Abstract
The past few years have seen the opening of several antitrust investigations against some of the most dominant and powerful companies in the world—e.g., the U.S. Department of Justice, numerous states, and the Federal Trade Commission have sued Google, Facebook, and Amazon, and the E.U. has launched additional proceedings against Amazon, Apple, Facebook, and Google. This paper looks at the latest trends and developments in the E.U. and the USA and analyzes the different regulatory approaches taken from a distinct business ethics, that is, ordoliberal perspective. The paper aims to derive ordoliberal-inspired antitrust principles and apply them to the current antitrust proceedings and investigations, thereby assessing their strengths and weaknesses. It also aims at developing ordoliberal-inspired reform proposals which might help to strengthen and “harden” modern-day antitrust regimes.
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06 September 2022
A Correction to this paper has been published: https://doi.org/10.1007/s13347-022-00582-8
Notes
Cp. Wörsdörfer, 2020.
Some researchers argue that E.U. competition law is, to some extent, influenced by ordoliberalism and thus tends to be stricter than its US counterpart. Yet, as the following sections will show, several aspects of the E.U. (and particularly the USA) antitrust regime would need to be reformed to fully realize its ordoliberal potential. The paper will show how this could be accomplished.
The work of Eucken and other ordoliberals not only shaped Germany’s socio-economic order after WWII (e.g., the monetary and economic reform of 1948, the monetary policy of 1957 [Bundesbankgesetz], and the anti-cartel legislation of 1957/58 [Law against Restraints of Competition and Monopolies Commission Act]); it has also played a significant role in the European integration process and has had a lasting impact on E.U. institutions and policies: e.g., Article 3(3) of the Treaty on European Union—same as the Treaty of Lisbon—requires the E.U. to establish a “highly competitive social market economy.” Furthermore, the Maastricht Treaty, and particularly the Euro convergence criteria, and the European Economic and Monetary Union, with their focus on price stability and the independence of the European Central Bank, are shaped by ordoliberalism (cp. Claassen et al., 2019; Dold & Krieger, 2020; Lechevalier, 2015).
Cp. Wörsdörfer, 2020.
Cp. Eucken, 1952/2004.
Cp. Eucken, 1952/2004.
Cp. for foundation: Wörsdörfer, 2022.
For more information on the Chicago School in general and its differences with the Harvard School of antitrust—and its main representatives, Areeda and Turner—see Hovenkamp, 2019; Hovenkamp & Scott Morton, 2020; Kovacic, 2007; Wu, 2018; for more information on the similarities and differences between the Chicago School and ordoliberalism, see Kornelakis & Hublart, 2021; Wörsdörfer, 2020, 2022.
Cp. Hovenkamp, 2019.
Cp. Baer et al., 2020.
Cp. Texas Attorney General, 2020.
Cp. Srinivasan, 2019.
Cp. U.S. District Court for the District of Columbia, 2022. Following this decision, the 48 state attorneys general mentioned above also appealed the court’s decision to dismiss their (separate) Facebook antitrust lawsuit; the case which challenges Facebook’s acquisition of Instagram and WhatsApp was initially rejected in June 2021.
Cp. New York Attorney General, 2021.
Cp. Subcommittee on Antitrust, 2020.
Of particular importance are the American Innovation and Choice Online Act, the Augmenting Compatibility and Competition by Enabling Service Switching Act (House version), the Ending Platform Monopolies Act, the Platform Competition and Opportunity Act (all of which are House proposals), the Augmenting Compatibility and Competition by Enabling Service Switching Act, the Competition and Antitrust Law Enforcement Reform Act, and the Merger Filing Fee Modernization Act (all of which are Senate initiatives)—to name a few.
White House, 2021.
Cp. European Commission, 2004.
Cp. for an overview: European Commission, 2022a.
Cp. European Commission, n.d.
Cp. European Commission, 2016b.
Cp. European Commission, 2017.
Cp. European Commission, 2015.
Cp. European Commission, 2016a.
Cp. European Commission, 2018.
Google, 2019.
Cp. European Commission 2016b.
Cp. European Commission, 2019.
Noteworthy is the ordoliberal thread running through the (Microsoft and) Google cases, i.e., the Commission sought to safeguard the freedom of choice of equipment manufacturers and consumers. Yet it must also be noted that from an ordoliberal perspective, the imposed remedies were inadequate to protect consumer sovereignty and operator choice.
Cp. European Commission, 2020a.
Cp. European Commission, 2021a.
Cp. Subcommittee on Antitrust, 2020.
