This paper, which can be found here, explores the evolution of antitrust over time, and how some of the challenges with network businesses are recurring issues for competition law.
It is structured as follows:
Section 1 examines the evolution of antitrust law over time.
Before the introduction of antitrust law, markets were generally subject to self-regulation. Antitrust was introduced to regulate a number of business practices without engaging in full-fledged regulation. Nonetheless, antitrust has teeth and can be quite intrusive.
A first example of this can be seen in the Standard Oil case. Standard Oil’s success was mainly due to a set of mergers and trusts it entered into with its competitors and railroads. The result of this success was that, by the 1890s, most businesses had to deal with Standard Oil or with one of the constituents of its extensive trust l. In order to address the ‘evil of restriction of output’, the Supreme Court ordered the dissolution of the Standard Oil trust.
A second example is the AT&T case. The American Telephone and Telegraph Company (AT&T) built the original long distance telephone network in the US. Even after 1894, when AT&T’s patents expired and the telephone industry opened up to competition, AT&T dominated the telecommunication industry until 1982. From its inception, the telecommunications market was considered a natural monopoly, in which regulation was necessary – which led to the creation of the FCC. In addition, antitrust agencies, in conjunction with the FCC, constantly monitored AT&T. In 1982, AT&T was broken up and ordered to divest seven subsidiaries that provided long-distance services.
The third case is Microsoft. Unlike in the previous cases, antitrust intervention did not take the form of a divestiture order, which, while mandated by a judge at first instance, was reversed on appeal. Instead, this case led to unbundling orders concerning the sale of operating systems and specific software such as Internet Explorer.
Section 2 explores how antitrust law applies in digital markets, and how it may impact investigations into Google’s business practices.
Digital markets are thought to be more complex than conventional ones, particularly as they often involve two-sided platforms, the dynamics of which are still underexplored. This does not mean that antitrust action is not possible against Google, but it does create uncertainty regarding what the appropriate approach to Google’s business practices should be.
This is apparent in the different approaches taken to the treatment of competing services by Google’s search results (i.e. to Google Search bias) on the two sides of the Atlantic. The FTC looked at these practices and concluded that Google’s conduct was a ‘by-product of “competition on the merits” and the competitive process that the law encourages’, and that any negative effect ‘was accidental’. As a result, the FTC archived the process. In contrast, the European Commission has fined Google multiple times for practices related to its search services, and particularly for anticompetitive search bias.
Section 3 argues that the digital economy is not very different from traditional markets.
Google and Standard Oil have several elements in common. Google understood the potentialities of the Internet and data, as Standard Oil understood the potentiality of oil and railroads. Today, data and information are as crucial for the economy as oil was for the economy of the 1900s. The main difference between Standard Oil and Google is that Standard Oil profited directly from selling oil, leveraging its economies of scale. Instead of doing this, Google profits indirectly from advertisers that use Google’s digital platform to promote products, leveraging on virtual network effects linked to its digital platform.
The author ultimately concludes that, as in the past, there is an alternative between structural antitrust remedies that address specific problems and more intrusive regulation – and considers that competition intervention may be preferable, because more targeted.
This paper provides an interesting overview of how competition law has dealt with the main challenges related to market concentration over the years. While the contents of the article are not particularly original, they provide an introduction to the role that competition law has played in disrupting anticompetitive market structures.