Big Tech in a Small Pond: How the Internet Economy Became So Concentrated and What Sector-specific Regulation Can Do to Reel it in

• Publication year: 2021

Big Tech in a Small Pond: How the Internet Economy Became So Concentrated and What Sector-Specific Regulation Can Do to Reel It In

Andy Wilson
University of Georgia School of Law, aw08991@uga.edu

Big Tech in a Small Pond: How the Internet Economy Became So Concentrated and What Sector-Specific Regulation Can Do to Reel It In

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BIG TECH IN A SMALL POND: HOW THE INTERNET ECONOMY BECAME SO CONCENTRATED AND WHAT SECTOR-SPECIFIC REGULATION CAN DO TO REEL IT IN

Andy Wilson^*

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TABLE OF CONTENTS

I. INTRODUCTION...........................................................................................249

II. ANTITRUST TOOLS ARE LIKELY INADEQUATE TO REMEDY INTERNET ECONOMY CONCENTRATION...................................................................251

A. ANTITRUST HAS BEEN WEAKENED BY COMMON LAW DEVELOPMENTS.................................................................................252
B. ANTITRUST FAILS TO PREVENT ANTICOMPETITIVE ACQUISITIONS BY DOMINANT INTERNET FIRMS.....................................................254
C. ANTITRUST FAILS TO ADDRESS STRUCTURAL FEATURES OF THE INTERNET ECONOMY THAT MAKES IT SUSCEPTIBLE TO CONCENTRATION...............................................................................257
D. SECTOR-SPECIFIC REGULATION, SUCH AS THE TELECOMMUNICATIONS ACT, IS AN ALTERNATIVE TO ANTITRUST THAT CAN ADDRESS STRUCTURAL FEATURES OF THE ECONOMY ...............................................................................................................260

1. Background and Structure of the Telecommunications Act. 261
2. Market Outcomes of the Telecommunications Act...............262

III. THE ACCESS ACT IS A PROMISING STEP TOWARDS CORRECTING THE INTERNET ECONOMY'S STRUCTURAL PROBLEMS.................................263

A. CORE PROVISIONS OF THE ACCESS ACT......................................264

1. Data Portability............................................................................265
2. Interoperability.............................................................................268
3. Delegatability................................................................................270

B. STRENGTHS OF THE ACCESS ACT..................................................272
C. WEAKNESSES OF THE ACCESS ACT...............................................275

IV. CONCLUSION................................................................................................278

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I. INTRODUCTION

In its early days, many people perceived the internet as a new space in which human autonomy, creativity, and productivity could flourish, freed from physical restrictions and government control.¹ Typical of this freethinking spirit was John Perry Barlow's 1996 "A Declaration of the Independence of Cyberspace," which celebrated the newfound autonomy enabled by the internet's radical decentralization and warned institutional authorities to keep out.² Twenty-five years later, his characterization of the internet as "an act of nature . . . grow[ing] itself through our collective actions"³ rings increasingly false as a mere handful of firms dominate their respective corners of the internet.⁴

The early optimism about the internet has given way to widespread concern about tech sector concentration, reaching across even starkly drawn political lines.⁵ The population at large appears to be souring toward the big internet companies⁶ even as their major rally in the face of the COVID-19 pandemic propped up the sagging economy and powered them to a record share of the S&P 500.⁷ On the academic front, a new movement calling for more vigorous antitrust enforcement to promote competition has gained prominence and

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traction.⁸ And politically, both state and federal governments are subjecting big tech to increasing scrutiny,⁹ most notably, with a series of antitrust suits against two of the biggest tech giants, Google and Facebook. The Trump Administration sued Google in October 2020 for monopolistic practices in its internet advertising and search engine services.¹⁰ It sued Facebook in December 2020 for anticompetitive conduct in acquiring Instagram and WhatsApp and selectively excluding developers from its application programming interfaces.¹¹ Dozens of state attorneys general joined forces in December to bring their own antitrust suits against Google and Facebook, with only a handful of states abstaining.¹² These suits are ongoing, but several have recently been dealt major setbacks.¹³

