April 01, 2020 Feature

Big Tech Investigated for Antitrust Violations

By James F. Herbison

Leading technology companies that provide key parts of our national technological infrastructure are facing intense antitrust scrutiny at both the federal and state levels. Regulators and enforcers are generally investigating whether market-leading online platforms gained or maintained market power through anticompetitive practices, or have otherwise harmed consumers. In June 2019, the U.S. Department of Justice’s Antitrust Division (DOJ) and the Federal Trade Commission (FTC) split jurisdiction over the four technology companies that have recently raised the most significant competition concerns: Amazon, Apple, Facebook, and Google. Under the arrangement, the FTC took jurisdiction over Amazon and Facebook, and the DOJ assumed jurisdiction over Apple and Google.1 In addition, Congress’s House Committee on the Judiciary announced its own antitrust investigation of digital markets and recently requested information from the leaders of the “Big Four.” Further, at the state level, state attorneys’ general from across the country have joined together in separate antitrust investigations of Google and Facebook. Lastly, Ryan A. Shores, associate deputy attorney general and senior advisor for technology industries, was recently appointed to help coordinate and guide the DOJ’s investigations into online platforms.

The Big Four

Facebook

Facebook is a multibillion-dollar social media company with 2.45 billion monthly active users around the world. Its online platforms are free to use, and almost all of its revenue comes from advertising fees charged to advertisers on the company’s platforms.

The company’s growth has coincided with an aggressive approach to acquisitions. Facebook has acquired almost 90 companies since 2003.2 The most notable of these acquisitions are Instagram (a photo-based social media platform acquired in 2012) and WhatsApp (a messaging service acquired in 2014).

In recent years, Facebook—and its CEO, Mark Zuckerberg—have been plagued by public criticism on multiple fronts. In 2018, the company faced a consumer privacy scandal after it was publicly revealed that a third-party firm, Cambridge Analytica, had collected data on millions of Facebook users, without their permission, and sought to use that information to sway political opinion ahead of the 2016 presidential election.3 The scandal resulted in the company settling consumer protection charges brought by the FTC for a record-breaking $5 billion.4

Google

Google is a multipronged technology company most known for its internet search engine. In 2015, the company became a subsidiary of holding company Alphabet, Inc., through a corporate restructuring. In the most recent quarter for which data is available, Alphabet reported earnings of nearly $40.5 billion, with Google properties accounting for essentially all of these earnings. Like Facebook, Google’s main internet tools are free to use, and almost all of the company’s revenues come from advertising fees.

Google also has been an extremely active buyer—Google and its parent, Alphabet, have acquired over 230 other companies since Google was founded in 1998.5 The most notable of these acquisitions show Google’s wide-ranging technological ambitions: in 2005, Google purchased the mobile operating system, Android; in 2006, Google purchased the industry-leading video streaming service, YouTube; in 2013, Google purchased the mapping and navigation company, Waze; and in 2014, Google purchased the artificial intelligence company, DeepMind.6 Notably, Google also has purchased companies that strengthen its foothold in the digital advertising space, such as DoubleClick in 2008 and AdMob in 2010.7

Google’s growth has raised the eyebrows of antitrust enforcers around the world, particularly in Europe. In the last three years, Google has been fined roughly $9.3 billion based on three separate antitrust investigations by the European Union (EU). Google has appealed all three fines, and each appeal remains ongoing in the European court system. The first charge by the European Commission, in 2017, found that Google’s search engine and its underlying search algorithms were anticompetitively favoring Google’s own online shopping service to the detriment of competitor sellers online.8 (Notably, the FTC opened an investigation into Google based on these same allegations but declined to bring charges in 2013.)9 The EU fined Google a second time last year for abusing its power, through its Android devices, in the mobile phone market.10 This fine was levied in combination with orders that Google stop tying its Android phones to other Google products, such as its search engine and internet browser (Google Chrome)—that is, Google was required to stop selling phones that have Google Search, Chrome, and other Google properties preinstalled and difficult for users to remove or change.11 Finally, in March 2019, the EU charged that Google used unfair and restrictive contract provisions related to the use of search tools and online advertising in its licensing agreements with other companies.12

While EU competition laws differ from U.S. antitrust laws, federal enforcers have taken note of the European Commission’s aggressive approach to policing Google and other big tech companies, with FTC Chairman Joseph Simons telling Congress that his agency is “very interested in what [the EU is] doing.”13

Apple

Apple is a consumer electronics and computer software retailer known primarily for its mobile devices, computers, and operating systems. Apple’s primary source of financial growth comes from sales of its popular devices (e.g., iPhone, iPad, and Mac). Its revenue for its fiscal year ending September 2019 eclipsed $260 billion.

Like its Big Four counterparts, Apple takes an aggressive approach to acquisitions. Earlier this year, CEO Tim Cook revealed that the company acquires a smaller company about once every two or three weeks.14 While many of these acquisitions involve lesser-known companies, Apple has its share of headline acquisitions, including the 2014 purchase of headphone-maker Beats Electronics.

Apple is no stranger to antitrust litigation. In 2013, the U.S. District Court for the Southern District of New York held that Apple violated section 1 of the Sherman Act by conspiring with major book publishers to fix the prices of e-books in an effort to undercut market leader Amazon’s price-setting ability in the e-book industry.15 More recently, the Supreme Court ruled that iPhone users have standing to sue Apple under section 2 of the Sherman Act for allegedly monopolizing the market for iPhone applications because it allows users to purchase these applications only through its own “App Store.”16

Amazon

Though now involved in an ever-increasing number of industries, Amazon made its name in e-commerce.17 Today, Amazon.com accounts for an estimated 37 percent of all online commerce. Amazon’s online retail operation is two-pronged. It is both a traditional retailer (selling products directly to consumers) and an internet platform on which third-party merchants can sell goods as long as they pay Amazon commission fees. Amazon’s overall business strategy is unique because the company has shown a willingness to sacrifice short-term profits in favor of long-term growth. In the past, Amazon’s net profits have often been below, or close to, zero; but in 2018, the company reported profits of over $10 billion—a record for the company.

