Collins | Is The Antitrust Free Ride Over For Big Tech?
In 1978, Robert Bork, who was then a professor at Yale Law School, wrote The Antitrust Paradox, which argued that antitrust enforcement should focus primarily — if not solely — on whether consumers were helped or hurt, even more than whether a proposed merger diminished competition. Since that time, a time in which regulators prohibited common newspaper and broadcast ownership in the same market, limited the number of broadcast outlets under one owner, and regulators broke up AT&T, the pendulum has swung the other way. So says Lerman Senter attorney Mark J. Palchick in the new May/June issue of MFM’s member publication, The Financial Manager.
In his article, “Bringing Down the Giants (or Not),” Palchick argues that “2017 was a low point for media regulation” and that the pendulum is swinging back, again. This time though, the argument is not that antitrust regulation is needed because consumers are paying more. Instead, using information from a 2020 report prepared by the U.S. House Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law’s investigation into digital advertising, elected leaders and others are arguing that the market dominance of companies including Google, Facebook, Amazon and Apple has “materially weakened innovation and entrepreneurship in the U.S. economy.”
Did anyone foresee these media giants so quickly and effectively taking over our lives and so stealthily becoming monopolies with an unquenchable thirst for power and profit? On the surface, companies like Google and Facebook seem to have such altruistic characteristics: Google allows you to ferret out seemingly un-findable information from every corner of the internet. Facebook lets you stay in touch with friends you haven’t seen since high school, and connect with long-lost relatives you didn’t know you had.
But beneath all these seemingly consumer-focused services, Palchick points out, these companies are in a bloodthirsty battle to own nearly every part of the media industry, including e-commerce, internet search, app stores, and social media. The U.S. Congress, the Federal Trade Commission, a multitude of state attorneys general and a large newspaper organization all agree that both companies are too big. They contend, though scores of lawsuits currently in various stages of advancement alleging that Google and Facebook became this powerful by colluding to acquire or kill off competitors, and/or creating barriers for smaller companies to successfully enter the market — all of which violate antitrust laws.
They certainly have the advertising side cornered.
According to Group M’s Global Marketing Monitor for the week of May 1, the world’s largest digital media owners grew by around 40% globally and by more than 30% each in the U.S. and Europe during the first quarter of 2021. How did Google, Facebook, Amazon, Twitter, Snap and Pinterest experience this level of growth while the world was still in the midst of the COVID-19 pandemic, and most other segments of the media industry were still deep in recovery mode?
There are some reasons for this escalation — one of them being that Google and Facebook control the majority of the digital advertising market in the U.S., capturing nearly all of its growth in recent years. Google operates the leading trading venue and the leading intermediaries that buyers and sellers go through to trade — in no small part due to use of clever technology it created specifically to render newspapers’ ad exchange much less effective, according to at least one lawsuit.
At the same time, Google itself is one of the largest sellers of ad space. In addition, a suit filed by 10 states against Google in late December 2020 contends that Facebook and Google agreed to cooperate and assist one another if they ever faced an investigation into a pact the allegedly formed to work together in online advertising.
The concern about anticompetitive behavior, as outlined in the report, is reflected in an extensive list of lawsuits, which Palchick lays out in his article. Among them, and likely the largest, the FTC and 46 states (plus D.C. and Guam) filed a massive lawsuit on Dec. 20, 2020, alleging that Facebook’s market power was obtained in violation of antitrust laws.
In January 2021 HD Media sued Google and Facebook, claiming they monopolized the digital advertising marketplace and suppressed a primary source of revenue for newspapers across the country. On Feb. 4 the Competition and Antitrust Law Enforcement Reform Act of 2021 was introduced by Sen. Amy Klobuchar (whose nearly 700-page book, Antitrust: Taking on Monopoly Power from the Gilded Age to the Digital Age, was released in late April), with hearings to take place in the near future. And this list doesn’t include the hundreds of lawsuits filed by other countries.
The Biden Administration has joined the fight, nominating Lina Khan, an associate professor at Columbia Law School, for one of the FTC’s five seats — something of an ominous sign for the nation’s largest technology companies. While still a law student in 2017, Khan wrote (and perhaps borrowed from Bork’s 1978 paper’s title) “Amazon’s Antitrust Paradox,” something of a treatise arguing for a tougher approach to regulating the e-commerce goliath.
Republicans are known for their hands-off approach to antitrust law; surprisingly, during Khan’s confirmation hearing before the Senate Commerce Committee in late April, only one Republican, Sen. Marsha Blackburn (R-Tenn.), questioned Khan about her “background and lack of experience” (she’s 32). Other Republicans at the hearing seemed enthusiastic about Khan’s adversarial stance toward big technology companies and urged her to wield the FTC’s regulatory powers aggressively, culminating with Sen Ted Cruz (R-Texas) stating “I believe the FTC should be doing much more to rein in the anticompetitive abuses of Big Tech.”
It’s still too early to know how successful these lawsuits will be, even if they are won by the governmental organizations and companies suing Facebook, Google and other media giants, says Palchick. In the meantime, it seems as if help in on the way from the FTC and other governmental bodies.
But just the violations of advertising antitrust alleged against Google and Facebook should be reason enough for those on the financial management side of our industry to pay close attention, as outcomes could have long-reaching effects on newspapers, television and radio stations, and online media. Indeed, it’s a watch-and-see situation, and we should all be watching very carefully.
The May/June issue of TFM, which includes Palchick’s expertly crafted article is currently available on the MFM website.
Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary, the media industry’s credit association. She can be reached at [email protected] and via the association’s LinkedIn, Facebook, Instagram and Twitter accounts.