This article is part of the Future Agenda, a series from Future Tense in which experts suggest specific, forward-looking actions the new Biden administration should implement.
2020 has been a turning point for antitrust enforcement: The House completed an extensive bipartisan investigation finding monopolies in several digital markets, Facebook is facing two lawsuits from the Federal Trade Commission and 48 state attorneys general, and Google is facing three; the third suit, from 38 state attorneys general, was announced Thursday. The antitrust enforcers Biden nominates should build on this momentum. The next chair of the FTC will have an opportunity to initiate new rules defining “unfair methods of competition,” a tool that the agency has historically been reluctant to use. While small businesses have been hit hard by the pandemic, COVID-19 has accelerated the dominance of the tech giants—Google, Amazon, Facebook, and Apple—with all of them reporting record-breaking growth in 2020. Now is the time for assertive action to promote competition, and the FTC should use its rulemaking authority to regulate anticompetitive practices in the tech industry.
The FTC’s Facebook complaint makes the case that the company has a monopoly in social networking, arguing that its acquisitions of Instagram and WhatsApp were anticompetitive. The complaint also details the anticompetitive conditions Facebook imposed on third-party software developers’ ability to be interoperable with its platform. Facebook only made application programming interfaces accessible if the developers agreed not to create functions that competed with Facebook’s offerings. One well-known example is the video app Vine, which let users connect with one another by using Facebook’s “Find Friends” API. But hours after Vine’s official launch, Facebook cut off its access. Rather than compete with apps like Vine on the merits, Facebook intentionally limited the competition.
This case is incredibly important and overdue, but lawsuits are not the only tool the FTC has to foster more competition in the tech industry. Unlike in other countries, the U.S. approach to antitrust has been limited to case-by-case review. This system often creates uncertainty about what the rules are, because companies must infer what constitutes unfair competition based on the cases the agency brings. Litigation is usually slow and expensive, with antitrust cases taking several years to resolve. And startups, civil society, and the public typically lack a forum to express their views.
The FTC could change this by creating regulations to rein in anticompetitive practices and prevent companies from monopolizing markets. FTC Commissioner Rohit Chopra and antitrust scholar Lina Khan have argued that agency rulemaking defining unfair methods of competition would enhance the predictability, efficiency, and transparency of antitrust enforcement.
Facebook is not and will not be the only company to engage in the anticompetitive practices alleged by the complaint. The FTC has the authority to define these as “unfair methods of competition,” creating bright-line rules for all companies to follow. This would help avoid the necessity to bring similar cases in the future.
Although the FTC has had this authority since the agency’s creation in 1914, it has only issued a single antitrust rule in more than 100 years—due entirely to lack of leadership and years of inertia. (That rule was later repealed.)
This could change if President-elect Biden appoints new leadership interested in reviving virtually unused tools that could make the agency more effective. There are many anticompetitive practices in the tech industry that could be ripe for FTC rulemaking, but there are three in particular that the agency should consider defining as unfair methods of competition.
First, the FTC could create a rule requiring “interoperability” between platforms and classifying efforts to limit interoperability as unfair. When the dominant platforms limit the ability of other companies to integrate with their products, they are able to strangle startups before they can become competitive threats. The FTC’s Facebook complaint alleges several examples of Facebook cutting off other apps’ access to its API to degrade the user experience when it viewed them as competitors. The complaint cites internal emails showing that this was an intentional strategy. When Facebook cut off API access to Circle, a local social networking app, it gave a pretextual reason externally. Internally, however, managers said the real reason was because the app was “duplicating the [social] graph- and doing a rather excellent job” and “very directly creating a competing social network on top of that graph.” Circle had been gaining 600,000 new users a day, but after that, the number fell to almost zero.
Second, the commission should classify as unfair the common practice of using hard-to-change default settings to prioritize the dominant platforms. For example, Google makes the Android mobile operating system—and so Google is the default search engine on Android devices. It takes users 15 steps to change it. Default settings, coupled with complex and confusing design interfaces that manipulate users to make certain choices (often referred to as “dark patterns“), unfairly entrench the dominant platforms. The Department of Justice’s lawsuit alleges that Google has agreements with Android device manufacturers that preinstall Google search, forbid preinstallation of other search engines, and make the Google search app undeletable.
Third, the FTC could create a rule defining self-preferencing as an unfair method of competition. Self-preferencing is when dominant platforms privilege their own products and services above more relevant content from competitors. The latest multistate antitrust lawsuit alleges that Google restricts the way that companies like Yelp and TripAdvisor can advertise so that it can promote its own reviews and downrank their reviews in search results.
If new FTC leadership pursues these rules, product quality and consumer choice will flourish as new market entrants are able to compete. Suing monopolies is good. Preventing monopolies is better.