life of philanthropy. The next major corporate breakup under Sherman was telephone company AT&T in 1984. That, too, was argued on the basis of preserving competition. The current US administration argued against the AT&T acquisition of TimeWarner saying competition and cable pricing would be negatively affected. Several observers suggested the US administration sought to force a spinoff of news network CNN, a subsidiary of Time Warner. An appeals court ruled in February Justice Department arguments were “unpersuasive.” European competition law is similar to US antitrust law and, obviously, much more recent. Many of the precepts are the same; preventing cartels and monopolies. Two significant and related differences are restrictions on State Aid and exempting trade unions from competition law. Publishers everywhere continue to howl and wail about big tech companies disrupting everything from engagement with readers to the shift in advertising revenues to digital platforms. Competition law (antitrust in the US) has not been particularly helpful in getting the horse back into the barn. The big tech companies have learned very well the lessons from the Microsoft decisions: get a big, smart legal team. Some, like Facebook, continue to stumble but even those missteps have not interrupted the cash flow. Some social commentators have referred to current times as the “second Gilded Age.” Billionaires buy islands and chart private space voyages while others, figuratively, drive for Uber. Media has become complicit in contradicting values; greed is good. See also... |
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