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Innovation and Antitrust: Learning from Past Government Antitrust Enforcement Actions

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Innovation and Antitrust: Learning from Past Government Antitrust Enforcement Actions

September 16, 2022

As Congress returns from the August and Labor Day recess, competition policies may be high on the priority list, with Sen. Klobuchar reintroducing the Journalism Competition and Preservation Act and likely lobbying Sen. Chuck Schumer for a vote on her American Innovation and Choice Online Act. Before considering legislation, though, Congress should take a close look at how the current leadership of the Federal Trade Commission (FTC) has abandoned the Commission’s past approach to protecting consumers from technology firms’ monopolistic practices.

Past cases against Microsoft, Intel, and Kodak can help us understand the government’s current antitrust investigations into Big Tech, and why those cases may or may not succeed. In each case, the government alleged that the technology firms harmed consumers by abusing dominant, or even monopolistic, positions within a well-defined market. The government is making similar accusations today against Apple, Google, Meta (Facebook), and Amazon.

The Department of Justice (DOJ) may be poised to file suit against Apple, alleging that the tech giant “abused its market power to stifle smaller tech companies, including app developers and competing hardware makers.” The government filed a lawsuit last year against Meta, alleging a monopolization of the “social media network,” and an action against Google, claiming that it violated antitrust law by preinstalling its search on devices, entering into agreements for manufacturers to preference its search, and more. The government has several other investigations open, including one concerning whether Apple’s practice of requiring developers to use certain credit card processing systems violates federal law.

The new enforcement actions and investigations differ, though, from the government’s historic actions. In the past, the FTC and DOJ did a much better job of defining relevant markets. And the past actions were focused on bettering consumers, increasing innovation, and punishing bad behavior. These are all factors on which antitrust should be focused and which Congress can address by providing resources and clear direction to the FTC and DOJ, rather than by overhauling competition law.

Kodak, Microsoft, and Intel tried to restrict how innovators or competitors could access a certain market. Kodak tried to prevent independent photography shops from acquiring the specialized paper on which pictures are developed. Microsoft tried to prevent consumers from using software—specifically, internet browsers created by third parties—on Windows operating systems. Intel tried to cut off access to its intellectual property when competitors tried to assert their own patents against the microprocessor giant.

Each action harmed consumers in unique ways. Kodak forced independent camera and development shops to close, raising the cost of getting photographs developed while decreasing convenience. Microsoft deprived innovators of the opportunity to independently develop software for Windows while preventing consumers from implementing non-Windows solutions. Intel prevented companies from developing microprocessor-related technology. Microsoft and Intel settled with the FTC or DOJ, while Kodak lost at trial.

Each case also had strengths and weaknesses. While Kodak may have monopolized the photographic paper import business, did that really harm consumers by raising their costs? Did independent shops really have a right to procure the paper from a specific source? Did Microsoft really have a monopoly, or would the pace of innovation eventually make the case irrelevant? For the historic cases against innovative companies, were consumers really harmed if innovative products lowered the cost of products and offered them more options?

In each historic case, too, the government broadly defined the relevant market. For Kodak, it was the “amateur camera, film, and photofinishing industry”; for Intel, the “general purpose microprocessor” manufacturing industry; for Microsoft, the “personal computer operating systems” industry.

The broad market definitions do not exist in today’s actions against Meta and Google. In the case against Meta, the government defines “personal social media network” so narrowly that the term applies only to Facebook, leaving out similar social media platforms such as Twitter, Snapchat, and TikTok. In its case against Google, the government conveniently ignores the fact that Android-based smartphones are fully customizable and that consumers can choose not to use Google’s products—oddly enough, because of the Microsoft case just mentioned.

Policymakers should learn from the past, which shows how the government can enforce existing law and standards. Until a few years ago, the government tried to balance enforcement actions to protect innovation against protecting consumers and preventing abuse. This delicate balancing is a model both agencies and policymakers should strive to follow, and it should be preferred over wholesale attempts to change antitrust policy.

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