Amazon’s acquisitions demonstrate its diverse ambitions: the company has purchased a grocery chain (Whole Foods), a smart doorbell company (Ring), and a pharmaceutical delivery company (PillPack), among numerous others.

Amazon’s rapid takeover of the e-commerce market has attracted significant antitrust attention. In July, the EU announced that it was investigating how Amazon uses nonpublic data collected from third-party merchants that use Amazon’s website to reach consumers.18 The concern is that Amazon uses this data to restrict competition, perhaps in ways that promote its own wares at the expense of smaller businesses. Domestically, the company has faced political backlash for several reasons, including its labor conditions and its business practices. A 2016 law review article, Amazon’s Antitrust Paradox, spurred conversations as to whether Amazon’s willingness to price below-cost and sacrifice profits for growth might ultimately be anticompetitive.19

The Investigations

FTC and DOJ Investigations

The FTC and DOJ honed in on the tech sector and, specifically, the Big Four in 2019. In February, the FTC announced a task force to monitor competition in the tech sector, reportedly with a focus on re-examining previously approved mergers.20 In June, reports revealed that the DOJ and FTC were splitting up jurisdiction over the Big Four, giving DOJ authority to investigate Google and Apple and the FTC authority to investigate Facebook and Amazon.21 The next month, DOJ announced a broad antitrust review into dominant technology firms, designed to analyze how the largest tech companies reached their status.22 This investigation, reportedly, will exist separate and apart from other efforts to monitor the industry.23 Finally, in September, DOJ announced that it would be investigating Facebook concurrently with the FTC—despite the June agreement giving the FTC jurisdiction—creating the rare effect of having both federal antitrust enforcers investigate the same company at the same time.24

Facebook is apparently the leading target in antitrust enforcement right now. Several details have leaked about the FTC’s investigation into the social media giant since the company announced in July that it was being monitored by the agency, and the FTC investigation apparently centers on Facebook’s acquisition practices: investigators reportedly are looking into past acquisitions that may have fortified Facebook’s leading position in the social media market,25 and they have also interviewed “Facebook’s current and former competitors” to understand the company’s business practices.26 In response, Facebook may already be making internal changes to prevent further scrutiny and, perhaps, protect its previous big-name acquisitions. Facebook stepped away from at least one potential acquisition in the social media space and has taken steps to enmesh its wide offering of messaging services (Facebook Messenger, Instagram, and WhatsApp)—moves that the company claims are designed to better service consumers but that critics see as an attempt to complicate any potential breakup of Facebook.27 Meanwhile, the DOJ investigation will reportedly focus on different conduct, though no specific focus has been reported yet.28

Fewer details have emerged regarding the preliminary investigations into Google, Apple, and Amazon. For Google, the focus appears to be on the company’s advertising practices,29 and, in September, Google did inform investors that DOJ had sent a “mandatory request for information” to the company regarding its previous antitrust investigations.30 The FTC’s look at Amazon, meanwhile, is centering on Amazon’s relationships with third-party merchants. As part of its probe, the agency reportedly has been interviewing businesses that sell products through Amazon, specifically questioning merchants about how much revenue they generate selling through Amazon versus selling elsewhere.31 As for Apple, little is known of any DOJ investigation.

State Attorneys’ General Investigations

Facebook

In September, the New York Attorney General (NY AG) announced that eight states and the District of Columbia were opening an antitrust investigation into Facebook.32 By late October, 47 states and U.S. territories had joined the probe.33 The initial announcement indicated that the investigation will examine Facebook’s dominance in social media and evaluate whether Facebook has “endangered consumer data, reduced the quality of consumers’ choices, or increased the price of advertising.”34

Google

Just a few days after the NY AG announced its investigation into Facebook, the attorneys general of 48 states, the District of Columbia, and Puerto Rico formally announced their antitrust investigation of Google.35 The Texas attorney general is leading the states’ investigation and claims that the “bipartisan coalition” will look at “Google’s overarching control of online advertising markets and search traffic that may have led to anticompetitive behavior harming consumers.”36 The investigation will focus on any evidence that Google has purposely stifled innovation or otherwise restricted consumer choice, particularly in digital advertising and search vehicles.37

Congressional Investigations

While the FTC, DOJ, and state attorneys general investigate big tech to possibly bring antitrust enforcement actions based on existing law, congressional committees in both the House of Representatives and the Senate are concurrently trying to determine whether new antitrust legislation is necessary to deal with the unprecedented challenges presented by the industry.

U.S. House of Representatives

In June, the House Judiciary Committee revealed that it was opening a “bipartisan investigation into competition in digital markets” to investigate its concern that “[a] small number of dominant, unregulated platforms . . . have the incentive and ability to harm the competitive process.”38 The investigation will look at potential anticompetitive practices among the large tech platforms and also will evaluate whether current antitrust laws and policies are “adequate to address these issues.”39

Since the announcement, the Committee has held two hearings as part of its investigation. The first hearing focused on how large tech platforms are affecting news publishers.40 The second hearing, which called high-ranking representatives of Amazon, Apple, Facebook, and Google to testify, explored whether, or how, these companies are stifling innovation across the economy, as alleged.41

In September, the Committee took its biggest step to date by sending requests for information directly to the leaders of the Big Four.42 The individually tailored requests seek a substantial amount of information, including details about each company’s perceived competitors, acquisition practices, and relevant business decisions.43

U.S. Senate

Though no formal inquiry into big tech has been announced in the Senate, the Senate Antitrust Subcommittee on Antitrust, Competition Policy and Consumer Rights has also held hearings regarding its concerns with the industry’s major players.44 During a September hearing regarding acquisitions by digital platforms, FTC Bureau of Competition Director Bruce Hoffman testified about the FTC’s record in approving mergers that have since raised competition concerns (for example, Facebook’s acquisition of Instagram in 2012), and whether the current legal standards for merger enforcement make it too difficult for the FTC to stop potentially anticompetitive acquisitions.45 Hoffman defended the FTC’s record while also emphasizing that the FTC was actively reconsidering old, consummated mergers over which the FTC has the power to sue to unwind.46

Legal Theories

The antitrust investigations into the Big Four technology companies may not result in any formal charges, much less legal liability for Amazon, Apple, Facebook, or Google. And even if enforcement charges are brought, the legal theories underpinning them will depend on what, if anything, investigators uncover. The Big Four, each in its own way, present characteristics that regulators and courts have yet to face in the antitrust context.

