The Control of Platforms: The Case for Antitrust Law in the Twenty-First Century

Abstract

A common story prevails that suggests dynamic markets long ago displaced the need for regulating large firms by way of tougher antitrust enforcement. Presently, however, an outpouring of academic and popular literature is calling for tougher antitrust enforcement in order to protect smaller competitors from large digital platforms, such as Amazon, Facebook, and Google. Even if the platforms are not pure monopolies, their market power can have harmful economic effects, such as reducing innovation and increasing the likelihood of anticompetitive conducts in the markets that the platforms dominate. In this essay I research the modern evolution of the U.S. antitrust laws and I argue for introducing new policies to strengthen them and mitigate foreseeable risks in the future. This essay includes three parts. In section one I show how the current framework in antitrust law emphasizes a consumer welfare goal, which relies heavily on Neoclassical Price Theory (more commonly referred to as “microeconomics”). I also argue that modern antitrust enforcement is quite narrow, which reflects the ascendancy and persistence of a specific interpretation of the term “consumer welfare.” In section two I argue that the current antitrust framework is too narrow to combat restraints of trade and anticompetitive practices in important digital sectors. More specifically, I argue the following: (1) the initial burden of proof, which plaintiffs must produce, prohibits basic analyses in court and makes the laws unpredictable even for specialists; (2) the removal of structural presumptions in merger law has enabled platforms to undertake anticompetitive growth strategies (i.e. acquiring nascent competitors); and (3) dominant platforms benefit disproportionately from network effects that strengthen their positions—e.g. advertisers, websites, and online retailers are reluctant to migrate to alternative platforms due to high ‘switching’ and ‘homing’ costs. In addition, platforms are given special status through a recent Supreme Court ruling—Ohio v. American Express—which only aggravates the concern that Amazon, Facebook and Google are unfairly exempted from regulation. In section three I discuss several proposals aimed at protecting innovation and deterring anticompetitive conducts by dominant platforms for all business operations in the United States.