The Fight for Fairness: Antitrust Challenges in the Digital Market

By Amanda Damayanti

Amanda Damayanti is an exchange student from Indonesia at the University of Pennsylvania. Back home, she is studying Law in the Faculty of Law, University of Indonesia.

The rapid development of technology changed the way we live, from how we access information and communicate with each other to how we conduct economic activities. Technological development paved the way for the emergence of the digital market, which changed the way economic activities are carried out. The digital market allows for more cost-effective activities, such as online advertising and web news distribution, cutting costs. The shift not only changed the way of the market but also changed the way it should be regulated. The rise of the digital market has resulted in some antitrust challenges and has led to the need for a change in the antitrust laws.

Antitrust laws are regulations that promote competition in the economy and regulate the concentration of economic power. [1] These laws ensure a competitive business environment, promote innovation, and protect consumers by keeping the prices of goods and services down. [2] In the United States, antitrust regulation is governed by the Sherman Act of 1890, the Federal Trade Commission Act of 1914 (which created the FTC), and the Clayton Act, also passed in 1914. [3] Though there have been revisions to the acts, the objectives of antitrust laws are the same: to ensure fair competition and protect consumers. Given the development of the digital market, more needs to be done in this digital era.

There are numerous antitrust challenges present in the digital market, some of which pertain to mergers and acquisitions issues and self-preferencing. Most of those issues deal with big tech companies. As discussed previously, the rise of the digital market shifted the ways we do business. Moreover, it also allowed for the emergence and growth of numerous big tech companies such as Google, Apple, Facebook (Now Meta), Amazon, and Microsoft. Though they now are massive, these companies have not always been that big; they have consistently expanded their scope through mergers and acquisitions of other companies. While mergers and acquisitions are not illegal, mergers done by large companies to expand even more disrupt the market, resulting in anti-competitive activities. These so-called “killer acquisitions” can curb competition, as smaller firms that compete with the big tech companies are gobbled up instead of being allowed to thrive. The FTC has worked towards preventing these from happening more in the future, for example, by preventing Meta’s acquisition of the virtual reality firm Within Unlimited, as well as preventing Microsoft from acquiring the video game company Activision Blizzard. [4] 

Another antitrust issue is self-preferencing, where e-commerce platforms favor their own products and services over those of their competitors. [5] For example, Google promotes Google Maps search results instead of other information, luring people to click on the top search results first. Additionally, Amazon has also allegedly done self-preferencing by listing their products as “cheaper alternatives” to competitors’ products. Because Amazon’s brands are usually cheaper, consumers pick them over the competitor brands. With this in mind, the House of Representatives has introduced the American Innovation and Choice Online Act (AICO), which would prohibit self-preferencing. [7] If passed, Apple would not be allowed to have their own apps pre-installed inside their products, and Google would not be allowed to put Google Maps search results at the top. 

Sometimes, however, self-preferencing might help consumers by making the service more efficient. On top of that, it is already a common practice outside of the digital marketplace. Supermarkets, for example, often display their own private-label products alongside their competitors’. [8] The question then becomes when self-preferencing is harmful to consumers. Antitrust policy in the United States has been grounded on achieving “consumer welfare.” Based on this belief, the government should find a balance between when self-preferencing is harmful to competition and when it is useful to make consumers better off.

