You are here

FTC-DOJ Signal Privacy Is a New Antitrust Risk for Google Facebook

SUMMARY:

U.S. antitrust enforcement is evidently undergoing a sea change in how it treats consumer privacy in its antitrust investigations. 

Since the early 2000s through apparently late 2017, DOJ and FTC antitrust enforcers did not consider privacy to be a “non-price factor” in antitrust enforcement.

However, since 2018 the evidence catalogued below indicates that privacy now can, and will increasingly be, a factor in antitrust enforcement involving Internet multi-sided business models going forward, in determining whether a commercial practice anticompetitively harms innovation, choice, or quality.

That’s because of increasingly evident consumer “revealed preferences” for privacy; personal data’s effects on competition for markets; and the inherent “flexibility” of the antitrust consumer welfare standard to adapt to new technological, market, economic, and consumer developments. 

A big reason many investors and the marketplace have concluded that Google and Facebook face no serious antitrust risk going forward was the backward-looking, core conventional-wisdom presumption that harms to consumers’ privacy and data security were largely irrelevant because of the consumer welfare standard focus on price reduction in Internet markets where the “price” is already zero, i.e. free.  

Despite conventional-wisdom, antitrust and privacy concerns are now clearly converging, for five reasons.

FIVE REASONS ANTITRUST AND PRIVACY ARE CONVERGING

1.      Signals from DOJ and FTC Leadership at Oversight Hearing

DOJ Antitrust Chief Makan Delrahim and FTC Chairman Joe Simons newly and officially signaled to Congress in an under-reported hearing last week, that the antitrust consumer welfare standard is flexible enough to incorporate and address anticompetitive consumer privacy harms.

In addition, Mr. Delrahim warned that U.S. privacy regulation like the EU’s GDPR could entrench or reward incumbent dominant Internet platforms like Google and Facebook. [See Appendix 1 below for the key under-reported DOJ Delrahim and FTC Simons privacy-related antitrust comments under oath.]

2.      DOJ Is Focusing on Some Consumers’ Revealed Preferences for Privacy

U.S. antitrust authorities recognize Congress, consumers, and industry broadly and seriously support passing Federal Internet privacy legislation, which is powerful implicit consensus evidence of consumers’ “revealed preference” for more privacy protections than the exceptionally-concentrated and monopsonized Internet platform market produces.

Specifically, DOJ Antitrust Chief Delrahim explained in detail in an April 2018 speech entitled “Antitrust in the Digital Era” how antitrust authorities can use “revealed preference” theory for privacy by ensuring that there “are sufficient incentives for new competitive entry” to meet consumer demand for privacy. [See Appendix 2 below for the excerpts of the speech relevant to privacy and antitrust.]

3.      DOJ Is Emphasizing “Flexibility” of Antitrust Consumer Welfare Standard for Digital Markets

DOJ Antitrust Chief Makan Delrahim in a May 2018 speech entitled, “Enforcing the consumer welfare standard in digital media markets,” explains further how the consumer welfare standard can adapt and be applied flexibly to multi-sided digital markets that most implicate privacy consumer welfare harms, by focusing on innovation, choice, and quality. [See Appendix 3 for the excerpts of the speech relevant to privacy and antitrust.]

4.      There Is General Google and Facebook Privacy Competition Foreclosure Evidence

What type of competitive offerings exist and don’t exist in the online consumer marketplace speak volumes about the dire need for privacy and antitrust to converge in government enforcement.

Google and Facebook’s one-size-fits-all, take-it-or-leave-it, monopsony models that efficiently could offer more consumer and business customization to address the revealed preference of many for more consumer privacy and data security, but don’t, are effectively undue restrictions of dynamic innovation, choice and quality.  

Monopsonies’ privacy terms-of-service and privacy-policy changes are not competitive market choices.

They are take-it-or-leave-it monopsony dictates, and an evident anticompetitive practice to maintain and extend market power by systemically foreclosing dynamic competition for the market by deterring new competitive entry by firms seeking to fulfill consumers revealed preferences for more privacy by offering innovative, higher privacy quality choices of business and price models for consumers and businesses.     

