In recent years, there has been increasing antitrust scrutiny around the world of large technology companies. The increased attention on competition in the digital economy started outside of the United States. Since 2019, however, the U.S. antitrust enforcers—the U.S. Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) as well as numerous state attorneys general—have closely scrutinized and brought enforcement actions against some of the largest tech companies. This client alert provides an overview of the recent competition enforcement trends, specifically: (1) key topics at issue in many tech investigations; (2) the increased focus on competition in labor markets; and (3) the U.S. FTC’s new, expansive interpretation of Section 5 of the FTC Act. In view of this uncertain landscape, tech companies should stay on top of these enforcement trends and potential risks they face.
Key Topics at Issue in Investigations of Tech Companies
Investigations of technology companies follow similar principles to investigations in other industries, but there are some concepts that the antitrust authorities have been considering more closely in the context of the tech industry. First is the concept of “gatekeepers,” which the government agencies have used to describe any entity that sits between users and suppliers/merchants. The agencies have shown a particular interest in large intermediaries and have expressed concern that certain intermediaries may be able use their position to increase fees, obtain restrictive terms, and extend their position in the marketplace. At the same time, intermediaries in the tech industry have generated significant benefits, including by lowering transaction costs, helping sellers and customers to more easily find each other, and enabling new business models and innovations.
Another concept that sometimes arises in tech investigations related to intermediaries is “zero-price” products, where a company makes its products or services free to certain users and makes money either through different products, different consumers (like advertisers), or at a different point in time. The notion of “free” products is not unique to the tech industry. Ad-supported media – including radio, broadcast television, and newspapers – existed long before the rise of the digital economy. Nevertheless, the agencies are currently grappling with how to define relevant markets and measure competitive harm in the absence of price competition. For example, the traditional test applied by enforces to define relevant markets that looks at a small but significant and non-transitory increase in price (or “SSNIP”) does not directly translate to zero-priced goods. Similarly, alleged non-price harms to consumers are often harder to prove than an increase in price.Continue Reading Antitrust Enforcement Trends in the Digital Economy