The digital dilemma: Why antitrust law struggles to break up tech monopolies

“ Fourth and finally, I believe that when the agencies bring cases in the high-tech sector, their story must be flexible not only to account for changes in the market place (be it competition for the x86 platform in the Intel litigation or Apple’s entry into mobile advertising in the Google/AdMob merger) , but that it should also account for dynamic effects and efficiencies. As I have said elsewhere, in my view, antitrust law has for far too long largely applied a static analysis, which looks mostly at marginal prices and costs in the short run. ”

“ These multi-sided markets differ only in that the business models of firms trying to attract consumers differ; for example, Google offers information search capabilities, Apple offers “Apps” (among other things, games) , and Facebook offers communication with “friends.”
The second argument I have heard is that the transactions or practices involved in high-tech cases are too dynamic to effectively challenge. There is certainly some validity to this critique. For one, the constant innovation in fast-moving markets means the market at issue in a case or investigation can literally change. ”

“ That although the act of Congress known as the anti-trust act has no reference to the mere manufacture or production of articles or commodities within the limits of the several states, it does embrace and declare to be illegal every contract, combination, or conspiracy, in whatever form, of whatever nature, and whoever may be parties to it, which directly or necessarily operates in restraint of trade or commerce among the several states or with foreign nations ”

“ A fifth challenge I have heard concerns innovation more generally. In the 30 years since the consent in Xerox, [16] the agencies have never litigated to conclusion a challenge to a transaction or conduct that threatens innovation alone. In fact, the best case on this point to my knowledge is the Second Circuit’s 1981 decision in SCM Corp. v. Xerox Corp. [17] There, the Second Circuit held that a defined product market is a prerequisite to an antitrust claim. ”

“ In my experience in cases involving the high-tech sector, the easiest way to define the relevant market is to figure out how the firm at issue monetizes its intellectual property or innovation. How does Google monetize its searches? How does Apple monetize its apps and iTunes? How does Facebook monetize public profiles? And so on. Identifying how firms monetize their bread and butter enables the agencies to zero in on who the customers are, whether there is competition, and whether the absence or potential absence of competition is a result of business acumen or anticompetitive conduct. ”

“ The third argument that I have heard against challenging conduct by firms in high-tech markets is that we can’t challenge conduct by firms that only have “incipient” monopoly power, as may be the case in conduct cases where a firm is on the cusp of achieving monopoly power, but the market has not yet tipped. This, for example, could have become an issue in the Google/AdMob merger. Google and AdMob were the number 1 and 2 mobile advertising networks, respectively. Apple was not in the market when the investigation began. ”

“ It is also the policy of my Administration to enforce the antitrust laws to meet the challenges posed by new industries and technologies, including the rise of the dominant Internet platforms, especially as they stem from serial mergers, the acquisition of nascent competitors, the aggregation of data, unfair competition in attention markets, the surveillance of users, and the presence of network effects. ”

“ It follows a fortiori that the use of monopoly power, however lawfully acquired, to foreclose competition, to gain a competitive advantage, or to destroy a competitor, is unlawful.
A man with a monopoly of theatres in any one town commands the entrance for all films into that area. If he uses that strategic position to acquire exclusive privileges in a city where he has competitors, he is employing his monopoly power as a trade weapon against his competitors. It may be a feeble, ineffective weapon where he has only one closed or monopoly town. ”

“ Government ought to have the right and will have the right, after surveying and planning for an industry to prevent, with the assistance of the overwhelming majority of that industry, unfair practice and to enforce this agreement by the authority of government. The so- called anti-trust laws were intended to prevent the creation of monopolies. That purpose of the anti-trust laws must be continued, but these laws were never intended to encourage the kind of unfair competition that results in long hours, starvation wages and overproduction. ”

“ A fourth challenge I have heard is that we should stay out of high-tech markets because, as a matter of policy, we should not be in the business of challenging an inventor’s conduct. Or, to put it differently, we don’t want to deter inventors from innovating, so their conduct should be per se legal. In the alternative, conduct by innovators in the high-tech sphere – regardless of its horizontal nature – should be subject to the rule of reason. ”

“ It necessarily involves the right of government inspection and control for the general welfare.
Difficulties from monopoly privileges.—All of these monopolies are granted for the purpose of conferring upon the whole community benefits that could not [pg 212] otherwise be secured. They are wise only so far as they secure this result. If the patent right system wastes the energies of inventors in contrivance of useless devices, there is loss; if it builds up a class of mere speculators, there is waste; if it fosters monopoly beyond the giving of a fair reward for invention, it is robbery. ”

“ Attempting to twist the law to make it illegal for technology to interfere with your old business method is frequently bad for the industry seeking the protection, as well as for the technology, the market, and the wider society. Since this worldview makes incumbents systematically blind to profit- making opportunities that could be secured by greater openness, rather than greater control, it actually disables them from pursuing some of the most promising methods by which they could have made money for their shareholders. ”

