Below, we have provided the full transcript of the second episode of our series Antitrust in a Digital World: Does It Work?. Read below to see the discussion about Antitrust in America: How a New Administration Tackles Digital Platforms.
Chelsea THOMAS:
Hello and good afternoon. My name is Chelsea Thomas and I am the Executive Director for ACT, the App Association. For those of you not familiar with the App Association, we represent and advocate on behalf of more than five thousand small and medium sized app development and connected device firms around the globe on issues such as privacy, competition and workforce development.
Wanted to say a quick thank you to Competition Policy International for partnering with us on this timely series on competition in digital markets. Just last week, the U.S. House of Representatives antitrust subcommittee kicked off another series of hearings to continue their work from last year’s committee report on competition in digital services.
In terms of agency action, the Biden-Harris administration inherited two major antitrust cases against Facebook and three against Google. Currently all eyes are on the administration and Congress to set the course for the next four years.
Our panel of experts will discuss how American antitrust will play out and its impact on American innovation. I’d like to turn it over to our panelists to introduce themselves, starting with Mr. Melamed.
Douglas MELAMED:
I’m Doug Melamed. I practiced law in Washington, D.C., for a few decades, most of that time in private practice. I spent about four and a half years, from 1996 until 2001, in the Clinton Justice Department, ending up the last several months as acting head of the Antitrust Division. From 2009 to 2014, I was Senior Vice President and General Counsel of Intel Corporation, and since that time I’ve been a member of the Stanford Law School faculty.
THOMAS:
Excellent. Thank you. Bill?
Bill BAER:
Like the unmuted Doug, I have a bit of a checkered past. I’ve been in and out of government, both at the FTC where I served twice, most recently in the late 90s as head of the Bureau of Competition and then I was over at DOJ for the last four years of the Obama administration, heading up antitrust enforcement and then the last ten or eleven months as the Acting Associate Attorney General. When I wasn’t there, I was at Arnold and Porter, and today I am a visiting fellow at the Brookings Institution here in D.C.
THOMAS:
Excellent. Thank you. Mark?
Mark JAMISON:
Hi. Mark Jamison. I’m Director of the Digital Markets Initiative here at the University of Florida in the Warrington College of Business. I’m also a visiting scholar at the American Enterprise Institute and unlike my two colleagues who just introduced themselves, I’m not a lawyer. I’m just an economist.
THOMAS:
No such thing as just an economist, I thought. And to you, Parag.
Parag SHAH:
Hi. Parag Shah. Not a lawyer nor an economist. I’ve been an entrepreneur for about 15 years building apps, both on mobile platforms starting from the Blackberry is when I first started, all the way to iOS and Android, developing and building companies primarily in the hospitality space, so consumer and hospitality experiences. Good knowledge between both apps, web based mobile, as well as Windows and Mac.
THOMAS:
Excellent. Thank you.
Well, let’s get started. The question that’s kicked off this series is around whether or not the current antitrust environment and regime works for the digital economy. I’d love to hear from each of you whether you think that it does work, if the existing laws are sufficient, if we need new laws, and whether or not the Biden-Harris administration has other tools at their disposal that might help them sort of navigate this path. And we’ll start with you, Doug.
MELAMED:
The question of whether the antitrust laws are sufficient for the problems of the digital economy has to start by asking what problems do you have in mind? Many of the concerns that I think many of us have about the digital economy are really not antitrust or even economic problems. Concerns about privacy, about the impact of the digital platforms on politics, misinformation and censorship complaints, what I call the social disintermediation when people spend time online instead of in their local community associations and so forth. Those aren’t really antitrust problems.
Antitrust is about anticompetitive conduct, conduct that interferes with the competitive process without adding any value to the economy. The laws, I believe, are in principle sufficient to address anti-competitive conduct and the competition and economic welfare problems that result therefrom in the digital economy. The challenge is new and difficult, the facts are unfamiliar in some instances, but the laws in principle are sufficient.
The problem is that the laws have been construed in an increasingly conservative way over the past about 40 years, and I think in several respects they need updating to reflect current economic learning and sound economic policy. So the big question in my view is, not whether we throw away the conceptual framework of antitrust law, but how to recalibrate the law. Do we do it through the traditional common law process by which antitrust doctrine has evolved, which will take a long time particularly given the conservatism of the courts? Or do we do it by new legislation, perhaps like those which have been proposed in the House and the Senate, which even if soundly drafted in the first instance risks unprincipled and unsound political compromise?
THOMAS:
Thank you. Bill?
