ICYMI: FTC’s Hoffman Warns Overzealous Antitrust Action Could Harm Startups
Speaking in a personal capacity at CCIA’s luncheon panel discussion held during the ABA Antitrust Spring Meetings, Bruce Hoffman, Acting Director of the Bureau of Competition at the U.S. Federal Trade Commission (FTC), argued current U.S. antitrust law is “the result of decades of experience in the United States with failed standards, such as protecting competitors at the expense of consumers.”
Contrary to critics’ caricature of the current approach to antitrust enforcement, he said, “In reality, many of our merger cases involve concerns about non-price aspects of competition that would be lost, including on-going innovation and product development efforts.”
His speech highlighted two key points:
— Overzealous antitrust action could harm, rather than help, startups and smaller companies. “A strategy designed to preserve the independence of startups could result in a decline in startup activity.”
— Data should not be viewed as a commodity or asset in assessing antitrust concerns. “There’s neither a theoretical nor an empirical basis for assuming in every case that a firm acquiring more data about customers is imposing the equivalent of a price increase or quality decrease.”
Please find more from Hoffman and other conference participants below.
Overzealous Antitrust Action Could Harm, Rather Than Help, Startups And Smaller Companies
Blocking Pro-Competitive Mergers Could Harm Consumers By Slowing Or Stalling Innovation. “First, there’s a risk of immediate consumer harm, because a larger incumbent firm acquiring a startup offers the startup a quick path to market by leveraging the acquirer’s capital, technology, distribution, or other assets. Without the acquisition, the startup would have to develop those assets itself, which it might or might not be able to do, and which may take longer than would happen with the acquisition. If that development is delayed or never occurs, consumers could suffer a loss.” (D. Bruce Hoffman, Competition Policy And The Tech Industry – What’s At Stake?” Federal Trade Commission, 4/12/18)
Hoffman: If “Acquisition Opportunities Are Constrained The Capital Available For Startups May Fall,” Reducing New Entrants Into The Market. “There could conceivably be a negative effect on the capital market for startups. To the extent exit strategies for startups involve acquisitions, if such acquisition opportunities are constrained the capital available for startups may fall. That, in turn, could result in fewer startups. In other words, a strategy designed to preserve the independence of startups could result in a decline in startup activity. This, of course, is a very difficult area to quantify, let alone to make any kind of confident predictions, and I won’t venture to do so. But, as we consider policy in this area, these are some of the issues we need to think about thoughtfully and carefully.” (D. Bruce Hoffman, Competition Policy And The Tech Industry – What’s At Stake?” Federal Trade Commission, 4/12/18)
CCIA President Ed Black: “Platforms Offered By Leading Tech Companies Are Used By Smaller Companies And Traditional Businesses To Expand Their Markets.” “Tech companies have been a key driver of economic growth for the past two decades. According to a recent Department of Commerce study, the digital economy grew 3.7 percent in 2016 compared to the overall economy’s growth of 1.7 percent and the tech industry supports millions of higher paying jobs. Platforms offered by leading tech companies are used by smaller companies and traditional businesses to expand their markets. But it is also true that tech innovations and new online startups are disrupting legacy industries from entertainment to transportation. The U.S. has traditionally supported this Darwinian system of innovation, and it has given us an economic advantage over countries whose systems support protecting particular companies instead of the competitive process.” (“Competition Policy And The Tech Industry: What Is At Stake?,” Ed Black, Computer & Communications Industry Association, 4/12/18)
Data Should Not Be Viewed As A Commodity Or Asset In Assessing Antitrust Concerns
Bruce Hoffman, Acting Director Of The Bureau Of Competition At The U.S. Federal Trade Commission, Does Not View Data Acquisition As A Price Increase Or Quality Decrease. “At present there’s neither a theoretical nor an empirical basis for assuming in every case that a firm acquiring more data about customers is imposing the equivalent of a price increase or quality decrease.” (D. Bruce Hoffman, Competition Policy And The Tech Industry – What’s At Stake?” Federal Trade Commission, 4/12/18)
Hoffman Points Out That Empirically, Regulators Cannot Analyze The Use Of Consumer Data The Same As How Consumers Use Money. “As an initial matter, it’s not necessarily clear that many consumers place much economic value on data about them, or that different consumers value such data in the same ways. Obviously, different consumers may place different values on money, but the valuation that consumers place on money is bounded in a way that the valuation they place on data may not be. The issues involving firms’ access to and use of consumer data are more analogous to a differentiated product, where different consumers may have different values associated with each aspect of product available in the market, and each consumer makes a purchase choice based on his or her own utility. This is reflected in the price the consumer is willing to pay. Empirically, consumers at large have not seemed to place greater value on firms that collect less data, and we are not aware of literature that clearly establishes any level of consumer valuation of data.” (D. Bruce Hoffman, Competition Policy And The Tech Industry – What’s At Stake?” Federal Trade Commission, 4/12/18)
Unlike Money, Hoffman Argues, Data Is Non-Rivalrous. “Unlike money, sometimes data can be transferred repeatedly to multiple firms, i.e., it is non-rivalrous. That means that even if firm A acquires a piece of data about me, I may still be able to provide the same data to firm B, C, D, or ad infinitum. That’s not always true, but it’s often true, and complicates any simple analogy between data and price.” (D. Bruce Hoffman, Competition Policy And The Tech Industry – What’s At Stake?” Federal Trade Commission, 4/12/18)
The Data Consumers Provide To Leading Tech Services “Is Immediately Used To Improve The Service That The Firm Is Providing.” “There’s an immediate positive return to consumers for data transfer. This is not directly analogous to the indirect potential benefit that you get from paying money to somebody where that money may or may not be plowed back into improving the quality of the product you’re offering. When you give data to a tech firm, often that data is immediately used to improve the service that the firm is providing to you. In fact, this exact issue—that increased data has direct positive effects on the customers providing the data—has sometimes been cited as a competition concern, on the grounds that this effect could make the services data-rich firms provide too good for competitors to match (whether this is a valid competition concern is an entirely different issue). This is simply not true for an increase in price, and it also is clearly distinct from a reduction in quality. In fact, in some ways, this effect could be viewed as an increase in quality or a reduction in price.” (D. Bruce Hoffman, Competition Policy And The Tech Industry – What’s At Stake?” Federal Trade Commission, 4/12/18)