“ Validation by Congress of agreements to exclude competition is unusual. [23] Monopoly is a protean threat to fair prices. It is a tantalizing objective to any business compelled to meet the efforts of competitors to supply the market. Perhaps no single fact manifests the power and will to monopolize more than price control of the article monopolized. There can be no clearer evidence of restraint of trade. ”

“ In considering what is the relevant market for determining the control of price and competition, no more definite rule can be declared than that commodities reasonably interchangeable by consumers for the same purposes make up that 'part of the trade or commerce', monopolization of which may be illegal. As respects flexible packaging materials, the market geographically is nationwide.
Industrial activities cannot be confined to trim categories. Illegal monopolies under § 2 may well exist over limited products in narrow fields where competition is eliminated. ”

“ Thus one can theorize that we have monopolistic competition in every nonstandardized commodity with each manufacturer having power over the price and production of his own product. [20] However, this power that, let us say, automobile or soft-drink manufactures have over their trademarked products is not the power that makes an illegal monopoly. Illegal power must be appraised in terms of the competitive market for the product. ”

“ If, indeed, this were a result of the system, it would seem unimportant that a short-run by-product of stability may have been greater efficiency and lower costs, for it is the theory of the antitrust laws that the long-run advantage of the community depends upon the removal of restraints upon competition. ”

“ When it was found to be wrong - Microsoft reversed its position and came up with its own (then, technologically inferior) browser (the Internet Explorer) . It offered it free (sound suspiciously like dumping) to buyers of its operating system, "Windows". Inevitably it captured more than 30% of the market, crowding out Netscape. It is the view of the antitrust authorities in the USA that Microsoft utilized its dominant position in one market (that of the Operating Systems) to annihilate a competitor in another (that of the browsers) . ”

“ I’ve already alluded to the Commission’s expertise in analyzing conduct by a firm with “incipient” monopoly power, which may not amount to the market power required by the “attempt to monopolize” case law. The conduct may also, however, involve deception (as it did in N-Data and Intel) and hence trigger the agency’s consumer protection expertise and Section 5’s consumer protection prong. Indeed, the federal courts have recognized the Commission’s special expertise in this respect. ”

“ Furthermore, some courts have found little room to impose antitrust liability for a unilateral refusal to deal when intellectual property rights such as patent or copyright protect the aftermarket goods. ”

“ The mode of ascertaining actual damages must necessarily depend on the peculiar nature of the monopoly granted. A man who invents or discovers a new composition of matter, such as vulcanized India rubber, or a valuable medicine, may find his profit to consist in a close monopoly, forbidding any one to compete with him in the market, the patentee being himself able to supply the whole demand at his own price. If he should grant licenses to all who might desire to manufacture his composition, mutual competition might destroy the value of each license. ”

“ By protecting him against competition from lowcost producers, it strengthens and enlarges his monopoly. It is said in reply that he, the patentee, has that monopoly anyway-that his exclusive right to make, use, and vend would give him the right to exclude others and manufacture the invention and market it at any price he chose. That is true. But what he gets by the price-fixing agreement with his competitors is much more than that. He then gets not a benefit inherent in the right of exclusion but a benefit which flows from suppression of competition by combination with his competitors. ”

“ To be more specific, the defendants in the former case through the pooling of their buying power increased their leverage over their competitive situations by insisting that they be given monopoly rights in towns where they had competition, else they would give a distributor no business in their closed towns.
It is, however, not always necessary to find a specific intent to restrain trade or to build a monopoly in order to find that the anti-trust laws have been violated. ”

“ For example, an illegal tying claim might allege that a manufacturer unlawfully tied the availability of parts to the purchase of its repair service.
Other scenarios describe different types of conduct that may harm competition when adopted by a firm with market power. For instance, a manufacturer with market power that has refused to provide consumers or aftermarket service providers with key inputs (such as parts, manuals, or diagnostic software and tools) may be subject to antitrust liability for maintaining its monopoly, if the effect of such conduct is to harm competition. ”

“ Other tactics described by commenters involve allegations of potentially exclusionary conduct, such as making products difficult or impossible to disassemble, in order to maintain market position and exclude aftermarket competitors, or the anti-competitive assertion of patent rights and enforcement of trademarks by manufacturers to restrict repairs not authorized by OEMs. Moreover, the use of embedded software that forces consumers to have the maintenance and repair of their products performed by the manufacturers’ authorized service networks may also raise competition issues. ”

“ They don’t have another tech to get out there and essentially plug in a USB port and fix their tractor, then they’re out. So they’re essentially tying up all the market into a monopoly to themselves, not allowing competition which drives prices up. ”

“ To hold, as we do, that private suits may be instituted under § 4 of the Clayton Act to recover damages for Sherman Act monopolization knowingly practiced under the guise of a patent procured by deliberate fraud, cannot well be thought to impinge upon the policy of the patent laws to encourage inventions and their disclosure. Hence, as to this class of improper patent monopolies, antitrust remedies should be allowed room for full play. ”

