Protecting Competition in the Digital Ecosystem and Exploring the Future of Antitrust
By Caroline Holland
As I conclude my tenure as a Mozilla Fellow, I have been reflecting on my work and the challenges that lie ahead when it comes to ensuring a healthy and competitive Internet ecosystem. I began my fellowship with a discussion about the energy surrounding antitrust and competition and I am concluding with an emphasis on coalescing around cooperation and learning.
My work for Mozilla has included convening expert roundtables, attending and participating in public discussions, publishing analysis pieces, and conversing with numerous stakeholders. The dialogue has been thought provoking and productive and it must continue.
We should not sweep under the rug the concerns about how antitrust law can be improved, but likewise we must not abandon the core competition principles of antitrust law. All participants in these conversations must listen and learn to better understand the concerns that fuel the many angles of these conversations. Only through sound understanding of the facts on the ground and legal and economic standards can we ensure that antitrust will do its job to ensure a competitive digital ecosystem today and in the future.
First Principles: T-Mobile/Sprint
Choice and competition for mobile access to the Internet is a first principle of a healthy Internet. But the proposed merger of T-Mobile and Sprint poses a threat because it would eliminate one of the four choices for nationwide wireless providers in the United States. Consumers would risk losing key competition that helps keep consumer prices in check and spur better service and greater innovation. While there may be no “magic number” of carriers for a competitive wireless market, the robust competition that followed the Department of Justice (DOJ) and Federal Communication Commission’s challenge to AT&T’s attempted acquisition of T-Mobile — which preserved four nationwide carriers — is significant.
In reviewing this merger, the DOJ should look skeptically upon claims that the merger is needed to deploy 5G. We heard similar claims about 4G when AT&T attempted to acquire T-Mobile. Yet, without that merger, we have robust 4G networks today. The DOJ should also be suspicious of claims that cable companies stand ready to replace any lost competition. This is a promise we’ve been hearing for more than six years, but these companies have not materialized into truly competitive alternatives to Verizon, AT&T, T-Mobile, and Sprint. Even if the cable companies expand their offerings and competitive reach, they would still be dependent on the major wireless carriers — also their biggest rivals in the market — in order to provide full, nationwide coverage.
Deploying the Full Potential of the Antitrust Laws
While competition for Internet access is a first principle, once users are on the Internet they should have a vibrant, competitive, and innovative marketplace for online services. Since I began my Mozilla fellowship last year setting out a number of questions for consideration, the chorus of concerns about competition in the digital ecosystem has only become louder.
But the debate has also evolved and spurred economic and legal research and exploration. Think tanks like the Washington Center for Equitable Growth are investing in economic research to help better understand markets and competition. Economists are looking at the pace of start-ups in the high-tech field. A wealth of scholarship has contributed to the discussion, including “Unlocking Antitrust Enforcement” by the Yale Law Journal and the Washington Center for Equitable Growth. This series of papers and proposals calls for more vigorous enforcement of current antitrust law by addressing vertical mergers, mergers that harm sellers, multi-sided markets, predatory pricing, and most favored nation clauses, to name a few, all issues that are relevant in the digital ecosystem. Still others have contributed their responses to these papers.
In a previous piece, “Taking on Big Tech Through Merger Enforcement,” I explained how merger enforcement can help protect competition in digital markets. Merger enforcement in particular can be the most straightforward way to do so because the agencies must act one way or another in deciding a merger before them. Plus, merger analysis is inherently forward looking and aimed at addressing market power in its incipiency.
The Future of Antitrust in Digital Markets
Key questions remain. How should antitrust enforcers and policy makers look at market structure and conduct by digital platforms? How and when should antitrust laws be used, bearing in mind that we don’t want to lessen the incentives for incumbent firms or start-ups to innovate?
The antitrust laws — specifically Section 2 of the Sherman Act and Section 5 of the Federal Trade Commission Act — address anticompetitive conduct by firms with monopoly power. It is important to note that these laws are not intended to punish a firm because it has attained monopoly power legitimately through business acumen, superior product or historical accident. Doing so would threaten the very core of our capitalist system that incentivizes other firms to innovate and develop the next great idea. However, once a firm has attained monopoly power, the antitrust laws serve to prohibit anticompetitive conduct that maintains or extends that monopoly in order to protect the competitive cycle.
Section 2 was the core basis for the DOJ’s lawsuit against Microsoft. Microsoft, which at the time controlled roughly 90% of personal computer operating systems, was accused and adjudged of using its monopoly to ensure that the Netscape browser — its biggest competitive threat to the Internet Explorer browser — could not reach PC users. In the words of one witness, Microsoft’s goal was to “cut off Netscape’s air supply,” thus depriving consumers of an innovative new way to access the wealth of information on the Internet. As we know, markets cannot always “self-correct,” particularly when barriers to enter a market are high. This threatens the healthy competitive life cycle of a market that would ordinarily incentivize competition in attempt to topple a monopolist.
The DOJ and FTC should pursue investigations when they find credible allegations of anticompetitive conduct that extinguishes or threatens to extinguish competition. Potentially anticompetitive conduct such as foreclosure, exclusion, and most-favored nations clauses may be ripe for examination in the context of digital platforms. In doing so, enforcers will need to be careful about distinguishing between conduct that can at the same time look both anticompetitive and competitive. And while we must always be concerned about false positives (enforcing against procompetitive conduct), the question becomes how to balance that concern with the risk of false negatives (failing to enforce against anticompetitive conduct) that can significantly impact the future of competition.
The agencies should also continue to embrace the broad and flexible standard they have long used for examining mergers and firm conduct. That is the manipulation of the competitive process that results in harm to consumers in the form of higher prices, reduced quality of goods and services, and less innovation. This includes anticompetitive monopsony power, which can harm workers who are entitled to a competitive market for their services.
While the antitrust laws are flexible and nimble, we should explore new questions and ideas for identifying and measuring harm, for analyzing the competitive impact of certain conduct, and for ways to promote competition. For example, can and should data be used as a proxy for price in analyzing platform services that are otherwise “free” to consumers? Could interoperability and data portability both help users better control their data and promote competition?
We must remain vigilant to preserving competition today, but we should also keep an eye on the road ahead to watch for the next paradigm shift(s) in technology and what may be needed to protect competition and innovation. I have been proud and honored to be a part this discussion and the efforts to channel the energy around antitrust and competition on promoting strong and successful antitrust enforcement and I look forward to remaining engaged in this important discussion.
