Antitrust in the Age of AI

The development of generative artificial intelligence (AI) has ushered civilization into a new era of technological curiosity and corporate integration. “Generative AI” is a type of AI that allows machinery to create new material rather than solely assess or change current data. Using models trained on massive quantities of data, generative AI may generate material—such as text, images, music, or video—that is sometimes indistinguishable from content created by people themselves. The global excitement around the debut of OpenAI’s ChatGPT has not only captivated the public’s attention but has also fueled the widespread adoption of AI across a variety of businesses. However, as AI technologies become more integrated into business processes, some antitrust concerns increase. Recognizing AI’s revolutionary influence, antitrust enforcers in the U.S., notably at the Federal Trade Commission (FTC) and the Department of Justice’s Antitrust Division, have emphasized the need to address the junction of AI and antitrust laws.

Federal antitrust rules, which are intended to create competitive markets and protect consumers, have expanded to cover the use of AI by businesses. These rules are intended to restrict actions that may reduce competition, including agreements among market participants and single-firm activity. For example, there have been worries about AI-powered pricing algorithms exchanging industry data, which might lead to anticompetitive agreements and artificially increased costs.

Companies as well as individuals that violate antitrust rules face serious repercussions, including civil enforcement proceedings, private civil litigation, and criminal prosecutions. For responsible individuals, sanctions may include civil monetary fines and injunctions, tripled damages, significant solicitor’s costs, and even jail.

The emergence of AI adds significant difficulties to antitrust issues. Today, AI can promote pricing collusion by using price monitoring and matching algorithmic software. Companies, despite wisely adjusting their prices to those of their competitors, are unable to communicate information about future pricing plans, either directly or indirectly, creating a new compliance difficulty for companies using price matching or implementing blockchains to implement smart contracts. Furthermore, AI may enhance the exploitation of market power through discrimination and bias, as well as the foreclosure of competitors, either through mergers, exclusive collaboration agreements, or the use of significant “Big Data“. As individuals write algorithms and decide upon their application, and without diversification and rigorous testing, this algorithm (which may have subtle biases) can then enter the system which can be automated and further perpetuated by AI.

As AI evolves and antitrust enforcement intensifies, companies that use AI should conduct an antitrust risk assessment, exercise caution when disclosing AI use to avoid collusion implications, audit third-party data sources and AI tools for accuracy, update antitrust compliance policies, and incorporate antitrust counsel into AI development and licensing processes.

In summary, the confluence of AI and antitrust rules is a complicated challenge that both regulators and industry must carefully address. As U.S. regulators aggressively confront the issues posed by AI, businesses must negotiate this changing landscape, developing comprehensive compliance controls to prevent antitrust risks connected with the incorporation of AI technology into their operations. In order to mitigate such risks, businesses should focus on examining suppliers of AI services and establishing in-house protocols, tools, and training.

In an era where AI’s potential for collusion, discrimination, and market power abuse becomes increasingly apparent, regulators’ proactive engagement highlights the importance of adjusting legal frameworks to the changing terrain of technological progress. Companies must stay diligent in ensuring that their AI applications comply with antitrust rules while also promoting fair competition and innovation in the marketplace.

ESG and Energy Reform: Holding Ourselves Accountable

In 2014, the Onion published this headline: “Scientists Politely Remind World That Clean Energy Technology Ready To Go Whenever.” The satirical report sharply criticized how most countries, at the time, were prone to overlooking the clean energy alternatives readily available to them in favor of the established oil, gas, and coal industries that made up such a large proportion of the global economy. By now, it seems like most countries have taken the hint: CO2 emissions finally reached somewhat of a plateau in 2022, after steady rises every year for the past few decades. A survey in July showed that, even in the United States, carbon emissions fell by 5% compared to May of last year – this change, admittedly, being partially due to the mild winter in the Northern Hemisphere.

The U.S. has always been one of the slowest countries in the transition towards clean energy while most other countries have placed it as a top priority. In 2021, we still produced 14.9 tons of CO2, per person – as opposed to Germany’s 8.1 tons and the United Kingdom’s 5.2 tons. The U.S. is still the world’s top producer of unrefined oil and natural gas – while we import an average of six million barrels of crude oil a day, mostly from Canada. Oil makes up nearly 8% of the U.S.’s GDP, despite the controversy that surrounds the average American’s grossly disproportionate carbon footprint.

