Is Antitrust Law Appropriate to Regulate Google and Facebook?

Recently Makan Delrahim, Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice, publicly criticized Google and Amazon for their ruthlessness and size, actually and provocatively citing past government breakups of big private utilities like Standard Oil. If you’re surprised that someone in Trump’s DOJ would poke big business and invoke the progressive antitrust regulation of the past, some explanation is in order. 

The government has always regulated the market, so “free markets” have always been a kind of mythical creature. What governments typically do is regulate “competition,” but that doesn’t just mean keeping firms from becoming too big or stopping them from establishing monopolies through sheer size alone. It also means regulating certain behaviors, if those behaviors limit the choices or distort the autonomy of consumers. This is what’s behind the recent drive to use antitrust regulation to control big infotech. 

For example, digital advertising has both crowded out local and independent news, and intruded on consumer privacy. Both of those effects could be justification for antitrust regulation because that private data can be used in ways that disadvantage competitors who do not mine such data. Digital advertising is also a ripe target for regulation because this year, it’s expected to “exceed TV and print advertising for the first time ever,” and the Trump reelection team “is doubling down on its digital ad strategy,” according to CNN.

Just three companies–Google, Facebook, and Amazon–account for 70 percent of spending on digital ads, so that short list is another antitrust red flag. 

There is increasing public pressure to apply antitrust law to these big data giants. The public doesn’t like the Faustian bargain that has been made—search the internet and connect with others all you want, largely for free, but the companies get to surveil you “across the whole web” and use that data in any way they want. It’s like liberty is being traded for the right to communicate and gather knowledge. And in the meantime, competitors like Yelp have complained that the access power of Google has been used to crowd the smaller players out. Traditional data append and email vendors now represent just a sliver of the consumer data market.

“Outside of Google, Facebook, and a few others, the rest of the market, which includes thousands and thousands of independent news publishers (that depend on digital advertising as their primary source of revenue), will shrink by 11 percent” this year.

Sometimes size prevents competitors from developing. This can be true even if the size doesn’t translate into higher costs for the consumer. In fact, the largest tech companies today allow most of their services to be used for free, so we can’t really rely on price to test the assumptions of antitrust law. The data those companies gain in the process is really the problem, because the ability to take that data (which other companies have no access to precisely because those companies give their services away for free) and “identify untapped and under-served markets, spot potential competitors and prevent them from developing – the kind of edge that antitrust law is meant to thwart.” Antitrust regulation may also be warranted because those large companies create “natural monopolies.” Now, in the past, some natural monopolies were seen as acceptable as long as they were subject to additional antitrust scrutiny, like “price controls and oversight boards.” One could argue that Facebook, which is very close to being a natural monopoly, ought to be subject to a special government oversight board just for it. 

The European Union hasn’t wasted any time or parsed out any nuances here. Since 2010, the EU has investigated Google for antitrust violations three times and charged Google with violating EU competition law with Google Shopping, AdSense, and the Android system. The Google Shopping and Android charges stuck, and the company has handed over €8 billion to the European body. 

Despite this scrutiny (or maybe because of it), Google is acting impetuous and bold. Just a few days ago, the company, fully aware that it’s under antitrust scrutiny, announced that it was buying another company, the data analytics firm Looker, for $2.6 billion. It’s hard not to surmise that the company is testing the government to see who blinks.

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