The Antitrust War on Tech Integration
Progressive antitrust reformers, along with a few conservatives hostile to Big Tech, have thus far failed to pass legislation that would expand antitrust law beyond the consumer welfare standard that has provided a rational boundary for antitrust enforcement for the past half-century. Instead, during the last several years, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) have launched a flurry of antitrust lawsuits aimed at expanding the range of conduct that can be deemed anticompetitive within—and pushing the boundaries of—existing laws and precedents.
In particular, cases filed by both the DOJ and the FTC are attempting to go beyond penalizing large technology companies for undertaking allegedly anticompetitive business practices to restrict how these companies can operate and design their online platforms—and even to break up integrated systems entirely. If the government were to succeed in several of these cases, it would send a signal to the largest tech companies that they should reconsider investing in innovations that might satisfy their customers too well at their competitors’ expense.
For example, the second major federal antitrust trial pitting the DOJ and several states against Google is currently underway. The complaint focuses on Google’s control over each stage of the “ad tech stack”—that is, the process for pairing advertisers with embedded digital advertisements on websites and in apps. Google stands accused of using its ownership of the most commonly employed tools at multiple layers of the ad stack to unfairly crowd competitors out of the market. Setting aside questions about the validity of the government’s claims, if Google were found to be abusing its market power in this way, a traditional remedy would be to force Google into a consent decree in which they commit to avoid certain anticompetitive behaviors and to pay damages to affected competitors. However, the DOJ’s complaint also seeks to have Google divest itself of multiple portions of its online ad business.
Such a request for the breaking up of integrated technology products follows a growing suspicion of large corporate size and vertical integration per se, especially in the tech sector. An FTC case against Amazon, for example, revolves around the company’s control of both an online retail platform and the distribution networks that fulfill its sales and demands punishment for Amazon, “including but not limited to structural relief”—that is, breaking up the company. Similarly, the FTC’s case against Meta seeks to undo Meta’s decade-old acquisitions of Instagram and WhatsApp, and the DOJ case against Apple stops short of asking for structural remedies while clearly expressing the desire that such remedies could be applied.
Although it may be the punishment most associated with antitrust in the public’s mind, the outright breaking up of companies has become a less-frequent remedy in recent decades, even more rarely awarded by courts. Because of their distrust of corporate size and market concentration for its own sake, some antitrust reformers—particularly self-styled Neo-Brandeisians like legal scholar and former Special Assistant to the President Tim Wu and current FTC Chair Lina Khan—have sought to re-normalize forced divestiture as a routine penalty for monopolization complaints.
Knowing that outright breaking up companies is harder to achieve, several recent tech antitrust cases seek instead to dictate how leading tech companies can compete using their own integrated products—even to redesign their platforms to accommodate rivals. For example, the DOJ v. Apple case would like to force Apple to grant its competitors’ smartwatches equal access to Apple’s mobile operating systems. Similarly, FTC v. Amazon would compel the online retail giant to cease providing privileged access to its featured “Buy Box” and conditioning its “Fulfilled by Amazon” service on participation in Amazon Prime. Returning to the Google ad tech case, the DOJ implies that Google has a duty to design its ad auctioning and placement platforms to be more interoperable with rival ad sellers.
Taken together, these cases seem to represent a concerted effort to overturn legal precedents, such as Verizon v. Trinko, which have established that even monopolies do not have a “duty to deal” by sharing their infrastructure on equal terms with their rivals. However, even if all of these cases fail, the signal they are sending to tech companies and investors is that U.S. antitrust enforcement is in danger of moving ever closer to a model like that in the European Union, where the welfare of competitors is considered at least as important as that of consumers. For instance, under Europe’s Digital Markets Act, bans on self-preferencing have already led companies like Google to decouple integrated products like its search, maps, and review features in order to comply.
In such an environment, regulated companies have far less incentive to invest in maintaining and innovating on platforms that accommodate third-party users because they must invest huge sums of money to develop new features that their competitors can then obtain for free. Nor will these competitors be incentivized to invest in creating sophisticated alternatives to Big Tech platforms if their reward for succeeding is to be assaulted by billion-dollar antitrust complaints and to be expected to cease competing once their company’s user base or market cap has grown too large.
The next example of this may already be forthcoming, as Nvidia’s meteoric rise to become America’s latest trillion-dollar tech success story has netted it multiple antitrust investigations from the DOJ. Part of Nvidia’s success has been its ownership of both the hardware and software that now powers a huge percent of the world’s artificial intelligence computation, but time will tell whether the current U.S. antitrust regime decides they have succeeded too well.
In order to pursue the vision of a hypothetically more-perfect competitive environment, high-minded regulators appear willing to destroy products and systems that, judging by their overwhelming success, consumers appear to be happy with. If they succeed, they will shift the competitive dynamic in the U.S. tech industry from permissionless innovation toward a state-run managed competition—to the detriment of consumer welfare, technological progress, and U.S. competitiveness.