By: Louis Naiman
Online commerce has a toll bridge problem.[1] Technology platforms, such as Amazon, Facebook, Google, and Apple, use their dominant market positions to impose economic chokepoints on third-party companies and consumers.[2] This past summer, however, the House Judiciary Committee passed a series of bills intended to introduce robust competition into online commerce.[3] To illustrate the problem and the significance of the Judiciary Committee’s recent legislative efforts, consider the following:
Imagine that you start a sweater-knitting company, and, from the doorstep of your office, you see countless cold, shivering people, all of whom are potential customers.[4] As you gaze out, you realize that these frigid folks live on the other side of a river that is reachable only via a privately owned toll bridge.[5] Sadly, the owner of the toll bridge either prevents you from using the bridge entirely or charges excessive fees. Additionally, the owner decides that they too want to get into the sweater-knitting business, and further hinders your access to the bridge. This arrangement is tremendously detrimental to competition in the knitted sweater market and results in higher priced-sweaters, fewer choices, and potentially inferior sweater quality.
Antitrust law has sought to remedy this problem through the essential facilities or “bottleneck monopoly” doctrine. The doctrine holds that it is unlawful for a company, which possesses exclusive control over a facility essential to competition, to deny potential competitors’ access to that facility on reasonable terms if doing so would create or maintain monopoly power in the relevant market.[6] However, the doctrine has long been dormant, neglected by enforcers over the past few decades as the pendulum of antitrust enforcement swung towards Chicago School-influenced analysis that critics allege was permissive of monopolistic tactics.[7]
Judicial decisions in Verizon v. Trinko and Pacific Bell v. LinkLine Communications, in particular, crippled the doctrine, holding that companies are “under no obligation to provide rivals with a ‘sufficient’ level of service.”[8] In Trinko, for instance, the Supreme Court declined “either to recognize . . . or to repudiate” the doctrine, noting that, even if it were to exist, it would be inapplicable where government regulations include “extensive provision for access” to the allegedly essential facility.[9] The eminent antitrust scholars Phillip Areeda and Herbert Hovenkamp described it as “less a doctrine than an epithet,” and “troublesome, incoherent and unmanageable,” respectively.[10] Even the Department of Justice’s Antitrust Division, which possesses enforcement authority over the nation’s antitrust laws, called the doctrine “flawed.”[11]
Recent political attention to the role of dominant tech platforms in online commerce promises to potentially awaken this long-neglected doctrine and revitalize antitrust enforcement in the digital marketplace. In June 2020, the House Judiciary Committee passed H.R. 3816, American Innovation and Choice Online Act.[12] The bill makes it unlawful for a large technology platform (termed “covered platform” in the legislation) to advantage its own products, services, or lines of business over those of another company.[13] Among its other provisions, the bill also prohibits the platforms from discriminating between similarly situated companies or interfering with another business’s pricing of its goods or services.[14]
Technology platforms have become functionally essential for other businesses to exist in the digital marketplace. The House Judiciary Committee’s 2020 report, Investigation on Competition in Digital Markets, extensively documents how Apple, Facebook, Amazon, and Google simultaneously serve as critical intermediaries for and competitors to third-party companies in online commerce.[15] The report details how the platforms abuse their dual roles through the systemic use of tactics like self-preferencing and the appropriation of key technologies.[16] Equally striking is what is omitted from the report: many businesses refused to speak with or requested anonymity from the House Judiciary Committee, a remarkably powerful and visible congressional committee, out of fear of retaliation.[17]
One of a handful of major antitrust bills that the House Judiciary Committee passed this summer, the American Innovation and Choice Online Act would dramatically alter the digital marketplace and the conduct of dominant technology platforms.[18] The bill’s passage would reflect Congress’s determination that companies like Amazon, Google, Apple, and Facebook possess chokepoints or bottlenecks in online commerce that they use to expand their market power to the detriment of competition and consumers. The legislation would constitute the most significant antitrust legislation in half a century, the most important domestic internet regulation since at least the 1996 Telecommunications Act and would dramatically improve competition online. The bill would also mark the culmination of a years-long, bipartisan effort to regulate the business practices of the tech platforms and would grant the FTC and DOJ tremendous new enforcement authority.
[1] Nikolas Guggenberger, Essential Platforms, 24 Stan. Tech. L. Rev. 237, 244 (2021) (“Thurman Arnold, the head of the Department of Justice’s Antitrust Division under FDR, memorably characterized monopolists as ‘a sort of toll bridge over which everyone has to pass.’”); see also Thurman Arnold, An Inquiry into the Monopoly Issue, N.Y. Times Mag., Aug. 21, 1938, at 1, https://www.nytimes.com/1938/08/21/archives/an-inquiry-into-the-monopoly-issue-thurman-arnold-holds-that.html.
