THE RISE OF THE DATA-OPOLY: CONSUMER HARM IN THE DIGITAL ECONOMY.

• Author: Fischer, Benjamin M.

INTRODUCTION

Our antitrust laws are a product of their time. Beginning in the 1870s, fundamental changes in transportation, communications, population growth, production technology, business organization, and finance culminated in rapid economic growth. (1) As the United States industrialized, it entered the "Gilded Age," (2) characterized by rapid social upheaval and technological advancement. Between 1870 and 1890, the population of the United States nearly doubled from 38.6 million to 63 million people, (3) while 7.1 million new Americans immigrated into the country. (4) America's industrial sector grew tremendously; real GDP increased twofold, (5) the energy consumption of the United States more than quadrupled, (6) and manufacturing production grew by over 50 percent. (7) New industries emerged. Railroads drastically lowered freight rates and enabled rapid, cross-country movement of goods and people. New technological advancements, such as the Bessemer process of steelmaking and new methods of distillation in petroleum refining, (8) led to the emergence of large, capital-intensive firms that were able to take advantage of economics of scale. (9)

However, the economic gains from this period were not evenly distributed; rather, corporate power became concentrated in the hands of the few. During the 1870s, John D. Rockefeller's Standard Oil grew from comprising about 4 percent of the US petroleum industry to 90 percent. (10) Standard Oil was able to use its dominant market position to extract rebates from railroads, (11) spend vast sums to defeat political rivals, (12) and exclude competitors from entering the market. (13)

Andrew Carnegie's Steel Company, which was later sold for an enormous sum to J.P. Morgan to create U.S. Steel, (14) bought out its rivals (15) and crushed labor unions. (16) Cornelius Vanderbilt formed his monopoly, New York Central Railroad, by refusing to accept the passengers or freight of his rivals until they agreed to sell their companies to him. (17) Criticizing the excesses of the Gilded Age, Walt Whitman wrote:

In fashionable life, flippancy, tepid amours, weak infidelism, small aims, or no aims at all, only to kill time. In business, (this all-devouring modern word, business,) the one sole object is, by any means, pecuniary gain. The magician's serpent in the fable ate up all the other serpents; and money-making is our magician's serpent, remaining to-day sole master of the field. (18) In 1890, in response to an alarming concentration of corporate wealth and power, Congress passed the Sherman Antitrust Act, (19) which, generally speaking, targeted attempts at monopolization and other anticompetitive behaviors. (20) Nearly two decades later, in 1914, Congress passed the Clayton

Antitrust Act to further prohibit anticompetitive practices, (21) as well as the Federal Trade Commission Act, which established the titular agency to enforce violations of antitrust laws. (22) In the decades that followed, the federal docket saw numerous lawsuits challenging the monopolies of the Gilded Age, (23) many of which resulted in the dissolution of trusts or otherwise diminished unlawfully amalgamated corporate power. Congress later amended these acts by passing the Robinson-Patman Act, (24) the Miller-Tydings Act, (25) the Celler-Kefauver Act, (26) and the Hart-Scott-Rodino Antitrust Improvements Act. (27) However, no significant antitrust legislation has been enacted since 1964.

While the times have changed, antitrust law has not. The monopolies of the twenty-first century are not railroads, oil producers, or steel manufacturers, but multinational technology companies: Amazon, Apple, Facebook and Google, often collectively referred to as "Big Tech." (28) However, while the technology monopolies of the twenty-first century look very different from the monopolies of the Gilded Age, America's antitrust framework remains mired in the past. Unsurprisingly, the Sherman Antitrust Act and the Clayton Antitrust Act, which continue to form the backbone of American antitrust regulation, have proven inadequate for preventing the emergence of, or otherwise regulating, today's monopolies; these technology companies, sometimes dubbed "data-opolies" on account of the massive amounts of data they are able to collect, are able to engage in anticompetitive conduct, including leveraging their monopoly power to exclude competitors from market entry and acquiring would-be market entrants. The rise of the data-opoly has also harmed consumers by reducing consumer choice, diminishing product innovation, and eroding user privacy. (29) However, the traditional antitrust framework, and its focus on price-related consumer harm, has failed to account for the economics of the data economy where users pay not with dollars, but with data.

