The state of antitrust and consumer protection law and enforcement, and their development, since the Pitofsky hearings #FTC-2018-0048-D-0120

Submission Number:
Maxwell Terry
Initiative Name:
The state of antitrust and consumer protection law and enforcement, and their development, since the Pitofsky hearings
As a software engineer and internet entrepreneur, the consumer welfare standard is no longer viable for antitrust enforcement and policy. Google (including Google Images, Google Maps, and YouTube) controls 90% of online search. [1] Facebook takes in 80% of social network adspend. [2] Amazon's share of ecommerce sales is up to 49%. [3] The effect of these companies consolidating market power may not yet be felt by "consumers" in terms of pricing: it's felt by would-be competitors unable to compete, SMBs squeezed to the verge of unprofitability in order to connect with customers, and stagnant wages all around. Consumers benefit from subsidized search, social networking, and ecommerce services, while developers and advertising customers pay an increasing price. The consolidation of tech platforms has hit me directly as an entrepreneur. I built a proto-blockchain system on an early cloud platform called AppJet in 2009. The platform was gobbled up and shut down by Google. Rather than spend weeks to months migrating the system, I ended up abandoning the project. How many other "seedlings" of potential competitors were wiped out in their infancy? In 2015, I built a web application for businesses to video chat with their customers on the Parse cloud platform, which Facebook had acquired and then shut down in 2017. It took months for us to migrate our service to another platform, and after the migration we were then completely locked into Amazon Web Services. Both AppJet and Parse lowered the barriers to entry for creating scalable web software systems, and were snuffed out by those who benefited most from existing complexity and lack of competition. These two small examples, which affected me personally, are part of a broader pattern of absorbing competition, through acquisition and appropriation. This is harming the ability for producers to produce, and, in turn, restricting the source of funds from which consumers can consume. Discussing Facebook's ripping-off of Snapchat Stories for Instagram, Brian Feldman wrote in New York Magazine [4]: "...when it's considered as a business strategy, employing Facebooks sheer magnitude as leverage to box out competitors, it sounds less like a dishonorable practice, and more like an anti-competitive, monopolistic one. Just as Microsoft was accused of using the size of its user base to win browser wars, Facebook looks as though its using the size of its user base to win social wars or, really, to build an impregnable wall around its kingdom." The FTC should prohibit the abuse of the size of user base to win wars. Marshall Steinbaum, a Fellow and Research Director at the Roosevelt Institute, captured the situation well and with additional citations [5]: "...the flaws in the consumer welfare standard are especially evident when it comes to tech platforms. As Lina Khan documented in her now-famous article [6], Amazon is a prime example of how trusts can run rampant in the modern era of lax antitrust enforcement under the consumer welfare standard: The tech giant charges low prices to consumers, and so it is able to consolidate power throughout its supply chain, favor its vertical affiliates, spy on its rivals using its domination of cloud computing, and use its control of one market to leapfrog into othersas the recent Whole Foods merger shows [7]. Likewise, Google and Facebook are actually free and purportedly serve as shining exemplars of consumer welfare, as traditionally definedexcept that they also let foreign powers sway our elections [8], force independent journalistic outlets to surrender their content for free or vastly reduced subscription and ad revenue [9], shut off whole app ecosystems on a whim should they decide they want those markets for themselves [10], suck in data unbeknownst to their users, and impose discriminatory "tying" conditions on hardware manufacturers who want to license an operating system [11]. All of these are exercises in market power, and all of them are ignored by the consumer welfare standard." 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.