Platforms, Power, and the Antitrust Challenge: a Modest Proposal to Narrow the U.s.-europe Divide

• Publication year: 2021

98 Nebraska L. Rev. 297. Platforms, Power, and the Antitrust Challenge: A Modest Proposal to Narrow the U.S.-Europe Divide

Platforms, Power, and the Antitrust Challenge: A Modest Proposal to Narrow the U.S.-Europe Divide

Eleanor M. Fox(fn*)

ABSTRACT

Big platforms dominate the new economy landscape. Colloquially known as GAFA(fn1) or FAANG,(fn2) the high tech big data companies are charged with using the power of their platforms to squelch startups, appropriate rivals' ideas, and take and commercialize the personal data of their users.

Are the platforms violating the antitrust laws? Should they be broken up? Or are they the agents of progress in the new economy?

On these points, the United States antitrust law and the European Union competition law may diverge. The Competition Directorate-General of the European Commission has brought proceedings against or is investigating Google, Amazon, Apple, and Facebook. Germany, under its own competition law, has condemned Facebook's conduct. Meanwhile, in the United States, authorities are skeptical, but they have commenced investigations.

This Article is a comparative analysis of U.S. and EU law regarding monopolization/abuse of dominance as background to understanding why EU law is aggressive and U.S. law may be meek in the treatment of the big tech platforms. First, it examines the factors that underlie the two perspectives. Second, it considers three cases or problems-Google/Comparative Shopping (EU), Facebook-Personal Data (Germany), and dominant platforms' acquisitions of start-ups that are inchoate competitive threats, such as Facebook's acquisitions of WhatsApp and Instagram. The Article considers what lessons the

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latest Supreme Court antitrust decision, Ohio v. American Express (AmEx),(fn3) holds for the analysis of the big data antitrust issues. Third, it asks what U.S. antitrust law and enforcement should do. It concludes that U.S. antitrust law should reclaim its role as watchdog to stop abuses of economic power, and makes suggestions for U.S. antitrust law to meet the big-platform challenge in a modest but meaningful and practicable way.

TABLE OF CONTENTS

I. Introduction .......................................... 298

II. A Brief Comparison of U.S. and EU Law of Monpolization/Abuse of Dominance .................... 300
A. The United States ................................. 300
B. Europe ............................................ 301
C. Presumptions and Divergences .................... 303

III. Implications for High Tech, Big Data .................. 304

IV. Three Examples of Alleged Platform Abuse ............ 306
A. Google/Comparative Shopping ..................... 306
1. EU Law ....................................... 306
2. U.S. Law ...................................... 308
B. Facebook-Abuse of Data ........................... 309
1. German Law .................................. 309
2. U.S. Law ...................................... 312
C. StartUps: Nipping Competition in the Bud ........ 313

V. Proposals ............................................. 315

VI. Conclusion ............................................ 318

I. INTRODUCTION

The high tech/big data platforms have been labeled as BAADD- "big, anti-competitive, addictive and destructive to democracy."(fn4) They dominate our lives, "steal" and sell our data, manipulate our minds, and use the power of their platforms to destroy or demote their rivals. The platforms tell a different story: they are creators of new systems that people want; they provide their popular services often at no charge; their popularity is the fruit of invention and the hallmark of success; any antitrust challenges will chill innovation. Moreover, the problems that exist are in the realms of data protection or consumer protection. The problems are bootstrapped into antitrust only by hip-

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ster populists who are anticapitalist and would destroy the free market system by handicapping creativity.(fn5)

This tugofwar of the extremes distracts from the middle. There is a large middle space for antitrust law-control over uses of economic power to suppress competition and undermine the workings of the market. To understand the claims of anticompetitive conduct, it is instructive to examine the antitrust treatment of big tech platforms by the European Union and by Germany, for these jurisdictions have been in the forefront in studying the issues and considering their antitrust dimensions. To understand the comparative reticence in the United States (although this may be changing), it is useful to consider the state of U.S. antitrust law. Since EU law and U.S. law are the dominant antitrust models in the world, a focus on them is fitting.