Government regulatory bureaus have not only failed to control the energy monopoly that oil and gas companies seem to have on our economy – they’ve encouraged its growth, often to immense public backlash. For example, the Bureau of Land Management (BLM) opens up nearly 90% of all publicly-owned U.S. land to oil and gas leasing. Recent reforms and regulations on this use serve to “increase returns to the public” rather than phase out oil and energy use, the way that most of the “public” wants. The Biden administration has even given explicit approval to large-scale, long-term oil enterprises like the Willow Project – a massive oil drilling project in Anchorage, Alaska, projected to add 9.2 million metric tons of CO2 to the atmosphere per year.

Organizations like the Center of Biological Diversity criticize these financial incentives as nothing more than stopgap measures, focused on ensuring that the government gets a cut of the profits that can be made from non-renewable energy. Other conservation groups take a more direct approach in confronting the BLM’s environmental harms. Earthjustice, for example, filed a lawsuit to stop the Willow Project entirely. Their case is currently pending appeal in the Ninth Circuit Court of Appeals.

Individual companies, hoping to make themselves more palatable to their environmentally-conscious consumers, have also started to hold themselves accountable for shifting towards greener-energy alternatives, primarily through the adoption of ESG initiatives: goals focused around improving the Environmental, Social, and Governance scores assigned to different corporations. They’re held responsible for transparency in their ESG disclosures both by their profit margins and by regulatory agencies like the Securities and Exchange Commission (SEC) – providing both the internal and external pressures necessary to change the behavior of even the most pollution-heavy companies.

The former holds companies accountable by providing a monetary incentive for corporations to meet their ESG initiatives. Greater transparency in company environmental disclosures is consistently tied to positive financial growth, creating greater trust across all levels of corporate governance and greater trust with the consumers that these corporations market towards. The latter allows the government to intervene directly through the SEC’s Climate and ESG task force. This team charges companies with misrepresentation (or even fraud) if they fail to make a good-faith effort to meet their ESG initiatives or lie in their public ESG disclosures. Multiple initiatives have both been proposed and passed by the SEC that create more transparency in private entities’ climate-related risks. The large fines and injunctions that the SEC has the power to impose further encourage corporations to be upfront with their environmental impacts – while their consumers push them to be more environmentally friendly overall.

It’s telling that even the Organization of Petroleum Exporting Countries (OPEC) is currently expanding its legal team specifically to manage climate change concerns and “energy transition law.” The U.S. often treats OPEC like a rival – having come head-to-head with it many times in the past and currently fighting to try to get the “No Oil Producing and Exporting Cartels” (NOPEC) Act through Congress, the same way they’ve done for the past two decades. As public opinion continues to shift towards clean energy over the oil, gas, and coal industries that dominated the market in the past, it wouldn’t be surprising if the United States started to focus its own legal power on the same fields of law – with pressures coming from both their external rivals and internal company movements towards ESG, overall.

SEC’s New Theory – Shadow Trading

Insider trading is a broad and murky area. However, now, the SEC has complicated matters with the introduction of a new theory — shadow trading. Unlike insider trading, where a person trades in the stocks of a company in which they have MNPI (material non-public information), shadow trading involves trading in an economically linked company with the MNPI of a target company (entirely different company). Coined by Mehta, Reeb and Zhao in their research paper titled “Shadow Trading ”, this concept was first put to test by the SEC in SEC v. Panuwat. The SEC slapped charges on Panuwat stating that he misappropriated material information about his pharmaceutical company, Medivation, to trade in the stocks of their competitor, Incyte Corporation. Since shadow trading was rather a novel concept, the SEC brought claims under the misappropriation theory of insider trading where trading is forbidden on the basis of MNPI obtained by someone who is not a corporate insider (i.e., a corporate outsider) in breach of a duty.

The SEC alleged that Panuwat, upon receiving confidential information from Medivation’s CEO about the imminent acquisition by Pfizer, misappropriated the information by swiftly purchasing out-of-the-money stock options in Incyte Corporation from his work computer. When the merger was made public the share prices of both companies rose and Panuwat reaped illicit profits of $107,066. Panuwat was charged with violating Section 10(b) and Rule 10b–5 of the Securities Exchange Act of 1934. Panuwat hit back by arguing that SEC failed to show that the information was material and unavailable to the public, there was a breach of fiduciary duty and that he possessed scienter (intent). However the Court ruled against him and dismissed his motion for summary judgment.

