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Introductory Post: The United States v. Google

TOTM Google is facing a series of lawsuits in 2020 and 2021 that challenge some of the most fundamental parts of its business, and of the internet itself — Search, Android, Chrome, Google’s digital-advertising business, and potentially other services as well.

Google is facing a series of lawsuits in 2020 and 2021 that challenge some of the most fundamental parts of its business, and of the internet itself — Search, Android, Chrome, Google’s digital-advertising business, and potentially other services as well.

Read the full piece here.

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Antitrust & Consumer Protection

The Dishonesty of Conservative Attacks on Section 230

TOTM President Donald Trump has repeatedly called for repeal of Section 230. But while Trump and fellow conservatives decry Big Tech companies for their alleged anti-conservative bias, . . .

President Donald Trump has repeatedly called for repeal of Section 230. But while Trump and fellow conservatives decry Big Tech companies for their alleged anti-conservative bias, including at yet more recent hearings, their issue is not actually with Section 230. It’s with the First Amendment.

Read the full piece here.

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Innovation & the New Economy

Online Intermediaries and “Know Your Business Customer” Requirements

TL;DR It comes as no surprise to anyone that illegal conduct occurs online. Unfortunately, the individuals and businesses engaging in illegal activity may avoid detection by using tools that hide their identity. This makes enforcement difficult or even impossible.

Problem… 

It comes as no surprise to anyone that illegal conduct occurs online. Unfortunately, the individuals and businesses engaging in illegal activity may avoid detection by using tools that hide their identity. This makes enforcement difficult or even impossible.

Solution… 

In some cases, there may be targeted solutions available whereby intermediaries are required to record and verify the identity of business customers. In principle, this approach could be used to directly pursue parties actually liable for illicit content with minimal burden on either the platforms, or non-business customers.

Read the full explainer here.

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Innovation & the New Economy

The DOJ’s Antitrust Case Against Google

TL;DR The Department of Justice and a few Republican state attorneys general have filed an antitrust suit against Google. But… The DOJ case will struggle.

Background…

The Department of Justice and a few Republican state attorneys general have filed an antitrust suit against Google. The complaint alleges that Google’s deals with Android smartphone manufacturers, Apple, and third-party browsers to make Google Search their default general search engine are anticompetitive, harming consumers by denying Google’s competitors the scale and data they need to compete.

But… 

The DOJ case will struggle. Nothing in these deals limits the ability of users to switch from Google to another search engine if they want to, and switching is trivially easy. Nor do the deals constrain Android smartphone makers from pre-installing competing search engines alongside Google. In fact, consumers benefit from these deals because they mean lower handset prices and greater incentive for Google to invest in Android. Moreover, the competition among general search engines to secure these default positions isn’t constrained by Google, and that competition should encourage all search providers to invest in their products.

Read the full explainer here.

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Antitrust & Consumer Protection

Do Injunctions for Patents Promote or Impede Innovation?

TL;DR Over the past 15 years, court decisions have weakened patent protections in the US. While some academics support such weakening, the evidence suggests that it may be having a detrimental effect on innovation.

Over the past 15 years, court decisions have weakened patent protections in the US. While some academics support such weakening, the evidence suggests that it may be having a detrimental effect on innovation.

Background…

Some academics argue that patent holders tend to charge excessive license fees to firms that implement their inventions, thereby impeding downstream innovation. The courts have responded by weakening the enforcement of patents in various ways, including by denying patent holders permanent injunctions. 

But

By making it more difficult for patent holders to obtain injunctions, courts have effectively reduced the incentive for firms to invest in primary inventions. This has arguably had a stronger negative effect on overall rates of innovation. 

Read the full explainer here.

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Antitrust & Consumer Protection

The Ghosts of Antitrust Past

ICLE Issue Brief PPI Director of Technology Policy, Alec Stapp reviews the antitrust cases against IBM, AT&T, and Microsoft and discusses what we can learn from them today. He explains the relevant concepts necessary for understanding the history of market competition in the tech industry.

Alec Stapp, current Director of Technology Policy at Progressive Policy Institute, and former Research Fellow, Law & Economics at International Center for Law & Economics (ICLE), reviews the antitrust cases against IBM, AT&T, and Microsoft and discusses what we can learn from them today. He explains the relevant concepts necessary for understanding the history of market competition in the tech industry.

Introduction

Big Tech continues to be mired in “a very antitrust situation,” as President Trump so eloquently put it in 2018. Advocates for more aggressive antitrust enforcement in the tech industry often justify their proposals by pointing to the cases against IBM, AT&T, and Microsoft. In announcing her plan to break up the tech giants, Elizabeth Warren highlighted the case against Microsoft in particular:

The government’s antitrust case against Microsoft helped clear a path for Internet companies like Google and Facebook to emerge. The story demonstrates why promoting competition is so important: it allows new, groundbreaking companies to grow and thrive — which pushes everyone in the marketplace to offer better products.

Tim Wu, a law professor at Columbia University, summarized the overarching narrative recently (emphasis added):

If there is one thing I’d like the tech world to understand better, it is that the trilogy of antitrust suits against IBM, AT&T, and Microsoft played a major role in making the United States the world’s preeminent tech economy.

The IBM-AT&T-Microsoft trilogy of antitrust cases each helped prevent major monopolists from killing small firms and asserting control of the future (of the 80s, 90s, and 00s, respectively).

A list of products and firms that owe at least something to the IBM-AT&T-Microsoft trilogy.