[2] Adi Robertson, Everything you need to know from the tech antitrust hearing, The Verge (July 29, 2020), https://www.theverge.com/2020/7/29/21335706/antitrust-hearing-highlights-facebook-google-amazon-apple-congress-testimony (quoting Rep. David Cicilline, “‘The platforms all ‘abuse their control over current technologies to extend their power’ by preferencing their own products or creating predatory pricing schemes. ‘Their ability to dictate terms, call the shots, upend entire sectors, and inspire fear represent the powers of a private government.’”).
[3] Cristiano Lima, House panel approves sweeping tech crackdown during overnight showdown, Politico (July 24, 2021, 12:16 AM), https://www.politico.com/news/2021/06/24/house-panel-green-lights-early-tech-antitrust-bills-as-marathon-session-grinds-on-495897.
[4] Nikolas Guggenberger, Essential Platform Monopolies: Open Up, Then Undo, ProMarket (Dec. 7, 2020), https://promarket.org/2020/12/07/essential-facilities-regulation-platform-monopolies-google-apple-facebook/ (providing the basis of the metaphor used above).
[5] Id.
[6] See MCI Commc’ns Corp. v. Am. Tel. & Tel. Co., 708 F.2d 1081, 1132-33 (7th Cir. 1983) (“Such a refusal may be unlawful because a monopolist’s control of an essential facility (sometimes called a ‘bottleneck’) can extend monopoly power from one stage of production to another, and from one market into another. Thus, the antitrust laws have imposed on firms controlling an essential facility the obligation to make the facility available on non-discriminatory… the case law sets forth four elements necessary to establish liability under the essential facilities doctrine: (1) control of the essential facility by a monopolist; (2) a competitor’s inability practically or reasonably to duplicate the essential facility; (3) the denial of the use of the facility to a competitor; and (4) the feasibility of providing the facility.”); see also Brett Frischmann and Spencer Weber Waller, Revitalizing Essential Facilities, 75 Antitrust L. J. 1, 25 (2008).
[7] Diane P. Wood, The Old New (Or is it the New Old) Antitrust: “I’m Not Dead Yet!!”, 51 Loy. U. Chi. L. J. 5 (2019) (“Over the nearly 130 years since the Sherman Act was passed, we have experienced vigorous trust-busting, Depression-era market control, aggressive measures toward international cartels, movements to control the overall size of companies, the Chicago School, and post-Chicago (or post-post-Chicago, by now). This might not be a pendulum, technically, but one cannot deny the ebbs and flows, and most importantly the persistence, of the debate.”).
[8] Verizon Commc’ns Inc. v. L. Offs. of Curtis V. Trinko, LLP, 540 U.S. 398 (2004); Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc., 555 U.S. 438, 442 (2009) (commenting on the “sufficient levels of service.”).
[9] Trinko, 540 U.S. at 411.
[10] Phillip Areeda, Essential Facilities: An Epithet in Need of Limiting Principles, 58 Antitrust L. J. 841, 853 (1990); Herbert Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice 254(6th ed. 2020).
[11] Dep’t. of Justice, Competition and Monopoly: Single-Firm Conduct Under Section 2 of the Sherman Act: Chapter 7 (2008).
[12] American Innovation and Choice Online Act, H.R. 3816, 117th Cong. (2021); see also Cristiano Lima & Leah Nylen, House panel approves plan to help break up tech giants, Politico (June 24, 2021, 3:21 PM), https://www.politico.com/states/california/story/2021/06/24/house-panel-approves-plan-to-help-break-up-tech-giants-1386987.
[13] American Innovation and Choice Online Act, H.R. 3816, 117th Cong. § 2 (2021).
[14] Id.
[15] Majority Staff of H. Subcomm. on Antitrust, Commercial, and Admin. Law of the Comm. on the Judiciary, 116th Cong., Investigation of Competition in Digital Markets, https://judiciary.house.gov/uploadedfiles/competition_in_digital_markets.pdf.
[16] Id. at 40.
[17] Id. at 27 (“Unfortunately, some market participants did not respond to substantive inquiries due to fear of economic retaliation. These market participants explained that their business and livelihoods rely on one or more of the digital platforms.”).
[18] Cristiano Lima, House panel approves sweeping tech crackdown during overnight showdown, Politico (July 24, 2021, 12:16 AM), https://www.politico.com/news/2021/06/24/house-panel-green-lights-early-tech-antitrust-bills-as-marathon-session-grinds-on-495897.
