Big Tech’s Dependence on Data Confounds Antitrust Effort

The FTC knows how to police markets driven by dollars and cents. But can it adapt to take on tech platforms providing products for “free?” And should it?

AP Photo/Marcio Jose Sanchez
Oct. 16, 2018, 8 p.m.

Federal antitrust regulators are scrambling to catch up to the competitive changes wrought by the reams of consumer data collected and collated by Facebook, Google, and other top tech platforms.

That’s the message hammered home throughout a series of discussions convened by the Federal Trade Commission on the future of competition policy in the 21st century. As one of the nation’s premier antitrust enforcers, the FTC prides itself on its ability to protect consumers against collusion and predatory pricing from brick-and-mortar establishments that corner too much of the marketplace.

But when it comes to enforcing competition rules against the world’s dominant tech platforms—many of which have amassed tremendous wealth and power, in part by providing consumers with “free” services in exchange for advertising revenue and access to user data—the commissioners admit they’re out of their depth.

“These [digital] marketplaces may not operate like they did in history, or how we learned about them in economics textbooks,” said Rohit Chopra, one of two Democratic FTC commissioners, at an antitrust hearing convened by the commission Monday. “And if we do not understand them, we are in big trouble.”

The commission’s other Democrat agrees. In a speech late last month, Rebecca Kelly Slaughter stressed that technological changes required a “critical rethinking” of the FTC’s antitrust doctrine.

The notion has bipartisan buy-in. While not going quite as far as his colleagues, Republican FTC Chairman Joseph Simons told senators earlier this month that the traditional “consumer welfare” model of antitrust—where an uptick in the dollar amount paid by consumers acts as the primary driver of antitrust actions—is likely in need of an update.

“One of the things where we could probably use some help, and new developments in the consumer-welfare model, would be how to deal with just these markets you’re describing, where the product is essentially given away for free,” Simons told Sen. Mike Lee during an oversight hearing.

As the commission continues its listening tour, which is set to conclude in November, the key question for both industry and consumer advocates is just how expansive Simons’s “new developments” in antitrust doctrine will be. The tech industry and many economists believe that while tinkering on the margins is fine, upending the current model of antitrust enforcement to accomplish political or societal goals means the rules could be applied arbitrarily and in a way that reduces innovation by undermining regulatory certainty.

“I think it would be a remarkable mistake to open the Pandora’s box for the antitrust tools to cover all sorts of things,” said Marianela López-Galdos, the head of competition and regulatory policy at the Computer & Communications Industry Association, which includes Facebook, Google, and Amazon as members.

Others argue that the FTC’s mandate to protect consumers—particularly on issues of data privacy—requires the commission to rethink the consumer-welfare model of antitrust. If nothing else, they hope to thread the needle by setting a real-world price on the consumer data being collected by platforms that offer their products for “free.”

“I actually think within the context of current antitrust law, the cases of Facebook, Google in particular will fit once we have a good understanding of data as a currency,” said Roger McNamee, the founder of venture-capital firm Elevation Partners. “They just gave a Nobel Prize this week to people who figured out how to [price] carbon. So I’m not actually talking about a novel theory any longer.”

McNamee believes that the FTC should bring antitrust enforcement cases against both Google and Facebook.

Most economists are skeptical of any drastic changes to antitrust enforcement when it comes to the major tech platforms. In order to get around the thorny problem of pricing a “free” service, they’ve focused on ways to identify the ease and prevalence of “multi-homing”—where consumers use multiple platforms simultaneously or for similar purposes, such as the dual use of ride-hairing apps Uber and Lyft.

“We’re really good at analyzing things that have positive dollar prices attached to them,” said David Evans, an economist at the University of Chicago Law School. “And we’re not so good at valuing the services themselves, independent of the prices. And what’s going to need to happen is there’s going to have to be a greater investment of effort in dealing with the non-price dimension of these platforms in order to really do sensible analyses.”