Section 1 of the Sherman Antitrust Act

Section 1 of the Sherman Act prohibits “[e]very contract, combination . . . , or conspiracy, in restraint of trade or commerce among the several States.”47 Courts later refined this broad statutory language to prohibit only “unreasonable” restraints.48 A restraint is unreasonable per se if it is “so inherently anticompetitive” that it can be deemed illegal “without inquiry into the harm it actually caused” (for example, a horizontal price-fixing agreement).49 Or, if the anticompetitive nature of the restraint is less obvious, it may need to be evaluated under the “rule of reason,” which requires “an inquiry into market power and market structure designed to assess the combination’s actual effect.”50 Agreements between vertical actors (e.g., a manufacturer and a retailer) are typically subject to the rule of reason.51

Google and Facebook: Two-Sided Markets

Google and Facebook operate in two-sided markets: one market for users (a person using Google’s search engine or Facebook’s social media platform) and another market for advertisers (a business that pays to advertise on the Google search result page or the Facebook platform).

The U.S. Supreme Court recently decided a section 1 case involving the two-sided market in credit card transactions, Ohio v. American Express Company.52 Credit card issuers make money by getting customers to buy their credit cards. At the same time, credit card issuers also generate revenue by charging merchants a small fee, or a percentage of the amount of each transaction for which the card is used. Therefore, every time a credit card is used, the issuer is making money from both the customer and the merchant—creating a two-sided market.53

In Ohio v. American Express, the DOJ and several states alleged that American Express violated section 1 of the Sherman Act through certain “antisteering provisions” it used in contracts with merchants.54 These provisions prohibited merchants from attempting to “steer” customers to use other types of credit or debit cards (for example, Mastercard) that charge smaller fees to the merchant. Such provisions, as the government admitted, are vertical restraints subject to a more lenient rule of reason analysis.55 The crux of the government’s argument nevertheless was that the “merchant market” and the “consumer market” were separate and that anticompetitive effects needed to be shown on only one side—in this case, the merchant market—in order for American Express to be liable.56

The Supreme Court disagreed. In a 5-4 decision, the Court held that both sides of the market needed to be analyzed under the rule of reason before determining whether the antisteering provisions were anticompetitive. In other words, any anticompetitive effect on merchants had to be weighed against potential procompetitive effects for consumers.57 The Court based its holding on the fact that credit card issuers “facilitate a single, simultaneous transaction between participants” and can be thought of as “‘supplying only one product’—transactions.”58 The Court thus held that, even if the antisteering provisions had anticompetitive effects on merchants, American Express would face section 1 liability only if those anticompetitive effects were greater than the procompetitive effects experienced by cardholders.

Many believed that Ohio v. American Express would have important ramifications on technology companies in two-sided markets, particularly Google and Facebook.59 The trade group representing the companies even filed an amicus brief in support of American Express.60 Google and Facebook combined control 60 percent of the domestic internet advertising market,61 and their ability to use this market power to generate favorable terms with advertisers and others is a potential area of section 1 scrutiny.

Yet, while the American Express decision may initially seem favorable to these tech giants and other actors in two-sided markets, the Court’s holding is not broad. One paragraph of the ruling, in fact, suggests that technology platforms could be treated much differently than credit card issuers:

To be sure, it is not always necessary to consider both sides of a two-sided platform. A market should be treated as one sided when the impacts of indirect network effects and relative pricing in that market are minor. Newspapers that sell advertisements, for example, arguably operate a two-sided platform because the value of an advertisement increases as more people read the newspaper. But in the newspaper-advertisement market, the indirect networks [sic] effects operate in only one direction; newspaper readers are largely indifferent to the amount of advertising that a newspaper contains. Because of these weak indirect network effects, the market for newspaper advertising behaves much like a one-sided market and should be analyzed as such.62

The critical question is how the Court would view a company like Google or Facebook. Are these companies more like American Express, operating in an environment of simultaneous transactions between participants, i.e., the internet user and the internet advertiser? Or are they more like a newspaper, extracting high advertising fees from advertisers because of the large number of users on the platform, but with users on the other side who are “indifferent” to the amount of advertising presented? Given the current lack of clarity, any antitrust investigation of Facebook or Google may be examining each company’s contracts with advertisers and third parties, perhaps relying on an argument that—unlike in American Express—a section 1 claim against either tech giant would need to show anticompetitive effects in only one market (not two) to be successful.

Amazon: How to Handle a Retailer Doubling as an E-Commerce Platform for Third-Party Merchants

Of the Big Four, Amazon is perhaps the most likely to be scrutinized under section 1 because it routinely enters into contracts with merchants who might be considered potential or actual competitors. Amazon is an atypical case because it is more than a standard retailer; it is an e-commerce platform that houses both its own products and (often competing) third-party products for sale.