BAER:
Sure. I agree with much of what Doug said, but if you accept the premise that there are some competition problems in the technology sector, the last point Doug made about whether taking the four to six to eight years necessary to bring litigation, think about the Google case which was brought last October and is not scheduled to go to trial, tentatively scheduled to go to trial, until September of 2023. There’ll be a trial, there’ll be appeals. So to the extent that you believe that there are significant competition issues involving dominant firms and add to that the conservatism, the Chicago school philosophy that seems to permeate the courts these days, I do think you risk an enduring dominance, a risk of a pattern of competitive behavior that actually will have longterm adverse consequences to the economy, which leads me to think that doing something along the lines of the bill Senator Klobuchar introduced a couple of weeks ago may be the right way to signal to the courts that we need to move back in a more balanced direction and give the courts and the enforcers the tools to attack bad behavior and anti-competitive acquisitions.
THOMAS:
Excellent. And Mark, any thoughts from an economist’s perspective?
You’re muted.
JAMISON:
I was just following Doug’s example. So I have some agreements, some disagreements with Bill and Doug. In thinking about what has gone well in antitrust in the past, actually I think the work of what we call the Chicago School actually helped us out quite a bit because it made us focus and understand that the purpose of an economy is to benefit the consumers. That’s a path we’ve been on for a couple hundred years in having market economies and the School simply put us in that direction in saying that antitrust should be focused on that as well. I think that was a correct focus.
There’s been a lot of empirical research on the effects of that and it’s given us mixed answers, depending upon how the analysis was done. So I don’t think there’s clarity that this has been a good thing or a bad thing other than it’s made us really focus in on what’s best for customers, so I think that’s really important.
I don’t think we need a change in laws, necessarily, although I’ll defer to lawyers on a lot of that, but I think what the administration is really going to need is an upgrade in its analytical tools. As Bill alluded to, these markets, these companies, change very fast and the way that we analyze things now is we take data from the past, we analyze it, we spend a year or two years, whatever, going through all of our administrative processes, court processes and then by time we get a decision or an action, the data we started with is not representative of the realities that we’re now facing. We need analytical tools that move faster, that have a better idea of what market power really is, what the sources of it might be so we can deal with those sources of problems as opposed to saying, “Ah, I found a problem five years ago and so in a couple of years I want to take care of it.” I just don’t think that’s going to serve us very well.
THOMAS:
And in terms of an entrepreneur’s perspective, Parag, I’m wondering how much you’re paying attention to all of this and what if any impact it has on your business and your day to day experience.
SHAH:
Yeah, Chelsea. I’m paying attention a lot to this. I think there’s a lot of factors that affect entrepreneurs and small business owners, app developers like myself. One first and foremost is innovation. These platforms have enabled a brand new economy to be created, allow us to distribute our products quickly, with trust from whoever is using the application because we have to follow a framework in order to do so. So that whole process has been really, really effective. I mean, the amount of small businesses and app developers that are out today I think are never have been created before. There’s more apps in the app stores than ever before and even from an economic standpoint, that’s growing the GDP tremendously and companies that we’re used to using now on a regular basis have been built because of mobile platforms like iOS and Android.
On top of that, I think that also I’m paying attention to it because of an acquisition standpoint. Many app developers like myself build companies to be innovative but realize that the IPO markets are not probably the reason we’re going to exit. A lot of venture capital money funds innovation with companies like ours and they expect to have a return on their capital and most of the time that happens through acquisitions, so if there were legislation or things in place that kind of broke up these larger platforms and they were less likely to acquire because of that, that I think would hurt and have a trickle down effect to entrepreneurs like myself that are building and hoping to either get acquired or a few of us get to the public markets but then are worried about acquiring other companies.
I think it’s got a lot of effects for developers like myself around what’s going to happen over the next few years with this administration so I’m very much paying attention to it.
THOMAS:
Excellent. Thank you. Bill mentioned the Facebook and Google cases. The Biden and Harris administration is inheriting a lot of antitrust work in the Facebook and Google cases. Assuming the cases are pursued by the Biden-Harris administration, what do you think the outcome will be and what lessons can we learn from that?
Let’s start with you, Bill.
BAER:
Thanks. Look, I long ago given up predicting … I have already predicted this could take a long time, but these cases are fact based and while we’ve seen the allegations of the two complaints, we actually don’t know how much they’re going to be able to prove, how persuasive the economic testimony is going to be on either side. Other than being confident we’re not going to get an answer in the near term, I think we’re just going to have wait and see.