Consider these three different types of Google and Facebook systemic foreclosure of price and business model market competition, that effectively foreclose innovative competitive entry that tries to meet the revealed preference demand for privacy and data security.

Permanent Fixed Price at Zero: Google and Facebook’s consumer monopsonies have largely foreclosed business model competition via fixing a permanent price of zero.

They ignore, and resist revealed preferences in competitive markets for dynamic market pricing of a positive-price subscription model option or a negative price model option where consumers are paid for their private information not just dictated in an implicit, not-fully-transparent, barter arrangement of service for personal data.

The essence of competitive free markets is price competition based on supply and demand, costs, risk and reward, quality, competition, disruptive innovation, etc. Economic analysis can show that a permanent fixed price of zero, i.e. no price dynamism ever, most favors winner-take-all network effects and monopsony models.  

No a-la-Carte Pricing: In a sector that prides itself for the efficiency of its targeted, customized, or personalized advertising, search, social, etc., why do the Google and Facebook consumer-monopsonies foreclose the opportunity for consumers to customize or personalize their chosen model and product and service offering?

The ~20% of users adopting ad-blockers is a revealed preference for non-ad-based choices, and for identity, reputation, and children protection choices.

For example, why are there no viable choices for: fewer ads + paid; paid only; payment per transaction or time-period; subscription by various usage levels/prices; or unlimited pricing; paid by a consumer-selected affinity sponsorship; or paid curated/customized content filters?

Where is the market dynamism one would expect from Internet technology dynamism?  

Why are there minimal viable offerings showing price model innovation, choice, or quality involving Google and Facebook’s markets?

No Business Pricing: Business needs and demand are obviously very different from consumer demand.

Google and Facebook do not recognize the revealed preference for different business and consumer offerings.

Many businesses would be candidates for a subscription search offering so that their business and trade secrets, and business confidential information could remain secret, and so their employees could get business-objective search results only and not ads first, because in a business context searches are targeted to the users’ personal interests/profile, not necessarily the firm’s business profile.

5.      There Is Specific Google and Facebook Privacy Competition Foreclosure Evidence

Google banned a privacy-innovative entrant from its Google Play store, Disconnect, that offers an app to enable consumers privacy protection from invisible tracking and from malware. Disconnect, an American company, founded by former Google employees, filed a telling antitrust complaint with the EU because the 2015 DOJ and FTC enforcers still were not interested in the convergence of antitrust and privacy at that time.   

Google Chrome appointed itself the world’s policeman of ad-blockers so Google can make sure its ads are not blocked by the revealed preference of consumers’ affirmative choice to avoid ad tracking, by using its monopoly-profits to pay ad-blockers white-list ransom fees so Google can avoid consumers ad blockers but new entrants can’t.

Google, as the world’s largest digital advertiser, monopoly search advertising provider, and owner of the world’s dominant browser, Chrome, with 50% market share in the U.S. and 63% worldwide, evidently is abusing its market power to limit privacy-revealed-preference innovation, choice, and quality.   

Just this week, WSJ reporting exposed that Google’s CEO chose to not disclose to the public a known software bug in March 2018, that shared Google+ users personal data with outside app developers, because Google wanted to avoid public comparisons with Facebook’s sharing of data with Cambridge-Analytica and avoid having Google’s CEO Sundar Pichai testify before Congress on privacy and data security – during the highly-charged, Cambridge-Analytica privacy atmosphere.  

Tellingly, this is at least the 18th time Google has chosen to not be transparent about how it treats consumer privacy and data security.

To appreciate the obvious and serious Google pattern of 17 deceptive privacy and data security practices, please see my FTC filing for the FTC competition hearings that catalogues Google’s deceptive serial over-collection and over-sharing of users’ data over a period of fifteen years – that has had powerful cumulative anticompetitive implications.

The most recent and notable of those anticompetitive privacy practices is Google Android’s collection of Android user’s movements even when the user thought all location tracking had been disabled.

Google now knows where most every American is, who they are with, where they have been and are going, and even what they are doing, because Google-Android devices collect a wide variety of location information automatically without permission and have made it deceptively hard to fully turn off any Google tracking -- per reported experiments by Quartz for Android here and Bluetooth here.