The recently announced EU investigation is centered on precisely this issue: whether Amazon has an unfair advantage in online commerce because it exists as both a retailer and a platform for retailers.63 Amazon enters into a “standard agreement” with any third-party retailer that uses Amazon’s platform to reach consumers, and this agreement stipulates that Amazon can monitor and use third-party retailer data.64

It has already been reported that the FTC investigation of Amazon is focusing on the company’s relationships with third-party merchants, and, like European agencies, the FTC may be seeking to uncover evidence that Amazon’s standard agreement and related conduct are anticompetitive. Still, under U.S. law, it remains an open question how a retail platform like Amazon would be analyzed under section 1.

Section 2 of the Sherman Antitrust Act

Section 2 of the Sherman Act prohibits companies from monopolizing, or attempting to monopolize, “any part of the trade or commerce among the several States. . . .”65 Two elements must be shown to prove monopolization: “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.”66

Google and Facebook: Monopoly over a Free Service?

As with respect to section 1, Google and Facebook can be examined together because of the qualities they share in their most scrutinized industries (respectively, search and social media).

Though many have called Google and Facebook monopolies, no court or legal authority has deemed either a monopoly under the U.S. antitrust laws. This is in part because categorizing these companies in a specific market is difficult.67 Moreover, the legal definition of monopoly power is “the power to control prices or exclude competition”68 or the ability to “profitably raise prices substantially above the competitive level.”69 This traditional definition is a roadblock to modern antitrust enforcement of Facebook and Google, considering that the companies’ primary products are free and that they are not threatening to raise prices at all.

A monopolization claim against either company, thus, would likely need to focus not on pricing evidence but on evidence that the company has the power to “exclude competition.” Facebook accounts for over 75 percent of the global social media market and about 59 percent of the domestic market.70 Google, meanwhile, holds almost 93 percent of the global internet search market and over 88 percent of the domestic internet search market.71 Recent data suggests that Google also holds over 73 percent of the market in search advertising.72 These estimates are sufficiently high to suggest that Facebook and Google may have monopoly power in their respective markets.73

Still, even assuming that a federal agency or state attorney general shows that Facebook or Google has monopoly power, it would need to demonstrate that the company either acquired or maintained that power through anticompetitive practices, often referred to as “exclusionary conduct.”74 The FTC’s reported contact with Facebook’s current and former competitors and the DOJ’s interactions with Google’s advertisers are likely aimed at uncovering whether any exclusionary conduct sufficient to hold up an antitrust claim took place, or is currently taking place. Should a claim alleging exclusionary conduct be brought, Facebook’s and Google’s likely defense is that their growth is purely attributable to the superior digital products they have created. The attainment of monopoly power, in itself, is not an antitrust violation.75

And, generally, exclusionary conduct is hard to prove. The court in United States v. Microsoft—one of the biggest antitrust cases involving a large tech company—noted, “Whether any particular act of a monopolist is exclusionary, rather than merely a form of vigorous competition, can be difficult to discern: the means of illicit exclusion, like the means of legitimate competition, are myriad.”76 There, the court delineated between “harm to the competitive process,” which is exclusionary, and “harm to one or more competitors,” which is not.77

Ultimately, in an antitrust environment that focuses on price-based harms to consumers, it is hard to predict how a U.S. court would evaluate a monopolization claim against a company that provides free services.

Apple: Harm Caused by Commission Fees Charged App Developers?

This past year, Apple lost in the U.S. Supreme Court on an important procedural matter in a civil class action brought by iPhone owners. In Apple v. Pepper, a putative plaintiff class alleged that Apple is in violation of section 2 of the Sherman Act for monopolizing the market for iPhone applications because iPhone owners are allowed to purchase applications only through Apple’s “App Store.”78 Apple charges developers selling apps on the App Store a 30 percent commission, and the plaintiff class claims that prices would be lower in a marketplace where developers are not charged the commission, or, put differently, prices allegedly would be lower if apps could be purchased outside the App Store.79

The issue before the Supreme Court was whether the iPhone owners had standing to bring their claims in the first place. The dispute centered on a prior Supreme Court case, Illinois Brick Company v. Illinois, that held that “indirect purchasers who are two or more steps removed from the antitrust violator in a distribution chain may not sue [under section 2 of the Sherman Act].”80 Apple argued that Illinois Brick allows consumers to sue only “the party who sets the retail price” (here, the app developers), even when—as in this case—the consumers are buying the apps directly from Apple through the App Store.81

The Court disagreed with Apple, holding that the class had standing to sue because “there is no intermediary in the distribution chain between Apple and the consumer.”82 In other words, the iPhone owners were found to be proper plaintiffs because they paid the “alleged overcharge directly to Apple.”83

Apple v. Pepper deals with private parties that have standing to sue under section 2, but antitrust agencies may be particularly attuned to the decision considering that the EU has received much-publicized complaints regarding the same 30 percent commission at the heart of Apple v. Pepper.84 The complaints to the EU arrived not from everyday App Store users but from Swedish audio-streaming company Spotify. Spotify claims that it has to artificially increase its membership prices to account for Apple’s commission fees, which disadvantages the company in its competition with Apple’s own streaming service, Apple Music.85 In light of this complaint and the initial success of the plaintiffs in Apple v. Pepper, investigators may be inclined to take a close look at whether the App Store is a vehicle for exclusionary conduct. In fact, Spotify representatives reportedly have already met with DOJ officials and the FTC task force.86

Amazon: An “Essential Facility” for Third-Party Merchants?

Any section 2 case against Amazon would first have to confront a market definition and market power problem. Amazon is known for defending itself on antitrust grounds by citing the fact that it controls only about eight percent of all U.S. retail shares.87 Even constricting the market to just online retail, Amazon still controls less than 40 percent of the total market.88 Therefore, any section 2 case against Amazon would first have to argue for a narrower market.

