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?

What the DOJ’s recent antitrust suits mean for Big Tech and the future of innovation

11/23/2020

0 Comments

 
Picture
By Albert Manfredi
​

Albert “Albi” Manfredi is a sophomore in the School of Engineering and Applied Science at the University of Pennsylvania. He intends to major in chemical and biomolecular engineering and hopes to complete the joint legal studies and history minor between The Wharton School and the College of Arts and Sciences. 

In the midst of a tumultuous year, the Department of Justice (DOJ) has recently filed historic antitrust lawsuits against large technology companies like Google and Visa. For some, this course of action is long overdue as the lax enforcement of antitrust allowed big information technology companies like Google, Facebook, Amazon, and Apple, to control the internet, extract huge fees from manufacturers, and dominate markets to limit competition and consolidate economic power [1]. For corporate America, these new suits have the potential to create a precedent for future cases, bringing a more regulated approach to the industry. 
Antitrust law was developed in the late 19th and early 20th centuries to combat the giant monopolies that ran the economy and most parts of the government. The Sherman Act of 1890 and the Clayton Act of 1914 defined the parameters the DOJ could use to bring these companies to court and seek remedies [2].  Specifically, the acts are broad so that courts could apply them in a variety of unforeseeable circumstances. Now, these same acts are being called upon to prevent similar monopoly control of technology sectors, where companies like Google control 80% of all internet searches and Visa facilitates 70% of all debit transactions [2, 3].
​

Despite its obvious application in cases where companies have large swaths of market share, opponents argue that antitrust should focus on the consumer and not on the control of the market. Essentially, as long as prices are low, market share should not be considered. As a result, much of the debate around antitrust regulation with tech companies in specific centers around the prospect of advancing technological innovation and whether or not regulation would help or hinder that goal. 

Proponents of antitrust enforcement argue that tech monopolies ruin the chances for disruptive, breakthrough innovation all while increasing prices over time for consumers. Big firms tend to innovate less because they are focused on quarterly earnings as opposed to long-term investments. Instead of new breakthrough designs, they focus on slight product improvements and cutting operational costs [4]. The prime example of this is Apple’s iPhone. Rather than create new technological feats, most research and development revolves around marginal improvements to the next generation of iPhones. Unfortunately for consumers, removing the home button does not meaningfully improve their quality of life in the way that technology industries should be vying for. 

Critics are quick to claim as a defense that big tech’s big projects serve as contributions to society. For instance, Express Wi-Fi by Facebook has given web access to 100 million people that otherwise wouldn’t have had it [5]. Google has also developed a hotspot program which gave 1.5 million people access to the internet in India [6].They argue that this is only possible given their large economies of scale that insulate them from volatility and uncertainty. Companies threaten that antitrust pressure forces them to drop risky growth strategies like these [7]. However, it’s what these companies don’t publicize that warrants punitive judicial action. 

Big tech companies kill off newly innovative competition to save their own economies of scale. They  have an incentive to slow the pace of technological change in order to increase their profits from existing products. As a result, they engage in a plethora of activities to prevent any competitors who could jeopardize that change [8]. The DOJ has been investigating this very phenomenon with Google and Visa. Google uses its power to pay off mobile phone manufacturers, carriers and browsers, like Apple’s Safari, to maintain Google as their default search engine, creating a self-reinforcing cycle of dominance [2]. Visa’s attempted acquisition of Plaid, a promising financial-tech startup, could potentially kill a revolutionary product that threatens Visa’s stranglehold over debit transactions [3]. 

In the aggregate, the big five tech companies made more than 600 acquisitions worth $200 billion over the past decade [9]. This along with predatory pricing practices have crippled smaller firms so much so that most have stopped entering the market and investors are more hesitant to invest in them. As such, it is no surprise that even before the COVID-19 pandemic, the Economist found that first round funding for venture capitalists is down 22% [10].

When faced with these arguments in antitrust lawsuits, the last line of defense for these grand corporations is to argue that consumer prices would rise if their odious monopoly is to fall. That was Google’s first response to litigation pursuits, where chief executives stated “the lawsuit would result in higher prices for consumers because Google would have to raise the cost of its mobile software and hardware” [2].

