Governments and policymakers harbor a deep concern due to the burgeoning power of Big Tech companies. Officials are between a rock and a hard place. On the one hand, Big Tech wields an influence over the public sphere. On the other hand, policymakers must show they are the guardians of public interest rather than the stooges of these tech giants. Even so, lawmakers must manage this balancing act rationally and avoid impulsive actions or unrealistic lawsuits that could do more harm than good.
Last week, the U.S. Department of Justice (DoJ) filed an antitrust lawsuit against Apple for "monopolization or attempted monopolization of smartphone markets" by illegally restricting access to its hardware and software. Apple is not the DoJ's first and only target. In 2023, the DoJ sued Google for monopolizing digital advertising technologies.
Similarly, the U.S. Federal Trade Commission (FTC) issued complaints against Microsoft, Amazon and Meta, Facebook's parent company. In 2023, the FTC filed a lawsuit against Amazon for illegally maintaining a monopoly. In 2022, the FTC's complaint against Microsoft sought to block Microsoft's acquisition of Activision Blizzard and its gaming franchises, including Call of Duty and World of Warcraft. Again, in 2022, the FTC sought to block Meta's merger with Within Unlimited and its successful VR-dedicated fitness app.
A similar situation unfolds in Europe. Last week, the European Commission opened "non-compliance investigations under the Digital Markets Act (DMA) into Alphabet's rules on steering in Google Play and self-preferencing on Google Search, Apple's rules on steering in the App Store and the choice screen for Safari and Meta's 'pay or consent model.'" This investigation is the latest of the EU actions against Big Tech. In the EU, Big Tech has also faced many lawsuits up until now, but unlike in the U.S., these cases tend to involve both competition and data privacy concerns.
Prominent cases against Big Tech send both overt and tacit messages. The main direct message is that legislators value competition and are willing to prosecute activities that harm it.
Secondly, they consider competition a catalyst for innovation. Through legal actions against Big Tech, lawmakers regard dismantling these firms' monopolistic hold as essential for fostering an environment where startups and competitors can flourish.
Thirdly, legislators ought to protect consumers. Through lawsuits and investigations, they aim to prevent Big Tech from dominating the competition at the expense of consumers enjoying lower prices and, more importantly, at the cost of illegally using consumer data.
Policymakers' main concern is Big Tech's immense influence, which goes beyond harming competition and consumer rights. If the focus was solely on these issues, lawmakers might reconsider the impact of antitrust lawsuits. These actions, while aimed at fostering fair competition for smaller businesses, signal intense scrutiny across the tech industry. This scrutiny encourages a cautious approach, deterring companies from embracing innovative or risky projects. Additionally, the uncertain success of these lawsuits and their departure from traditional legal interpretations further push companies to act conservatively, often with limited insight.
Furthermore, while Big Tech has the resources to survive in such an uncertain regulatory environment, small and medium-sized enterprises and startups lack similar legal support, which puts them at a disadvantage. This scenario naturally does not provide any advantages for competition and consumers.
Looking back at what happened when Microsoft was investigated in the late 1990s and early 2000s for being too dominant can help us understand what downsides might happen now. Research shows that even though the investigation led to more patents being filed, it did not lead to more new products or companies entering the market. So, it's unclear whether these kinds of investigations really help competition or consumers.
On the other hand, Big Tech's power benefits innovation and customers. The power of being big tech enables them to lead in innovation. As Herbert Hovenkamp, a professor at Penn Law School, states in an FT interview, "the rate of innovation is high" for big tech and the sector is among the largest patent holders. Because they have resources to allocate to R&D, ready customer bases, can take more risks, and can receive quality legal support to survive in complex legal scenarios.
Considering all this, why are lawsuits and threats of regulation so imminent and even so novel that sometimes do not follow precedence? Of course, the desire to protect competition and consumers rightfully plays a role in that. Another key factor is the lawmakers' discomfort with Big Tech having so much control over the economy. They are concerned that these companies could harm competition and disrupt the capitalist order, which governments strive to protect.
Another significant factor is big tech's influence on politicians' fate. Think about the many social media companies that blocked Trump's accounts or the influence misinformation spread through social media has on politicians, even if there is a certain level of regulation against misinformation. The power of large tech companies, which even influences a U.S. president, naturally instills fear.
Governments need to be intelligent and strategic. Rather than yielding to fear and uncertainty, policymakers can adopt more strategic ways to protect competition and consumers. This includes fostering innovation through support for smaller businesses and establishing closer collaboration with Big Tech companies. In this way, states can effectively manage their influence while nurturing a fair and competitive digital environment. Now is the time for states and policymakers to abandon impulsive actions driven by fear and embrace rational and strategic decision-making.