“ On the other hand, to hold, as we do not, that private antitrust suits might also reach monopolies practiced under patents that for one reason or another may turn out to be voidable under one or more of the numerous technicalities attending the issuance of a patent, might well chill the disclosure of inventions through the obtaining of a patent because of fear of the vexations or punitive consequences of treble-damage suits. Hence, this private antitrust remedy should not be deemed available to reach § 2 monopolies carried on under a nonfraudulently procured patent. ”

“ A monopolist could enforce its will against a smaller rival simply because the potential cost of extended litigation and discovery where the burden of proof shifts to the defendant is itself a deterrent to innovation and competition. Misreading the statute to shift the burden in this way could allow powerful manufacturers in practice to create monopolies where they are not in principle supported by law. ”

“ But to put it bluntly, I worry that the Supreme Court is not only modifying procedural rules to cabin the private plaintiff’s bar, but that it is curbing the substantive rules as well. Since 2004, the Supreme Court has decided ten antitrust cases – not one of those cases was brought by the government. [37] This means that the vast majority of substantive antitrust law is being made in cases involving private plaintiffs. ”

“ Hence, Crane concludes, in the predatory pricing context and even in the Section 5 context, “the predominance of private antitrust litigation has stymied public antitrust enforcement by precipitating the creation of restrictive liability norms that are then applied to public lawsuits as well.” Id. ↑ Commissioner J. Thomas Rosch, Promoting Innovation: Just How “Dynamic” Should Antitrust Law Be?, Remarks before the USC Gould School of Law 2010 Intellectual Property Institute (March 23, 2010) , available at http://www.ftc.gov/speeches/rosch/100323uscremarks.pdf ”

“ What triggers the application of the antitrust laws is the asserted tying arrangement, the sale of one product conditioned on the purchase of another. And it is not all tying transactions in general but only those where leverage in one market has been used to distort another which so far have been held illegal restraints of trade. The basis for the rule is clear where the seller is dominant in the tying product market, where the product is patented, or where it is in short supply. ”

“ This may mean that consumer data is handled more loosely than some would like, but it also means that there is competition along many different axes that we might not otherwise see. In contrast, there are firms like Apple that pride themselves on a closed platform not only because it allows them to control the quality of the operating system and content better, but also because it gives them much greater control over users’ privacy. ”

“ In 2022, the Anti-monopoly Law was amended to improve the anti-monopoly framework for the platform economy, banning operators from abuse of a monopoly position by leveraging their strengths in data and algorithms, technology, capital, and platform rules. ”

“ China advocates that all governments should actively maintain open, secure, and stable global supply chains for IT products and services, strengthen collaborative R&D on new generations of information technology, and integrate into the global innovation network. Governments, international organizations, businesses and think thanks should discuss and develop international rules of digital governance that reflect the wishes of all parties and respect the interests of all, to promote the healthy and orderly development of the digital economy. ”

“ One party will hold that when it is necessary for the government to interfere to protect those whom it represents from the oppression of monopoly, it should assume at once the whole ownership and management of the monopoly. Their opponents will argue that government should interfere only to the extent needful to maintain the rights of the public; and that it is far better that industry should be directed by the private individuals whose interests are at stake than by government officials. ”

“ We decide, then, that it is for the public advantage at present that both the ownership and operation of manufacturing industries and of trade must remain in private hands. The next question is, will the greatest advantage to the public be secured by starting a crusade to re-establish competition and break up all existing monopolies in manufacturing and trade; or by taking the opposite course, legalizing monopolies and so regulating them by law that they shall be prevented from making undue profits by laying an exorbitant tax upon the public? ”

“ If an incorporation law is not deemed advisable, a license act for big interstate corporations might be enacted; or a combination of the two might be tried. The supervision established might be analogous to that now exercised over national banks. At least, the antitrust act should be supplemented by specific prohibitions of the methods which experience has shown have been of most service in enabling monopolistic combinations to crush out competition. The real owners of a corporation should be compelled to do business in their own name. ”

“ A combination of entrepreneurs to harass and deter their competitors from having 'free and unlimited access' to the agencies and courts, to defeat that right by massive, concerted, and purposeful activities of the group are ways of building up one empire and destroying another. As stated in the opinion concurring in the judgment, that is the essence of those parts of the complaint to which we refer. If these facts are proved, a violation of the antitrust laws has been established. If the end result is unlawful, it matters not that the means used in violation may be lawful. ”

“ The Obama-Biden Plan Barack Obama and Joe Biden understand the immense transformative power of technology and innovation and how they can improve the lives of Americans. They will work to ensure the full and free exchange of information through an open Internet and use technology to create a more transparent and connected democracy. They will encourage the deployment of modern communications infrastructure to improve America's competitiveness and employ technology to solve our nation's most pressing problems -- including improving clean energy, healthcare costs, and public safety. ”

“ That's why members of the Administration continue to engage with advocates to ensure the Internet remains a free and open platform as technology continues to disrupt industries and connect our communities in ways we can't yet imagine. ”

“ We must shape the rules that will govern the advance of technology and the norms of behavior in cyberspace, artificial intelligence, biotechnology so that they are used to lift people up, not used to pin them down. ”