Even if the market definition problem is overcome, it still needs to be demonstrated that Amazon has engaged in some form of exclusionary conduct. And showing anticompetitive behavior may be difficult considering that Amazon is known for its low (sometimes even loss-leading) pricing.89

Yet one possible section 2 theory—related to the potential section 1 claims discussed above—would be to classify Amazon as an “essential facility” through which third-party merchants must pass in order to reach consumers.90 A “monopolist’s control of an essential facility . . . can extend monopoly power from one stage of production to another, and from one market into another.”91 Accordingly, entities that control an essential facility must make the facility “available on non-discriminatory terms.”92 If it can be shown that Amazon controls the means on which these third-party merchants rely in order to reach consumers, and that Amazon has also discriminated against or intentionally disadvantaged these third-party sellers, then a claim against Amazon under the essential facility doctrine may have footing.

Newly Introduced Legislation

As evidenced by the congressional inquiries into big tech, legislators are keen to propose solutions regarding the alleged problems posed by the country’s largest technology companies. The following list provides a background on some of the specific bills recently introduced in Congress to rein in monopolies, particularly those in the technology sector.

  • Monopolization Deterrence Act: The Monopolization Deterrence Act would give the DOJ and the FTC the power to seek civil penalties for section 2 monopolization offenses (a power they do not currently have) and would also increase penalties for companies liable for monopolization.93
  • Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act: The ACCESS Act seeks to increase competition in the social media space by forcing large social media providers like Facebook and Google to make user data portable so that smaller competitors may have access to that data and a chance to overcome the network effects that favor incumbents in these tech spaces.94
  • Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data (DASHBOARD) Act: The DASHBOARD Act would require social media platforms like Facebook to tell consumers and regulators what data they are collecting and how the companies are monetizing that data. It also would expand users’ ability to delete data collected by these platforms.95
  • Journalism Competition and Preservation Act: This Act would allow news publishers to negotiate collectively with online platforms like Facebook and Google to improve their financial position. Responding to the current environment where Facebook and Google swallow up a large portion of digital advertising revenues, this bill seeks to give news publishers the opportunity to increase their own revenues by providing them safe harbor under the antitrust laws to negotiate collectively with the tech giants.96

Appointment of New DOJ Technology Industries Adviser

Beyond legislative reform, the DOJ has created a new enforcement position within the Office of the Deputy Attorney General and appointed Ryan A. Shores as its new associate deputy attorney general and senior advisor for technology industries.97 The DOJ said that the creation of the position and appointment of Shores “reflects the significance of the Department’s review of competitive conditions among online platforms.”98 This review includes the Antitrust Division’s investigation of “whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers”;99 and the appointment of Shores has been interpreted as a signal of the significance of the DOJ’s ongoing investigations of online platforms.100 Indeed, the DOJ has commented that its investigations will not be circumscribed by the antitrust laws and that it may also seek to address privacy and public safety issues.101

Conclusion

The Big Four sit at the center of the current political and social debate over U.S. antitrust law. Amazon, Apple, Facebook, and Google have each experienced incredible growth in the twenty-first century, though that growth has come with increased scrutiny. In the midst of this, it is worth remembering that U.S. antitrust laws have always been fluid, and the general statutory language has been subject to evolving interpretations. While the next evolution remains uncertain, it seems clear that the tech giants of our time will help shape that evolution.

Endnotes

1. These clear lines have been muddied by the DOJ’s announcement in September 2019 that it is also investigating Facebook.

2. See Diane Bartz, U.S. Justice Department to Open Facebook Antitrust Investigation: Source, Reuters (Sept. 25, 2019), https://www.reuters.com/article/us-facebook-probe-antitrust/justice-department-to-open-facebook-antitrust-investigation-source-idUSKBN1WA35M.

3. See Issie Lapowsky, How Cambridge Analytica Sparked the Great Privacy Awakening, Wired (Mar. 17, 2019), https://www.wired.com/story/cambridge-analytica-facebook-privacy-awakening/. Privacy concerns have been linked to the antitrust concerns raised by enforcers, states, and Congress. Makan Delrahim, the head of the Antitrust Division at DOJ, said in June, “[D]iminished quality is also a type of harm to competition. As an example, privacy can be an important dimension of quality. By protecting competition, we can have an impact on privacy and data protection.” See Makan Delrahim, Assistant Attorney General, Remarks for the Antitrust New Frontiers Conference: “. . . And Justice for All”: Antitrust Enforcement and Digital Gatekeepers (June 11, 2019), https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-remarks-antitrust-new-frontiers.

4. This record settlement stemmed from FTC allegations that Facebook had violated a 2012 settlement order with the agency, including provisions ordering Facebook not to misrepresent “the extent to which a consumer can control the privacy of information maintained by [Facebook]” or “the extent to which [Facebook] makes or has made information accessible to third parties.” See generally Complaint for Civil Penalties, Injunction, and Other Relief, United States v. Facebook, Inc., No. 19-cv-2184, (FTC July 24, 2019) (“2019 FTC complaint”); Stipulated Order for Civil Penalty, Monetary Judgment, and Injunctive Relief, United States v. Facebook, Inc., No. 19-cv-2184 (FTC July 24, 2019) (“2019 FTC Settlement Order”); In re Facebook, Inc., C-4365, 2012 FTC LEXIS 135 (FTC July 27, 2012) (“2012 Facebook Settlement Order”).

5. Google Acquisitions, Crunchbase (Oct. 17, 2019), https://www.crunchbase.com/organization/google/acquisitions/acquisitions_list#section-acquisitions. For a visual representation of Google’s acquisition activity, see Matt Reynolds, If You Can’t Build It, Buy It: Google’s Biggest Acquisitions Mapped, Wired (Nov. 25, 2017), https://www.wired.co.uk/article/google-acquisitions-data-visualisation-infoporn-waze-youtube-android.