This shows how Google non-transparently abuses explicit user privacy assurances for anticompetitive advantage.  

It is telling that the FTC has not enforced the 2011 FTC-Google-Buzz privacy consent decree since it abruptly closed all five of its antitrust probes of Google in early January 2013.

Facebook’s acquisition of WhatsApp tipped Facebook to a social advertising monopoly in filling the gaps in its global user base in most places Facebook was not the leading messenger social service. It also was the apparent trigger for Google and Facebook to collusively decide in 2014 to each cease directly competing with each other.  

The Facebook-WhatsApp transaction was tacitly approved by the FTC in April 2014 without a second request, but the FTC did warn Facebook that WhatsApp should not break its privacy promises with the FTC and Facebook should not use WhatsApp users’ data without their affirmative consent.

In 2017, the EU Competition Commissioner fined Facebook $122m for misrepresenting the Facebook-WhatsApp acquisition in promising that Google and Facebook could not combine WhatsApp data with Facebook data when it could, and actually did.

The FTC apparently did nothing about this Facebook-WhatsApp privacy misrepresentation, despite its unique American authority and mission to not let companies misrepresent their business practices to consumers, and despite having a 2012 Google-Facebook privacy decree in place that most thought prohibited what Facebook did with WhatsApp personal data.   

The Facebook-WhatsApp acquisition turns out to have been an effective foreclosure of WhatsApp’s ad-averse, $1-a-user subscription fee business model to protect users’ privacy.

When it was acquired by Facebook for $19b, a record 1,800-times-sales, WhatsApp had a business model that was not designed for fast revenue growth, only user growth, because its business model for 450m users was a free service for a year and then a subscription price of $1-per-year per-user thereafter.

Moreover, WhatsApp had an aversion to adopting an advertising model for a social messenger service, because WhatsApp founders were especially committed to protecting user privacy given the 2013 mass surveillance revelations in the Edward Snowden affair.

Just last month, WhatsApp Founder Brian Acton criticized Facebook in the press for demanding a WhatsApp ad-only business-model, when Mr. Acton thought other approaches like a user-aligned, subscription payment model would have been better for user privacy and data security.  

 

CONCLUSION

The beginning of an apparent sea change in the way U.S. antitrust enforcers treat consumer privacy in antitrust enforcement evidently is underway and accelerating as revelations of Google and Facebook privacy and antitrust problems increase.

The convergence of privacy and anticompetitive practices has already occurred in the marketplace, and that fact is only becoming more evident and serious with time. Welcome to the new 21st century, multi-sided business model, antitrust enforcement reality.

DOJ Antitrust Chief Delrahim and FTC Chairman Simons’ public statements indicate they “get it” and understand they are behind-the-curve here and need to race to catch up, to remain relevant in 21st century consumer markets.  

Conventional wisdom is wrong that Google and Facebook face minimal real accountability in the U.S. for privacy and/or antitrust.

That’s because Federal privacy legislation is a matter of when it passes and how tough it will be, not whether it will eventually pass; and because U.S. antitrust authorities are now evidently intent on adapting consumers’ varied preferences for privacy to new antitrust consumer welfare standard theories of harm to innovation, choice, and quality, and to the economic analysis needed to prove these anticompetitive harms.  

Forewarned is forearmed.

***

[APPENDICIES NOTE: bolds are added for emphasis and were not in the original.]

APPENDIX 1: Evidence from 10-3-18 Senate antitrust oversight hearing:

Many apparently missed the biggest takeaway from the Senate Judiciary Antitrust Subcommittee hearing with testimony from DOJ Antitrust Chief Makan Delrahim and FTC Chairman Joe Simons under oath that signaled interest and even eagerness to ensure the antitrust consumer welfare standard was flexible enough to address consumer privacy concerns.   

