The Modern Antitrust Debate and Competition’s Inflection Point

I’ve been attempting to soak in many diverse viewpoints, as well as different academic positions on our current tech industry theme of antitrust and monopoly market power. Suffice it to say, I’ve been down some interesting rabbit trails of reading and academic commentary. But the more I ingested a range of information, the more I’m convinced we are at a critical time for the entire understanding of what it means to be competitive as a business. Competition, at its very nature, is at an inflection point.

Historically, there is some precedent, but also no precedent for where the tech industry finds itself today. Every industry has had its 800 lb Gorilla’s, however, what makes the digital age unique comes with both its scale (overall size of the market and total potential customer base) and a very different cost structure in terms of marginal cost. On the marginal cost point specifically, in the digital realm, these are often much lower, and sometimes even zero, than the analog world.

This point of the competition, and the deeper need to re-evaluate it against previous antitrust/monopoly eras, is one of the main themes being discussed which came out of the Ninth Circuit ruling in favor of Qualcomm over the initial ruling in favor of the FTC. The key theme now being highlighted in antitrust academia was a point made in the Ninth circuit opinion of hypercompetitive actions being different anticompetitive actions. There is now debate and a school of thought that desires to more clearly clarify what it means to allow hypercompetitive action and how, and in what ways it differs from anti-competitive action. This debate will be ongoing, but I think it has only amplified what much modern thinking believe which is we certainly need to reform antitrust laws, into something more equipped to deal with a world that is so different thanks to technology and the digital age, than the one many of the foundations of antitrust law were built on.

One of the challenges, of many, facing those who may propose legislation, or be in a position to rule on and enforce legislation, will be to look beyond just economics. Pricing, or costs, are often brought into the discussion where the competitor with market power is impacting pricing, distribution, or both as it relates to stifling competition or innovation with the side effect of consumer harm. Proving harm, particularly consumer harm, is one of the most critical exercises here.

Within that, it was a little worrying, and also a showcase of how difficult this exercise will be, that the judge in the recent hearing between Apple and Epic used the example that Apple does not allow other app stores as an example of potential monopoly behavior. While you can argue, and Epic is, that there are concessions Apple can make to allow for different economic benefits for consumers to buy at lower prices, suggesting the remedy is allowing other app stores has the potential to harm consumers even more. If any company or app store could launch on iOS, it creates an opportunity ripe for the stealing of sensitive consumer data, malware, theft and fraud, and a host of other issues. I bring this up to simply say, there is a much broader conversation to had about how to protect consumers and have their best interests at heart. Apple’s position on requiring in-app-purchase is largely in an attempt to protect consumers from the larger threat of malicious intent. I’ve stated this before and will argue it as justification for this imperfect process of Apple’s as the benefit that outweighs many of the other tradeoffs.

I hear a lot of critiques about Apple’s position with regard to third-party payments but see little critical thought offered about what alternative can be provided that still protects the consumer from fraud, theft, and invasion of privacy. When it comes to Apple’s potential solutions here, debating how to safely protect the consumer from the tremendous harm that has come from the open web is where to start. Teasing out all options with this angle of consumer protection is critical first and foremost.

Progress here will be very slow. However, analyzing every case, hearing, and in certain cases, any rulings are critical as the groundwork being laid will set a precedent for future cases that antitrust academics, lawyers, and those in the judicial process will all be watching closely.

This theme and the surrounding debates will be an ongoing development for what I assume will be years to come. But as I stated, what’s at stake has the potential to reshape competition in the 21st century.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

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