The Court held that Panuwat had material information regarding the merger and its disclosure would have been viewed by a reasonable investor as material when deciding to trade in those securities. While Panuwat did point out that he did not possess any information about Incyte when he purchased the stock options, SEC said that the market viewed Medivation and Incyte to be complementary to each other. SEC blamed Panuwat for narrowing the meaning of materiality and held that the information would have been material for more than one company. SEC showed evidence from reports and articles that linked Medivation and Incyte, Panuwat’s positive comments about Incyte months before he bought stock options and Panuwat’s awareness of the market reports which influenced his perspective on the biopharmaceutical market. It was also established that Panuwat had MNPI since he had access to confidential information through summary of bids, letters soliciting final bids and internal emails related to the merger.

These allegations were further strengthened when SEC successfully established breach of fiduciary duty. The Court held that Panuwat was bound by Medivation’s insider trading policy that prohibited all employees from using the company’s sensitive and confidential information for profit by trading in securities. Panuwat breached this duty by using MNPI’s of Medivation to trade in Incyte’s securities. Lastly, the Court held that Panuwat possessed intent, when he actually used information about Medivation’s acquisition to purchase stocks in Incyte. Panuwat immediately purchased stocks right after he received an email showing that the merger was to move forward.

However it is to be noted that Judge Orrick was careful to place the liability on Panuwat because of the broad language of Medivation’s insider trading policy that prohibited their employees from trading in any stock or security. It is unclear whether Panuwat would still be liable under the section absent the broad language or explicit prohibition in the policy. Furthermore, this fact pattern could be applied to any scenario where it is found that information from one company can be linked to the stock price of another. This is unreasonable since any corporate insider could be liable for trading in stocks with the information of their own company.

Shadow trading is still a relatively new concept and Panuwat’s case is only at its initial stage. Shadow trading is not an uncommon phenomenon and the SEC has claimed to take up the task of mitigating illegal trading in all forms starting from Panuwat. It is also a caveat to the ones who interpret insider trading laws narrowly, that the courts are willing to accept the broad powers of the SEC. Needless to say if this is accepted in the future it is a threat to the corporate insiders and would have far reaching effects. Therefore it is important to adopt policies to curb insider trading litigation with the Panuwat decision in mind. After all, prevention is better than cure.

Senate Bill 54: California takes one step further into sustainable finance

This October 8th, 2023, Gavin Newsom, Governor of California, signed into a law the Senate Bill n°54, or SB 54. The law will come into effect in March 1st, 2025, and aims to promote sustainable finance through diversity in venture capital (VC) companies by empowering historically underrepresented communities. Similar to the California Equal Pay Pledge of 2019, it is part of a political commitment to achieve gender and racial equality.

Venture Capital (VC) companies are companies or investment funds that usually invest in early-stage start-ups. Consequently, VCs drive innovation, economic and employment growth. In recent years, we have observed an increase in Socially Responsible Investment (SRI). This investment strategy consists in investors threatening to discard assets from the VC’s equity if it does not comply with corporate social responsibility standards. Hence, impact investing is limited to investors’ resources. These stakeholders cannot act alone towards an impact investing approach and sustainable finance. Regulators must promote sustainable finance throughout the investment chain. The California State Capitol attempts to do so through the SB 54.

The SB 54 provides more scrutiny on the policies conducted by VCs. The law targets “covered entities”, which is a VC company that: “(i) primarily engages in the business of investing in, or providing financing to, startup, early-stage, or emerging growth companies [; or] (ii) manages assets on behalf of third-party investors, including, but not limited to, investments made on behalf of a state or local retirement or pension system.”

Additionally, the VC company must: “(i) [be] headquartered in California [; or] (ii) [have] a significant presence or operational office in California [; or] (iii) [make] venture capital investments in businesses that are located in, or have significant operations in, California [; or] (iv) [solicit] or [receive] investments from a person who is a resident of California.”

Besides, the law prescribes duties to the targeted VCs, namely through a yearly survey reporting information related to its “founding team”. This targets owners of initial shares or interests of the company, a stakeholder who had an important role within the business before the issuance of initial shares or who is not a passive investor in the business, the chief executive officer, the president, the chief financial officer, the manager of the business, or any other stakeholder benefitting from the same level of authority.

Simultaneously, the VC must report information related to gender identity, race, ethnicity, disability status, and sexual orientation of the individual falling under the “founding team” criteria. The report shall also mention if that individual is a veteran or a disabled veteran, and if he/she is a resident of California. The person surveyed can decline to provide information, but the use of this right must be notified in the report.

