Penn Undergraduate Law Journal
  • Home
  • About
    • Mission
    • Masthead
    • Faculty Advisory Board
    • Partner Journals
    • Sponsors
  • Submissions
  • Full Issues
  • The Roundtable
    • Pre-Law Corner
  • Events
  • Contact
    • Contact
    • Apply
    • FAQs
  • Home
  • About
    • Mission
    • Masthead
    • Faculty Advisory Board
    • Partner Journals
    • Sponsors
  • Submissions
  • Full Issues
  • The Roundtable
    • Pre-Law Corner
  • Events
  • Contact
    • Contact
    • Apply
    • FAQs

The Roundtable


Welcome to the Roundtable, a forum for incisive commentary and analysis
on cases and developments in law and the legal system.


INTERESTED IN wRITING FOR tHE rOUNDTABLE?

Regulating Tech Monopolies: Different Industry, Same Fundamentals

3/17/2016

0 Comments

 
Picture
By Nayeon Kim

Nayeon Kim is a freshman at the University of Pennsylvania.

Last April, Margrethe Vestager, the European Union’s antitrust chief, formally accused Google of manipulating search results in favor of its other businesses. For example, she argued that Google intentionally displayed its shopping site on the front when people searched for products, diverting traffic from the sites of its competitors. Although there could be some political motives behind the actions of European regulators, the existence of this conflict itself attests to the immense amount of power Google has over the online search market and informs us of how things may go wrong when a single company virtually dominates an industry.

Not only has Google faced antitrust investigations in Europe, but in the US as well; however, the US investigation did not ultimately result in a formal charge. In 2013, the Federal Trade Commission, or FTC, concluded its two-year investigation on whether Google violated any US antitrust regulations. The FTC stated that it would not file a lawsuit against Google because it could not find sufficient evidence of the company breaking the law. [1]
Referring to the 1890 Sherman Act, the FTC argued that although Google dominates the online search industry, it neither attains nor maintains its current position through monopolistic means. Especially concerning Google’s Universal Search, which shows Google’s products on top when the user searches for certain goods, the FTC found that this mechanism is primarily used to improve user experience, not to curb existing or nascent competition. [2] Although the FTC acknowledged that competitors could have been harmed by Universal Search, it characterized such outcomes as incidental to the purpose of best serving customers. However, the FTC still ordered Google to alter its business practices in other areas, including letting companies to remove brief descriptions of their products on Google’s search page and granting fair access to patented technologies for smartphones to its competitors.

Although the FTC declared that the core practices of Google are fair, there are many who disagree with the FTC’s decision. More importantly, the number of antitrust cases against big technology companies are likely to increase in the future. A fairly mature technology industry usually has one or at most two big players: Google for search, Facebook for social media, Uber for ride hailing, and so on. [3]

An industry is formed when a clever, enterprising person first conceives a business idea, and then many imitators emerge and try to make themselves the dominant player of the said  industry. After a while, the industry is usually dominated by one player and other companies die out, not because the dominant company intentionally blocked competition but because of various factors including the network effect and the virtuous cycle of more users leading to more data, which enables the company to provide better services to customers using that data, leading to even more users. Moreover, today most technology companies offer software that can be used free forever, which eliminates the need for customers to move on to the second-best product. [4] The environment in which big technology firms operate is conducive to forming what may appear to be monopolies that should be regulated.

Even though the industry the Sherman Act is trying to regulate today is drastically different from the industries that existed in 1890, the Sherman Act still provides a good framework for determining whether an action of a “monopoly power” in the market should be regulated. The Sherman Act does not regulate a company just because the company’s market share is significantly larger than that of its competitors. Instead, the law was originally intended and continues to be  interpreted to only punish companies that hinder fair competition. [5] The spirit of the law is to benefit consumers by encouraging healthy competition in the industry which motivates companies to innovate and deliver better products to their users. It seems that the technology giants are doing exactly that, since they are forced to constantly innovate because of intense competition in the technology industry in general and since they are providing their products for free to expand their user base and making money from capitalizing it. Actually, Google, certainly a giant company, may not be a “monopolist” as defined in the Sherman Act because the company is facing intense competition from other large players that are trying to establish their place in the future search industry. [6]

Competitors of industry-dominating technology firms may be tempted to accuse the giant on the grounds of being a monopolist. However, monopoly laws must serve two purposes at the same time: preserving the incentive to motivate and preventing companies from engaging in unfair practices. The Sherman Act is a reasonable attempt to balance these seemingly conflicting interests. In today’s fast-changing tech space, it would be better for companies to identify and develop new products for the future rather than clinging to political forces to regulate what the giants have done in the past.