In a first decision in the Apple v. Epic Games case, Apple won nine out of ten counts: The judge ruled, among others, that Apple is not a monopolist and that Epic Games must pay Apple damages ($3.6 m) for contract breaching, that is, violating Apple’s app store policies. Yet Apple’s anti-steering provisions were considered anti-competitive and thus illegal (the main reason being that they hide crucial information from app users, thereby stifling consumer choice). Consequently, Apple needs to change its app store policies and loosen its grip over in-app purchases (e.g., the company will no longer be able to prohibit app developers from communicating with users about alternative payment and subscription options; that is, app developers can now provide a link which directs app users away from the App Store and steer them to the developers’ website to purchase or subscribe to digital content). Apple has 90 days to implement the verdict, but Epic Games has already appealed the ruling (cp. U.S. District Court Northern District of California, 2021a, 2021b). Noteworthy in this regard is that in early 2022, 35 US states—and Microsoft—have voiced their support for the Epic Games’ appeal through amicus curiae briefs (cp. Foss Patents, 2022). Shortly after that, Microsoft announced changes to its app store rules similar to those proposed by the recently advanced Open App Markets Act (i.e., treating all apps equally and not ranking company apps over others; app developers will also be permitted to use their own payment systems). The likely reason for these rule changes is that the company is in the middle of the Activision Blizzard acquisition, where it needs approval from the FTC (note that with this acquisition, Microsoft is moving more and more into the gaming subscriptions market and would hence benefit from a liberation of app store regulation) (cp. Washington Post, 2022a).
Cp. European Commission, 2021c.
Cp. European Commission, 2022b.
Cp. de Streel & Larouche, 2021.
Bundeskartellamt, 2021a.
Bundeskartellamt, 2021b.
Cp. Bundeskartellamt, 2022.
Cp. Bundeskartellamt, 2021b.
Cp. Bundeskartellamt, 2021d.
Cp. Bundeskartellamt, 2021e.
Cp. Wörsdörfer, 2021.
Cp. Wörsdörfer, 2020, 2021, 2022. Noteworthy is that (some of) big tech’s market shares, and the corresponding market dominance and power, have been quite persistent over the past few years (see, for instance, the market shares of social media platforms and search engines depicted in European Parliamentary Research Service, 2021).
Cp. European Commission, 2010, Articles 4–5.
Cp. European Commission, 2021g, Article 5(1)(d).
Cp. Commission “Competition Law 4.0,” 2019.
Cp. Wörsdörfer, 2020.
Note that market shares are considered a key indicator of market power, whereas market capitalization is a critical indicator of economic power (broadly defined). Interestingly, the DMA uses market capitalization—not market shares—as one of the main criteria for designating a company as a gatekeeper (i.e., companies are considered a gatekeeper if they have an annual turnover of more than EUR 7.5bn or a market capitalization of more than EUR 75bn; in addition, they need to have more than 45 m monthly active end-users and more than 10 k active business users [cp. Council of the E.U., European Commission, 2020c, 2021e; European Parliamentary Research Service, 2022; Schwab, 2021]). For more information on the “no-fault monopolization” debate (i.e., should market power per se be considered illegal?), see Hovenkamp, 2009.
Cp. Statista, 2021.
It remains to be seen whether the DMA will have a significant impact in this regard and be able to reverse the current trend towards the “refeudalization” of the economy—to use the ordoliberal expression.
Cp. Wu, 2018.
Cp. Bloomberg, 2016.
Cp. Subcommittee on Antitrust, 2020.
Taplin, 2017, p. 128.
Note that the DMA does not address this issue, to the contrary. Given the lack of an independent antitrust agency and the concentration of powers in the hands of the Commission (see below), political influence and pressure—e.g., by rent-seeking and lobbying groups—might become an even bigger problem.
Cp. Bradford, 2020.
This is especially the case in the USA and less so in the E.U., where competition authorities tend to also consider other parameters, besides the price, including product or service quality, consumer choice, and the level of innovation (see the discussion on the E.U.’s Google Shopping probe above). Noteworthy is also that the protection of competition in and of itself is an explicit goal of E.U. competition law.
Cp. Schweitzer, 2021.
Cp. Monti, 2021.
Cp. European Parliamentary Research Service, 2022.
Cp. Crandall & Winston, 2003.
Cp. Podszun et al., 2021.
Note that most of the following reform proposals are inspired by or derived from Eucken’s writings; that is, they are Euckenian in spirit but cannot directly be found—at least not verbatim—in the ordoliberal primary literature. The goal is to revise and update classical ordoliberal principles and—by applying them to the digital economy—establish a new antitrust paradigm (i.e., “ordoliberalism 2.0”).