Finally, the VC company must also provide “the number of [VC] investments to businesses primarily founded by diverse founding team members, as a percentage of the total number of venture capital investments the covered entity made.” Eventually, the results must be submitted to the Civil Right Department (CRD), a state agency that publicizes the data in a searchable database. Monetary penalties are prescribed for VCs who breach the provisions. The fine will be reinjected in the Civil Rights Enforcement and the Litigation Fund to enforce the Civil Rights laws.

This law is welcomed because it intervenes on a level distinct from that of the investors. It is an additional tool that must be used simultaneously with the investors’ room of maneuver. Here, the law targets the policies undertaken by the VC companies in their structure and thus, in their investment choices. Through the report and its publication, the law gives incentive for VC companies to include more diversity in their founding team. By doing so, it aims at easing the burden upon investors who favor ethical investments but are slowed down by the lack of capital.

Conversely, the law does not establish specific diversity standards for compliance; instead, it mandates the submission of a report. Consequently, VCs can potentially disclose a founding team composition lacking in diversity without facing direct consequences.

Yet, the law introduces an indirect incentive for increased diversity, as the annual report is made public. Accordingly, a VC company disclosing a lack of diversity in their data may experience a decline in stock prices. This decline could be attributed to investors prioritizing impact investing over mere profit gains. Hence, the responsibility for fostering sustainable finance ultimately rests on the shoulders of investors. In the end, this law must act as a stepping stone for future laws to provide solutions throughout the investment chain. For instance, regulators could set diversity standards for VCs to abide by, or nudge them to invest in a certain percentage of ESG companies.

Can Generative AI Be An Inventor?

Generative AI has evolved significantly through the integration of machine learning algorithms, allowing systems to create content, models, and solutions autonomously based on learned patterns and data. Can AI be an inventor? The Federal Circuit said no in its decision Thaler v. Vidal , denying a researcher’s claim of AI as the inventor of two patents. The court rejected the researcher’s interpretation of patent law, but it did not discuss the rights of AI or the nature of the invention. It reasoned that adjudicating on the patents’ inventorship only requires reading the language of the Patent Act, which explicitly requires inventors to be “individuals.” “When a statute unambiguously and directly answers the question before us, our analysis does not stray beyond the plain text,” the Federal Circuit held.

After the Federal Circuit denied treating AI as an inventor on its own, the question remains whether it can be named a co-inventor, and to what extent a human inventor can use AI in the process of invention. In response, in his executive order issued on October 30, 2023, President Biden asked the United States Patent and Trademark Office (USPTO) to draft guidelines on determining who the inventor is when an invention is developed using AI. The executive order instructed the USPTO to provide examples showcasing the various roles AI might play in the process of invention and to elucidate the evaluation process for determining inventorship in each specific role.

The question of AI inventorship gives rise to hard policy and ethical issues. Policy-wise, a disqualification akin to the Federal Circuit’s ruling may deter researchers and inventors from investing resources and time in developing generative AI due to the inability to safeguard resulting inventions. Content creators may encounter a substantial amount of freely available content that has the potential to weaken their position in the market. Ethical implication appears at the same time. Dr. Thaler, the creator of the generative AI system DABUS, claimed that not recognizing AI’s intellectual production by refusing to recognize its status as an inventor speciesism. In fact, the ethical inquiries about the societal status of AI surfaced long before its ascent. Can it be recognized as an independent creator or thinking being? How to better protect investment in generative AI? The USPTO is set to release its guidelines on February 23, 2024, and inventors and legal experts anticipate that they would address these pressing questions.


Are There “Defects” in the Share Repurchase Disclosure Modernization Rule?

The United States Court of Appeals for the Fifth Circuit rejected the Securities and Exchange Commission (SEC)’s rule for share repurchase disclosure modernization (“Share Repurchase Disclosure Modernization Rule”) on October 31, 2023, stating that the “[r]esponse to uncertainty about matters of low probability or low magnitude should be markedly different from those of high probability and magnitude.”