6. See id.

7. See id.

8. Press Release, European Comm’n, Antitrust: Commission Fines Google 2.42 Billion for Abusing Dominance as Search Engine by Giving Illegal Advantage to Own Comparison Shopping Service (June 27, 2017), https://europa.eu/rapid/press-release_IP-17-1784_en.htm; see Mark Scott, Google Fined Record $2.7 Billion in E.U. Antitrust Ruling, N.Y. Times (June 27, 2017), https://www.nytimes.com/2017/06/27/technology/eu-google-fine.html?module=inline.

9. See Fed. Trade Comm’n, FTC File No. 111-0163, Statement of the Federal Trade Commission Regarding Google’s Search Practices In the Matter of Google Inc. (Jan. 3, 2013), https://www.ftc.gov/sites/default/files/documents/public_statements/statement-commission-regarding-googles-search-practices/130103brillgooglesearchstmt.pdf.

10. Press Release, European Comm’n, Antitrust: Commission Fines Google €4.34 Billion for Illegal Practices Regarding Android Mobile Devices to Strengthen Dominance of Google’s Search Engine (July 18, 2018), https://europa.eu/rapid/press-release_IP-18-4581_en.htm; Adam Satariano & Jack Nicas, E.U. Fines Google $5.1 Billion in Android Antitrust Case, N.Y. Times (July 18, 2019), https://www.nytimes.com/2018/07/18/technology/google-eu-android-fine.html?module=inline.

11. Press Release, supra note 10; Satariano & Nicas, supra note 10.

12. Press Release, European Comm’n, Antitrust: Commission Fines Google €1.49 Billion for Abusive Practices in Online Advertising (Mar. 20, 2019), https://europa.eu/rapid/press-release_IP-19-1770_en.htm; Scott, supra note 8.

13. Satariano & Nicas, supra note 10.

14. Lauren Feiner, Apple Buys a Company Every Few Weeks, Says CEO Tim Cook, CNBC (May 6, 2019), https://www.cnbc.com/2019/05/06/apple-buys-a-company-every-few-weeks-says​-ceo-tim-cook.html.

15. United States v. Apple Inc., 952 F. Supp. 2d 638 (S.D.N.Y. 2013), aff’d, 791 F.3d 290 (2d Cir. 2015).

16. Apple Inc. v. Pepper, 139 S. Ct. 1514 (2019).

17. Amazon’s other ventures include hardware manufacturing, cloud computing, and online streaming services.

18. Georgina Prodhan, Explainer: What Is the EU’s Antitrust Investigation into Amazon About?, Reuters (July 17, 2019), https://www.reuters.com/article/us-eu-amazon-com-antitrust-explainer/explainer-what-is-the-eus-antitrust-investigation-into-amazon-about-idUSKCN1UC24R.

19. Lina M. Khan, Amazon’s Antitrust Paradox, 126 Yale L.J. 710 (2016).

20. John D. McKinnon, FTC Aims New Task Force at Big Tech, Wall St. J. (Feb. 26, 2019), https://www.wsj.com/articles/ftc-aims-new-task-force-at-big-tech-11551209556?mod=article_inline.

21. Seth Fiegerman, Google, Facebook and Apple Could Face US Antitrust Probes as Regulators Divide Up Tech Territory, CNN (June 3, 2019), https://www.cnn.com/2019/06/03/tech/facebook-google-amazon-antitrust-ftc/index.html.

22. Daisuke Wakabayashi, Katie Benner & Steve Lohr, Justice Department Opens Antitrust Review of Big Tech Companies, N.Y. Times (July 23, 2019), https://www.nytimes.com/2019/07/23/technology/justice-department-tech-antitrust.html.

23. Brent Kendall, Justice Department to Open Broad, New Antitrust Review of Big Tech Companies, Wall St. J. (July 23, 2019), https://www.wsj.com/articles/justice-department-to-open-broad-new-antitrust-review-of-big-tech-companies-11563914235.

24. David McLaughlin, Attorney General Barr Seeks DOJ Facebook Antitrust Probe, Bloomberg (Sept. 25, 2019), https://www.bloomberg.com/news/articles/2019-09-25/attorney-general-barr-sought-doj-facebook-antitrust-probe. Reportedly, this move by DOJ has caused quite a bit of consternation among officials at the FTC.

25. Mike Isaac, How Facebook Is Changing to Deal with Scrutiny of Its Power, N.Y. Times (Aug. 12, 2019), https://www.nytimes.com/2019/08/12/technology/facebook-antitrust.html; see also Brent Kendall, John D. McKinnon & Deepa Seetharaman, FTC Antitrust Probe of Facebook Scrutinizes Its Acquisitions, Wall St. J. (Aug. 1, 2019), https://www.wsj.com/articles/ftc-antitrust-probe-of-facebook-scrutinizes-its-acquisitions-11564683965.

26. Georgia Wells & Deepa Seetharaman, Snap Detailed Facebook’s Aggressive Tactics in ‘Project Voldermort’ Dossier, Wall St. J. (Sept. 24, 2019), https://www.wsj.com/articles/snap-detailed-facebooks-aggressive-tactics-in-project-voldemort-dossier-11569236404?mod=searchresults&page=1&pos=6.

27. Id.

28. Id.

29. Sarah Forden & David McLaughlin, DOJ Scrutinizes Google Advertising, Search in Antitrust Probe, Bloomberg (Aug. 8, 2019), https://www.bloomberg.com/news/articles/2019-08-08/doj-scrutinizes-google-advertising-search-in-antitrust-probe.

30. Brian Fung, Google Hit by DOJ Demand for Antitrust Records, CNN (Sept. 6, 2019), https://www.cnn.com/2019/09/06/tech/justice-department-antitrust-google/index.html.

31. Spencer Soper & Ben Brody, Amazon Probed by U.S. Antitrust Officials over Marketplace, Bloomberg (Sept. 22, 2019), https://www.bloomberg.com/news/articles/2019-09-11/amazon-antitrust-probe-ftc-investigators-interview-merchants.

