A few months ago, Sen. Elizabeth Warren (D-Mass.) called for Amazon to be broken up. Instead, last week Amazon finalized its acquisition of major film studio MGM.
On Capitol Hill, the push for antitrust reform to address Big Tech’s power has substantial bipartisan support. Two bills have been put forward to accomplish this. Both recently advanced through the Senate Judiciary Committee, and lawmakers are now scrutinizing them carefully.
It’s terrific that Congress recognizes the need for antitrust reform. Like most other antitrust academics, we think antitrust has become too passive. It therefore brings us no pleasure to inform readers that these two bills are deeply misguided. Not only would they cause immense economic damage, but they also fall woefully short of providing the kinds of reform that antitrust really needs.
Both bills address major platforms excluding competing businesses from their services or favoring their own products over those of competitors. This can certainly be anticompetitive. For example, suppose Apple introduces a new weather app and then kicks all other weather apps out of its App Store to eliminate the competition. That would be anticompetitive, and antitrust should condemn it. Unfortunately, this type of conduct has been extremely difficult to challenge ever since the Supreme Court gutted this area of antitrust in a 2004 case called Trinko.
This is a clear opportunity for valuable reform. Major platforms should be held accountable when they exclude sellers of competing products for no good reason. But the proposed antitrust bills do much more than that. And more is not always better.
The biggest problem is that the bills make it presumptively illegal for a platform to do just about anything that treats other products differently than the platform’s own products. Imagine that you run a grocery store, and you also sell your own brand of cereal, which you place on your shelves alongside competing brands. But some of the competing brands don’t like where you’ve placed them; they want to be placed on the same shelf as your cereal, or perhaps one shelf higher. Or maybe they don’t like that you promote your own cereal but not theirs.
Now imagine that these companies not only can sue you under antitrust law, but that they won’t even have to prove that your actions were anticompetitive (the usual prerequisite for antitrust enforcement). Instead, the burden is on you to prove otherwise. If the competitors’ claims are frivolous, you should prevail in the end, but not before you incur substantial litigation costs clearing your name.
At present, antitrust law is too eager to reject allegations of anticompetitive harm, even when plaintiffs offer strong evidence. But the proposed bills would merely create the reverse problem. The resulting threat of widespread litigation will act like a tax that deters platforms from doing things that benefit the public. Platforms may decide not to introduce new products (or to discontinue existing ones) based on the likelihood that sellers of competing goods can sue for any perceived slight. This could also have an adverse effect on how new products are designed.
Platforms may also lose their incentive to protect consumers from harmful or misleading products. For example, it is in Amazon’s interest not to carry defective or dangerous goods, and similarly an app store does not want to carry malicious apps. This is a common reason why platforms sometimes remove certain third-party products from their storefronts. But the new bills would make this presumptively illegal. And the costs of defending such actions in court will undermine platforms’ motivation to remove harmful products.
Legislators might score some political points if these bills are passed, but the fruits of this effort would quickly sour. It would not take long for the public to realize that the specifics of these bills do a lot more harm than good. As when antitrust has overstepped in the past, opponents of antitrust enforcement will then say, “See, we told you antitrust reform is a bad idea.” But the truth is just the opposite: We really do need antitrust reform, including in Big Tech. But we need to do it in a sensible way.
Erik Hovenkamp is a law professor and economist at USC Gould School of Law who specializes in antitrust and innovation policy. D. Daniel Sokol is a professor of law and business at USC Gould School of Law and USC Marshall School of Business who specializes in antitrust and business law.