THOMAS:
Thanks. Doug, any additional thoughts?
MELAMED:
I do think the agencies probably need more funding, not only for these cases, but as you say for the many additional competition issues that will no doubt wind up on their plates. I expect the aqencies to pursue the Google and Facebook cases. I think they might even expand them, certainly the Google case. Like Bill, I can’t predict the outcome. They’re fact dependent. The complaints raise issues that are very troubling to be sure, but I can think of possible defenses, even if the facts alleged are proven. So, we’ll have to wait and see about that.
I do want to add two other thoughts. The pending Justice Department Google case is not doctrinally new. It’s not going to make new law. It’s based on rather conventional allegations of tying up important distribution channels, and it will depend entirely on the facts.
The Facebook case is potentially much more important because it raises the question of so-called nascent acquisitions. That issue might come down to the legal question of whether the Sherman Act can be used to prohibit acquisitions that are not more likely than not to harm competition but that could have huge harmful effect sunder unlikely but very possible circumstances. That potentially is a very important legal question that could really change merger doctrine.
THOMAS:
Great. Mark or Parag, would either of you like to chime in here?
JAMISON:
Yeah, I’ll weigh in just a little bit and first just to add something to what Parag was saying earlier about the importance of these platforms in creating or allowing other businesses to be created. We’ve been doing some studies of that here at the university and have found that they’ve been very effective in creating entrepreneurship. We’re doing some further studies just into the app economy, but preliminary evidence has been that these have been very effective in allowing people to create new businesses and again, this is still kind of preliminary, but it looks like the effects have been larger for women and minorities than for white males which I thought might be true, but I’m really interested in how those results are starting to look. So we ought to think very carefully about saying we know how these particular platforms should be run and how they should behave.
I do think the administration will in all probability pursue these cases. I think they’ll have a tough time. I agree with Doug and Bill that it’s all about the facts. It’s also all about trying to interpret the facts and that has proven to be very difficult over time because you have to be an expert in how these industries work and the companies tend to get it wrong as well. I don’t remember the exact number offhand but it’s something like 90% or 80% of all startups fail and these are the people that are experts at startups. Can you imagine how hard it is for an economist sitting in Florida or an attorney sitting in D.C. to figure out what those entrepreneurs should be doing?
THOMAS:
Thank you. And beyond those cases, I think Doug mentioned that there are a number of other sort of competition related issues that are going to percolate and are currently in front of the administration. What sorts of bandwidth do you think that the administration has, and FTC, and DOJ? What bandwidth do they have to take on additional antitrust issues? Let’s go to you, Doug.
MELAMED:
I’m not closely connected right now as to what their budgetary and personnel constraints are, but in general, the government has been shrinking relative to its needs. That’s been true of the antitrust agencies. The needs are growing so I would certainly expect that, as I suggested earlier, that they’re going to need new resources, more funding, more lawyers, more economists, more specialists perhaps to deal with some of the technical issues raised in the digital economy.
THOMAS:
Bill, it looked like you were going to chime in as well?
BAER:
Sure. The FTC, this is all public information that came out last fall, has got very, very serious financial constraints. The antitrust division, as well, has been subject to a limited hiring freeze. These cases are big, complex, very, very costly. There are other investigations reportedly underway and to come up with some sort of funding mechanism that gives these agencies the ability to do their jobs is very important. There’s a lot of talk about for the first time in years changing the Hart-Scott-Rodino premerger notification filing fee structure and making sure those new sources of income are directed to the two antitrust agencies in the first instance. They clearly would put a cap on it, but I think you’ve seen both in the House antitrust subcommittee bipartisan support for increased funding and you see some of that coming out of the Senate judiciary antitrust subcommittee as well. So there may be an area of consensus here that would provide the agencies with more of the resources they need to do the job we expect of them.
THOMAS:
And obviously tied to resources and bandwidth, you can’t leave out the personnel side of things and I’m curious to what extent you think that any appointees might shape the agenda. Let’s start with you, Bill.
BAER:
Sure. Look, personnel often determines policy or approach to policy. While there’s probably general agreement about issues that ought to be pursued, how they’re pursued, what the triage is in terms of priority setting, that will determine a lot on who the Biden-Harris administration appoints to key positions. Right now we have an acting chair, a Democrat, Rebecca Slaughter, at the FTC, and she’s already begun to talk a little about what she has in mind but there will soon be two vacancies on the commission. There’s one already, but Rohit Chopra, the other Dem, is going to move over to the Consumer Financial Protection Bureau if and when the Senate confirms him. So the picks at the FTC will be quite significant. We don’t yet have a nominee for the head of the antitrust division. I assume that will be coming in the next few weeks. Unclear how long it will take to confirm that person as well as to confirm the two nominees that President Biden picks for the Federal Trade Commission. So we’re going to have a period of time where it’s a little unclear of who the personnel is going to be and what the policy priorities will be. It may well be the summer and the fall before that begins to sort itself out.