32. Steve Lohr, New Google and Facebook Inquiries Show Big Tech Scrutiny Is Rare Bipartisan Act, N.Y. Times (Sept. 6, 2019), https://www.nytimes.com/2019/09/06/technology/attorney-generals-tech-antitrust-investigation.html.

33. Annie Palmer, 47 Attorney Generals Are Investigating Facebook for Antitrust Violations, CNBC (Oct. 23, 2019), https://www.cnbc.com/2019/10/22/47-attorneys-general-are-investigating-facebook-for-antitrust-violations.html.

34. Id.

35. Steve Lohr, Google Antitrust Investigation Outlined by State Attorneys General, N.Y. Times (Sept. 9, 2019), https://www.nytimes.com/2019/09/09/technology/google-antitrust-investigation.html.

36. Press Release, Ken Paxton, Att’y Gen. of Texas, Attorney General Paxton Leads 50 Attorneys General in Google Multistate Bipartisan Antitrust Investigation (Sept. 9, 2019), https://www.texasattorneygeneral.gov/news/releases/attorney-general-paxton-leads-50-attorneys-general-google-multistate-bipartisan-antitrust.

37. Id.

38. Press Release, U.S. House Comm. on the Judiciary, House Judiciary Committee Launches Bipartisan Investigation into Competition in Digital Markets (June 3, 2019), https://judiciary.house.gov/news/press-releases/house-judiciary-committee-launches-bipartisan-investigation-competition-digital.

39. Id.

40. Online Platforms and Market Power, Part 1: The Free and Diverse Press: Hearing Before the H. Comm. on the Judiciary, 116th Cong. (June 11, 2019), https://judiciary.house.gov/legislation/hearings/online-platforms-and-market-power-part-1-free-and-diverse-press.

41. Online Platforms and Market Power, Part 2: Innovation and Entrepreneurship: Hearing Before the H. Comm. on the Judiciary, 116th Cong. (July 16, 2019), https://judiciary.house.gov/legislation/hearings/online-platforms-and-market-power-part-2-innovation-and-entrepreneurship.

42. See Letter from U.S. House of Representatives Comm. on the Judiciary to Jeff Bezos, CEO, Amazon (Sept. 13, 2019), https://judiciary.house.gov/sites/democrats.judiciary.house.gov/files/documents/Amazon%20RFI%20-%20Signed.pdf (request for information from Amazon); Letter from U.S. House of Representatives Comm. on the Judiciary to Tim Cook, CEO, Apple (Sept. 13, 2019), https://judiciary.house.gov/sites/democrats.judiciary.house.gov/files/documents/Apple%20RFI%20-%20Signed.pdf (request for information from Apple); Letter from U.S. House of Representatives Comm. on the Judiciary to Mark Zuckerberg, CEO, Facebook (Sept. 13, 2019), https://judiciary.house.gov/sites/democrats.judiciary.house.gov/files/documents/Facebook%20RFI%20-%20Signed.pdf (request for information from Facebook); Letter from U.S. House of Representatives Comm. on the Judiciary to Larry Page, CEO, Alphabet (Sept. 13, 2019), https://judiciary.house.gov/sites/democrats.judiciary.house.gov/files/documents/Alphabet%20Inc.%20RFI%20-%20Signed%20%28003%29.pdf (request for information from Alphabet).

43. Letters from U.S. House of Representatives Comm. on the Judiciary to Bezos, Cook, Zuckerberg, and Page, supra note 42.

44. Competition in Digital Markets: Examining Acquisitions of Nascent or Potential Competitors by Digital Platforms: Hearing Before the S. Comm. on the Judiciary, Subcomm. on Antitrust, Competition Policy & Consumer Rights, 116th Cong. (Sept. 24, 2019), https://www.judiciary.senate.gov/meetings/competition-in-digital-technology-markets-examining-acquisitions-of-nascent-or-potential-competitors-by-digital-platforms.

45. Id.

46. Id.

47. 15 U.S.C. § 1.

48. See State Oil v. Khan, 552 U.S. 3, 10 (1997).

49. Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 768 (1984).

50. Id.

51. Id.

52. 138 S. Ct. 2274 (2018).

53. Id. at 2285.

54. Id. at 2284–85.

55. Id. at 2284.

56. Id. at 2284–85.

57. Id. at 2286 (“[C]ourts must include both sides of the platform—merchants and cardholders—when defining the credit-card market.”).

58. Id.

59. See Lina M. Khan, The Supreme Court Case That Could Give Tech Giants More Power, N.Y. Times (Mar. 2, 2018), https://www.nytimes.com/2018/03/02/opinion/the-supreme-court-case-that-could-give-tech-giants-more-power.html.

60. Brief of Amicus Curiae, The Comput. & Commc’ns Indus. Ass’n in Support of Respondents, 2018 U.S. S. Ct. Briefs LEXIS 217 (Jan. 2018).

61. Sheila Dang, Google, Facebook Have Tight Grip on Growing U.S. Online Ad Market: Report, Reuters (June 5, 2019), https://www.reuters.com/article/us-alphabet-facebook-advertising/google-facebook-have-tight-grip-on-growing-u-s-online-ad-market-report-idUSKCN1T61IV.

62. Ohio, 138 S. Ct. at 2286.

63. Press Release, European Comm’n, Antitrust: Commission Opens Investigation into Possible Anti-Competitive Conduct of Amazon (July 17, 2019), https://europa.eu/rapid/press-release_IP-19-4291_en.htm; see also Prodhan, supra note 18.

64. Press Release, supra note 63; Prodhan, supra note 18.

65. 15 U.S.C. § 2.

66. United States v. Microsoft Corp., 253 F.3d 34, 50 (D.D.C. 2001) (citing United States v. Grinnell Corp., 384 U.S. 563, 570–71 (1966)).