(1) IBM: software as product, Apple, Microsoft, Intel, Seagate, Sun, Dell, Compaq
(2) AT&T: Modems, ISPs, AOL, the Internet and Web industries
(3) Microsoft: Google, Facebook, Amazon

In other words, by breaking up the current crop of dominant tech companies, we can sow the seeds for the next one. But this reasoning depends on an incorrect — albeit increasingly popular — reading of the history of the tech industry.

Click here to read the full issue brief.

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Antitrust & Consumer Protection

Correcting Common Misperceptions About the State of Antitrust Law and Enforcement

Written Testimonies & Filings On Friday, April 17, 2020, ICLE President and Founder, Geoffrey A. Manne, submitted written testimony to the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Antitrust, Commercial, and Administrative Law.

On Friday, April 17, 2020, ICLE President and Founder, Geoffrey A. Manne, submitted written testimony to the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Antitrust, Commercial, and Administrative Law. Mr. Manne contends that underlying much of the contemporary antitrust debate are two visions of how an economy should work. 

One vision, which tends to favor more intervention and regulation than the status quo, sees the economy and society as being constructed from above by laws and courts. In this view, suspect business behavior must be justified to be permitted, and . . . the optimal composition of markets can be known and can be designed by well-intentioned judges and legislators.

On the other hand, there is the view of individual and company behavior as emerging from each person’s actions within a framework of property rights and the rule of law. This view sees the economy as a messy discovery process, with business behavior often being experimental in nature. This second conception often sees government intervention as risky, because it assumes a level of knowledge about the dynamics of markets that is impossible to obtain.  

In Manne’s view,

Antitrust law and enforcement policy should, above all, continue to adhere to the error-cost framework, which informs antitrust decision-making by considering the relative costs of mistaken intervention compared with mistaken non-intervention. Specific cases should be addressed as they come, with an implicit understanding that, especially in digital markets, precious few generalizable presumptions can be inferred from the previous case. The overall stance should be one of restraint, reflecting the state of our knowledge. We may well be able to identify anticompetitive harm in certain cases, and when we do, we should enforce the current laws. But dramatic new statutes that undo decades of antitrust jurisprudence or reallocate burdens of proof with the stroke of a pen are unjustified.  

Manne goes on to address several of the most important and common misperceptions that seem to be fueling the current drive for new and invigorated antitrust laws. These misperceptions are that: 

  1. We can infer that antitrust enforcement is lax by looking at the number of cases enforcers bring;  
  2. Concentration is rising across the economy, and, as a result of this trend, competition is declining; 
  3. Digital markets must be uncompetitive because of the size of many large digital platforms; 
  4. Vertical integration by dominant digital platforms is presumptively harmful; 
  5. Digital platforms anticompetitively self-preference to the detriment of competition and consumers; 
  6. Dominant tech platforms engage in so-called “killer acquisitions” to stave off potential competitors before they grow too large; and 
  7. Access to user data confers a competitive advantage on incumbents and creates an important barrier to entry. 

 

See his full testimony, here.

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Antitrust & Consumer Protection

Making Sense of the Google Android Decision

ICLE White Paper The European Commission’s recent Google Android decision will go down as one of the most important competition proceedings of the past decade. Yet, in-depth reading . . .

The European Commission’s recent Google Android decision will go down as one of the most important competition proceedings of the past decade. Yet, in-depth reading of the 328-page decision leaves attentive readers with a bitter taste. The problem is simple: while the facts adduced by the Commission are arguably true, the normative implications it draws—and thus the bases for its action—are largely conjecture.

This paper argues that the Commission’s decision is undermined by unsubstantiated claims and non sequiturs, the upshot of which is that the Commission did not establish that Google had a “dominant position” in an accurately defined market, or that it infringed competition and harmed consumers. The paper analyzes the Commission’s reasoning on questions of market definition, barriers to entry, dominance, theories of harm, and the economic evidence adduced to support the decision.

Section I discusses the Commission’s market definition It argues that the Commission produced insufficient evidence to support its conclusion that Google’s products were in a different market than Apple’s alternatives.

Section II looks at the competitive constraints that Google faced. It finds that the Commission wrongly ignored the strong competitive pressure that rivals, particularly Apple, exerted on Google. As a result, it failed to adequately establish that Google was dominant – a precondition for competition liability under article 102 TFEU.

Section III focuses on Google’s purported infringements. It argues that Commission failed to convincingly establish that Google’s behavior prevented its rivals from effectively reaching users of Android smartphones. This is all the more troubling when one acknowledges that Google’s contested behavior essentially sought to transpose features of its rivals’ closed platforms within the more open Android ecosystem.

Section IV reviews the main economic arguments that underpin the Commission’s decision. It finds that the economic models cited by the Commission poorly matched the underlying fact patterns. Moreover, the Commission’s arguments on innovation harms were out of touch with the empirical literature on the topic.

In short, the Commission failed to adequately prove that Google infringed European competition law. Its decision thus sets a bad precedent for future competition intervention in the digital sphere.

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Antitrust & Consumer Protection

Economics is Dead. Long Live Economics! A Review of The Economists’ Hour

TOTM The central irony of the Economists’ Hour is that in criticizing the influence of economists over policy, Appelbaum engages in a great deal of economic speculation himself. Appelbaum would discard the opinions of economists in favor of “the lessons of history,” but all he is left with is unsupported economic reasoning.

John Maynard Keynes wrote in his famous General Theory that “[t]he ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

Read the full piece here.

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Antitrust & Consumer Protection