THOMAS:
Excellent. Doug, anything to add?
MELAMED:
I will just add the following. There’s a tradition in antitrust of a lack of political interference, at least by the White House, in antitrust enforcement by the Justice Department dating back to the Nixon days. The FTC is an independent agency. While the President will no doubt nominate as FTC Commissioners people that he believes in general are compatible with his vision of what antitrust policy ought to be, the enforcement decisions are going to be made by those individuals, not directed by the White House. So personnel will matter a great deal, not only because of the big picture ideological perspective, but also in terms of how cautious they are, how bold, how creative and imaginative they are. Those qualities are going to affect the day to day decisions of the agencies a great deal.
THOMAS:
Excellent. Mark or Parag?
JAMISON:
Nothing to add.
THOMAS:
All right.
BAER:
Let me add just one-
SHAH:
Same here.
BAER:
One of the key issues, I think, that where there needs to be change from the Trump administration is the Federal Trade Commission and antitrust division were not in sync on many very important issues. The antitrust division of DOJ took the unprecedented step of opposing on appeal a victory the FTC had won in the Qualcomm case in the Northern District of California. There, I think, will be and needs to be a close policy coordination. You can’t have these two agencies with overlapping jurisdiction speaking with anything but one voice and that will need to be a priority for whoever’s running the FTC and whoever ends up as Assistant Attorney General for antitrust.
THOMAS:
And there have been some rumblings that the Biden-Harris administration might appoint a competition czar within the White House. What do you think the likelihood of something like that sort of helping to sort of bridge the gap between the agencies, or is that unlikely?
BAER:
I think … Look, I don’t know whether there will be somebody with a competition portfolio in the National Economic Council or whatever, but going back to the point Doug made a couple minutes ago, that’s not going to be somebody who’s going to be coordinating law enforcement. I think the White House you can expect to return to the old normal, staying the hell away from those issues. A competition policy coordinator is much more likely to work with other executive branch and independent agencies to make sure they are taking similar protection and competition issues into consideration in the way in which they choose to regulate. I think that would be the focus of competition policy coming out of this White House.
There was an Obama-Biden executive order issued in April of 2016 which began to try to get the agencies to make sure they put competition principles into play in terms of the decisions they made and that would probably be a baseline starting ground for whatever the Biden-Harris people choose to do.
THOMAS:
Excellent. Anyone else want to weigh in there?
JAMISON:
I would just add that I think it’s right that it’s very hard to have a competition czar in the White House, especially when you have a Federal Trade Commission and you’ve got to get three votes and those people have some degree of independence. Now, we’ve seen many times, not necessarily with the FTC but in other commissions where Commissioners will just yield their authority to the political actors, but I think that’s more rare than common. So it’s hard, I think, to have someone in the White House dictate what some of these agencies would do.
THOMAS:
All right. Well, turning our focus slightly and just up the road to Congress, obviously there was a lot of action in the last Congress, kind of capped off by the House Judiciary Committee’s report on antitrust. One area they touch on, and Parag you mentioned this a little bit in your opening remarks about the digital economy, but one area that they touch on is lowering the legal standard for enforcement agencies to challenge a merger and I’m curious if we should talk a little bit about the policies around mergers because Klobuchar has also introduced a bill, Senator Klobuchar, has also introduced a bill on that, but I’d also love to hear from you, Parag, on what does that look like for an entrepreneur when you’re looking at changing legal ground on what’s allowable in terms of mergers?
SHAH:
Yeah, Chelsea. Like you said, I shared a little bit earlier about this in my sort of opening remarks and this is a huge concern for individuals like myself and founders of companies. We expect to have some type of exit. Most of us … Or many. I shouldn’t say most. Many of us are building companies that are looking to get some type of exit or some liquidity event to happen in the future. Companies like us that do end up raising capital from private equity or venture capital, they are expecting that liquidity even to happen and if all of a sudden there are less mergers or more restrictions around acquisitions that are happening in the economy, that is going to affect how much capital is being deployed into certain markets. To me that is a huge difference because if there is a significant exit, especially with one of these really large corporations, if someone sells to companies like a Google or a Facebook, that has a huge ripple effect that entire industry.