67. For example, many people categorize Facebook as a “social media” company in competition with entities like Twitter and Tumblr. However, Facebook views itself differently. Facebook’s Mark Zuckerberg testified before Congress that “[i]t certainly doesn’t feel like [Facebook is a monopoly] to me,” and he referred to the other large technology companies as Facebook’s competitors (mentioning Google, Apple, and Amazon by name).

68. United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956).

69. Microsoft Corp., 253 F.3d at 50 (citing 2A Phillip E. Areeda et al., Antitrust Law 85 (1995)).

70. Social Media Stats Worldwide: Dec 2018 – Dec 2019, Statcounter, https://gs.statcounter.com/social-media-stats (last visited Jan. 22, 2020); Social Media Stats United States of America: Dec 2018 – Dec 2019, Statcounter, https://gs.statcounter.com/social-media-stats/all/united-states-of-america (last visited Jan. 22, 2020).

71. Search Engine Market Share Worldwide: Jan–Dec 2019, Statcounter, https://gs.statcounter.com/search-engine-market-share/all/worldwide/2019 (last visited Feb. 11, 2020); Search Engine Market Share United States of America: Jan–Dec 2019, Statcounter, https://gs.statcounter.com/search-engine-market-share/all/united-states-of-america/2019 (last visited Feb. 11, 2020).

72. Megan Graham, Amazon Is Eating into Google’s Most Important Business: Search Advertising, CNBC (Oct. 15, 2019), https://www.cnbc.com/2019/10/15/amazon-is-eating-into-googles-dominance-in-search-ads.html.

73. See Monopolization Defined, FTC, https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/monopolization-defined (last visited Jan. 22, 2020).

74. Microsoft Corp., 253 F.3d at 58.

75. Id.

76. Id.

77. Id. (emphasis in original).

78. Apple Inc. v. Pepper, 139 S. Ct. 1514, 1519 (2019).

79. Id.

80. Id. at 1521 (citing Ill. Brick Co. v. Illinois, 431 U.S. 720, 746 (1977)).

81. Id.

82. Id.

83. Id.

84. Thomas Ricker, Apple to Be Formally Investigated over Spotify’s Antitrust Complaint, Says Report, Verge (May 6, 2019), https://www.theverge.com/2019/5/6/18530894/apple-music-monopoly-spotify-app-store-europe.

85. Id.

86. Diane Bartz & Stephen Nellis, Exclusive: Antitrust Probers in Congress ask Spotify to Detail Alleged Apple Abuses, Reuters (Oct. 4, 2019), https://www.reuters.com/article/us-tech-antitrust-apple-exclusive/exclusive-antitrust-probers-in-congress-ask-spotify-to-detail-alleged-apple-abuses-sources-idUSKBN1WJ1Y3.

87. Matt Day & Jackie Gu, The Enormous Numbers Behind Amazon’s Market Reach, Bloomberg (Mar. 27, 2019), https://www.bloomberg.com/graphics/2019-amazon-reach-across-markets/.

88. Matt Day & Spencer Soper, Amazon U.S. Online Market Share Estimate Cut to 38% from 47%, Bloomberg (June 13, 2019), https://www.bloomberg.com/news/articles/2019-06-13/emarketer-cuts-estimate-of-amazon-s-u-s-online-market-share.

89. Id.

90. See Samuel R. Miller, Is Amazon Violating the Antitrust Laws?, Justia (July 25, 2019), https://verdict.justia.com/2019/07/25/is-amazon-violating-the-antitrust-laws.

91. MCI Commc’ns Corp v. AT&T Co., 708 F. 2d 1081, 1132 (7th Cir. 1983).

92. Id.

93. Monopolization Deterrence Act of 2019, S. 2237, 116th Cong. (July 23, 2019), https://www.congress.gov/bill/116th-congress/senate-bill/2237/text?format=txt.

94. Augmenting Compatibility and Competition by Enabling Service Switching Act of 2019, S. 2658, 116th Cong. (Oct. 22, 2019), https://www.congress.gov/bill/116th-congress/senate-bill/2658/text.

95. Designing Accounting Safeguards to Help Broaden Oversight and Regulations on Data, S. 1951, 116th Cong. (June 25, 2019), https://www.congress.gov/bill/116th-congress/senate-bill/1951/text.

96. Journalism Competition and Preservation Act of 2019, H.R. 2054, 116th Cong. (Apr. 4, 2019), https://www.congress.gov/bill/116th-congress/house-bill/2054/text?q=%7B%22search%22%3A%5B%22Hr+2054%22%5D%7D&r=1.

97. Bryan Koenig, Shearman Antitrust Atty Named New DOJ Tech Adviser, Law360 (Oct. 23, 2019), https://www.law360.com/articles/1212493/shearman-antitrust-atty-named-new-doj-tech-adviser.

98. Press Release, U.S. Dep’t of Justice, Ryan A. Shores Appointed as Associate Deputy Attorney General and Senior Advisor for Technology Industries (Oct. 23, 2019), https://www.justice.gov/opa/pr/ryan-shores-appointed-associate-deputy-attorney-general-and-senior-advisor-technology.

99. Press Release, U.S. Dep’t of Justice, Justice Department Reviewing the Practices of Market-Leading Online Platforms (July 23, 2019), https://www.justice.gov/opa/pr/justice-department-reviewing-practices-market-leading-online-platforms.

100. Koenig, supra note 97.

101. Matthew Perlman, DOJ Says Tech Platform Inquiry Could Go Beyond Antitrust, Law360 (Nov. 18, 2019), https://www.law360.com/media/articles/1220989/doj-says-tech-platform-inquiry-could-go-beyond-antitrust-.

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By James F. Herbison

James F. Herbison (jherbiso@winston.com) is a partner in the Chicago office of Winston & Strawn LLP. His practice focuses on complex commercial litigation, particularly civil and criminal antitrust matters.