The SEC proposed a draft of the share purchase disclosure modernization rule, in December 2021 (“Proposed Rules”), to promote transparency, which in turn enhances efficiency, competition, and capital formation. A key factor that leads to information asymmetry among issuers, insiders, and investors, is the timing of the disclosure. In a share repurchase transaction, since the issuers of the securities are repurchasing their own securities, insiders and affiliated purchasers possess significantly more information about the issuers and their prospects. In contrast, investors only become aware of this information a month or so after the end of the quarter when the issuers’ 10-Q filing is released. To assist unsophisticated investors who lacked access to or the understanding of complex trading information, the SEC proposed that the details of the repurchase activities be disclosed daily. It believed that a daily disclosure of an issuer’s repurchase activities would provide investors with more granular information such as the reasons behind the repurchase. This would enable them to better evaluate the market for the issuer’s securities and the actions of the issuer’s insiders. It also sought alignment with global regulations like those of the U.K. and Hong Kong where issuers must report repurchases to the stock exchange before trading begins the next day.

One key concern regarding opportunistic repurchase activities is management’s interest. Repurchasing shares reduces the denominator for earnings per share, allowing an apparent increase in the issuer’s earnings per share. The management can use it to meet or beat its earnings forecast for the quarter or the year. Furthermore, if the management’s compensation is tied to earnings, the management can use repurchases as a tool to maximize its compensation. Through the disclosures, both the SEC and investors may be able to identify trading patterns and any bad-faith practices.

However, the Share Repurchase Disclosure Modernization Rule, which was finally adopted in May 2023, differed from the Proposed Rules. The SEC backed away from its initial position where it proposed that the trades be disclosed daily. In the Final Rules, the SEC mandated that issuers of securities disclose their aggregate repurchase activities on a daily basis, at the end of each quarter instead of the same day as the trade (“Aggregate Disclosure Regime”).

The Chamber of Commerce protested the Aggregate Disclosure Regime. It believed that the Share Repurchase Disclosure Modernization Rule allows the SEC to micromanage and discourage repurchase activities. It argued that while there may be an increase in transparency pursuant to the disclosures, the rule does not explain how increased transparency will promote efficiency, competition, and capital formation. Further, the Chamber of Commerce by way of its comments on the Proposed Rules commented that the SEC should undertake different quantitative studies to justify the need for these heightened disclosures. It suggested various studies that the SEC could undertake to gauge if there is a need for these heightened disclosure requirements like (i) the percentage of issuers’ annual and long-term incentive plans that is tied to earnings per share and how it correlates with buybacks, (ii) the number of issuers using share repurchases to trigger executive bonuses that would not have been earned, (iii) investors’ reaction to more frequent repurchase disclosure in other jurisdictions, or (iv) the movement of stock prices on days that repurchases are disclosed in jurisdictions with daily reporting. The Chamber of Commerce pleaded before the Fifth Circuit that the SEC had acted arbitrarily and capriciously in formulating the proposed rule since it had not responded to the Chamber of Commerce’s comments on the proposed rule’s economic impact and could not “substantiate the rule’s benefits.”

In its order, the Fifth Circuit exercised its powers under the Administrative Procedure Act (“APA”) and ruled in favor of the Chamber of Commerce. The court held that the agency had not “examine[d] the relevant data and articulate[d] a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983). The Fifth Circuit held that “[i]f opportunistic or improperly motivated buybacks are not genuine problems, then there is no rational basis for investors to experience uncertainty [in the event the disclosure is made at a later date].” After all, motivated buybacks may be a matter of “low magnitude and low probability.” Accordingly, it held that the SEC had failed to “substantiate the rule’s benefits.” The Court ordered the agency to correct the “defects,” including the lack of justification for the heightened disclosure, within 30 days.

The purpose of the Proposed Rule, like that of the disclosure standards of some other jurisdictions, is to assist unsophisticated investors who lack access to or the understanding of complex trading information. Therefore, additional quantitative analysis of the proposed rule’s economic impact—demanded by the Chamber of Commerce—is hardly necessary to form a “rational connection” between the disclosure requirements and its concerns. However, the U.S. has been opposed to a continuous disclosure regime, and the Chamber of Commerce’s pushback on additional disclosures is no surprise.

While it remains to be seen whether the SEC will rectify the “defects” by modifying the heightened disclosure or justifying its position, most issuers will likely need to continue preparing their 10-Q filings in accordance with the Share Repurchase Disclosure Modernization Rule, which still applies to Q3 starting on October 1, 2023.






Acquisition of Activision Blizzard by Microsoft

After a wait of nearly two years since its initial announcement of the deal, Microsoft finally acquired Activision Blizzard for $68.7 billion on October 13, 2023 after receiving a nod from the U.K. regulators. This acquisition is likely Microsoft’s strategy to boost its product Xbox Game Pass, which is a membership-based service. However, the deal went through a lot of hardships including an insider trading investigation, wrongdoing accusations from multiple New York City funds and concerns from Senators. The biggest hurdles were set forth by the United States’ Federal Trade Commission (FTC) and the Competition and Markets Authority of the United Kingdom.