Instagram being sold to Facebook I think was a huge deal for what social were being created and how much capital was being put into those types of apps and it’s sparred an entire new ecosystem of innovation and without that innovation you’re not going to see new things. You’re actually going to limit competition, in my opinion, because you’re only allowing these big companies to then have the capital to build these large scale infrastructure applications. From years ago the economy has sort of shifted where app developers and new companies like myself, it’s very difficult to charge a monthly fee or some type of subscription when you have a consumer level product. You have to get scale and you have to get scale quickly and build out a opportunity for other revenue opportunities and streams. In order to do that, many times you have to be able to raise capital. You have to be able to scale quickly and before anyone else can.
The days of bootstrapping until you’re a multi-millionaire company are sort of at its end where you’re raising this capital and you’re innovating quickly and fast, you’re getting mass adoption from the consumer and then you’re getting the eyes of some of these bigger platforms and if that doesn’t translate into an acquisition or evaluation of some sort, I think it’s going to hinder the ability for this innovation to happen and a lot of these companies might shut down because they don’t have the infrastructure to keep going and keep raising additional capital or continuing to get more consumers on their platform.
THOMAS:
Mark, I see you nodding.
JAMISON:
Yeah.
THOMAS:
Do you have additional thoughts?
JAMISON:
Yeah, I agree with what Parag was just saying and this is a place where I hope Congress and the administration pay a lot of attention to the research that’s been done because the research on startups and businesses being developed is exactly what he described. One of the key failure points is when a company has to go from a person’s ideas and the product they’ve developed and having a system where they make decisions to where the systems make decisions, a much bigger institution. A lot of people cannot make that transition, but they can sell to someone that has made that transition, that knows about marketing, knows about financial systems, et cetera. So it’s really important, we’ve seen that in the research on the computer hardware industry, we’ve seen it on the smartphones as well, as how they’ve developed. That’s just something we’ve really learned.
It’s something that at least in the last Congress they seemed to have chosen to not pay attention to. If you look at the staff report that came out from the judiciary committee, 375 pages on all of the different things that they did not like about what was going on. There’s only one page on the benefits of the tech economy. It was also very troubling, if you look at the literature we’ve developed over the past, say, twenty years, in he very top academic journals there have been ten to fifteen articles per year on how these platform economies work, what are the business strategies at work, what are the benefits to the platforms, and what do they do and how do they serve customers? Not one of all those 250 some articles were cited in the staff report. Not even one. Mostly they cited newspaper articles.
I’d really like for them to think more seriously and harder about what it takes to get companies started and to let them be successful.
MELAMED:
Let me jump in if I can. There’s a great deal of wisdom, I think, in what Parag and Mark just said, but the question is how far should the law go in giving wide berth to this strategy of invest and then sell? Antitrust law has always been a kind of microsurgery. It depends as we’ve said, as Bill said earlier, on the facts. It depends on finding anti-competitive conduct, including anti-competitive acquisitions. There’s a lot of data suggesting that merger law has been under-enforced. These data include various indicia of increased concentration by industry and merger retrospectives. In hospital mergers, for example, antitrust really missed the boat.
So I think, as I suggested earlier, some recalibration is in order. The Klobuchar bill is an effort to recalibrate, consistent with the big premise that antitrust is about economic welfare and that antitrust is not about regulation, that it involves a commitment to competitive markets so that the kinds of concerns that Mark and Parag have talked about can be respected. Sometimes, acquisitions go too far.
The House report reflects something very different. It reflects a populist push that is really not focused on economic welfare. The report to which Mark referred did not talk at all about economic welfare or efficiency. It is concerned with inequality, political power, fairness, and a variety of other goals. It’s prescriptions are a blunt instrument that in my mind would do more harm than good because they would throw out, as it were, the baby with the bath water. I don’t think one should look at the House report as a proposal for the kind of recalibration of antitrust law that Bill and I have referred to. It’s a populist political proposal that I think is intended to serve very different goals.
THOMAS:
Go ahead, Bill.
BAER:
If I can pile on here, I think one thing we need to be careful about in understanding legitimate points Parag and Mark are making is that if in fact you have legislation which limits the opportunity of a few dominant firms to make acquisitions in certain sectors, if it has the effect of that, it is not necessarily, I don’t think going to dry up all investment. It’s not a spigot that is on or is off. There are many good-sized tech companies that may well be willing to bid for that new idea. So while there is some risk here that we will stifle some innovation, I concede that point, it’s not clear to me that placing a higher burden of justification by a dominant platform on making acquisitions of firms, as Doug said earlier, that may or may not have the potential to sell somebody else and help that somebody else become a future competitor or the dominant platform. That is basically going to end up drying up investment in startups. I’m not sure that’s a proposition that’s supportable.
