Must-Read New Research On Competition And Tech
Must-Read New Research On Competition And Tech
From leverage to free speech to big data, the past weeks have provided us with exciting new research in competition and tech. We’ve compiled some recent must-read papers, including:
Patrick Todd: Digital Platforms And The Leverage Problem
Neil Chilson and Casey Mattox: [The] Breakup Speech: Can Antitrust Fix the Relationship Between Platforms and Free Speech Values?
Alexander Krzepicki, Joshua Wright, John Yun: The Impulse to Condemn the Strange: Assessing Big Data in Antitrust
Patrick Todd: Digital Platforms And The Leverage Problem
Todd addresses the concept of leverage — “the act of distorting competition in the adjacent market by, through various means, exploiting market power in the primary market” — in digital markets. He argues that three recent ideas to curb anticompetitive leveraging (blocking platform owners from owning adjacent products and services, enforcing a nondiscrimination standard, and reversing the burden of proof) would undermine the consumer welfare standard.
Antitrust law exists to protect competition, not competitors. “As Judge Frank Easterbrook has mercilessly held, ‘injuries to rivals are byproducts of vigorous competition, and the antitrust laws are not balm for rivals’ wounds.’ Antitrust law maintains a distinction between pro- and anti-competitive leveraging because consumers frequently benefit from the conduct outlined above. Conversely, implementing any of the above proposals would decrease or negate entirely the ability of platform owners to show that such conduct benefits consumers.”
Ultimately, the current consumer welfare framework is capable of addressing anticompetitive behavior among platforms and should be maintained. “Intervention should remain targeted and evidence-based. If a complainant can adduce evidence that a platform owner is leveraging into a neighboring market and raising the complainant’s cost of doing business, and if the platform owner cannot show a pro-competitive justification for the behavior, antitrust law will intervene to restore competition under existing standards.”
Read Todd’s full paper here, via Nebraska Law Review, and his blog post here, via Truth on the Market.
Neil Chilson and Casey Mattox: [The] Breakup Speech: Can Antitrust Fix the Relationship Between Platforms and Free Speech Values?
Chilson and Mattox address the issue of free speech issues on digital platforms, and whether antitrust should be used to address free speech concerns. They argue that even if platform power over speech is a concern (a statement in itself up for debate) antitrust is not the solution.
Current antitrust law doesn’t permit breaking up companies based on free-speech concerns: “current antitrust law likely does not support breaking up tech platforms based solely on the free speech concerns discussed above. Supporters of these proposals informally frame the antitrust violations as monopolization or attempted monopolization cases. But being a large company with a high market share—or even being a monopoly—does not violate antitrust law. Antitrust law has rejected the simplistic conclusion that ‘big’ is inherently ‘bad’ because that approach was harmful to consumers and arbitrary in application.”
Changing the mandate of antitrust law to address speech concerns would have severe unintended consequences: “unleashing antitrust regulators to pursue non-competition-related goals would threaten free speech values. Removing key constraints on antitrust’s powerful tools—tools with a history of abusive and arbitrary use—would weaken antitrust’s ability to protect the competitive process and increase the risk that governments and others will abuse such tools to interfere with speech.”
Read more here, via the Knight First Amendment Institute at Columbia University.
Alexander Krzepicki, Joshua Wright, John Yun: The Impulse to Condemn the Strange: Assessing Big Data in Antitrust
Krzepicki, Wright, and Yun aim to link big data concepts to existing ideas in antitrust. They argue that the history of antitrust offers multiple examples of academics, regulators and courts “condemning” new and irregular business practices. To prevent the recurrence of such a reaction, they present a two-stage process for analyzing Big Data: first, data collection (similar to economies of scale), and secondly, transformation (similar to learning by doing and research and development).
The collection of big data can be compared to the concept of economies of scale, but it doesn’t automatically result in higher profits. “Unlike economies of scale, however, the mere collection of big data does not inevitably provide a benefit that results in higher profits. Rather, collected data provides a potential opportunity for higher profits. We can label this first stage, where the firm collects the data, as the ‘data-input’ stage.”
Stage two involves the combining of collected data with other resources and inputs in order to create value. “By way of analogy, while academics all generally have access to the same scholarly journals, court cases, and, in many instances, data, the level of production will differ in terms of both quality and quantity, based on a variety of factors. Therefore, this second stage is more akin to learning by doing and research & development. In other words, this data-output stage is about innovation.”
Labelling Big Data as an impediment to competition makes little sense. “Effective investments in big data (along with machine learning and artificial intelligence) can certainly create competitive distance between rivals. Yet this distance is a byproduct of competition on the merits and, as numerous examples confirm (including the well-documented replacement of incumbents in numerous digital markets), is not necessarily an impediment to entry by innovative new firms.”
Read more here, via CPI.