But while McNamee is still hoping to find a way to put a dollar amount on consumer data and plug it into the current antitrust model, he says a focus on empirical metrics won’t be enough to tackle big tech’s phenomenal power and reach.

“These issues, at the scale these companies operate at, cannot be viewed as only about markets and only about economics,” said McNamee. “Facebook operates 2.2 billion Truman Shows, and between Facebook and Google and the use of filter bubbles they have changed the public square really dramatically. So their form of market power has implications that we’ve never seen previously.”

Most economists reject that notion, arguing that the scale of Facebook, Google, and Amazon could produce tremendous benefits for consumers. Shoehorning social or political objectives into antitrust policy, they say, would hurt both consumers and the companies.

“The antitrust statutes are competition statutes,” said Michael Salinger, an economist at Boston University. So if you want to have policies that are based on something other than competition, then you need to pass other laws.”

The FTC hearings on antitrust come as Washington wrestles with the continued fallout from Big Tech’s role in foreign election interference and a slew of data privacy scandals. The Trump administration is also currently weighing antitrust remedies to correct perceived anti-conservative biases at Facebook and Google, and the president himself recently suggested that both companies, as well as Amazon, may be in “a very antitrust situation.”

That activity likely weighs on the minds of the FTC commissioners and staff as they conduct their review. “I would be surprised if they’re not a little bit influenced by the current political environment,” said Steven Tadelis, an economist at the University of California, Berkeley.

But most observers are confident that however the FTC chooses to tackle the problem of antitrust enforcement in a data-driven, platform-dominated world, it will make its decision independently.

“They’re basically professionals who are applying tools to figure out whether people are violating the antitrust laws,” said Evans. “And I think they tune out all the political talk in the background.”

What We're Following See More »
OVER SEXUAL HARASSMENT ALLEGATIONS
House Ethics Committee Sanctions Meadows, Kihuen
7 minutes ago
THE LATEST

The House Ethics Committee has formally sanctioned Reps. Mark Meadows and Ruben Kihuen over sexual harassment-related allegations. "Meadows was found to have violated House rules 'by failing to take appropriate steps to ensure that his House office was free from discrimination and any perception of discrimination.'" Meadows will have to pay over $40,000 to cover the cost of former chief of staff Kenny West's salary, who remained on his payroll even after Meadows' learned "of credible harassment allegations against the former aide. ... Kihuen, who announced his retirement as the #MeToo movement swept Capitol Hill last year, was found to have 'made persistent and unwanted advances towards women who were required to interact with him as part of their professional responsibilities.'"

Source:
EX-COAL LOBBYIST, FORMER #2
Trump To Nominate Andrew Wheeler To Lead EPA
18 minutes ago
THE DETAILS

"President Trump said he plans to nominate Andrew Wheeler, acting head of the Environmental Protection Agency, to be the EPA's Senate-confirmed administrator." Wheeler took over as acting administrator in July, "when then-EPA chief Scott Pruitt resigned amid numerous spending and ethics scandals. ... Before working for the government, Wheeler was a lobbyist and lawyer for energy companies such as coal mining giant Murray Energy Corp."

Source:
BUT NOT SUBMITTED THEM
Trump Says He's Completed Answers to Mueller's Questions
2 hours ago
THE LATEST
CORNYN, GRAHAM NEXT IN LINE
Grassley Will Chair Judiciary Committee, Leave Finance
4 hours ago
THE LATEST
RULES NOW ENTER PUBLIC COMMENT PERIOD
DeVos Overhauls Guidance to Colleges on Sex Misconduct Cases
5 hours ago
THE DETAILS

Education Secretary Betsy DeVos has updated the Obama administration's controversial rules on how colleges handle claims of sexual misconduct by students under Title IX. "The proposed new rules aim to significantly enhance legal protections for the accused, and reflect a sentiment expressed personally by President Trump that men are being unfairly presumed guilty." The rules, which must undergo a public comment period, would allow schools to elevate the burden of proof in sex cases to "clear and convincing evidence." They would also permit cross-examination, and lift time limits on investigations.

Source:
×
×

Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.

Login