JAMISON:
And if I could just add to that, I don’t think anyone’s claiming that it’ll dry up investment but it certainly dampens it. It dampens what people will try to and who will actually make it into that stage of work. I do think we want to stay humble in how we understand these business. It’s really hard for us to be able to look at a portfolio of, say, ten companies in a sector and say, “Okay, A and D want to merge but I really think A and F should merge.” We’re not in that space. I worked for Sprint for a period of time. Sprint was built by acquisitions and one of the lessons I learned from listening to the company talk about itself is that acquisitions are often a mess. You think it looks like a good idea but it turns out that you just can’t get those cultures to work together. Those were, again, the people whose capital was on the line, the people who were the experts. It’s really hard for those of sitting on the outside to be able to pick and choose. So we just want to stay humble in that. We have to investigate it. They’re exactly right on that, but it’s a hard thing to do well.
THOMAS:
Another thing that has sort of surfaced from the House judiciary committee’s work on this is Chairman Cicilline’s proposal to do a Glass-Steagall type approach for big tech companies. Bill, I’m wondering if you have any thoughts on that.
BAER:
Well, this notion of Glass-Steagall kind of separation, that if you run a successful platform you can’t compete with the sellers on it. That’s clean, it’s simple, but I’m not sure it’s a good idea. You take an Amazon that has invested in building out a platform and the logistics associated with delivering the goods. The notion that they would be prohibited from offering some products and taking advantage of the efficiencies associated with their prior investment, that they’re just prohibited from doing that, I’m not sure I think that’s the way to go. You can see that there could be behavior by a company like Amazon … The House committee report, staff report, talks about whether there was predatory behavior directed towards diapers.com which forced diapers.com to sell to Amazon. That could be problematic behavior but to say the successful platform can’t move into adjacent spaces potentially deprives consumers of the benefits of the competition these folks would provide. So I would be very hesitant to go structural in the way that is being talked about and the way the Glass-Steagall Act set down parameters for behavior previously.
JAMISON:
If I could just jump in-
THOMAS:
Go ahead.
JAMISON:
I couldn’t agree more. It’s very problematic to try and embed in law what an industry structure should look like in an industry that’s changing this fast. We just had an article, A group of economists had an article come out last year in one of our top journals, The RAND Journal of Economics, looking at this issue in the smartphone industry and found that the vertical integration was actually really important to coming up with good innovations and high quality products. It’s not a one size fits all and a law that says it is, is just going to give us some bad results.
THOMAS:
Parag?
SHAH:
If I could just him in one on that, too, because I think you both really made some really good points. For me, looking at this is difficult because there’s two things that come to mind for me. One is what is … What does legislation consider to be part of the platform? How wide does that go, because does Apple having a camera or a phone app on their platform constitute as some third party has to build that and they’re not allowed to have that pre-installed when you purchase that?
To me, it becomes a slippery slope and I even look at physical retail. I mean, it’s no different what Amazon’s doing than Target and Walmart and any of these big box retailers are doing. They have their own brand of baby wipes and toilet paper and all these things on the shelf. I don’t think it’s any different than that, in my opinion, so is that legislation going to be widespread or is it just specific to the digital economy? I think a lot of people forget even though that there are entrepreneurs that are hurt by these platforms going into somewhat of their business, I think more are helped and I think that, like Mark you keep bringing up that point like you’ve got to look at the data. How many people are helped because of it and the reality is the consumer isn’t going to find value in even purchasing, potentially, that phone if it doesn’t come with some pre-installed apps that allow them to be functional out of the box.
I would love for everyone in this world to be as tech-forward as I am, but the reality is they’re not and they want to go buy something from store, they want to turn it on and they want it to work on the basic levels of, “I can text someone. I can call someone. I can open a web browser and search for something and go to a webpage. I want some basic functionality,” and if you don’t have that and all of a sudden you’re requiring someone to download or look through a bunch of difference apps that are available out there, I think that’s going to cause a lot of problems and issues with not only third party developers like myself but consumers adopting these types of platforms.
THOMAS:
Bill or Doug, either of you want to chime in?