Other than the AICO, the Open Apps Market Act was also proposed as a bill to regulate competition in the digital market. At the end of 2022, the House approved the Act to regulate big tech’s dominance. [9] The bill would have given states more control over competition cases and provided more money for federal regulators. [10] Despite the effort, the bill stalled in the Senate. It was discovered that those companies worked together to prevent antitrust legislation from passing.  Tech giants and related trade groups spent $277 million on lobbying, surpassing antitrust legislation supporters by sixfold. Amazon itself allocated a total of $16 million to prevent both AICO and Open Apps Market Act to pass, marking its highest spending in that period across any year on record. [11] Similarly, Apple broke its previous record for lobbying expenditures by spending $2.5 million in the first quarter of 2022. [12]
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Given the power big tech companies have, it is clear that the fight against anti-competitive behavior is going to be challenging. Still, other more viable proposals would tackle these challenges. These include enhancing merger control frameworks to better cater to the digital economy, strengthening the enforcement of abuse of dominant positions, enhancing digital tools and expertise, developing cross-border cooperation among competition authorities, and conducting market studies to identify evident competition problems that may arise. [13] In early November, the FTC and Department of Justice (DOJ) met with G7 competition authorities at the G7 Competition Authorities and Policymakers’ Summit to discuss competition in the digital market. [14] The summit included shared commitments on keeping a fair digital market as well as discussions on how to regulate new technologies in the digital market, such as artificial intelligence. [15] One of the topics is regarding the use of AI to set consumer prices, which may lead to illegal collusion and price fixing. Additionally, the summit stressed the importance to regulate key inputs in AI, namely massive data compilations, machine learning, and substantial computational resources, as it may lead to bundling, tying, exclusive dealing, or self-preferencing deals. [16] There remains much work ahead to establish comprehensive antitrust laws. Nonetheless, the United States is progressing towards this goal, aiming to ensure fair competition and regulation amidst the changing technology environment.

References:
[1] "Antitrust," Legal Information Institute, Cornell Law School, accessed November 28, 2023, https://www.law.cornell.edu/wex/antitrust.

​[2] "Antitrust Laws," Federal Trade Commission, accessed November 26, 2023, https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/antitrust-laws.

[3] Ibid.

[4] "A Wave of Acquisitions May Have Shielded Big Tech from Competition," Yale Insights, accessed November 27, 2023, https://insights.som.yale.edu/insights/wave-of-acquisitions-may-have-shielded-big-tech-from-competition.

[5] Ibid.

[6] "Big Tech’s Self-Preferencing Delusion," Cato Institute, accessed November 28, https://www.cato.org/briefing-paper/big-tech-self-preferencing-delusion#protecting-competitors-over-consumers.

[7] Eric Cortellessa. "Congress Is Taking on Big Tech Monopolies—But Are These Proposals Serious Enough?" Time, accessed November 27, 2023, https://time.com/6168761/congress-big-tech-monopoly-antitrust/.

[8] Rebecca Klar and Karl Evers-Hillstrom. "Big Tech Fought Antitrust Reform and Won," The Hill, accessed November 28, 2023, https://thehill.com/policy/technology/3785894-how-big-tech-fought-antitrust-reform-and-won/. 

[9] Ibid.

[10]  "Technology Firms Increase Lobbying Efforts Ahead of 2022 Midterm Elections," AP News, accessed November 28, 2023, https://apnews.com/article/2022-midterm-elections-technology-business-lobbying-congress-6e49cfc65668b99c633647898d114a8b. 

[11]  "How Big Tech Fought Antitrust Reform and Won," The Hill. Accessed November 28, 2023, https://thehill.com/policy/technology/3785894-how-big-tech-fought-antitrust-reform-and-won/. 

[12] "The Hill - Apple, Amazon, Meta Report Record Q1 Lobbying Spending Amid Antitrust Fight," The Hill, accessed December 2, 2023, https://thehill.com/lobbying/3275654-apple-amazon-meta-report-record-q1-lobbying-spending-amid-antitrust-fight/. 

[13] OECD. "OECD Handbook on Competition Policy in the Digital Age," accessed November 26, 2023. https://www.oecd.org/daf/competition/oecd-handbook-on-competition-policy-in-the-digital-age.pdf.

[14] "FTC and DOJ Meet with G7 Enforcement Partners to Discuss Competition in Digital Markets," Federal Trade Commission, accessed November 29, 2023. https://www.ftc.gov/news-events/news/press-releases/2023/11/ftc-doj-meet-g7-enforcement-partners-discuss-competition-digital-markets. 

[15] Ibid.

​[16] Colin P. Ahler and Cole Craghan, “G7 Commits to Tackling Antitrust Concerns Posed by AI Technologies,” accessed December 2, 2023, https://www.swlaw.com/publications/legal-alerts/g7-commits-to-tackling-antitrust-concerns-posed-by-ai-technologies#:~:text=Following%20a%20summit%20in%20Japan,intelligence%20(%E2%80%9CAI%E2%80%9D)%2C.

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