The FTC was established under the Federal Trade Commission Act with a mission to protect “the public from deceptive or unfair business practices and from unfair methods of competition through law enforcement, advocacy, research, and education.”  The FTC blocked Microsoft from acquiring Activision Blizzard on December 8, 2022 alleging that the deal would provide Microsoft with undue advantage which would lead to the suppression of competitors. The FTC believed that if Microsoft acquired Activision, it would be able to manipulate Activision’s pricing, Activision’s game quality, and player experience on rival consoles and gaming services. The FTC alleged that Microsoft would even be able to change the terms of Activision’s content which could result in harm to consumers. Finally on July 11, 2023, Judge Jacqueline Scott Corley ruled in favor of Microsoft and found that there was not a substantial likelihood that the Microsoft-Activision deal would lessen competition. On the contrary, the court found that Microsoft’s arguments provided evidence that consumers will have more access to Call of Duty after the deal. Microsoft committed in writing, in public, and in court to keep Call of Duty on PlayStation, which is owned by Sony, for the next ten years maintaining the quality of the game exactly how it will be available on Xbox to ensure fair competition.

The Competition and Markets Authority (“CMA”) of the United Kingdom raised additional issues for Microsoft. CMA is a watchdog organization that ensures that consumers in the UK are not subject to malpractices such as monopolization and that there is no unfair competition in the economy. On July 6, 2022 an inquiry, for ensuring fair competition among businesses in the UK, was initiated by CMA. CMA stated in a press release that it speculated that the Microsoft-Activision deal could be harmful to its rivals, both current and future, by hampering access to Activision’s games. Finally on October 13, 2023, CMA granted Microsoft consent to acquire Activision with the condition that the sale of Activision’s cloud streaming rights shall terminate prior to the acquisition which was proposed in the first proposed merger.

As a result of these orders and decisions, Microsoft was able to acquire Activision Blizzard for a whopping amount of $68.7 billion on October 13, 2023, making it the biggest deal in the history of the gaming industry. This deal will open new gates for Microsoft in the gaming industry with it becoming the third largest gaming company, in terms of global revenue, after Tencent and Sony. Microsoft now has access to multi-dollar IPs of Activision and is expected to become a key player in the esports market. The significant advantage that Microsoft gains through this deal is the reduced time-to-market with new gaming products. It will be able to expand into the market at a fast pace after acquiring Activision. Microsoft now has a strong position to change the gaming industry in the upcoming years.

The Game of Chips?

As tensions escalate, the US has taken steps to stop chipmakers in the country from selling their semiconductor products to China. In order to ensure that obtaining the raw material used to produce the chips is hard, the government has made a few updates to the rules. Also, there is a tab on forty other countries so that the same raw material is not supplied to China indirectly either. The main motive behind such a ban by the US is to prevent China from gaining any further military strength.

The rules for regulating the exports do not apply to regular chips but only to those capable of pulling powerful AI stunts. Going forward, the companies engaged in the export of such chips must get special permission for sales to other countries. Further, the government requires that the chip companies disclose if their chips are close to the established threshold. The decision to export the same or not shall be decided on a case-by-case basis ensuring that national security is not threatened.

The latest advancements in the chip export ban have worsened the tension between the two countries. China has criticized the move and has asked the United States to stop the unnecessary weaponization of the technology industry. The stocks of the major chip developers in the US, like Nvidia and Intel, have plummeted.

In the short run, this ban by the US might put China behind if China does not develop its technology in this field. While China is dependent on imports of advanced chips, this move may not be sufficient in derailing its technological progress. However, this action might end up hurting various American companies that rely on the Chinese market, and no level of support from the government for semiconductor industry may be able to fill the gap.

Since technology is a driving factor of development and convenience, it can also have serious military repercussions. No nation can underestimate protecting its interest, as it is the foremost responsibility. However, the ongoing technological advancements are constantly blurring the line between commercial and military utility.

At the international level, the observers see the ban as an interplay of economic, geopolitical and technological factors. The US is trying to protect its national security interest, and China is accusing it of destabilizing the world economy. The long-term impacts remain uncertain for both countries, being majorly dependent upon China’s ability to overcome this hindrance.  However, a transparent and well-developed control process might help mitigate the risks. In the meantime, this might prove to be beneficial for other Asian countries as the West will be looking for new markets and suppliers. Southeast Asia might be considered a more appealing option compared to major chip-producing nations like South Korea and Taiwan, given the region’s perceived neutrality amid the continuing trade tensions between the U.S. and China.