Fortunately for consumers, these along with the threats to stop technological innovation have historically been empty. In the European Union, Google was fined $9 billion and there was little to no change in business operations [2]. In the United States, antitrust action against AT&T in the 1980s lowered prices overnight and skyrocketed innovation in the long term, paving the way for the creation of the internet [11]. More recently than that, the 1990s lawsuit of Microsoft reached a settlement agreement that made tech executives so anxious they undermined their own power to make markets more competitive [11]. Overall, enforcing antitrust law restructured the market so companies could only maintain their profits by truly innovating.
While many consumers cannot imagine a world without large brands like Facebook, Apple, and Google, the world of economies of scale comes at a great cost. This is especially salient with the emergence of artificial intelligence and its potential to revolutionize society economically, medically, and in terms of improved quality of life. But if the current trend of monopolies killing innovation continues, experts estimate that 95% of the impact AI could have on society would be undercut [12].

Overall, the outcome of these upcoming lawsuits may determine the fate ofAmerican technological innovation for decades to come. Deputy Attorney General Frank Rosen put the debate into perspective: “If the government does not enforce its antitrust laws to enable competition, we could lose the next wave of innovation. If that happens, Americans may never get to see the next Google” [2]. 

[1] Baker, Jonathan B. The Antitrust Paradigm: Restoring a Competitive Economy. Cambridge, MA: Harvard University Press, 2019. 

[2] Kendall, Brent, and Rob Copeland. “Justice Department Hits Google With Antitrust Lawsuit.” The Wall Street Journal. Dow Jones & Company, October 21, 2020. https://www.wsj.com/articles/justice-department-to-file-long-awaited-antitrust-suit-against-google-11603195203   

[3] Kendall, Brent, and AnnaMaria Andriotis. “Justice Department Files Antitrust Lawsuit Challenging Visa's Planned Acquisition of Plaid.” The Wall Street Journal. Dow Jones & Company, November 5, 2020. https://www.wsj.com/articles/justice-department-files-antitrust-lawsuit-challenging-visa-s-planned-acquisition-of-plaid-11604591434 

[4] Atkinson, Robert D., and Michael Lind. Big Is Beautiful: Debunking the Myth of Small Business. Cambridge, MA: The MIT Press, 2019. 

[5] Constine, Josh. “Facebook's Internet.org Has Connected Almost 100M to the 'Internet'.” TechCrunch. TechCrunch, April 25, 2018. https://techcrunch.com/2018/04/25/internet-org-100-million/ 
[6] Joshi, Sonam. “1.5 Million People Access the Internet via Google's Free Wi-Fi at 19 Indian Railway Stations.” Mashable. Mashable, June 21, 2016. https://mashable.com/2016/06/21/google-india-railways-wifi-internet/ 

[7] Sen, Conor. “Tech Regulation Could Be Oddly Great for Investors.” Bloomberg.com. Bloomberg, 2019. https://www.bloomberg.com/opinion/articles/2019-06-05/regulation-will-reshape-google-facebook-and-other-tech-giants  

[8] Simon, Munongo. “Effects of Firm Size and Market Structures in Technological Innovation: A Review of Literature.” Journal of Sustainable Development Studies 2, no. 2 (2013): 170–81. https://core.ac.uk/download/pdf/229605921.pdf 

[9] Bloomberg, David McLaughlin |. “Analysis | Did Big Tech Get Too Big? U.S. Crackdown Seeks Answer.” The Washington Post. WP Company, October 19, 2020. https://www.washingtonpost.com/business/did-big-tech-get-too-big-us-crackdown-seeks-answer/2020/10/16/db8153f6-0fe8-11eb-b404-8d1e675ec701_story.html 

[10] “American Tech Giants Are Making Life Tough for Startups.” The Economist. The Economist Newspaper, June 2, 2018. https://www.economist.com/business/2018/06/02/american-tech-giants-are-making-life-tough-for-startups  

[11] Wu, Tim. The Curse of Bigness: Antitrust in the New Gilded Age. New York: Columbia Global Reports, 2018. 

[12] Kottenstette, Ryan. “Silicon Valley Companies Are Undermining the Impact of Artificial Intelligence.” TechCrunch. TechCrunch, March 15, 2018. https://techcrunch.com/2018/03/15/silicon-valley-companies-are-undermining-the-impact-of-artificial-intelligence/ 
The opinions and views expressed in 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
​