In response to a question from Senator Blumenthal (D-CN) on privacy consumer harm and antitrust with Internet platforms:

Mr. Delrahim: “The power they might have is important. Are they taking any action to preclude a new innovator who could provide the consumer that safety security they want or wish, that is an antitrust issue. It is something we should be concerned with.”  (1:52)

Mr. Simons: “This fits in the normal toolbox for antitrust. We look at a merger’s impact on price and on quality. And privacy can be a part of quality. Some consumers may prefer more privacy than less, so that can be determined in the marketplace and a merger could eliminate or reduce that quality factor.Let me just say this. If there is news about a data security or data breach in the news, its already public and we are concerned about it and we are looking at it.” (1:54)

In response to Senator Booker on whether new laws are needed for privacy and the importance of  privacy and competition to a level playing field.

Mr. Simons: “Privacy. I think we need to do something on privacy. The FTC has been involved and a leader on privacy and want to continue in this role. We need to get this right and work with you and the Congress. Couldn’t agree more that we need to do something. One thing we need to be careful about though. We don’t want to have a situation where more privacy equals less competition. We need to do privacy in a way that does not hinder competition.” (2:02)

Mr. Delrahim: I support that. We have a live example right now in Europe where the GDPR has been enacted with new regulations. Usually it is the incumbents who have the resources and power to utilize the new regulatory burden to prevent new entrants. How that will be done will be a good way to learn what not to do. (2:03)

Chairman Lee asked Mr. Simons about whether the economy has been hurt by lax antitrust enforcement, and Mr. Delrahim about the adequacy of the consumer welfare standard.

Mr. Simons: “We have had a very strong bipartisan consensus on how to do antitrust enforcement and policy until recently. It existed for twenty-five years. We have initiated hearings … as part of a process to put back together the strong bipartisan consensus which we have had previously.” (2:05)

Mr. Delrahim: The consumer welfare standard… “has served us well, it is flexible enough. The basic principles ultimately are the actions we take should benefit the consumer and keep markets free.” (2:07)

Chairman Lee asked if the consumer welfare standard needed nuancing where the price paid by the consumer is free in return for use of their personal data?

Mr. Simons: “Concerning the consumer welfare standard, my view is it is very flexible. So for example it develops and accounts for new things over time. For example, one new thing that is relatively new are multi-sided platforms… one of the things where we probably could use help in new models in the consumer welfare model is how to deal with these markets where the product is given away for free for people watching, to get their eyeballs for advertising to them, the television model or for the situation of where you get personal data.” (2:26)

Mr. Delrahim: “I agree with the same challenge we should be concerned with. How do we treat that particularly when we deal with the doctrine of predatory pricing which we have to look at after the Supreme Court precedent; even if it is below a certain level of cost pricing which zero presumably would be, but is that the appropriate way to look at it given when a consumer is turning over something valuable? How do you assess value to that information they are providing in exchange for certain goods. I don’t think there is a question about some of the pro-competitive benefits for some of these services but how do you value that? I do believe the consumer welfare standard is flexible enough for us to, within that framework, to work on and address the competition concerns that might arise.” (2:27)

 

 

Appendix 2: Evidence of Antitrust and Privacy Convergence – Delrahim speech 4-19-18

Assistant Attorney General Makan Delrahim Delivers Keynote Address at the University of Chicago's Antitrust and Competition Conference – “Antitrust Enforcement in the Digital Era” --Thursday, April 19, 2018

[Note: below are the excerpts of this speech that relate to privacy and antitrust. Bold has been added for emphasis.]

“A basic concept in economics that is helpful in the new area of high-tech platforms is the theory of revealed preference. …

This concept is particularly helpful in understanding dynamic or emerging markets, including digital markets. That is, economic value is demonstrated by consumers’ willingness to pay for goods and services.

With recent congressional attention and rising consumer awareness, we may be witnessing a revealed preference for personal data privacy in the digital economy. Ten years ago, few of us may have cared whether companies had access to our data. We would give up our private data freely in exchange for access to a “free” platform—to connect to friends, or to strangers. But the public now recognizes that, for many such platforms, advertisers on the other side of the platform pay handsomely for that access. …

With a greater understanding of the nature and scope of data collection and sharing, today, the mentality regarding free platforms may well be changing. I know that for me, it has changed

How many of you would pay $1 a year so that your social media data would never be shared with a third party? $12 a year? $100 a year?