This Article begins with a lay-of-the-land description of how the EU law on abuse of dominance differs from the U.S. law of monopolization. It examines three matters in which Europe has acted or has signaled its concerns with big tech. It considers the probable U.S. treatment of the same problems, including implications of the latest Supreme Court antitrust decision, Ohio v. American Express (AmEx).(fn6) In AmEx, the Supreme Court reinforces U.S. conservatism-even while public rhetoric demands greater antitrust activism especially with a view to taming big tech.(fn7)

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The Article concludes that the big tech markets are conducive to behavior to suppress competition. This behavior is occurring. Yet its harms are totally discounted by influential antitrust experts and policy makers who insist on a minimalist antitrust and maximal freedom of even dominant firms. There are ways in which the U.S. antitrust laws can protect the public from this suppression of competition despite the constant narrowing of the law by the Supreme Court of the United States.

II. A BRIEF COMPARISON OF U.S. AND EU LAW OF MONPOLIZATION/ABUSE OF DOMINANCE

A. The United States

The U.S. Sherman Act was enacted in 1890, famously, to control the power of the big trusts. Major legislation in 1914 and again in 1950 extended the reach of the law to control exclusionary practices that had become rampant and to stem a rising tide of economic concentration that was thought to threaten democracy.(fn8) For most of a century the U.S. antitrust law was akin to the economic democracy of markets.(fn9) But beginning in the third quarter of the twentieth century, the Supreme Court reversed course in the name of efficiency and freedom. Today U.S. monopoly law-Section 2 of the Sherman Act-has a cabined scope. To run afoul of the law, a firm must not only misuse monopoly power; it must create more power. Moreover, the courts apply a default presumption that conduct of even a monopoly firm is efficient and good for consumers; thus, that it does not increase power.(fn10)

But the U.S. antitrust laws have one more weapon to combat unilateral (nonconspiratorial) use of economic power: Section 5 of the Federal Trade Commission Act. Section 5 prohibits "unfair methods of competition." "Unfair" is construed to mean "anticompetitive." Given the statutory language of "unfair methods," the meaning of "anticompetitive" attributed to Section 5 can appropriately be more elastic than the meaning of "anticompetitive" attributed to the Sherman Act. It should be more elastic, for the Federal Trade Commission Act was adopted as "a way to stop incipient Sherman Act violations, or, more

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broadly, undeserved growth."(fn11) Typically, however, the FTC hesitates to stray from the narrow path of the Sherman Act.

B. Europe

Meanwhile in Europe, at the end of World War II, a core of European nations resolved to create a new structure of governance so as never to have a war again. Six nations, led by Germany, France, and Italy, formed the European Coal and Steel Community in 1951-1952 and then the European Economic Community in 1957-1958. This visionary project depended upon the realization of community-a single European market. As Montesquieu said, "people who trade together tend not to fight."(fn12) They come to respect one another, and hatreds dissolve. Free trade and free movement in the internal market was at the heart of the European conception. That meant nations' border-barriers had to fall. As the founders presciently anticipated, once tariffs and quotas were abolished, private firms would reerect them. Moreover, the member nations had nurtured their own national champions, typically stateowned enterprises, entrenching nationalistic barriers. Thus, it was necessary to embed antitrust in the Treaty(fn13) itself, to prevent private power and privileged enterprises from defeating the project for economic community. As a result, the Treaty (now, the Treaty on the Functioning of the European Union) contains Article 101, which prohibits anticompetitive agreements, and Article 102, which prohibits abuses of a dominant position,(fn14) as well as other integral provisions to control public and private economic power.

Like the U.S., the EU went through two important phases with regard to the question: When is single-firm conduct anticompetitive?

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In the first stage, EU law was formalistic. The law was aggressive against dominantfirm conduct that excluded rival firms. It contained a broad presumption against exclusive contracts by dominant firms. The second phase came in the 1990s, and, even more dramatically, in the first decade of the new millennium. This was epitomized by the European Commission's 2009 guidance paper on dominant firm...