MELAMED:
I agree with what’s been said, but I think Parag’s last point is really important. If you have this kind of separation, this kind of wall, you have to define the platform. If you define the platform as it exists today, you’re going to prevent the kinds of natural improvements, innovations, and changes over time that improve economic welfare. If you imagine a regulator who is going to police the boundaries and permit certain evolution – deciding whether it’s okay now to load the camera in — then you have heavy-handed regulation dictating the innovation path, or at least constraining the innovation path, of these platforms. That would have huge costs in terms of efficiency and innovation and economic welfare, as Bill said at the outset.
I could imagine an argument that could justify that kind of regulation if there were huge harms and there is no other reasonably effective way to deal with them, but I haven’t seen the proof of such harms. There’s clearly a case that some small businesses have been disadvantaged when Amazon’s been able to do a better job in their business than they could do. That’s competition. That’s creating wealth and benefiting consumers. There is real harm when a platform engages in anti-competitive conduct to disadvantage adjacent businesses, but I haven’t seen any reason yet to believe that the antitrust laws aren’t sufficient to police that on a case by case basis.
THOMAS:
Bill, did you want to add anything? All right. Excellent. I think in addition to a new administration and a new Congress, we’re also sort of seeing a dark horse player in some of these policy debates and that is state governments chiming in with legislation on competition issues. I am curious if you all have been following those conversations and how do you operate within that when you’ve got a tension between state and Congress and the administration or all of these different forces at play within the competition policy dynamic? Let’s start with you, Mark.
JAMISON:
Yeah, I think it’s really tough for the states to try and step in and do something that’s very effective. I’m talking about my own state in some sense because our governor has legislation for big tech regulation he’s pushing. The State of Florida is part of some of the antitrust suits against some of the big tech companies. I think it’s really hard to think that we would have a different kind of regulation for a Facebook or a Google that you’ll have when you cross the line into Georgia or go over to Alabama or go to anyplace else in the United States. I just don’t think that’s practical at all. It’s a good way to get people to discriminate against Floridians.
We’ve already seen all the problems in Australia, trying to change what contracts might look like or relationships might look like between journalists and some of the big tech platforms. That was not easily resolved and probably isn’t resolved yet. I’m skeptical of states trying to play a very large role here.
THOMAS:
Doug or Bill, either of you want to chime in here? All right.
BAER:
Look, this is always a challenge on law enforcement in a federal system where the states has powers, the federal government has powers. I think it’s been impressive on the two pending cases that over time the state AGs and FCC on the one hand and DOJ on the other got more or less in the same place. I think that’s a huge priority. It makes antitrust enforcement much more effective. The notion that we’re going to get a thousand flowers blooming on the regulatory side is worrisome, as Mark put so well, and it is, again as Mark suggested, we’ve got regulatory frameworks being articulated and possibly enacted in Europe, on the continent, over in the UK, in addition to Australia. This is going to be a huge policy challenge for the Biden-Harris administration. It’s not just working with the states, but it is trying to come up with an effective approach to dominate tech platforms that basically goes after the bad but doesn’t attack the good. Big challenge.
THOMAS:
Yeah, and-
MELAMED:
Let add one thought. The pressure from the states and the benchmark pressure from Europe and other jurisdictions is evidence of the tremendous unease that people have with the digital platforms. I think the federal government has to respond to that, even if only, to damp down the alternative of a thousand flowers blooming and inconsistent, multiple overlapping regulations. Within the bounds of sound antitrust policy, it seems to me the federal government has to move a little bit towards being more aggressive to demonstrate politically that there is no need for more radical or more diverse regulation of the economy and that the federal antitrust laws are up to the job.
THOMAS:
Parag, for you, there’s a sort of fragmented system right now when you’re looking at potential legislation from states, federal legislation and then different international markets doing their own thing as well. What does that sort of fragmentation and uncertainty mean for you as a small business owner, as an entrepreneur? What does that practically mean for you?
SHAH:
I mean, you guys, all three said it eloquently and for me, it just comes down to the fastest way to kill innovation is state by state laws and regulations. People don’t realize the cost for small businesses to take on this type of regulation. We are in a national, I would argue an international, economy and people can download things from all over the world but let’s just even stay within the United States for a second. State by state would be absolutely crazy and to me, you actually give the benefit to the larger corporations because they have the bandwidth and the legal expertise to fight and to change their platform that is state by state. Companies like us would immediately go under if there was different regulation in different states and we had to tweak our platform for every single legislation that was state by state. There’s no way we could keep track.