Your answer today is likely different than what it was in 2008, and what it may be in 2028. And not everyone’s answer is the same: like any good or service, there is a trade-off between what you give up in exchange for what you obtain. That trade-off may be different across the population. Some may be willing to give up access to their data or privacy for free, whereas others may demand some valuable service—like access to a technological platform—before they do so. Still others may view the benefits of access to a digital platform as inadequate compensation for the loss of control over their private information. From an economic standpoint, the key takeaway is that revealed preference for data privacy could signal the emergence of a new market asset. …

As public attention has been drawn to the practice of collecting data, there is a heightened concern about the value of privacy and the value of consumer data. This concern is no longer limited to privacy advocates and policymakers who have sounded the alarm for years, only for their concerns to fall on deaf ears.

We may now be witnessing a fundamental change in the marketplace. As preferences shift—or as users of digital platforms become better informed about the consequences of sharing their private data—we could be entering a world in which a substantial number of consumers view their data as an asset they won’t part with for free.

At a basic level, the bargain between platform and user appears to be shifting. At the margins (and with a generational shift), some may opt out of certain networks because they simply don’t see the bargain as working in their favor. Time will tell.

As a result, the overwhelming incentives to design technologies to maximize the collection and use of personal information may be shifting, and with that shift companies are designing technologies that respond to our revealed preferences for privacy. Some call it “privacy by design,” but in essence it is the simple idea that companies can respond to changing demands by designing and marketing technologies with privacy as the default setting.

There is some burgeoning evidence to support the idea of an emerging market for data privacy. Users of online platforms now are exercising greater control of their data through modifications to their security and privacy settings. News reports also suggest that many users are tuning out social media networks that they believe do not provide adequate protection of their personal data. And new services are emerging that respond to these changing preferences.

Indeed, Facebook COO Sheryl Sandberg has floated the idea that customers would need to pay a premium price for total privacy.

And the popularity of Snapchat, which posed some competitive threat to Facebook, was largely based on its so-called “vanishing” chats.

In other markets, we already have examples of consumers making choices that favor privacy. Music streaming services like Pandora and Spotify, for example, have basic subscriptions with ads and premium subscriptions without ads. Obviously, the incentive to gather data of users on ad-free premium subscriptions is not the same as it is to gather data of users who receive the service free with ads.

What role does antitrust law play in all of this? In the current environment, there is an arms race among some enforcers to use the strongest remedies available to combat the perceived problem, reminding me of the H.L. Mencken quote that “there is always a well-known solution to every human problem” that is “neat, plausible, and wrong.”

For example, some argue that U.S. or international agencies should simply declare that data is the new digital currency, that online platforms have been exploiting data without consent, that loss of informational control is anti-competitive, and then impose eye-popping penalties by multiplying some measure of data value by the size of the customer base. I wouldn’t call that an antitrust remedy stemming from an evidence-based analysis. Such an approach ignores the economic nuance of revealed preference—that is, not every customer values their data, or their privacy, the same way. Money has face value, but privacy cannot yet be measured in nominal terms, and varies according to the type and utility of the data used.

A more effective approach grounded in evidence would be to ensure that there are sufficient incentives for new competitive entry in markets for platforms with network effects, while ensuring that customers who prefer established business models still have access to the product or service they want.

Many experts have testified that imposing rigid regulations or a new (and likely irreversible) statutory scheme may not be a necessary or viable solution for fostering competition. Like other government entities, competition authorities and consumer protection agencies are at risk of regulatory capture. There is a long history of incumbent companies manipulating regulatory schemes to create entry barriers. A monopolist may be willing to incur a cost for maintaining its monopoly, if the same cost is applied to new competitors. In that event, consumers don’t win.

That is not to say that antitrust law and economics should play no role. Quite the opposite. When any new asset class emerges, companies will try to gain monopoly power over that asset. This can cut two different ways.

On one hand, in certain platform markets involving network effects, there may be barriers to entry or a tendency toward a single firm emerging as the sole winner. Antitrust enforcers may need to take a close look to see whether competition is suffering and consumers are losing out on new innovations as a result of misdeeds by a monopoly incumbent.

