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A FAANGed Giant: Antitrust in the Tech Age

July 29, 2019
With tech companies gaining increasingly large amounts of power in our economy, the threat of monopolization has reawakened. As such, the Federal Trade Commission (FTC) and the Department of Justice’s (DOJ) Antitrust Division have both ramped up their efforts to respond in kind. However, today’s monopolies are unlike those of the past, and regulators will need to use antitrust law in novel ways to react appropriately.

According to microeconomic theory, a monopoly will charge higher prices and produce fewer goods than the competitive market, thereby harming consumers. Furthermore, a lack of competition is thought to stifle innovation, preventing beneficial technological progress. Historically, in order to prevent these risks, the United States government created the FTC and the Antitrust Division of the DOJ. Their missions are similar, as they both aim to protect consumers and promote competition.[1] In the past, regulators have relied on dissolution in response to monopolies. In 1911, courts ruled to split Standard Oil, John D. Rockefeller’s oil giant, into several smaller, independent entities.[2] Decades later in 1974, the Department of Justice sued under the Sherman Act of 1890 to break up AT&T into regional entities.[3]

This worked because the government, in effect, artificially created competition. This competition, in theory, results in lower prices and higher quality goods for consumers because the firms are now working against each other to be the best in the market. Dissolution, however, is not the end-all-be-all of antitrust solutions. For example, it worked in the AT&T case because the company and its physical capital were split into regional companies that served consumers in given geographic areas.[4] However, this strategy would be less effective with companies whose main operations take place in cyberspace. It would be impractical, for instance, to split up Google’s servers into different companies, and this goes for the other FAANG companies as well.

FAANG is the acronym for Facebook, Amazon, Apple, Netflix, and Google, the largest tech stocks traded in the United States; they have a combined market cap of $3.1 trillion USD.[5] While Netflix is not of particular antitrust concern, regulators have been binge watching the other FAANG companies. The danger these companies pose is unlike the dangers of the monopolies of old. The tech titans aren’t likely to dominate the market in order to raise prices. In fact, they’ve done the opposite. When Facebook acquired Whatsapp, it dropped the $0.99 USD subscription fee, making the app more accessible to users.[6] Furthermore, Amazon’s lightning-fast shipping, extraordinarily wide array of goods, and overall superior service has allowed it to dominate the retail industry. This dominance has forced competitors like Best Buy and Walmart to reduce their prices, resulting in net lower prices for consumers.[7] Google’s integration into thousands of tech and Internet services has allowed its consumers to forego the arduous task of signing up for website after website after website. These companies have made life significantly easier for consumers. They’ve allowed for ease of access across multiple platforms as well as lower prices. So, what are we to do?

“The antitrust laws,” according to an article by Former United States Circuit Judge Frank Easterbrook, “are designed to prevent reductions in output and the associated higher prices.”[8] This is where current antitrust laws fall short. Because much of it revolves around consumer welfare (specifically, prices and output), it fails to account for firms like the FAANG companies that don’t have these negative effects on consumers. In The Amazon Paradox, an article by competition law specialist Lina Khan, Khan writes that “the current framework in antitrust…is unequipped to capture the architecture of market power in the modern economy.”[9]

Some, including Democratic Presidential Candidate Elizabeth Warren, have called for a breakup of big tech.[10] This would come about either by undoing past acquisitions or by splitting off different parts of the business. In the eyes of those who support these plans, this will bring balance to the market, restore competition, and create more brands. However, in the words of Neil Sadaka, “breaking up is hard to do.” The University of Pennsylvania’s very own Herbert Hovenkamp, an antitrust professor, noted that break ups are “horrifically expensive to bring, and the remedies are always disappointing.”[11] The break up that turned AT&T into seven regional firms took eight years.[12] In short, the solution towards which many look when they think of antitrust may not be viable for big tech.

Now it’s up to lawmakers and regulators to figure out what, if anything, is to be done about big tech. Some will die by the dissolution remedy. Others believe that big tech is in a good spot and that too much regulation may pose a greater threat than dominance itself.[13] Only time will tell which camp will have its way. We should, however, be wary of the old adage that tells against putting all of one’s eggs in the same basket. If we place our eggs in one or only a few baskets, those eggs may very well be cracked by a FAANGed giant.

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References

  [1]https://hbswk.hbs.edu/item/the-amazon-effect-is-changing-online-price-competition-and-the-fed-needs-to-pay-attention

  [2]https://www.ftc.gov/about-ftc/what-we-do

  [3]https://www.economist.com/business/1999/12/23/standard-ogre

  [4]https://www.cnet.com/news/momentum-grows-to-break-up-big-tech-as-amazon-facebook-google-and-apple-face-scrutiny/

  [5]https://library.cqpress.com/cqresearcher/document.php?id=cqresrre1983121600

  [6]https://www.investopedia.com/terms/f/faang-stocks.asp

  [7]https://marketrealist.com/2016/05/facebook-plans-monetize-whatsapp/?utm_source=yahoo&utm_medium=feed&utm_content=read-next-a&utm_campaign=facebook-benefits-whatsapp-deal

  [8]https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=2152&context=journal_articles

  [9]https://www.yalelawjournal.org/note/amazons-antitrust-paradox

  [10]https://www.adweek.com/digital/elizabeth-warren-proposes-breaking-up-big-tech/

  [11]https://www.ft.com/content/cb8b707c-88ca-11e9-a028-86cea8523dc2

  [12]https://www.cnet.com/news/momentum-grows-to-break-up-big-tech-as-amazon-facebook-google-and-apple-face-scrutiny/

  [13]https://www.nytimes.com/roomfordebate/2016/04/28/is-google-a-harmful-monopoly/monopolies-like-google-are-innovators-which-is-good-for-consumers

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  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The World Bank Data (U.S.)</h3><p><img width="130" height="118" alt="" src="/live/image/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg" class="lw_image lw_image484 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 2x, /live/image/scale/3x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 3x" data-max-w="1406" data-max-h="1275"/>The <strong>World Bank</strong> provides World Development Indicators, Surveys, and data on Finances and Climate Change.</p><p> Quick link: <a href="http://data.worldbank.org/country/united-states" target="_blank">http://data.worldbank.org/country/united-states</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>