Nearly 100 years ago, Supreme Court Justice Louis Brandeis wrote “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.” Keeping those words in mind, the U.S. House Democrats’ antitrust subcommittee published an Investigation of Competition in Digital Markets report in late 2020 demonstrating the need for serious reform and action to rein in the unfair power that Big Tech companies hold today in their respective markets. Following the report, President Biden issued an Executive Order with the aim to ensure strict enforcement of his antitrust policies. Biden then appointed Lina Khan, the progressive author of the controversial Amazon’s Antitrust Paradox article, as Chair of the Federal Trade Commission (FTC). Khan was a surprise appointee but a clear indication of the administration’s strong pro-enforcement and pro-competition approach to antitrust. Today, Khan is leading the charge against Big Tech with just one mantra in mind – any harm to competition is enough justification to go after companies that use their size and market power to squash competitors.
For decades, antitrust law has been implemented with the aim to prevent dominant companies from capturing the market. Over the last couple of years, regulators at the FTC and the Justice Department have been aggressively, albeit, unsuccessfully attempting to rein in the unfettered monopoly power of Big Tech using this traditional monopoly theory. In 2020, the FTC sued Facebook alleging that the company had been anti-competitive in its personal social networking market wherein it had a dominant position. But a federal judge dismissed the antitrust suit citing “lack of evidence” on the part of the FTC. Recently, the FTC, led by Lina Khan, refiled the antitrust suit, and in January 2022, the regulator secured a major victory when a U.S. District Judge denied Facebook’s motion to dismiss. The court held that the FTC had enough facts to plausibly establish that Facebook possesses monopoly power and had “willfully maintained that power through anticompetitive conduct.”
But more interestingly, the FTC has now come up with an innovative argument that has not previously been seen in the antitrust ecosystem. Regulators are now focusing less on consumer harm and leaning towards how Big Tech dominance harms businesses that sell goods and services to, and on, tech platforms. Apple, Google, Amazon, and Meta all depend on their suppliers. Whether for ad space on Meta and Google, apps on iOS, or small-scale manufacturers on Amazon, the FTC is taking a strong stance that these platforms are middlemen who by virtue of their powerful hold over the market, are adversely impacting sellers on their platforms. In fact, there is a new word now being thrown around by the regulators – “monopsony”. As opposed to a monopoly, the seller in a monopsony is not the dominant party. Instead, it is the buyer who is the dominant party. Just as monopolists can affect consumers adversely, regulators are arguing that monopsonists can similarly control and adversely affect sellers.
In the eyes of the FTC, Big Tech platforms are abusing their power and position as monopsonists as they are, in effect, proxy buyers for all consumers on their platforms. The longstanding view that vertical mergers usually pose no threat to competition is also being undone by the monopsonist view. It is not essential whether mergers or acquisitions of smaller players make the market more efficient. Rather, it is more important to ensure that Big Tech companies do not accumulate too much power and that competition remains healthy for all consumers and sellers alike. This is especially true where these companies are deciding how the market works, how the pricing is done, and at the same time participating in them. Take Amazon as an example– it creates the rules on how sellers are to participate on its platform, it decides how the goods are displayed on its platform, it further decides on how advertisements are placed, and how delivery charges are to be priced. Moreover, Amazon itself takes part in the marketplace by selling its own products on the same platform. Thus, Amazon wears two hats or maybe even three. This makes Amazon a prime target for FTC scrutiny.
The Biden administration has made it clear that the power these firms possess must be curtailed to promote competition. Amongst the recent changes, vertical mergers are now being scrutinized even more closely. Policies are being implemented requiring firms to obtain multiple approvals before confirming acquisitions with the FTC, having a right to question even after acquisitions close. It is evident that Lina Khan is here to challenge and change the status quo. Big Tech platforms, on the other hand, will not go down without a serious fight. Without serious congressional and legislative backing, Khan will find it hard putting to test her antitrust theories in a system dominated by capitalists, politicians, lobbyists, and the federal courts.