Evaluating Arguments for Antitrust Action against Tech Companies

Abstract

Growing concern about large digital platform companies, particularly Google, Facebook, Amazon, and Apple, exercising monopoly power has given rise to antitrust investigations that examine whether they are guilty of exclusionary practices. After defending the consumer welfare standard as the basis for decisions, this paper explores whether the market power and conduct of each company justifies antitrust action. Whether to pursue such action should be based partly on a counterfactual analysis of the consequences of the likely remedies that would be applied if a company is found guilty. Remedies, such as divestiture of acquired firms or structural separation of vertically integrated firms, would likely harm consumers who benefit from lower costs and increased innovation that result from combining complementary products into one ecosystem. This paper argues against a more activist antitrust policy considering the knowledge and incentives of the courts and those who enforce it. It is difficult to accurately assess the effects of firm conduct on consumer welfare, and enforcement agencies’ decisions may not be based entirely on objective analysis but on political pressure, sometimes from a firm’s competitors. Instead of pursuing more activist antitrust policy, the government should remove barriers that keep firms from entering new markets and competing vigorously.