Antitrust Law Daily FTC’s Wilson critical of House antitrust report’s assumptions, recommendations
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Friday, April 9, 2021

FTC’s Wilson critical of House antitrust report’s assumptions, recommendations

By Peter Reap, J.D., LL.M.

Wilson and her fellow panelist from the Public Policy Research Center took issue with the 2020 report’s call for sweeping reforms.

Faulty assumptions led to concerning and flawed recommendations in the long-awaited and much-discussed majority report issued last year, Investigation of Competition in Digital Markets by the House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law, said FTC Commissioner Christine S. Wilson. Her personal views were expressed in a webinar hosted today by Competition Policy International and the Information Technology and Innovation Foundation (ITIF), and moderated by ITIF’s Director of Antitrust and Innovation Policy Aurelian Portuese. Wilson was troubled but what she saw as faulty assumptions underlying the report and specifically took issue with the report’s questioning the adequacy of current antitrust law to effectively deal with the perceived problem of market concentration by the four firms—Facebook, Google, Amazon, and Apple—the report focused on. She said that this same question had been asked before and both times, echoing her personal view, the answer was that the existing antitrust legal framework was sufficient to police big tech. Moreover, she was troubled by three specific recommendations in the report involving the essential facilities doctrine, product improvements, and predatory pricing cases. Wilson was joined by panelist Mark Jamison of the Public Policy Research Center in the discussion and both Jamison and Portuese largely shared her view that the report was deeply flawed.

Assumptions. Both panelists began the webinar by agreeing that several assumptions underlying the report were troubling. The report "very carefully" failed to define the term "digital markets," yet used it extensively, said Jamison. Wilson added that it was necessary to look behind the "digital markets" label and with no clear definition the report risked proposing solutions that were either too narrow or too broad.

The report’s seeming desire was to "supplant the consumer welfare standard with a multiple goals analysis or a competitive process analysis is going to insert a lot of subjectivity into the analysis and undermine the predictability and certainty that you need to generate investment in the economy," said Wilson. She said that criticism of the consumer welfare standard for focusing only on prices, especially short term prices, was not accurate. The FTC has brought over 100 cases charging harm to innovation, among other things such as high prices, and she mentioned the very recent FTC action against the Illumina and Grail merger where the only harm alleged was to innovation. She added that criticism of the consumer welfare standard for not providing innovation or for not providing clarity was concerning. She said she was "suspicious" when people try to apply new labels to old, well-established concepts, wondering what "baggage" they are trying to bring into the analysis. She was "very concerned" that the relabeling in the report to call antitrust an "analysis of the competitive process" would lead to focusing the analysis on effects on competitors, rather than on analyzing the effects on competition and consumers.

Discussion continued on the report’s assumptions, questioning how broad antitrust reforms could be expected when it was limited to only four firms. Jamison added that the report’s citations included numerous complaints made by rivals to the big 4 firms and newspaper articles with a very low standard for accuracy. Wilson noted that 12 times in the report the nation’s railroad regulatory regime was held up as a good model for big tech. However, she observed that nowhere did the report mention that the railroad regulatory regime was repealed, on a bipartisan basis, because it was found ultimately to stifle innovation, raise prices, and lower output. This was "a stunning omission," from the report, in her view.

Wilson noted that there was a lot of hostility to big tech at the moment but that it was important to disaggregate concerns over privacy and data security, content moderation, and antitrust issues. She said the proper solution would be to handle the first two issues separately by looking at federal privacy legislation to address data security and looking at Section 230 for content moderation. Finally, the report did attempt to grapple with the antitrust issues, but there were factual inaccuracies in the report. Wilson noted that some observers have reported over 200 inaccuracies in the report and found that some materials cited in the report actually contradict the points that they were cited to support. Further, other materials, including reports by scholars who were promised that their submissions would be published by the committee, have instead remained undisclosed.

Recommendations. Before moving on to address specific recommendations of the report that she disagreed with, Wilson said that the question asked by the report: is "antitrust law fit for the purpose," has been asked and answered previously. For example, in the Microsoft case, the Court there said the antitrust laws on the books sufficed to address anticompetitive conduct in the high-tech sector. A few years later, the Antitrust Modernization Commission was asked by Congress to look into the same question and concluded that yes, the antitrust laws are sufficiently broad and flexible to police what goes on in the high-tech sector. She said it was important to also consider the significant challenges going on now to the tech sector like the cases against Google and Facebook, and the new FTC case against Surescripts.

As for specific recommendations in the report, Wilson first said that people who want to breathe new life into the essential facilities doctrine are taking a very static view of the market. The incentives to invest and innovate will be destroyed if companies know their innovations will have to be shared with competitors.

Second, on product improvements, she said the report proposes that product improvements that may inconvenience rivals, even if they benefit consumers, should be prohibited. She said this left her "scratching her head and wondering why?" because we want rivals to be inconvenienced and to have to respond competitive stimuli—that is the way the market should work.

Finally, Wilson said the report proposes to make it easier to bring predatory pricing cases. She was very concerned with a policy that would remove the incentives of companies to go into the market with very low prices above some measure of cost that would benefit consumers. She said this recommendation flowed from an OpEd in the New York Times by Tim Wu (a Columbia antitrust professor and a critic of "big tech," who was named as a special assistant to the president on technology and competition policy matters on March 5, 2021) praising small, high cost flour producers who sold flour at $6 per bag while larger companies sold flour for $2 a bag. She found this idolization of these smaller companies very concerning.

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