Competition — And Competition Policy — In Digital Markets: The House Report

The House Antitrust Subcommittee Report makes clear the weakness not just of competition in the tech sector, but also of competition policy toward the tech sector.  We argue that this is the result of the failure to employ one important tool of antitrust, namely, structural separation.  Economics and experience teach that breaking up such firms is almost surely necessary in order to make the companies focus on serving customers better rather than on handicapping their rivals.  We review the evidence, discuss the alternatives, and provide guidance for how structural separation can be employed in bringing competition to the tech sector.

By John Kwoka & Tommaso Valletti¹

I. INTRODUCTION AND SUMMARY

The House Antitrust Subcommittee has concluded its milestone study of Amazon, Apple, Facebook, and Google with a lengthy report entitled “Investigation of Competition in Digital Markets.” Despite that title, the report is in fact not so much about the weakness of competition in digital markets as it is a report on the weakness of competition policy toward digital markets. After all, the bulk of the report documents the unimpeded rise to dominance of these giants over online search, ecommerce, social media, and advertising, and how this dominance has “diminished consumer choice, eroded innovation and entrepreneurship in the U.S. economy, weakened the vibrancy of the free and diverse press, and undermined Americans’ privacy.” Since these object