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North America’s three big internet “platforms,” Amazon, Alphabet (Google), and Meta (Facebook), continue to face four major U.S. antitrust challenges. Are these lawsuits good for American – and global – innovation? Research shows platforms like these have conferred substantial benefits on consumers. The suits likely will meet judicial skepticism and threaten to drag on for years, and there is no consensus on their legal basis or economic benefits. The platforms also face burgeoning antitrust litigation and regulatory scrutiny overseas. All told, these multiple legal actions will impose major costs on platforms and may reduce their incentive to innovate. The Hippocratic Oath, “first, do no harm,” suggests U.S. antitrust enforcers should seriously consider dropping the lawsuits.
The Four Major U.S. Antitrust Suits
The three above-mentioned tech giants have faced four major government challenges to their business practices, brought by the two federal “sister” antitrust enforcers, the Federal Trade Commission and the Justice Department. Each case is still at the federal trial court level, and may drag on for years, pending appeals.
The DOJ sued Google in October 2020, claiming the platform had collectively locked up the primary avenues through which users access search engines, and thus the internet, thereby unlawfully maintaining monopolies in search and search advertising. This case was tried in late 2023, with the closing argument scheduled for May 2024 (the judge says he has “no idea” how he’ll rule).
The FTC sued Facebook in December 2020, alleging a “systematic strategy … including its 2012 acquisition of up-and-coming rival Instagram, its 2014 acquisition of the mobile messaging app WhatsApp, and the imposition of anticompetitive conditions on software developers—to eliminate threats to its [social network] monopoly” and “to deprive advertisers of the benefits of competition.”
Then in January 2023, the DOJ sued Google again, asserting a violation of the Sherman Antitrust Act by “neutralizing or eliminating ad tech competitors through acquisitions; wielding its dominance across digital advertising markets to force more publishers and advertisers to use its products; and thwarting the ability to use competing products.”
Finally, in September 2023, the FTC sued Amazon, arguing that “[b]y stifling competition on price, product selection, quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon ensures that no current or future rival can threaten its dominance.”
The factual specifics of the cases differ, but the big picture theme is the same: Each of the big three platforms is alleged to have used various tactics affecting advertisers, retailers, and consumers, in order to maintain its dominance in its particular corner of the internet world – social networking (Facebook), search engines (Google), and e-commerce (Amazon).
Evaluating The Cases
The platforms have defended their actions as increasing their business efficiency, enabling them to better serve consumers. There is plenty of evidence to back up this idea, such as a 2019 study published by then-MIT professor Erik Brynjolfsson in the Harvard Business Review, which indicated that free digital goods provided by internet platforms provided huge net benefits for consumers.
The platforms’ defenses may resonate well in court. The Supreme Court said that antitrust is “a consumer welfare prescription” in 1979. Since then, U.S. judges have ruled that benefits to consumers, rather than the propping up of competitors, is the key goal of antitrust law. Prior to the Biden Administration, both Democratic and Republican government enforcers agreed that this “consumer welfare standard” should guide American antitrust enforcement policy
Senior Biden Administration antitrust officials, however, have rejected reliance on this standard in 2021. They maintain that antitrust should advance other goals beyond consumer welfare, such as small business protection, labor rights, fighting inequality, and environmental improvement.
What Comes Next For Platforms Like Google And Facebook?
The lower courts, bound by Supreme Court precedent, may be expected to rule for the government only if they find that the platforms’ actions have undermined the competitive process and threaten harm to consumers. Whether they will do so is most uncertain. It depends on how individual courts view the law and facts in light of complex and contradictory arguments put before them.
Legal scholars differ on the antitrust prosecution of platforms. For example, a leading U.S. antitrust treatise writer, Professor Herbert Hovenkamp, generally supports the antitrust challenges to the platforms, seeing a need to restore competitive behavior (particularly in the case of Amazon and Facebook) or deal with “natural monopoly” concerns (Google). Stanford professor Douglas Melamed states that Google’s conduct “clearly has some legitimate benefits, and the question is how the courts are going to fit that into the overall analysis.” Howard University professor Andrew Gavil says that “[t]he allegations are definitely serious” in the 2020 case against Google, but “[w]hether the evidence will pan out is the big question.” Law and economics scholar Geoffrey Manne believes that the FTC’s suit against Amazon “will face an uphill battle before the courts.”
There is at least one outcome that we should brace for. Facing antitrust uncertainty, the platforms may be expected to pull their competitive punches and focus more on legal strategizing than on consumer-centric innovation. In addition, Stanford professor Riitta Katila suggests that antitrust may have unintended consequences in constraining innovation by limiting opportunities for complementary firms that deal with the giants and fill niches in the market.
It bears mentioning that the platforms face both lawsuits and new regulations in Europe and other jurisdictions, potentially threatening their long-term global leadership in key internet sectors.
There Is No Economic Consensus On Dealing With Platforms
There is no consensus position among economists on how governments should deal with platforms or what the effects of antitrust or regulatory interventions would be.
Leading regulatory economists Robert Crandall and Thomas Hazlett explain that both overly aggressive antitrust and regulation may cause major American internet platforms to innovate less and undermine consumer welfare.
Other noted scholars, Professors Howard Shelanski and William Rogerson, believe that targeted regulation rather than traditional U.S. antitrust enforcement may be better suited to deal with possible competitive threats posed by platforms.
A University of Chicago survey of 80 American and European economists revealed a variety of views on whether antitrust or regulation should be applied to platform activities.
The Key Consideration Should Be The Hippocratic Oath, “First, Do No Harm”
U.S. Government trustbusters should be mindful of both the possible harms and the putative benefits of antitrust challenges to platforms, in deciding whether to proceed with these long-term cases. Given the clear benefits platforms have bestowed on consumers and business users, the costs of platform litigation, and uncertainty as to the likely effects of antitrust remedies, U.S. enforcers should keep in mind the Hippocratic Oath to “first, do no harm.” That appears to suggest pulling the plug on existing lawsuits.