In Part I, this Note will consider the history of antitrust regulation in this country, from the Gilded Age to the twenty-first century. Part II will provide a brief overview of the classical antitrust framework. In Part III, this Note will illustrate how the conceptual shortcomings of the classical antitrust framework have facilitated the emergence of data-opolies. Part IV will analyze proposals and potential solutions to the data-opoly problem, and propose a focus on data, the underlying commodity which has enabled the rise of the data-opoly. Part V of this Note will consider other similar measures, including state laws, the current European privacy framework, and several pieces of legislation pending in various state legislatures. Finally, in Part VI, this Note will suggest implementing a privacy regime focused the rights of individuals in their data, which would have the effect of providing an effective remedy to the data-opoly problem from outside the antitrust regulatory framework.

1. ANTITRUST REGULATION

   The regulatory framework for antitrust law comes from a variety of statutes passed between 1890 and 1964. In 1890, Congress passed the Sherman Antitrust Act, (30) which prohibited contracts, combinations, or conspiracy in restraint of interstate or international trade, (31) outlawed monopolizing, attempting to monopolize, or conspiring to monopolize, (32) and tasked the Department of Justice with the duty to institute proceedings in equity to prevent and restrain such violations, including by injunctive relief. (33) Within the meaning the Sherman Act, unlawful restraints of trade can include horizontal restraints such as price fixing, (34) market allocation, (35) and concerted refusals to deal, (36) as well as vertical restraints such as tying. (37) Monopolization and attempted monopolization offenses require anticompetitive behavior. In order to demonstrate anticompetitive behavior under the Sherman Act, a plaintiff must show "that (1) defendant has, and exercises, such overwhelming strength in the [relevant] market that it controls that market, (2) this strength excludes some potential, and limits some actual, competition, and (3) this strength is not attributable solely to defendant's ability, economies of scale, research, natural advantages, and adaptation to inevitable economic laws." (38)

   In 1914, the Clayton Antitrust Act expanded antitrust regulation to prohibit predatory pricing, (39) to prohibit sales and leases contingent on the purchaser or lessee refusing to deal with competitors of the seller or lessor, (40) and to prohibit anticompetitive mergers and acquisitions, (41) as well as to provide for a right of action for damages by individuals, (42) and for injunctive relief by individuals and the federal government. (43) The 1914 Federal Trade Commission Act established the Federal Trade Commission (FTC), an administrative body tasked with enforcing antitrust laws. (44) The FTC was statutorily authorized to conduct its own investigations, although enforcement required an Article III Court. (45) The act also substantively expanded antitrust laws by prohibiting unfair methods of competition and unfair or deceptive acts or practices. (46)

   The Robinson-Patman Act of 1936 (47) amended the Clayton Antitrust Act to redefine price discrimination and address other discriminatory practices (48) to criminalize certain offenses in the Clayton Antitrust Act, (49) and to prohibit sales at unreasonably low prices. (50) The Miller-Tyding Act of 1937 amended Section 1 of the Sherman Act to provide an exception for fair trade agreements, (51) and although this provision limited the efficacy of the Sherman Act, (52) this provision was narrowly construed by the Supreme Court, (53) and later repealed. (54) The Celler-Kefauver Act, passed by Congress in 1950, amended the Clayton Antitrust Act to expand its prohibitions against mergers and acquisitions so as to include in its scope both vertical and horizontal mergers and acquisitions which could limit competition. (55) The Hart-Scott-Rodino Antitrust Improvements Act of 1976 strengthened antitrust law by requiring parties undergoing mergers to file with the Federal Trade Commission and Department of Justice to determine whether those mergers would violate antitrust laws. (56)

2. CLASSICAL ANTITRUST THEORY

   While the American economy has changed dramatically since these laws were originally enacted, the core statutory framework has remained substantially the same. Furthermore, while the antitrust laws were originally interpreted broadly, (57) subsequent trends and developments in the enforcement of antitrust laws have significantly diminished their reach. First, the Courts have narrowly interpreted the goals of antitrust laws by applying a "consumer welfare" focus, which emphasizes not the effect on the market as a whole but rather the prices ultimately paid by consumers. Second, courts have taken the view that underenforcement is preferable to overenforcement, (58) a position at odds with the legislative intent of the antitrust laws. (59) Third, enforcement of the antitrust laws has been split between the Federal Trade Commission and...