Big Tech’s Novel Harms: Antitrust or Regulation?

This chapter explores policy options for novel harms like privacy, fake news, or hate speech in digital markets. The discussion shows that the novel harms allegedly inherent in big tech firms are not strictly related to monopoly power. Regulation is thus the way forward, not competition. And consumer protection regulation is a better approach than competition spirited “utilities regulation” or revenue-sharing driven “retail regulation.”

Policy Conversation on Big Tech

This chapter describes the polarization observed in the contemporary policy conversation about big tech. According to one view—which can be called neo-structuralism—each big tech firm is a structural monopoly harmful to the economy and the political system. Big tech firms must be regulated, if not broken up. Legislative reform is a prerequisite. According to another view—which can be called consumer welfarism—serious factual inquiry of tech companies' market power is necessary prior to any enforcement initiative. Existing antitrust laws provide the right framework, though disagreements arise about the interpretation of applicable principles and rules. The chapter shows that both views have limitations, and concludes that additional study is needed to evaluate the economic and social issues raised by tech giants.

Conclusion

This concluding chapter explains that the picture of big tech firms as monopolists is intuitively attractive, but analytically wrong. The digital economy has a variety of properties that work together to impose on firms a pressure equivalent to oligopoly competition. In particular, network externalities, increasing returns to adoption, and tipping effects produce significant discontinuities. This influences the direction and intensity of competition. Tech firms compete with others by a process of indirect entry, and reconfigure existing channels of competition.

Antitrust in Moligopoly Markets

This chapter draws the implications of the theory of moligopoly competition for antitrust law and policy. In digital industries, economic forces discounted in received theory produce socially beneficial incentives on monopoly firms to compete by indirect entry in untipped markets, when they understand that their monopoly rents in tipped markets are under pressure. Antitrust should thus focus on maintaining competitive pressure in markets that have tipped, and apply more forgiving rules towards the leveraging of market power in untipped markets. Besides, antitrust should adopt tools that allow fact finders to draw a better line between tipped and untipped markets, complementing inferences of monopoly power drawn from structural methods of market definition and evaluation of market power.

A Concrete Theory of Moligopoly

This chapter presents an empirical theory of moligopoly competition, in which big tech firms compete by a process of indirect entry. It begins by introducing each tech giant, namely, Facebook, Apple, Amazon, Netflix, Google, and Microsoft. The chapter then identifies six properties common to many of them: diversification, discontinuity, long termism, growth, exploration and discovery, and flexibility. All six properties work together toward a competitive outcome. Moreover, moligopoly competition appears to lead to a substantial allocation of resources to invention.

Economics of Big Tech: Monopoly v Uncertainty

This chapter focuses on the economics of big tech. It asks whether the standard monopoly model of received economic theory is the appropriate framework to analyze big tech firms. The question is important; the monopoly model underpins antitrust and regulatory policy. It provides the intellectual foundation for the assessment of anticompetitive conduct and transactions in digital markets. However, economic models on which laws are based may lose relevance as a result of technological change. Our analysis suggests that the average tendencies of big tech firms do not fit the textbook monopoly model. Instead, observed properties of big tech firms like increasing returns to adoption, network externalities, and tipping effects hint at the superiority of a distinct economic model of competition under uncertainty.

The “Moligopoly” Hypothesis

This chapter examines the empirical validity of the moligopoly hypothesis—that is, the intuition that big tech monopolies are exposed to oligopoly competition across markets. The focus is on big tech firms’ annual filings to financial regulators as well as business analysts’ reports, market research and competitive intelligence. The data calls attention to the possibility of latent and complementary levels of competition in big tech that antitrust and regulatory decision-makers miss in their assessments of monopoly power in digital markets. This competition does not seem to originate from substitute products or services. And it seems to vary at firm level, suggesting significant heterogeneity amongst big tech firms.

Introduction

In recent years, big tech’s entry into new markets like entertainment, banking, or healthcare has aroused monopoly complaints from established players. Both in the European Union (EU) and the United States, congressional institutions, antitrust agencies, and market regulators appear to be increasingly concerned. Whilst US antitrust authorities are yet to act, the European Union has adopted aggressive decisions against big tech. In addition, regulatory reform is on the tables of European lawmakers with proposals to limit big tech’s acquisitions of startups or mandate data sharing with competitors. Contemporary policy reliance on a monopoly explanation is, however, inconsistent with descriptions of intense levels of big tech oligopoly competition found in financial reports, market research, and competitive intelligence analysis. This chapter attempts to sketch out the book’s ambition to give a fuller account of big tech competition.