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Combatting Consolidation With Antitrust Enforcement, Not More Consolidation

November 5, 2019

In the current era of “big tech,” there have been various proposals on how to deal with the rise of dominant digital platforms. These range from no government regulation to breaking up monopolies and creating sector specific regulation. Another proposal calls for empowering workers by creating antitrust exemptions for small businesses and independent contractors to collaborate when negotiating with bigger businesses. This exemption would likely be from Section 1 of the Sherman Act, which prohibits horizontal competitors from colluding with each other. But when thinking through how to best address dominant digital platforms, we must be careful not to create more antitrust problems in our mission to solve them.    

Increasing the bargaining power of employees is a good idea. This is why antitrust law has always allowed unions. Today, especially in the gig economy, certain companies have the resources to act as a Goliath among Davids. But the fundamental problem in the gig economy — and corporate America more broadly — is that many workers who depend on just one or a few sources for their paychecks are classified, not as employees, but as freelancers or independent contractors. This is not to say that simply reclassifying these workers as “employees” under current law is a simple solution. But recognizing that workers can band together for better pay and treatment from their employers does not require new kinds of antitrust exemption, but rather making sure that current labor law is fulfilling its purpose.

New antitrust exemptions for small businesses, however, are more problematic. As the size and role of digital platforms continues to increase, and as markets become more concentrated, creating antitrust exemptions that could allow certain categories of businesses to collude or agree not to compete will not solve the problem, or will solve some problems at the expense of creating others. In particular, broad exemptions that allow businesses of any size to fix prices, agree to quality reductions, or reduce output should be rejected.

That is not to say that all cooperative behavior between firms — of any size — should be unlawful. Current law allows companies to participate in standard-setting bodies, purchasing cooperatives, and other beneficial initiatives that do not interfere with competition. And some new forms of such cooperation may be allowed under current law. If not, their proponents can make the case that they should be. But giving a class of entity a broad exemption from antitrust would carry more risk than reward. While tech conglomerates keep getting bigger, we need to address the antitrust issues directly through strong antitrust enforcement, not exemptions. We must be wary of antitrust exemptions and all their unintended consequences, regardless of who they apply to. For example, where will we draw the line on what is considered a small business? How will we ensure the exemption is not unfairly exploited through loopholes by big businesses or wealthy individuals in a way that often occurs with tax exemptions? Will small businesses be allowed to engage in “no-poach” agreements? What if allowing small businesses to collude with each other leads to a new group that has too much economic power? If small businesses can form their own cartel, will all the organizations within the group be treated equally or will powerful interests come to dominate and end up silencing the workers they are there to protect? 

Instead, for the digital economy to thrive more fairly and robustly for consumers, businesses, and competitors, we need courts to fully enforce antitrust laws (which has significantly declined since the 1980s era of deregulation), and for Congress to pass pro-competition policies for the digital era.  

As we try to think through how to best solve increasing market concentration, there are many antitrust scholars with ideas, which we saw during the series of public hearings on competition and consumer protection that the Federal Trade Commission held this year. Jon Sallet, antitrust expert and former Department of Justice official, wrote an article that highlights five specific ways to strengthen FTC enforcement of antitrust laws that experts discussed at the hearings. These recommendations include the understanding that antitrust laws are not only there to protect consumers from rising prices but also to protect the competitive process more broadly. We must pay attention to today’s growing market concentration because underenforcement of antitrust laws is a greater risk than overenforcement as it can lead to higher prices, reduced innovation, and increased income inequality. Moreover, Congress should expand FTC authority and enforcement tools in order to let the agency fully address anticompetitive conduct. In addition to these recommendations, we can also empower workers by looking to where competition and other areas of the law intersect. For example, if ridesharing apps could more easily enter the market, platforms would have less power and drivers would have more power to negotiate for better opportunities. Alternatively, we could encourage business structures where gig economy workers themselves collectively own the platforms for which they work.  

Antitrust law should be reformed to promote competition against powerful firms. In recent decades, courts have created presumptions in antitrust law that have become problematic in today’s market. As a result, the courts should rethink these precedents. Furthermore, Congress needs to create new laws to fill the gap in antitrust law to cover the emergence of digital companies where existing antitrust laws may not help. And government agencies need to fully enforce antitrust laws as well as implement regulations to protect workers. 

Without more competition, economists expect less innovation, higher prices, and lower product quality. Congress can and does regulate private sectors and the tech sector should be no different. Workers, small businesses, and consumers are better off with strong antitrust enforcement and targeted pro-competition policies rather than creating blanket exemptions to an area of law where the major problem has been too little enforcement. In the long run, stronger enforcement of antitrust laws, improving antitrust laws, and creating regulations to fill in gaps in the law will be best for workers and consumers. 

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