Competition

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.  

What is non-neutral, neutrality nonsense?

When the world’s dominant biased-broker Internet platforms, Google, Facebook, and Amazon, are the biggest funders of network neutrality and utility common carrier regulation for competitive ISPs, and their dominant, increasingly utility-like, network-effect-driven, business models, regularly treat other businesses non-neutrally while misrepresenting to the public that they are neutral platforms.

Google, Facebook, and Amazon demand maximal ISP regulation for network neutrality, transparency, and accountability, when ISPs operate their networks neutrally, transparently and accountably without it, but Google, Facebook, and Amazon fiercely oppose operating their much larger, global, encrypted-networks, with network neutrality, transparency, or accountability.

The “techlash” has exposed Google, Facebook, and Amazon, as the most dominant companies in the U.S. warranting antitrust scrutiny, as inherently biased-broker non-neutral networks, and as privileged platforms who abuse Section 230 immunity from civil liability to operate non-neutral, non-transparent, unaccountable, and anticompetitive Internet platforms.  

This is the non-neutral, neutrality nonsense of Google, Facebook, and Amazon – i.e. their asymmetric regulatory recipe for a winner-take-all, unlevel playing field.

Consider the ways that the EU’s announced antitrust probe of Amazon is a game changer in spotlighting how Amazon Marketplace’s conflicted-expanse is a de facto unlevel playing field.

First, the ongoing probe will spotlight that Jeff Bezos, Amazon, investors, and U.S. antitrust authorities can no longer dismiss that Amazon faces antitrust risk.

The EU’s competition commissioner, Margrethe Vestager has launched a preliminary, expert, bulls-eye antitrust probe at by far the most antitrust-vulnerable part of Amazon’s online market-monopsonization model – i.e. the anticompetitive Amazon Marketplace structure where Amazon first commands unchecked, most of its competitors’ most sensitive business confidential information/data and metadata; and second non-transparently and unchecked, determines their competitors’ rank and costs to commercially access Amazon’s monopsonized online consumer demand.

Simply the EU is investigating whether Google’s unchecked dual role as an economy-wide merchant and platform make it an inherently anticompetitive biased-broker?

A core question for the FTC to answer in its hearings on “Competition and Consumer Protection in the 21st Century,” is what are the FTC’s underlying competition expectations?

Why have telecom, cable, and wireless network communications’ convergence with information technology turned out to be pro-competitive, but the Internet platforms’ reverse convergence of information technology with communications networks turned out to be anti-competitive, i.e. naturally winner-take-all?

Asymmetric governmental competitive expectations are why.

Congress’ stated purpose in passing the 1996 Telecommunications Act was “to promote competition and reduce regulation…” [bold added] and Congress’ antitrust savings clause clearly did not change the applicability of antitrust laws to communications networks.

In stark contrast, as an unregulated information service, information technology companies’ networks operated outside of the FCC’s pro-competition mandate, despite the well-known monopolistic behavior of consumer/business software provider Microsoft at that time.

Evidently antitrust non-enforcement can have big consequences.

It can cause big un-ignorable problems that get the attention of the President, all of Congress, and both political parties. That rare feat of collective attention-grabbing can point them collectively in the same rough direction – back to antitrust authorities that could have, or should have, prevented many of the messy Internet platform unaccountability problems that they collectively are wrestling with resolving now.   

Before the FTC has its first retrospective review hearing on its own institutional performance this fall, it has been getting an implicit earful from its governmental superiors that it actions and inactions have apparently created broad and serious negative consequences for competition.

As the FTC prepares for their public hearings on “competition and consumer protection in the 21^st century” this fall, it would be reasonable and instructive for the FTC to seek to better understand the root cause of the need for these once-in-a-generation FTC hearings and to confront some of the most evident serious effects of this root cause problem.

First this analysis asks and answers “what most stunts the FTC’s antitrust and consumer protection law enforcement mission?

Second it asks a dozen of the most important questions the FTC should be asking to zero in on what problems are evidently happening with competition and consumer protection in the marketplace that the FTC’s mission and efforts evidently have been unable to deter, address or resolve since the Pitofsky hearings in 1995.

The likely probability of an eventual U.S. v. Alphabet Sherman monopolization case improved further now that we know how weak Alphabet-Google’s likely primary U.S. antitrust defense of Android is.

This means not only is a potential U.S. v. Alphabet antitrust case stronger than the seminal successful and upheld U.S. v. Microsoft precedent, but Google’s relative antitrust defense is much weaker too.

Google’s CEO Sundar Pichai’s public Android antitrust defense has fatal flaws.

First, Google-Android claims Apple iOS is a direct competitor when factually in an antitrust context it is not.

SUMMARY

The impending EU-Google-Android abuse of dominance conviction and expected record fine and substantial behavioral prohibitions, begs the question of how U.S. antitrust enforcers will eventually act on the outcome of their own Google-Android investigation?  

Anyone concerned with the anticompetitive state of digital advertising, and how to fix it, should focus like a laser on the circumstances surrounding the 2014 FTC’s pass on formally investigating if the Facebook-WhatsApp acquisition would “substantially lessen competition” under the Clayton Antitrust Act.

That obvious FTC mistake in hindsight, triggered a winner-take-all domino effect that not only tipped Facebook to a social advertising monopoly, but also tipped the overall digital advertising market to the anticompetitive digital advertising cartel that evidently predominates today.

Some brief context is helpful here. This big 2014 FTC mistake was the fourth of a pattern of big anticompetitive FTC mistakes concerning the digital advertising marketplace over the last decade.  

Below is the executive summary of my new white paper, “Internet Market Failure to Protect Consumer Welfare,” which can be accessed here.

It is a timely and relevant submission to two different and current U.S. Department of Justice efforts to learn more about the impact of Internet-related issues.

1.      Submission for: the U.S. DOJ Cyber-Digital Task Force June 2018 Report to the Attorney General
 Tasked to “…ensure that Internet-based technologies remain sources of enrichment, rather than becoming forces of destruction and vectors of chaos;” and