These developments signal not only widespread awareness that there is a problem with the state of the tech sector, but also state and federal governments' willingness to tackle it. In addition to these antitrust suits, Congress has recently considered legislative approaches addressing the problem of tech sector concentration, such as the "Augmenting Compatibility and Competition by Enabling Service Switching" (ACCESS) Act.¹⁴ Its sponsors intend for it to

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restore competition to the concentrated digital economy,¹⁵ thereby giving Americans more choice and control of their online presence.¹⁶

Given that antitrust enforcers are now vigorously attempting to rein in big tech firms' anticompetitive practices,¹⁷ the question naturally arises whether sector-specific regulation such as the ACCESS Act is necessary. After all, regulators already possess an established legal framework for remedying harmful market concentration in the form of antitrust law.¹⁸ The first section of this Note will explore the inadequacy of current antitrust law to deal with competitive harms in the internet economy, showing that sector-specific regulation is necessary. The second section will consider the ACCESS Act as an example of sector-specific regulation that, although flawed, contains key elements that address the underlying structural problems of the internet economy.

II. ANTITRUST TOOLS ARE LIKELY INADEQUATE TO REMEDY INTERNET ECONOMY CONCENTRATION

Antitrust law aims to restrain business practices deemed to harm competition and, indirectly, consumers.¹⁹ The antitrust laws on the books prohibit unreasonable restraints on trade, such as monopolization or attempt to monopolize, mergers and acquisitions tending to lessen competition, and unfair

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methods of competition.²⁰ Congress passed the Sherman, Clayton, and FTC Acts between 1890 and 1914 with the aim of "protect[ing] the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up."²¹ These principal antitrust laws presumptively form the first line of defense against harm to consumers from internet sector concentration. Faced with the increasing concentration of wealth and power in a handful of internet firms, legal academia has divided into roughly three camps. First are those who either see no problem with the current state of affairs or think that if there is an imbalance, it will inevitably be corrected by disruptive innovation.²² Either way, to this laissez-faire group, intervention beyond what is already being done is unnecessary.²³ Next, some scholars believe that the current antitrust framework provides adequate tools to rein the technology sector and just needs to be enforced more consistently.²⁴ Finally, others believe antitrust is not sufficient to address competition harms in the digital economy and call for a new set of regulatory tools.²⁵ This Note argues that the third group is correct and that new regulatory tools would be more successful in correcting the imbalances of the tech sector.

A. ANTITRUST HAS BEEN WEAKENED BY COMMON LAW DEVELOPMENTS

Although the legislation establishing antitrust law in the U.S. provided its framework and goals, antitrust doctrine has never "been precisely formulated as a comprehensive whole."²⁶ Instead, antitrust developed largely through the common law process, influenced by a succession of different prevailing

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ideologies.²⁷ Since the late 1970s, antitrust has morphed from incorporating societal values about concentration and promoting competition to focusing narrowly on economic efficiency and consumer welfare.²⁸ As a result, as the economy faces a new and likely more entrenched form of monopoly in the internet giants,²⁹ antitrust has lost much of its former power.³⁰ The same common-law development that gave judges flexibility in promoting antitrust's aims now binds judges via stare decisis with four decades' worth of restricting antitrust enforcement.³¹ The Supreme Court, under Chief Justice John Roberts, has increasingly favored large companies over public interest concerns, despite growing agitation in academia for stricter, revamped antitrust enforcement.³² Thus, the laissez-faire approach has carried the field for the last few decades and, in so doing, erected substantial barriers to more vigorous enforcement within the existing framework.³³ Further, the consensus view has been that "power in digital markets will be rare and fleeting, and that enforcement efforts would entail a prohibitively high risk of chilling innovation."³⁴ This view has led antitrust enforcers to take an especially hands-off approach in the internet economy.³⁵

As a result of U.S. antitrust's common-law development, the federal and state agencies bringing antitrust suits against large technology companies face steep obstacles. They must not only rely on doctrines developed long before the emergence of the internet economy and poorly suited to its dynamics, but must also overcome decades' worth of unfavorable precedent to meet their burdens of proof. Most saliently, federal court precedents and agency standards making consumer welfare the exclusive aim of antitrust have eroded its capacity to

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restrain big tech's anticompetitive practices.³⁶ The currently-used measures of consumer welfare—higher price, lower quality, and stunted innovation—are more difficult to prove in digital markets.³⁷

Antitrust...