On the other hand, of course, antitrust economists understand that monopolies often can be fragile, and they give rise to new entrants. Indeed, it is the prospect of gaining lawful monopoly power that provides incentives to innovate and create products consumers want. We seek to encourage competition for the market—that is, dynamic competition to innovate and provide new products or services that customers demand.

In reaction to controversies over how companies use or misuse personal data, we may see the emergence of new competitors in the digital space that attract customers based on promises of user privacy. Neither antitrust agencies nor incumbent monopolists should be allowed to kill off this type of competition. Antitrust enforcement should ensure that the markets allow for new, more efficient, more innovative competitors to enter.

Whether antitrust enforcement makes sense in this area is therefore an evidence-based question: are consumers who believe that their data is digital currency facing a monopoly seller or monopsony buyer with structural barriers to competition and entry?

That is the question enforcers should answer. Admittedly, it is a complex question and we need studies and new and innovative thinking—exactly the kind of thinking that occurs and is fostered at institutions such as the University of Chicago.

The antitrust consensus approach is flexible enough to accommodate new and evolving economic wisdom, so long as it is grounded in empirical evidence. If there is an evidentiary basis for an enforcement action against any platform, and if that enforcement action is built on a sound economic foundation, antitrust agencies should fulfill their duties to the American consumer.At the same time, I believe that, as enforcers, we should be open and receptive to empirical evidence that companies in digital markets may be engaging in predatory pricing or other exclusionary conduct to drive out competition and cause long-run harm to consumers. …

In the context of digital platforms, an evidence-based approach is critical to protecting innovation. Disruptive competition and new business models are healthy, and should be encouraged. It is rational, pro-competitive, and pro-consumer for new entrants to charge low prices. Predation that harms dynamic competition, however, should not be condoned.

Another approach to exclusionary conduct in digital markets that might be worthy of consideration is an “economic sense” test within the Brooke Group framework. That is, there may be an antitrust violation where a business practice makes no economic sense other than to harm competition and subsequently recoup short-term losses. To channel Sherlock Holmes, if you rule out all pro-competitive justifications through a careful empirical analysis, all that’s left may be anticompetitive action. …

As enforcers who bear the burden of proof, we must demand hard evidence of anticompetitive harm before rushing to condemn as unlawful business practices that fuel innovation and thus dynamic competition. An agency or court considering a Section 2 claim under the Sherman Act must be careful not to kill the golden goose of innovation. …

The stakes of digital markets are enormous. That is why we are all here today. That is why Congress held hearings earlier this month in Washington, D.C. And why the Senate held them almost exactly 20 years ago in the Microsoft hearings.

If there is clear evidence of harm to competition in digital platforms, enforcers must take vigorous action and seek remedies that protect American consumers, so that free markets or consumers don’t instead bear the risk of failure.”

 

 

Appendix 3: Evidence of Antitrust and Privacy Convergence – Delrahim speech 5-22-18

Assistant Attorney General Makan Delrahim Delivers Remarks at the Jevons Colloquium in Rome – “Enforcing the Consumer Welfare Standard in Digital Media Markets” -- Tuesday, May 22, 2018

[Note: below are the excerpts of this speech that relate to privacy and antitrust. Bold has been added for emphasis.]

“… I believe that three additional indicators of consumer welfare deserve greater attention in analyzing competitive effects in digital markets: innovation, choice, and quality. The Supreme Court and other courts, in describing antitrust as “a comprehensive charter of economic liberty,” often invoke these three concepts and note that innovation, consumer choice, and product quality constitute competitive effects that merit consideration in an antitrust analysis. Because these factors can be difficult to quantify, they often play a subsidiary role to price and output measures.

Given the challenges in defining and measuring output in platform markets, innovation, choice, and quality can serve as valuable metrics for competitive effects. They are all consistent with the Sherman Act’s overarching consumer welfare prescription.

First and foremost, innovation is central to consumer welfare. In a free market economy, new businesses emerge by offering consumers something new, rather than simply more of the same. For that reason, innovation is inherently disruptive, making it a target of entrenched business models that see existential threats from new entrants. Competition policy should encourage these threats to incumbents, not restrict them. The cycle of dynamic competition almost invariably accrues to the benefit of consumers.