Chrome’s “Sandbox”: Corporate Advertisements and Consumer Privacy

In 2020, in the midst of existing tensions between consumer privacy and corporate profit,  Apple seemed to take a major step in the field of digital rights—on the side of the consumers, for once. The tech giant’s primary search engine, Safari, was reconfigured to automatically block all third-party cookies. It became the second browser to ever do so, following Tor, a browser already well-known for its focus on total digital anonymity.

Third-party cookies are the driving force behind targeted advertising: by keeping track of what websites a user visits, companies can show advertisements targeted towards goods and services that the user might specifically be interested in. These cookies are imposed by “third-party” servers that allow for data to be transferred across multiple websites at once. Browsing a shopping website for purses, for example, might inject first-party cookies into your browser that allow that website to continue showing you purse recommendations. If third-party cookies are enabled, however, browsing any other website allows it to pull from your purse-browsing data—showing you purse ads no matter where you go.

Safari’s cookie block closed many of the potential security vulnerabilities and addressed privacy issues inherent to allowing websites to share data between each other without a user’s explicit permission. It also cut off a significant source of ad revenue for companies that relied on these targeted advertisements as a source of profit, such as Safari’s search-engine competitors. Not to be outdone, Google supposedly started phasing out its own use of third-party cookies on Chrome and Chromium-based browsers. In turn, however, it insidiously provided advertisers with another option for maintaining their streams of targeted ad revenue: the “FLoC” and “TrackAPI” programs, which ultimately evolved into the modern “Privacy Sandbox” that came into full effect this September. Instead of using cookies, the Privacy Sandbox is the name for a developer tool built into the search engine itself that tracks user searches. Users are sorted into cohorts of people with similar interests, and the group’s collective data is then passed on to advertising companies. The Privacy Sandbox is a new replacement for an old tracking method that has gotten bad optics in recent years, allowing Google to assert its concern for user privacy while continuing to track searches in ways that violate user privacy rights.

This arms race in the field of privacy protection exemplifies a push-and-pull between consumer rights and profit margins that has characterized corporate activity in the digital age. Legislators have only recently begun to address the lack of federal and state regulations regarding user rights and privacy online—with the burden of improvement being placed primarily on the corporate entities that benefit from tearing them down in the first place. With the increasing skepticism that Internet-based companies face from their users today, corporations have been forced to frame themselves as privacy-conscious entities, even as they attempt to maintain the same profits that they have reaped from targeted advertising in the past.

Different corporations have dealt with public opinion on their advertising methods in different ways. As mentioned earlier, companies like Apple have shifted the burden of profit to the consumers: rather than relying on ads to make money, they make users pay subscription fees (or buy expensive devices like iPhones) in exchange for the privilege of blocking advertisements and cookies entirely. Other corporations have begun to rely heavily on user “consent,” warning users every time they log onto a website that uses third-party cookies and providing them with an opt-out option. Some companies have dedicated themselves entirely to the cause of consumer privacy: the search engine DuckDuckGo uses private search ads that do not rely on users’ browsing habits, while the Mozilla Firefox browser is utterly transparent with what necessary data it collects from its users to improve its open-source engine.

Nevertheless, it seems that ad-driven tech giants still reign supreme over more privacy-conscious alternatives. In 2022, Google possessed an astonishing 86-96% of the search engine market share; the closest runner-up, Yahoo, occupied a measly 3%. Similarly, as of September 2023, Chrome made up 63% of the market share of all browser usage worldwide. Safari trailed behind at 20%, serving as a larger competitor primarily due to mobile iPhone and iPad use. Given that Internet privacy seems to be a major concern for modern corporations—to the point where many have adjusted their business practices to account for it—why have more users not turned towards more obviously privacy-friendly options like Mozilla?

Google argues that it is because its products are better than those of its competitors. The U.S. Department of Justice, however, in the biggest tech monopoly antitrust trial of the twenty-first century thus far, claims otherwise. It contends that Google’s predominance arises from the illegal maneuvers it has taken to outcompete smaller search engine and browser companies, making itself the default way to access the Internet for billions of users across the globe. The trial against Google began on September 17 this year. Only time will tell what it will reveal about Google’s potentially monopolistic practices and how sanctions, if they are imposed, will affect the rest of the digital market.

