Updated: Feb 1, 2021
Three years ago, the EU fined Google €2.42 billion for alleged abuse of market dominance, as its search engine gave preference to its own shopping platform. A year and a half ago, Brussels launched an investigation into Spotify’s claims over Apple’s behaviour towards other music streaming apps. However, antitrust regulation really became a prevalent topic in mid-2020. This article seeks to summarise the main antitrust cases and regulatory advances of the last half-year.
Epic Games Inc. v. Apple Inc: an example of private antitrust law enforcement
On the 13th of August, Epic Games decided to by-pass Google and Apple’s 33% commission on any purchases made through apps available on their app-store by setting up an ‘Epic direct payment’, which gave customers a 20% discount compared to the Play or App store prices. This violation of Google and Apple’s app policy caused Epic Games' most successful game, Fortnite, to be removed from the companies’ respective app stores. Apple also removed all of Epic Games apps, effectively banning the app developer. Epic Games subsequently sued Apple by claiming that the fee levied breached competition law and gave an unfair advantage to Apple’s own services. The case was mostly settled on the 9th of October and Epic Games’ claim was rejected. Nonetheless, this case is significant in two aspects. It points out the limits of private enforcement of competition law because judges are seemingly unwilling to take bold decisions in cases brought by private entities. Secondly, it kick-started US regulators’ appetite for action towards the tech industry. Several public bodies have commenced proceedings since.
The US’s anti-trust approach: Google and Facebook on trial under existing legislation
On October 20th, the US Department for Justice took its first step in the now broader legal campaign against big tech. Big tech companies are overall accused of channelling users from their dominant platforms to their other in-house services thus deliberately cutting out competitors. As Spotify put it in its complaint to the EU, GAFAMs (an acronym for Google, Apple, Facebook, Amazon and Microsoft) essentially act as “both a player and referee”.
The Department of Justice took a narrow approach to its lawsuit against Google in which it targets the firm’s contracts that ensure its search engine remains prominent with users. For instance, Google pays large amounts of money to Apple and other phone and computer makers so that they make Google the default search engine, as well as automatically installing other of the firm’s services such as Maps or Gmail. Although a restrictive claim is more likely to be successful, such a case does not have the scope to transform the market. However, two other cases have been brought by different groups of state attorney generals. They tackle Google’s anti-competitive behaviours to maintain its search and search advertising monopolies more broadly than the Justice Department. They seek to challenge Google’s search engine’s treatment of rivals. Combined, these three cases are an opportunity to redefine the application of antitrust law, thus preventing regulators from going down the difficult path of rewriting regulation that the EU has chosen.
Potentially even more successful is the Federal Trade Commission’s investigation into Facebook’s aggressive strategy of buying competitors in order to bury competition. Citing internal emails, the FTC claims that Facebook bought Instagram and WhatsApp because “it is better to buy than compete”. The FTC is going to court with high standards as they seem to claim that nothing short of a large restructuring of the company will cure the current anti-competitive effects. However, Facebook’s acquisitions had been approved at the time, which led the firm to declare the case an attempt to rewrite history. Nonetheless, this case shows that regulators are getting to grips with the neoliberal view of consumer wellbeing, not a vision about prices anymore but about time, attention and personal data.
The EU’s new regulatory framework: the DSA and the DMA
The EU has taken a different approach to tech antitrust than the US. Although it continues investigating GAFAMs, such as with the recent investigation into Amazon’s data collection and product development, the EU also designed new legislation specifically for the purpose of regulating big tech. The Digital Services Act aims at harmonising existing Member States’ legislation on issues of e-commerce, such as targeted advertising, counterfeit products… The Digital Market Act targets gatekeeping firms such as Google or Amazon and seeks to force them to create a level-playing field that does not favour their products compared to competitors’. These new acts try to legislate existing markets but they shy away from fostering a change in business models. They regulate gatekeepers’ behaviour but do not prevent them from being gatekeepers in the first place. This is probably because the DSA and DMA also serve another EU goal, that of promoting its own tech sector to compete with US and Chinese giants.
The effects of anti-trust legislative changes on US/EU relations
The main difference between the US and the EU is their approach to tackling big tech regulation: the US is trying to adapt existing anti-trust legislation while the EU is trying to design a new set of competition rules specifically targeting big tech. The EU’s approach is much more stringent and indirectly targeted towards US tech which is likely to create political tensions. US companies are likely to aggressively lobby in Brussels but also in Washington so that the government itself addresses the issue with the EU. Moreover, there are fears that the Biden administration will be too soft on concentrated corporate powers. However, cooperation is needed more than ever as Chinese technology is taking off. Both options need to produce results fast but the cases against Google may not be heard before 2022 and the EU’s legislative process usually takes months. In the meantime, China develops its own platforms supported by state aid, GAFAMs cash profits and consumers lose out.
Potential drawbacks of more stringent regulation
All these cases and new regulations are already having an impact on companies. Alphabet’s boss, Sundar Pichai, argues that he now spends most of his time dealing with regulators rather than implementing his ideas for innovation, which in the long run disadvantages consumers who could benefit from the innovation. Punishing a company for having an exceptionally good product would also not benefit consumers. Indeed, Google’s chief economist Hal Varian argued that Google is not a monopoly because it offers a high-quality service to the consumer for free. Google also claimed that if the Justice Department was to win, it would “artificially prop up lower-quality search alternatives, raise phone prices, and make it harder for people to get the search services they want to use”.
Moreover, in the case of Facebook, going back on the deals it made to build its social media empire may have significant consequences for investors and thus consumers. If regulators start going back on deals they previously approved, investors’ and companies’ appetite for mergers and acquisitions will decline which may in turn harm investments in consumer-facing innovation.
Lastly, more onerous rules risk disproportionately affecting small players, although the EU’s DSA and DMA are trying to target larger players. Numerous rules and case rulings will be more difficult to navigate for SMEs than for unicorns. Moreover, some small businesses are very grateful to be able to sue Amazon or Apple’s services because they benefit from their halo effect and gain a wider customer scope.
Although 2021 is unlikely to see these conflicting interests be resolved, change is inevitable: new competitors will emerge, established positions will be challenged and consumers will gain awareness of the consequences of their everyday use of the internet.