Second, consumer choice can be an important metric for consumer welfare effects to the extent a practice or merger results in the elimination of a unique product offering. As enforcers, we must carefully analyze whether a company with market power uses that power in a manner that excludes an innovative product, service, or feature that customers desire. Likewise, concerted action—particularly in the context of standard setting organizations—can stymie consumer choice where competitors adopt self-serving standards that restrict consumers’ ability to seek out more attractive or less expensive alternatives. …

Third, product quality can be a useful barometer for whether a merger or business practice harms competition to the detriment of consumers. Courts recognize that a reduction in competition can result in less innovation, and less of a need to provide a high quality product. The notion of “quality” is not limited—it incorporates more than simply the shininess of the new product or the box it arrives in. Particularly for media and technology companies, quality is best captured as the entire customer experience.  …

Just as measures of consumer welfare warrant flexibility in the context of digital markets, as enforcers we should also be mindful in understanding how barriers to entry enable or facilitate exclusionary conduct that harms consumers.

One traditional method of considering entry barriers focuses on fixed costs that a new entrant must incur—that is, it asks whether the risk of upfront investment is too high and the likelihood of success too low, thus deterring entry. In digital markets, entry barriers often appear to be quite low. A new software product can be revolutionary and gain popularity with relatively minimal investment in physical infrastructure, and certainly no regulatory barriers such as the need for spectrum licenses. At the same time, powerful network effects can create their own implicit barriers to entry in markets where a dominant player has clearly emerged, making traction for a new entrant difficult to achieve regardless of its efficiency or quality. …

To conclude, I encourage further research and civil debate on these important issues, as we are having here. As enforcers, we must be very careful in our enforcement actions to ensure that we don’t punish the very competitors who have won the race we have encouraged them to compete in.

At the same time, we must be vigilant in utilizing the tools provided to us within a sound antitrust and economic framework. In particular, we should not hesitate to bring an action where there is evidence of harm to competition manifested through higher prices, lower output, reduced innovation, undue restrictions in consumer choice, or a serious deterioration in quality. Failure to enforce the antitrust laws in a timely manner may result in heavy-handed government regulation later. Rarely a preferred result to free market competition. 

We have and should maintain a flexible, dynamic consumer welfare standard that is well-equipped to face threats to competition in media markets in the digital age.”

***

Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an Internet competition and policy consultancy for Fortune 500 companies, some of which are Internet platform competitors, and he is Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. Cleland has testified before the Senate and House antitrust subcommittees on Google. Eight different Congressional subcommittees have sought Cleland's expert testimony and when he worked as an investment analyst, Institutional Investor twice ranked him the #1 independent analyst in his field.

***

Precursor LLC Research on Asymmetric Accountability Harms:

Part 1:   The Internet Association Proves Extreme U.S. Internet Market Concentration [6-15-17]

Part 2:   Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms [6-22-17]

Part 3:   Why Aren’t Google Amazon & Facebook’s Winner-Take-All Networks Neutral? [7-11-17]

Part 4:   How the Google-Facebook Ad Cartel Harms Advertisers, Publishers & Consumers [7-20-17]

Part 5:   Why Amazon and Google Are Two Peas from the Same Monopolist Pod [7-25-17]

Part 6:   Google-Facebook Ad Cartel’s Collusion Crushing Competition Comprehensively [8-1-17]

Part 7:   How the Internet Cartel Won the Internet and The Internet Competition Myth [8-9-17]

Part 8:   Debunking Edge Competition Myth Predicate in FCC Title II Broadband Order [8-21-17]

Part 9:   The Power of Facebook, Google & Amazon Is an Issue for Left & Right; BuzzFeed Op-Ed[9-7-17]

Part 10: Google Amazon & Facebook’s Section 230 Immunity Destructive Double Standard [9-18-17]

Part 11: Online-Offline Asymmetric Regulation Is Winner-Take-All Government Policy [9-22-17] 

