Antitrust War on Tech Integration

Progressive antitrust reformers, along with some conservatives hostile to Big Tech, have yet to pass legislation that would expand antitrust law beyond the consumer welfare standard that has been the rational limit of antitrust enforcement for the past half-century. Instead, over the past few years, the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) have brought a wave of antitrust lawsuits aimed at expanding the scope of conduct that can be considered anticompetitive under—and pushing the boundaries of—existing laws and precedents.

In particular, the cases brought by both the DOJ and the FTC are trying to go beyond punishing big tech companies for allegedly anticompetitive business practices to restricting how those companies can operate and design their online platforms—even breaking up integrated systems altogether. If the government were to succeed in some of these cases, it would send a signal to the largest tech companies that they should reconsider investing in innovations that might oversatisfy their customers at the expense of their competitors.

For example, the second major federal antitrust case, pitting the DOJ and several states against Google, is currently underway. The complaint focuses on Google’s control over every step of the “ad tech stack”—that is, the process of connecting advertisers with embedded digital ads on websites and in apps. Google is accused of using its ownership of the most widely used tools at many levels of the ad stack to unfairly squeeze competitors out of the market. Putting aside the merits of the government’s claims, if Google were found to be abusing its market power in this way, the traditional remedy would be to force Google to issue a consent decree agreeing to refrain from certain anticompetitive conduct and to pay damages to injured competitors. But the DOJ’s complaint also seeks to force Google to divest itself of many parts of its online advertising business.

This demand to break up integrated technology products comes amid growing suspicion about corporate size and vertical integration in general, especially in the technology sector. The FTC’s case against Amazon, for example, concerns the company’s control over both its online retail platform and the distribution networks that carry its sales, and seeks punishment for Amazon, “including but not limited to structural relief”—that is, breaking up the company. Similarly, the FTC’s case against Meta seeks to reverse Meta’s decades-long acquisitions of Instagram and WhatsApp, while the DOJ’s case against Apple falls short of seeking structural remedies while clearly indicating a desire for such remedies to be implemented.

While it may be the punishment most associated with antitrust law in the public eye, outright breakups have become a rarer remedy in recent decades, and courts have become even rarer to impose them. Given the distrust of corporate size and market concentration for its own sake, some antitrust reformers—particularly self-proclaimed neo-Brandeites like the lawyer and former special assistant to the president Tim Wu and current FTC Chair Lina Khan—have sought to renormalize forced divestments as a routine punishment for antitrust complaints.

Knowing that a complete breakup of companies is harder to achieve, several recent antitrust cases in the tech industry have instead sought to dictate how leading tech companies can compete with their own integrated products—even to the point of redesigning their platforms to match their rivals. For example, Department of Justice vs. Apple the case would force Apple to grant its competitors’ smartwatches equal access to Apple’s mobile operating systems. Similarly, FTC v. Amazon would force the online retail giant to stop providing privileged access to its featured “Buy Box” and making its “Fulfilled by Amazon” service contingent on Amazon Prime membership. Returning to the Google ad technology case, the Justice Department suggests that Google has an obligation to design its ad auction and placement platforms to be more interoperable with competing ad sellers.

Taken together, these cases appear to constitute a coordinated effort to overturn legal precedents such as Verizon vs Trinkothat have established that even monopolies have no “obligation to act” by sharing their infrastructure on equal terms with their rivals. But even if all these cases fail, the signal they send to tech companies and investors is that U.S. antitrust enforcement is in danger of veering toward a model like the European Union’s, where the welfare of competitors is considered at least as important as the welfare of consumers. For example, under the European Digital Markets Act, prohibitions on self-privileging have already led companies like Google to separate integrated products like search, maps, and review features to comply.

In such an environment, regulated companies have much less incentive to invest in maintaining and innovating platforms that serve external users, because they have to invest huge sums of money in developing new features that their competitors can then obtain for free. These competitors will also have little incentive to invest in creating sophisticated alternatives to Big Tech platforms if the reward for success is being hit with billion-dollar antitrust complaints and expected to stop competing when their company’s user base or market capitalization becomes too large.

Another example of this may be coming, as Nvidia’s meteoric rise to become America’s latest trillion-dollar tech success story has landed it multiple antitrust investigations from the Justice Department. Part of Nvidia’s success has been its ownership of both the hardware and software that now power a huge percentage of the world’s AI computing, but it remains to be seen whether the current US antitrust regime will decide it has been too successful.

To realize the vision of a hypothetically more perfect competitive environment, sophisticated regulators seem willing to destroy products and systems that, judging by their overwhelming success, appear to please consumers. If they succeed, they will change the competitive dynamics in the U.S. technology industry from permissionless innovation to government-managed competition—to the detriment of consumer welfare, technological progress, and U.S. competitiveness.