According to Wu (2018, pp. 127–139), such an agenda could also be labeled “neo-Brandeisian” as it shares multiple insights with Louis Brandeis, the former U.S. Supreme Court justice, who is not only famous for his work on privacy as a human right (i.e., “right to be let alone” [together with Warren]), but also for his “principles of economic decentralization,” “democratic economy,” and “regulated competition.” Both ordoliberals and Brandeis defined liberty as freedom from public and private coercion (thereby arguing against government and business overreach and dominance). And they were both committed to free and competitive markets operating within a strong socio-political framework. Noteworthy in this regard is also the Utah Statement (cp. Wu, 2019), which recommends abandoning Bork’s consumer welfare standard, lowering the bar to prove violations of antitrust laws (e.g., monopoly leveraging, predatory pricing, and self-preferencing), resuscitating structural presumptions in (vertical) merger control, conducting ex-ante and ex-post merger reviews, and implementing more structural (instead of behavioral) remedies, which would also include corporate break-ups and divestitures.
Cp. Subcommittee on Antitrust, 2020.
Cp. Furman et al., 2019.
Cp. Klobuchar, 2021.
Cp. Subcommittee on Antitrust, 2020. Note that the DMA does not include such a presumption, nor does it include a shift in the burden of proof.
Cp. Commission “Competition Law 4.0,” 2019.
Ordoliberals would also recommend scrutinizing the effects of conglomerate M&As and combating the influence-leverage of the involved conglomerates, e.g., by banning mergers that exceed a specific size. Hovenkamp (2021b), for instance, argues that platform acquisitions of start-ups should be considered exclusionary practices—given that their main motive is to prevent the eventual emergence of a future rival—and that those mergers should only be approved if non-exclusive license agreements are guaranteed. He also argues that “killer acquisitions” should be seen as cartels. That is, all those cases where a big company acquires an innovative start-up and shuts it down to protect the parent company’s own business—or where a firm acquires the patents of another company and declines to practice them but sues other companies for IP infringements—should be treated the same as an ordinary cartel. The reason is that such a “merger-plus-shutdown” does not yield any efficiencies—to the contrary, it harms consumer welfare.
Cp. Wu, 2018. Note that the DMA focuses primarily on behavioral, not structural remedies.
Note that the DMA intends to complement current ex-post competition law with ex-ante (sector-specific) regulation (cp. Larouche & de Streel, 2021); it would thus move considerably closer to the ordoliberal ideal.
Cp. Commission “Competition Law 4.0,” 2019.
Cp. Furman et al., 2019.
Cp. Klobuchar, 2021.
Cp. Commission “Competition Law 4.0,” 2019.
Cp. Khan, 2017.
Cp. Subcommittee on Antitrust, 2020.
Cp. Baer et al., 2020; Shapiro, 2019. Note that the DMA does not foresee the creation of an independent antitrust agency at the European level, nor does it include sufficient financial (i.e., budget increase) and human resources (i.e., technical expertise and know-how, including data analysts, AI specialists, and independent researchers) (cp. de Streel & Larouche, 2021).
Cp. for more information on such an “enforcement pyramid” which would start with a regulatory dialogue between antitrust agencies and gatekeepers, followed by commitments and fines, and lastly behavioral and structural remedies: CERRE, 2021.
Cp. Klobuchar, 2021.
A more swift and effective antitrust enforcement would mean to complete probes within months, not years.
Cp. Furman et al., 2019. Note that, based on the DMA, the Commission can impose interim measures while the respective market investigation proceeds.
Successful antitrust plaintiffs should also be allowed to recover pre- and post-judgment interest (cp. Klobuchar, 2021, p. 358). The recovery of both is essential for multi-year antitrust cases during which price fixers can retain illegal overcharges, earn interest, and reinvest the money. Recovery of those interests would impose the total costs of antitrust violations on the perpetrator and deter possible (future) wrongdoings; in addition, it would incentivize an earlier settlement and thus prevent lawsuits from being used to delay and manifest the status quo.
Cp. Klobuchar, 2021.
Lanier, 2013, pp. 79 and 97.
Lanier, 2013, p. 250.
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Wörsdörfer, M. Big Tech and Antitrust: An Ordoliberal Analysis. Philos. Technol. 35, 65 (2022). https://doi.org/10.1007/s13347-022-00556-w
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DOI: https://doi.org/10.1007/s13347-022-00556-w