If the DOJ succeeds, hopefully Internet users will begin looking towards business models that genuinely focus on protecting their digital rights, no matter how murky and ambiguous those rights may seem. With the possibility of increased market competition, true privacy protection might become a far more relevant concern for those companies hoping to woo privacy-conscious consumers into using their services—rather than, as Google has done, paying lip service to the issue of privacy while maintaining the same invasive practices from which it profited in the past.

The Failure of the US Antitrust Laws in Tackling Predatory Pricing

The Biden administration has made antitrust enforcement a top priority. In July 2021, President Biden signed the Executive Order on Promoting Competition in the American Economy, which directed the antitrust agencies to take a more aggressive approach to enforcement. The administration has also appointed a team of enforcement-minded leaders to lead the main antitrust agencies, including Lina Khan as the chair of the FTC. In the first major antitrust case in the context of the contemporary Big Tech landscape, the DOJ has brought a lawsuit against Google, alleging that the company has abused its dominance in the online search and advertising markets. The suit accuses Google of illegally monopolizing the advertising technology market in violation of sections 1 and 2 of the Sherman Antitrust Act of 1890, which prohibits using exclusionary practices to maintain a monopoly. The trial commenced in September 2023 and is anticipated to take three months.

In theory, the court could order Google to be broken up, but legal analysts consider that option unlikely and even impossible. This raises the question of whether antitrust laws created in the late nineteenth through mid-twentieth century have failed to keep pace and become obsolete. Our solution to the anti-monopoly problems must align with our ideals of political and economic democracy. This article will first briefly map out the US antitrust laws and some of the main critiques, and next, it will lay out a potential reform to such laws.

The focus of antitrust laws until the 1960s was to ensure that the market structure was competitive by prohibiting price fixing. In the landmark case Standard Oil, the Supreme Court held that predatory pricing violated antitrust laws because Standard Oil used such practice to drive out rivals and gain monopoly in an otherwise competitive market. Starting in the 1970s, as the Chicago school of economic theory developed, antitrust laws shifted to consumer welfare standards, which see antitrust laws’ purpose as to promote efficiency. In the leading case Reiter, the SCOTUS solidified this view and held that “[c]ongress designed the Sherman Act as a “consumer welfare prescription.”This decision fundamentally reformed the antitrust litigation by changing the standing requirement, which required the plaintiff to show that there was harm to consumer welfare in the form of price increase and output restrictions. The Court introduced the recoupment test, under which the plaintiff must demonstrate that the target company can recoup its investment after the predatory scheme.

However, the recoupment test is no longer equipped to tackle big tech’s power. As one example, Amazon accomplished its rise as the world’s largest e-commerce website, at least in part, through pricing schemes that completely disregarded antitrust laws. Amazon evaded scrutiny by keeping its prices low, which forced publishers to set their own prices, and Apple would get a 30% cut. The DOJ charged Apple with colluding with the publishers to fix the prices of e-books and raise their prices in the market. The DOJ completely missed how Amazon’s below-cost pricing tactics afforded it significant advantages to achieve monopoly power in the e-book market. The current antitrust system fails to account for how modern-day e-commerce platforms can recoup losses.

One of the major voices for change in antitrust laws is Senator Elizabeth Warren. Her plan consists of two parts. First part of the Senator Warren’s proposal is to designate large tech platforms, such as Amazon, as “Platform Utilities” and break them apart from any participant on that platform. In other words, these companies would be prohibited from owning both the platform utility and any participants on that platform. They also would be required to meet a standard of fair, reasonable, and nondiscriminatory dealing with users. Second, Senator Warren proposes to enforce existing laws to break up mergers that reduce competition and to put pressure on big tech companies to be more responsive to user concerns.

Warren’s plan shifts the focus of antitrust enforcement to a more holistic standard. By breaking up large companies, she is reigning in the power these companies have to manipulate markets in their favor. Following a standard of “fair, reasonable, and nondiscriminatory dealings,” the courts can look at various factors to decide if a company’s activity violates the antitrust laws. This plan is a great way to attack some structural issues with our modern-day antitrust enforcement system; however, it does not account for predatory pricing schemes as it does not offer a solution for recoupment requirements.

One way to strengthen Warren’s plan is to place the presumption of predation on such company when a dominant company prices its products below its production cost. As seen in the Amazon case, recoupment does not count for today’s e-commerce economy, because there is a business justification to engage in such actions. The presumption puts the burden on these giant conglomerates.