[1] Gustin, Sam. “Google’s Federal Antitrust Deal Cheered by Some, Jeered by Others.” TIME, January 4, 2013.
http://business.time.com/2013/01/04/googles-federal-antitrust-deal-cheered-by-some-jeered-by-others/
[2] Federal Trade Commission. “Google Agrees to Change Its Business Practices to Resolve FTC Competition Concerns in the Markets for Devices Like Smart Phones, Games and Tablets, and in Online Search.”
https://www.ftc.gov/news-events/press-releases/2013/01/google-agrees-change-its-business-practices-resolve-ftc
[3] Malik, Om. “In Silicon Valley Now, It’s Almost Always Winner Takes All.” The New Yorker, December 30, 2015. http://www.newyorker.com/tech/elements/in-silicon-valley-now-its-almost-always-winner-takes-all
[4] Melnick, Lloyd. “Winner Takes It All.” lloydmelnick.com. https://lloydmelnick.com/2014/09/30/winner-takes-it-all/
[5] Federal Trade Commission. “Monopolization Defined.” https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/monopolization-defined
[6] Louis, Tristan. “Why an Antitrust Suit Against Google Will Fail.” Business Insider, October 15, 2012. http://www.businessinsider.com/why-antitrust-lawsuits-fail-2012-10

Photo Credit: Flickr User faungg

The opinions and views expressed through this publication are the opinions of the designated authors and do not reflect the opinions or views of the Penn Undergraduate Law Journal, our staff, or our clients.

0 Comments

Your comment will be posted after it is approved.


Leave a Reply.


    Categories

    All
    Akshita Tiwary
    Alana Bess
    Alana Mattei
    Albert Manfredi
    Alexander Saeedy
    Alexandra Aaron
    Alexandra Kanan
    Alice Giannini
    Alicia Augustin
    Alicia Kysar
    Ally Kalishman
    Ally Margolis
    Alya Abbassian
    Anika Prakash
    Anna Schwartz
    Ashley Kim
    Astha Pandey
    Audrey Pan
    Benjamin Ng'aru
    Brónach Rafferty
    Bryce Klehm
    Cary Holley
    Christina Gunzenhauser
    Christine Mitchell
    Christopher Brown
    Clarissa Alvarez
    Cole Borlee
    Connor Gallagher
    Dan Spinelli
    Dan Zhang
    David Katz
    Davis Berlind
    Derek Willie
    Dhilan Lavu
    Edgar Palomino
    Edna Simbi
    Emma Davies
    Esther Lee
    Evelyn Bond
    Filzah Belal
    Frank Geng
    Gabriel Maliha
    Georgia Ray
    Graham Reynolds
    Habib Olapade
    Hailie Goldsmith
    Haley Son
    Harshit Rai
    Henry Lininger
    Hetal Doshi
    Iris Zhang
    Irtaza Ali
    Isabela Baghdady
    Ishita Chakrabarty
    Jack Burgess
    Jessica "Lulu" Lipman
    Joe Anderson
    Jonathan Lahdo
    Jonathan Stahl
    Joseph Squillaro
    Justin Yang
    Kaitlyn Rentala
    Kanishka Bhukya
    Katie Kaufman
    Kelly Liang
    Keshav Sharma
    Ketaki Gujar
    Lauren Pak
    Lavi Ben Dor
    Libby Rozbruch
    Lindsey Li
    Luis Bravo
    Lyndsey Reeve
    Madeline Decker
    Maja Cvjetanovic
    Maliha Farrooz
    Marco DiLeonardo
    Margaret Lu
    Matthew Caulfield
    Michael Keshmiri
    Mina Nur Basmaci
    Muskan Mumtaz
    Natalie Peelish
    Natasha Darlington
    Natasha Kang
    Nayeon Kim
    Nicholas Parsons
    Nicholas Williams
    Nicole Greenstein
    Nihal Sahu
    Omar Khoury
    Owen Voutsinas Klose
    Owen Voutsinas-Klose
    Pheby Liu
    Rachel Bina
    Rachel Gu
    Rachel Pomerantz
    Rebecca Heilweil
    Regina Salmons
    Sajan Srivastava
    Sandeep Suresh
    Sanjay Dureseti
    Sarah Simon
    Saranya Das Sharma
    Saranya Sharma
    Sasha Bryski
    Saxon Bryant
    Sean Foley
    Sebastian Bates
    Serena Camici
    Shahana Banerjee
    Shannon Alvino
    Shiven Sharma
    Siddarth Sethi
    Sneha Parthasarathy
    Sneha Sharma
    Sophie Lovering
    Steven Jacobson
    Suaida Firoze
    Suprateek Neogi
    Takane Shoji
    Tanner Bowen
    Taryn MacKinney
    Thomas Cribbins
    Todd Costa
    Tyler Larkworthy
    Vatsal Patel
    Vikram Balasubramanian
    Vishwajeet Deshmukh
    Wajeeha Ahmad
    Yeonhwa Lee

    Archives

    January 2023
    December 2022
    November 2022
    September 2022
    June 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    May 2019
    April 2019
    March 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    December 2017
    November 2017
    October 2017
    August 2017
    July 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    April 2016
    March 2016
    February 2016
    December 2015
    November 2015
    October 2015
    September 2015
    August 2015
    July 2015
    June 2015
    May 2015
    April 2015
    March 2015
    February 2015
    November 2014
    October 2014
    August 2014
    July 2014
    June 2014
    May 2014
    April 2014
    March 2014
    December 2013
    November 2013
    October 2013
    September 2013

Picture
Picture
​