I personally … We currently deal with hospitality venues and a lot of times we deal with bars and age verification. We have an age verification app that you can download from the app store that scans a driver’s license or passport and validates the age. We have to deal with a lot of this right now because each state is a little bit different in terms of what data we can collect, how long we can store that data, what does that look like and the reality is we’re trying to provide a service for these bars so that they don’t have to lose their liquor license, they don’t have trouble and issues. But the more and more regulation that they’re adding to this is much more difficult for us to build a really solid product and focus on the product and not so much is, “Oh, we kept this data for a day longer and now we have the opportunity to get sued by the state and possibly bankrupt our company.”
So, those are the things that we’re thinking about all the time and I think that these legislators need to think about this, Congress needs to think about how this is going to affect small businesses versus just the large players in the market.
THOMAS:
Excellent. Thank you. All right. Well, we are coming up on the end of the panel, so this is the final question and it is a wish list question. If you could talk to the Biden-Harris administration, Congress, any of the states and say, “If you’re going to accomplish one thing on antitrust this is what I want you to accomplish,” what would that be? Let’s start with you, Doug.
MELAMED:
I would want the administration to be bold in bringing sound antitrust cases that are likely to improve antitrust doctrine, that have the kinds of facts, like the Microsoft case, that enable the courts to understand and accept where appropriate boundary-expanding legal theories.
THOMAS:
Excellent. All right. Bill.
BAER:
I share Doug’s hope that that could happen. I don’t think it’s going to happen, which is why I think the hope for me is that we get some form of legislation similar to the Klobuchar bill that basically gets us away from the very, very cautious, avoid type one errors, errors of over-enforcement that seems to have permeated antitrust jurisprudence the last forty years. We’re not talking about a dramatic change but some burden shifting, some requirements that a dominant firm justifies behavior, justifies its acquisition of firms that while small potentially could be competitors, not ban them outright, not per se rules, but rebalance things a little bit is what I think we need to do to our antitrust laws and I trust that the judiciary will then implement those tweaks in a way that will get us back to an approach to growing concentrations, to dominance, to monopolization behavior that’s closer to what the authors of the antitrust laws initially intended.
THOMAS:
Thank you. Mark?
JAMISON:
I’d encourage them to continue something that I think the Federal Trade Commission and Department of Justice have been fairly good at and just need to do a lot more of, and that is develop really sound analytical tools so we understand what we’re looking at. As I said before, these markets, these industries are moving way too fast for the way that we’ve traditionally done things. We need to dig in deeper and understand if there’s market power, where does it come from so we can deal with the come from rather than say, “I saw market power five years ago.” It may be gone by now. That’s just way too late. So I’d really like for them to dig in deep, take a look at the literature that’s out there and try and make some decisions and have some decision analyses that are much more consistent with how businesses really work.
THOMAS:
Thank you. And Parag.
SHAH:
My wishlist comes for more of a fair competition framework on the sense that I think that they need to take a ten thousand foot level idea and look at the entire digital economy before diving into just certain companies and the way they operate. What I mean by that is I think that there are new frameworks in this new economy that are created. Things like marketplaces have never been a conversation before these marketplaces started and existed. I mean, Amazon is primarily one of the leading ones. But if you look at these types of categories that exist, they need to look at that and say, “Okay. How do we create a framework that everyone can play in there?” As a developer, I’m less worried about competing directly with an Amazon or a Facebook with a similar product that they may have or build. I’m more worried about can I play in a fair environment?
To me these big platforms like Apple and Google are allowing everyone to play in their sphere. That doesn’t mean that you’re going to be successful just because you’re on the app store, but it lets you at least get distribution, where there’s other companies that have marketplaces but they don’t allow anyone to be involved in that and they keep looking at the big guys and I think you need to look at all companies and say, “Hey, if you have a marketplace, you’ve got to police your marketplace and here’s the regulation around your marketplace. If you have integrations, here’s how you do it.” You have to create these frameworks because when you create these frameworks, especially in a development environment, that’s where innovation flies and the fact … To me it proves, between Google and Apple, there are more cross-platform apps today than ever before because the both of these companies realize that as more developers could build in a single framework and distribute on both those platforms, both parties would win and I think that’s critical when it comes to other companies that are not as large as Apple and Google but still fall into that same framework.
THOMAS:
Excellent.
Well, thank you all so much for your time. Thanks to our panelists. If we were in a real auditorium, you would be getting a round of applause, so thank you all very much for your time and your wise words and thank you to your partner, CPI, for helping us put on these events and thank you to all of you who are watching for being a part of this. Have a wonderful day and we’ll see you again. We’ve got another one of these panels coming up next week, so thank you.