Part 12: CDA Section 230’s Asymmetric Accountability Produces Predictable Problems [10-3-17]

Part 13: Asymmetric Absurdity in Communications Law & Regulation [10-12-17]  

Part 14: Google’s Government Influence Nixed Competition for Winner-Take All Results[10-25-17]

Part 15: Google Amazon & Facebook are Standard Monopoly Distribution Networks [11-10-17]

Part 16: Net Neutrality’s Masters of Misdirection[11-28-17]

Part 17: America’s Antitrust Enforcement Credibility Crisis – White Paper [12-12-17]

Part 18: The U.S. Internet Isn’t a Free Market or Competitive It’s Industrial Policy [1-4-18]

Part 19: Remedy for the Government-Sanctioned Monopolies: Google Facebook & Amazon [1-17-18]

Part 20: America Needs a Consumer-First Internet Policy, Not Tech-First[1-24-18]

Part 21: How U.S. Internet Policy Sabotages America’s National Security [2-9-18]

Part 22: Google’s Chrome Ad Blocker Shows Why the Ungoverned Shouldn’t Govern Others [2-21-18]

Part 23: The Beginning of the End of America’s Bad “No Rules” Internet Policy [3-2-18]

Part 24: Unregulated Google Facebook Amazon Want Their Competitors Utility Regulated [3-7-18]

Part 25: US Internet Policy’s Anticompetitive Asymmetric Accountability - DOJ Filing [3-13-18]

Part 26: Congress Learns Sect 230 Is Linchpin of Internet Platform Unaccountability [3-22-18]

Part 27: Facebook Fiasco Is Exactly What US Internet Law Incents Protects & Produces [3-26-18]

Part 28: How Did Americans Lose Their Right to Privacy? [4-14-18]

Part 29: The Huge Hidden Public Costs (>$1.5T) of U.S. Internet Industrial Policy [4-15-18]

Part 30: Rejecting the Google School of No-Antitrust Fake Consumer WelfareStandard [4-20-18]

Part 31: Why New FTC Will Be a Responsibility Reckoning for Google Facebook Amazon [4-27-18]

Part 32: “How Did Google Get So Big?” Lax Bush & Obama FTC Antitrust Enforcement [5-23-18]

Part 33: Evident Internet Market Failure to Protect Consumer Welfare -- White Paper [5-31-18]

Part 34: What Happened Since FTC Secretly Shut 2012 Google-Android Antitrust Probe? [6-8-18]

Part 35: Buying WhatsApp Tipped Facebook to Monopoly; Why Didn’t FTC Probe Purchase? [6-19-18]

Part 36: The Sea Change Significance of Simons-FTC Privacy and Antitrust Hearings [6-27-18]

Part 37: New U.S. Privacy & Data Protection Law Is Inevitable Like a Pendulum Swing [7-9-18]

Part 38: Why a US v. Google-Android Antitrust Case Is Stronger than US v. Microsoft [7-16-18]

Part 39: Google-Android’s Deceptive Antitrust Defenses Presage a US v. Alphabet Suit [7-20-18]

Part 40: Case Study of Google Serial Over-collection of Private Data for FTC Hearings [7-30-18]

Part 41: The Unfair and Deceptive Online-Offline Playing Field – FTC Hearing Filing [8-7-18]

Part 42: What Most Stunts FTC Antitrust and Consumer Protection Law and Enforcement? [8-21-18]

Part 43: Why New U.S. Privacy Data Protection Law Will Preempt State Privacy Laws [8-27-18]

Part 44: What’s the FTC Hearing before their Hearings on the Unlevel Playing Field? [9-6-18]

Part 45: Google Facebook & Amazon’s Anticompetitive Nontransparent Exchange of Ideas [9-12-18]

Part 46: The Unlevel Playing Field of Asymmetric Competition Expectations [9-17-18]

Part 47: How EU Amazon Antitrust Probe Spotlights Amazon as an Unlevel Playing Field [9-26-18]

Part 48: Google Facebook Amazon’s Non-Neutral, Neutrality Nonsense Harms Competition [10-2-18]

Q&A One Pager Debunking Net Neutrality Myths